Tribute to Jim McGrath

Ed. Note-Jim McGrath died this week. He was a good friend and a trusted  colleague. My thoughts are with his wife, sister and her family and his parents and the rest of us who were privileged to know Jim. Jim was a grizzly bear of a man, having played college football at Marquette and tried out for the New England Patriots. He later became a lawyer, helped run a federally funded drug task force, worked in local government and then used all of this experience to move into the the specialty of corporate investigations. The articles he posted on his blogsite, Internal Investigations Blog, were packed with facts, tips, witticisms and insights for the compliance practitioner around the issue of internal investigations. Jim’s generosity was well-known. He was one of the very few people I know that everyone liked and in no small feat had earned the very Southern sobriquet that he was a ‘great guy’. Two years ago this month, I published an interview with Jim, which I repost below as a tribute to my good friend. 

————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————-

1.      Where did you grow up and what were your interests as a youngster?

I grew up in an inner ring suburb of Cleveland.  My Dad was an attorney and later a Common Pleas Court judge and so it was expected that my sister, brother, and I would go to college.  We were the only family with a college graduate as the head of our household in our neighborhood, to the best of my knowledge.  We were good kids and well thought of by the neighbors, because my father beat (mostly figuratively) honesty, respect, integrity, personal responsibility, hard work, and humility into us.

My interests were always sports, and primarily football, although I also played baseball (catcher), basketball, and soccer.  I always liked controlled violence and hitting or being hit.  That attitude was common in my youth and I was often the youngest kid in the pick-up game and so I had to be tough.  Even at 48 years of age, it still brings a smile to my face to remember that I never shied away from a hit, even with much bigger guys.  I think that I am still that way.

Just as importantly, I worked a lot as a kid. When I was 13, he got me a job washing dishes at a mom-and-pop pizza joint about a mile from home.  By the time I was 14, I was a cook.  That job taught me almost everything I know about working: the customer is always right; you have to be on time; you have to give your best effort; the boss has the final say (even if he is an idiot), how to balance school, work and extra-curricular, etc.  It has been a tremendous benefit to me to have had that job.  In college, started and ran my own house-painting business.  In law school, I clerked, worked at another pizza joint, and drove a dump truck (many times, all in one day) in order to pay my tuition.

2.      Where did you go to college and what experiences there led to your current profession?

I went to Marquette University in Milwaukee for my undergraduate education.  I wanted to go there because it was a Jesuit institution and although the Jesuits have a tendency to irk the Pope, they certainly can teach. Because my Dad was an attorney, I was exposed to the profession early.  It was a natural progression for me, I guess.  I used to go to his office with him on Saturdays when I was a kid and would bang out fake motions on the old typewriters.  Plus, it was “downtown”, which meant something here (as elsewhere) before the explosion of freeways, malls, and exurbs.  My Dad had been a prosecutor, as well, so I always wanted to do the same and “wear the white hat”.

3.      As we would say in Texas, you look like you played some ‘ball’ in your day? What positions did you play and did you play professionally?

I played ball and even had tryout offers with the New England Patriots and the New York Giants.  I went to Marquette for academics.  I guy already there mentioned me to the football coach and he contacted me and asked me to come out for the team.  Here was the rub: the program was not a varsity one.  Marquette had a club program. The team played varsity Division III teams in the Illini-Badger Conference and others.   As a sophomore through senior, I was the fullback.  More like Robert Newhouse than Earl Campbell.  I opened a lot of holes and caught swing passes. I loved it, especially the contact as a lead blocker.

I went to a tryout with the Patriots in 1987.  My goal was to not be the first running back sent home and I wasn’t.  Of course, I didn’t make it to training camp, either.   After I got cut, there was something there from the Giants.  It was a “heard you got cut, come on up and see us” wire.  I had to get back and get ready for law school and the Giants were coming off a Super Bowl win in January.  I figured that if I couldn’t stick with the Pats, who were on a downward trend, I surely wasn’t going to displace Maurice Carthon in New York.  And that was the end of my football career.

4.      You started your legal career in law enforcement. What can you tell us about that and how did it shape your professional career going forward?

A few years after getting out of law school, I got an offer to be an assistant prosecutor in another inner ring Cleveland suburb.  By age 29, I was the chief prosecutor and had my hands in everything from multiple-slaying homicides to mortgage frauds.  We did it all and at tremendous volume.

About the same time (age 29), I was asked to replace the former CLO of a regional narcotics unit that was run under the auspices of the DOJ and funded through a Byrne Grant.  I did that for almost 15 years and it was there that I got the chance to work with some truly excellent investigators.  I also had the opportunity to make a lot of very good and helpful contacts across a broad spectrum of law enforcement agencies and professionals, some of whom I am now able to tap for corporate internals.

Between both law enforcement gigs, I supervised and directed 3,000+ investigations of varying sizes and complexities.  It was a great training ground for what I am doing now.  The narcotics unit won an award as the undercover unit of the year from the Ohio Attorney General while I was there and we were excellent at what we did.  We used to sit in surveillance vehicles and dream about how we could turn these talents into careers in the private sector, and when the corporate landscape began to favor internal investigations by outside counsel, I decided to tab some of my former cohorts and launch this firm.

5.      Why did you start your Blogsite, what did you hope to achieve from it and what will be your focus going forward?

I started my blog site, as a means to gain exposure to readers as potential clients.  In addition, I have always enjoyed writing and felt that I had some worthwhile impressions to give on the lay of the investigative land.  The blog has netted me a tremendous network of readers and fellow C&E professionals that has translated and will continue to translate into business opportunities.  I enjoy writing the posts, although sometimes it is daunting when I get very busy.  If I could, and if there were a market for it, I would write full time on investigations or C&E issues, but I doubt that I would be able to make a living that way, given the relatively narrow focus of my writings.  It is being picked up and rolled into Dick Cassin’s ethiXbase consortium, which itself is an honor.  I intend to continue to write on my impressions on a wide variety of investigations facets across various sectors of the economy, business, and sports.

—————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————

Jim is the second friend I have lost in the past couple of months, quite suddenly, the other being RC Collins. They were both in the their 50s. So on a very personal note, if you are over 50, please, please, please, get an annual physical. I don’t know if would have helped Jim and RC but it might have and perhaps they would still be with us today. 

Come On Get Happy – The Partridge Family and GSK’s Internal Investigation

Today we celebrate an anniversary of one of the all-time lows in the American cultural milieu; for on this date in 1970, the television show The Partridge Family appeared on the ABC Television network. Symbiotically created from the ashes of the television show The Monkees and the real-life family pop group The Cowsills; The Partridge Family starred, as its TV-mom, Oscar winning actress Shirley Jones and as her eldest TV son, and teenaged girl heartthrob, her real-life stepson David Cassidy. Proving once again that 1960s and 1970s television really was largely a cultural wasteland, the family romped and sang their way across a never-ending sunny southern California in multi-colored converted school bus. While the episodes themselves were as close to putrid as one can get, they did have better success with their lip-synced music from each episode. One song, I Think I Love You, reached No. 1 on the Billboard Pop Charts that year.

I thought about this strange convergence of history and culture (or perhaps the lack of culture) when considering more lessons learned from the GlaxoSmithKline PLC (GSK) corruption scandal. I was particularly focused on GSK’s response to at least two separate reports from an anonymous whistleblower (brilliantly self-monikered as GSK Whistleblower) of allegations of bribery and corruption going on in the company’s China business unit. One of the clear lessons from the GSK matter is that serious allegations of bribery and corruption require a serious corporate response. Not, as GSK appears to have done, in their best Inspector Clouseau imitation, not being able to find the nose on their face.

Further, and more nefariously, was GSK’s documented treatment of and history with internal whistleblowers. One can certainly remember GSK whistleblower Cheryl Eckard. A 2010 article in The Guardian by Graeme Wearden, entitled “GlaxoSmithKline whistleblower awarded $96m payout”, where he reported that Eckard was fired by the company “after repeatedly complaining to GSK’s management that some drugs made at Cidra were being produced in a non-sterile environment, that the factory’s water system was contaminated with micro-organisms, and that other medicines were being made in the wrong doses.” She later was awarded $96MM as her share of the settlement of a Federal Claims Act whistleblower lawsuit. Eckard was quoted as saying, “It’s difficult to survive this financially, emotionally, you lose all your friends, because all your friends are people you have at work. You really do have to understand that it’s a very difficult process but very well worth it.” So to think that GSK may simply have been SHOCKED, SHOCKED, that allegations of corruption were brought by an internal whistleblower may well be within the realm of accurate.

There would have seemed to have been plenty of evidence to let the company know that something askance was going on in its Chinese operations. The international press was certainly able to make that connection early on in the scandal. An article in the Financial Times (FT), entitled “China accuses GSK of bribery” by Kathrin Hille and John Aglionby, reported “GSK said it had conducted an internal four-month investigation after a tip-off that staff had bribed doctors to issue prescriptions for its drugs. The internal inquiry found no evidence of wrongdoing, it said.” Indeed after the release of information from the Chinese government, GSK said it was the first it had heard of the investigation. In a prepared statement, quoted in the FT, GSK said ““We continuously monitor our businesses to ensure they meet our strict compliance procedures – we have done this in China and found no evidence of bribery or corruption of doctors or government officials.” However, if evidence of such activity is provided we will act swiftly on it.”

Laurie Burkitt, reporting in the Wall Street Journal (WSJ) in an article entitled “China Accuses Glaxo of Bribes”, wrote that “Emails and documents reviewed by the Journal discuss a marketing strategy for Botox that targeted 48 doctors and planned to reward them with either a percentage of the cash value of the prescription or educational credits, based on the number of prescriptions the doctors made. The strategy was called “Vasily,” borrowing its name from Vasily Zaytsev, a noted Russian sniper during World War II, according to a 2013 PowerPoint presentation reviewed by the Journal.” Burkitt reported in her article that “A Glaxo spokesman has said the company probed the Vasily program and “[the] investigation has found that while the proposal didn’t contain anything untoward, the program was never implemented.”” From my experience, if you have a bribery scheme that has its own code name, even if you never implemented that scheme, it probably means that the propensity for such is pervasive throughout the system.

I have often written about the need for a company to have an investigative protocol in place so that it is not making up its process in the face of a crisis. However the GSK matter does not appear to be that situation. It would not have mattered what investigation protocol that GSK followed, it would seem they were determined not to find any evidence of bribery and corruption in their China business unit. So the situation is more likely that GSK should have brought in a competent investigation expert law firm to head up their investigation in the face of this anonymous whistleblower’s allegations.

In an ACC Docket article, entitled “Risks and Rewards of an Independent Investigation”, authors James McGrath and David Hildebrandt discuss the use of specialized outside counsel to lead an independent internal investigation as compliance and ethics best practices. This is based upon the US Sentencing Guidelines, under which a scoring system is utilized to determine what a final sentence should be for a criminal act. Factors taken into account include the type of offense involved and the severity of the said offense, as well as the harm produced. Additional points are either added or subtracted for mitigating factors. One of the mitigating factors can be whether an organization had an effective compliance and ethics program. McGrath and Hildebrandt argue that a company must have a robust internal investigation.

McGrath and Hildebrandt take this analysis a step further in urging that a company, when faced with an issue such as an alleged Foreign Corrupt Practices Act (FCPA) violation, should engage specialized counsel to perform the investigation. There were three reasons for this suggestion. The first is that the Department of Justice (DOJ) would look towards the independence and impartiality of such investigations as one of its factors in favor of declining or deferring enforcement. If in-house counsel were heading up the investigation, the DOJ might well deem the investigative results “less than trustworthy”.

Matthew Goldstein and Barry Meier discussed the need for independence from the company being investigated in an article the New York Times (NYT) about the General Motors (GM) internal investigation entitled “G.M Calls the Lawyers”. They quoted William McLucas, a partner at WilmerHale, who said, “If you are a firm that is generating substantial fees from a prospective corporate client, you may be able to come in and do a bang-up inquiry. But the perception is always going to be there; maybe you pulled your punches because there is a business relationship.” This is because if “companies want credibility with prosecutors and investors, it is generally not wise to use their regular law firms for internal inquiries.” Another expert, Charles Elson, a professor of finance at the University of Delaware who specializes in corporate governance, agreed adding, “I would not have done it because of the optics. Public perception can be affected by using regular outside counsel.””

Adam G. Safwat, a former deputy chief of the fraud section in the Justice Department, said that the key is “Prosecutors expect an internal investigation to be an honest assessment of a company’s misdeeds or faults, “What you want to avoid is doing something that will make the prosecutor question the quality of integrity of the internal investigation.”” Also quoted was Internal Investigations Blog editor, Jim McGrath who said, “A shrewd law firm that gets out in front of scandal can use that to its advantage in negotiating with authorities to lower penalties and sanctions. There is a great incentive to ferret out information so they can spin it.”

The GSK experience in China will inform compliance practitioners for years to come with the company’s plethora of miss-steps. Perhaps one day the company will become as successful as The Partridge Family and they can open their annual meeting with The Partridge Family Theme – Come On Get Happy!

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2014

When to Bring in Investigative Counsel and Why

When should you bring in a true outsider to handle an internal investigation? What about specialized investigative counsel? Jim McGrath, who often writes about the need for specialized investigative counsel, has also pointed out on several occasions that having an independent eye on things is also a plus. However, rarely do we see both questions played out so publicly as is currently going on in the General Motors (G.M.) recall investigation. Indeed, Matthew Goldstein and Barry Meier discussed these  questions in Sunday New York Times (NYT) Business Section article by, entitled “G.M Calls the Lawyers”.

For those of you not familiar with G.M.’s problems, McGrath also wrote about them in his Internal Investigations Blog, in a post entitled “What Did GM Know and When Did They Know It?” McGrath describes the current issues as “the revelation that General Motors is the target of probes by Congress and by the National Highway Transportation Safety Administration over its handling of ignition switch defects in at least six of its popular automobiles. Failures in these switches may have resulted in as many as thirteen deaths and seemingly point to quality control failures at the automaker.” Others have estimated the death totals much higher for this defect. And, as McGrath notes, the key question is ‘what did GM know and when did they know it’?

Interestingly G.M. has hired two law firms to handle the investigation. One is King & Spalding, which handled much of the product liability litigation over the alleged defect and the second is Jenner & Block. In the NYT article, a prominent plaintiff’s lawyer, Lance Cooper, who fought GM and King & Spalding on this product liability litigation noted the obvious when he said, “They are part of the story.” By this he meant that “King & Spalding’s switch from a fierce defender of G.M. to a potential inquisitor into the company’s actions may also pose a conflict. For one, some of the firm’s lawyers may have to ask their own colleagues if they advised G.M. about whether to recall the vehicles at the time the Melton case was settled.”

More importantly for G.M., the retention of “outside counsel in these cases is part investigation, part public-relations gambit and part legal strategy. In most cases, the goal isn’t to publicly flog a company or its top executives, but rather to limit damage to an institution’s reputation or to contain the financial harm to shareholders of a publicly traded company. And it does so under the protection of the attorney-client privilege. From the point of view of the company, a well-done internal investigation can shape the accepted story of what happened — and produce findings that allow the company to negotiate for lower penalties from prosecutors or regulators down the road.” But, more importantly, to “achieve those ends, the law firms conducting the investigations must be viewed as forthright and uncompromised. In this respect, some critics have already questioned G.M.’s choices.”

The NYT quoted another lawyer, William McLucas, a partner at WilmerHale, who said, “If you are a firm that is generating substantial fees from a prospective corporate client, you may be able to come in and do a bang-up inquiry. But the perception is always going to be there; maybe you pulled your punches because there is a business relationship.” This is because if “companies want credibility with prosecutors and investors, it is generally not wise to use their regular law firms for internal inquiries.” Another expert, Charles Elson, a professor of finance at the University of Delaware who specializes in corporate governance, agreed, adding, “I would not have done it because of the optics. Public perception can be affected by using regular outside counsel.””

Adam G. Safwat, a former deputy chief of the fraud section in the Justice Department, said that the key is “Prosecutors expect an internal investigation to be an honest assessment of a company’s misdeeds or faults, “What you want to avoid is doing something that will make the prosecutor question the quality of integrity of the internal investigation.”” The aforementioned Jim McGrath was also interviewed for the article. He said, “A shrewd law firm that gets out in front of scandal can use that to its advantage in negotiating with authorities to lower penalties and sanctions. There is a great incentive to ferret out information so they can spin it.”

All of these concerns are equally valid in the Foreign Corrupt Practices Act (FCPA) or UK Bribery Act investigation context. But they are layered upon the Fair Process Doctrine. This is because procedural fairness is one of the things that will bring credibility to your Compliance Program. This Doctrine generally recognizes that there are fair procedures, not arbitrary ones, in a process involving rights. Considerable research has shown that people are more willing to accept negative, unfavorable, and non-preferred outcomes when they are arrived at through processes and procedures that are perceived as fair. Adhering to the Fair Process Doctrine in your Compliance Program is critical for you, as a compliance specialist or for your Compliance Department, to have credibility with the rest of the workforce.

In internal investigations, if your employees do not believe that the investigation is fair and impartial, then it is not fair and impartial. Further, those involved must have confidence that any internal investigation is treated seriously and objectively. I have recently written about several aspects of internal investigations, in order to emphasize how to handle internal whistleblower complaints in light of the Dodd-Frank implications. One of the key reasons that employees will go outside of a company’s internal hotline process is because they do not believe that the process will be fair.

This fairness has several components. One would be the use of outside counsel, rather than in-house counsel to handle the investigation. Moreover, if a company uses a regular firm, it may be that other outside counsel should be brought in, particularly if the regular outside counsel has created or implemented key components that are being investigated. Further, if the company’s regular outside counsel has a large amount of business with the company, then that law firm may have a very vested interest in maintaining the status quo. Lastly, the investigation may require a level of specialization that in-house or regular outside counsel does not possess.

Living in Houston, this all played out in disastrous results during the Enron scandal. Near the end of Enron’s run, its regular outside counsel, Vinson & Elkins, investigated questionable accounting practices at Enron. As the NYT article noted, “The firm’s investigation is viewed as an utter failure or a corporate whitewash. The review essentially gave Enron a clean bill of health just months before it collapsed in one of the biggest accounting frauds of all time. In 2006, the law firm paid $30 million to Enron’s bankruptcy estate to resolve claims that its actions had contributed to the energy company’s demise.”

All of this means, your company needs to get it right in the hiring of outside counsel to handle an investigation. As McGrath wrote at the end of his blog, “the Jenner and King people will have to make like Howard Baker and ask what the president – or other ranking person with reporting authority to NHTSA – knew and when they knew it. Because the cover-up is usually worse than the underlying wrong and this one could cost GM $35 million and its reputation.” The NYT article ended with the following, “The best internal investigations are the ones that don’t receive much media attention. A company deals with a problem quickly, and if there’s something to report to authorities, the company tends to be treated leniently for its forthrightness.” Amen.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2014

My Favorite Blog Posts from 2013

One of the best things about the Foreign Corrupt Practices Act (FCPA), UK Bribery Act and other anti-corruption practice areas is the top notch quality of commentators. While Mike Volkov regularly derides the FCPA paparazzi for being scare mongers and the FCPA Professor chastises FCPA Inc. for attempts to paint FCPA enforcement in the worst possible light so as to draw clients to their collective resources; there is also a great set of bloggers, writers and pundits who put out solid, useful and well-reasoned pieces on FCPA and Bribery Act issues. In this blog post, I would like to highlight some of my favorite posts from some of my favorite commentators over the past year.

From the Dean

If you do not know who the Dean of FCPA bloggers is you have not been looking too long or too hard. It’s Dick Cassin, who is the Founder, Editor and Publisher of the FCPA Blog, which consistently reports on all things compliance around the globe. But for me, it is when Dick writes from the heart, he is able to articulate what many of us are feeling but cannot seem to put into words. My favorite post from Dick this year was his tribute to President Kennedy on the occasion of the 50^th anniversary of the President’s assassination, entitled “And So The Legend of Camelot Was Born”. Dick ended his post with the following quote from Teddy White, “He advanced the cause of America at home and abroad. But he also posed for the first time the great question of the sixties and seventies: What kind of people are we Americans? What do we want to become?” The question still stands.

From the FCPA Professor

If you have never debated the FCPA Professor, live or via email, you should. But be prepared to bring your A-Game and your authority. He posts daily and has become a great resource for guest posts over the years which challenge the status quo on a variety of legal and compliance issues. Each morning I cannot wait to see what the Professor has to say that day. However, what I have really come to appreciate is his Friday Round-Ups. Each Friday, the Professor gives us a round-up of recent FCPA and related news, articles and developments not otherwise covered by him in his Monday – Thursday posts. I should also say he saves some of his best witticism for these posts. My favorite post from the Professor this year was the milestone of his 100^th Friday Round Up, appropriately entitled “The 100^th Edition of the Friday Round-Up”. Tune in each Friday for another edition of this great resource.

From Jim McGrath

I continually bemoan to Jim McGrath that he needs to post blogs more often than his twice or thrice weekly output. The reason being they are so good and I want to see more of his stuff. As you might guess from the title of his blog, Internal Investigations Blog, he tends to focus on investigations; some criminal, some civil, some internal and some external. McGrath is an ex-prosecutor and tends to view things through that prism and give us a different perspective of law enforcement. He writes about investigations inside and outside the realm of anti-corruption but his insights are certainly applicable to any FCPA or Bribery Act investigation.

My favorite post from McGrath this year was his piece on 7-Eleven, entitled “Human Trafficking Concerns for 7-Eleven in Wake of Payroll Scam”. In this article he detailed the federal investigation into allegations that 7-Eleven franchisees in New York and Virginia had engaged in human trafficking and possible involvement by the franchisor through its payroll system. His piece was a cautionary tale for the compliance practitioner about the need for internal controls, internal monitoring and internal investigations. McGrath ended his post with the following, “Further, its future due diligence efforts as regards suppliers and franchisees should include a review for human rights abuses such as those suggested here. Otherwise, it will have to sell a helluva lot of Slurpees to pay the fines, costs, and disgorgements that a failure to do so will no doubt entail.” In other words, trust but verify.

From Mike Volkov

Mike Volkov has worked at the Department of Justice (DOJ) on Capitol Hill and for Big Law. He now has founded his own firm, the Volkov Law Group and writes the Corruption, Crime & Compliance blog. Mike primarily writes about anti-corruption but he also writes about health care fraud, anti-trust compliance and enforcement and many other topics. While I cannot determine if he set out to have a theme this year, Volkov has written many articles this year which focus on the role and position of the Chief Compliance Officer (CCO), the need for independence and resources required for the position.

My favorite post from Volkov was entitled “The Only Thing [In-House Counsel and CCOs] Have to Fear, Is Fear Itself”. His title is a play-off of what I believe to be the most inspiring FDR speech so that alone is worth the price of admission. He also tells one of the great stories about his days from Big Law. Volkov related that he wrote his views on the UK Bribery Act and the length of time it would take for any meaningful enforcement to take place, “I received a call from the firm’s London partners and was chastised for undermining their entire “marketing” program. (In stark contrast, many clients wrote me and thanked me for my “honesty.)” As my 16 year old daughter might say, ‘Sometimes you just have to keep it real’.

From Across the Pond

If you do not subscribe to thebriberyact.com, you are missing out on the best site for all things UK Bribery. thebriberyact.com guys, Barry Vitou and Richard Kovalevsky QC, consistently give their readers both practical insight and in-depth analysis. Their interviews of the relevant players allow all compliance practitioners to develop insight into what the top UK regulatory officials are thinking about on the Bribery Act. They also write from the very British perspective of understatement and skewering satire, which is more than a ton of fun for us Americans to read.

My favorite post which illustrated all of the above traits was from March and is entitled “Parliament report calls for Bribery Act review: Our opinion – Junk in. Junk Out.” In this post, they took on the call for the urgent scrutiny of the UK Bribery Act by a parliamentary select committee claiming that the Act has met with “confusion and uncertainty.” To this rather inane claim, the guys responded “We cannot think of a piece of legislation which has sparked much more commentary, advisory, much of it on line and completely free, including our own eponymous website.” But my favorite line was their dénouement to the British MP who brought up the need for clarification of the UK Bribery Act, “And, Tony from Alderly PLC, if you’re reading feel free to give us a call.  We can help you.”

My Favorite from 2013 (Think Big)

My favorite blog post of the year was actually posted on December 28, 2012 by Matt Ellis, Founder and Editor of the FCPAméricas blog, which was entitled “Wal-Mart, Go Big on FCPA Compliance”. The reason that it is my favorite of 2013 is because it is the one post that I have thought the most about, talked the most about, read the most about and it even inspired me to write on the issue myself. In his post Ellis challenged Wal-Mart to “go big” on compliance in the wake of its world-wide FCPA investigation and policy implementation. He wrote, “Wal-Mart should instead use the FCPA investigation, and the attention it has generated, as an opportunity. It is an opportunity to go big on compliance.” Ellis went on to detail some specific suggestions that Wal-Mart could implement to help the fight against bribery and corruption that, due to its size and market share, would be in a unique opportunity to put in place.

Within the anti-corruption compliance community there was a noted buzz about Ellis’ piece and his suggestions. I was inspired to write a blog post, entitled “Wal-Mart-Be a Leader in Compliance”, due to the ideas articulated by Ellis. Seemingly inspired by Ellis’ example, Michael Scher, writing in the FCPA Blog, in a piece entitled “Michael Scher talks to the feds”, used the Wal-Mart investigation as a jumping off point to ask the DOJ to resolve several open issues on compliance as he saw them. In others words, Ellis piece (hopefully) got not only Wal-Mart to thinking but several others of us. That is why it is my favorite blog post of 2013.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2013

The Miami Dolphins-A Code Red for Compliance

Tom Cruise: Did you order a Code Red?

Jack Nicolson: You’re G__D__ right I ordered a Code Red.

The above lines were spoken in the movie version of “A Few Good Men”. If there was ever one scene which demonstrated that Tom Cruise can really act; for my money this was the scene. He held his own with Jack Nicholson, while both were just barely controlling anger that almost caused them both to burst.

I thought about the above line while reading and hearing this week about the ongoing imbroglio inside the Miami Dolphins. For those of you who do not follow pro football, Jason Martin, an offensive lineman left the team, allegedly due to the bullying and taunting of another team mate, Richie Incognito. Martin released at least one voice mail which Incognito had left on Martin’s cell phone, which to say the very least could come across as a racist rant. It also appears that Martin was ‘bullied” into paying for certain veterans on the team to fly to and be entertained in Las Vegas to the tune of over $15,000. (A trip which Martin, as a rookie, was not invited to participate in.) Martin has also alleged other taunts and bullying had been directed his way by Incognito. Incognito for his part initially claimed it was all in good fun, sort of ‘boys will be boys’ in the context of a professional football team locker room. He later changed his story to say that Dolphins management, in the form of an un-named coach, had asked him to ‘toughen up’ Martin.

When the story broke earlier this week, Dolphins management suspended Incognito. Since that time, the sports commentariat has been pontificating on this matter non-stop. Additionally, several pro football players have weighed in. Andrew Sharp, writing in Grantland.com, in a piece entitled, “The Miami Dolphins and Everything That Will Never Make Sense” summed up the different camps that pro football players broke into over this story as follows “Some players are pragmatic about what went wrong (Fletcher), a lot of players think the victim should’ve handled this differently, some are just happy that one of the dirtiest players in the league is getting his comeuppance, and others feel like they need to defend Incognito. That’s why the reactions from players have been so interesting. Everything that’s black-and-white to outsiders seems pretty gray among actual football players.”

As one of millions of American males who participated in organized sports over the years, I certainly understand that things are tolerated in locker room that are not tolerated in more polite parts of society. The sports ethos of working things out within the team is a strong one. Finally as a man sometimes you either feel the need to stand up against bullying yourself or at least society expects you to take some self-responsibility and take direct action. But the role of football and the place of the locker room sometimes are antithetical to greater societal norms. A recent example from pro football was the New Orleans Saints ‘Bounty-Gate’ Scandal where an Assistant Coach was caught on tape urging his defensive players to “go after the head” of an opposing quarterback, explaining that if you kill the head, the body will wither and die.

Not exactly the life lessons one would hope to impart in sports.

But what are the compliance lessons from this sordid episode. As you would expect, former football player Jim McGrath wrote about the matter on his site, Internal Investigations Blog, in a post entitled, “Best Focus for NFL’s Richie Incognito Investigation”. McGrath concluded, “What Incognito might have done to a teammate is rotten, seemingly antithetical to team cohesiveness, and injurious to the club’s success this season and maybe beyond. And, sadly, it is not out of character for too large a chunk of today’s NFL talent pool. But it may violate organization-wide rules and – if so – whether the Dolphins did or didn’t enforce those rules is a good focus for this inquiry.”

From my perspective and the lesson for the compliance professional is that allegations of inappropriate conduct must be taken seriously and investigated. It has been reported that the Chinese government investigations into GSK came about from a ‘disgruntled employee’ who did not believe he had received sufficient termination benefits. GSK apparently felt it had sufficient grounds to terminate the employee without the payment of such compensation. I guess not.

For many employees it is about perceived fairness. This would seem to call into play the Fair Process Doctrine, which recognizes that if there are fair procedures, not arbitrary ones, in a process involving rights, people are more willing to accept negative, unfavorable, and non-preferred outcomes when they are arrived at by processes and procedures that are perceived as fair.

In the context of any compliance related investigation, if your employees do not believe that the investigation is fair and impartial, then it is not fair and impartial. Further, those involved must have confidence that any internal investigation is treated seriously and objectively. One of the key reasons that employees will go outside of a company’s internal hotline process is because they do not believe that the process will be fair.

Finally, if any investigation results in discipline, it must not only be administered fairly but it must be administered uniformly across the company for the violation of any compliance policy. Simply put if you are going to fire employees in South America for lying on their expense reports, you have to fire them in North America for the same offense. Failure to administer discipline uniformly will destroy any vestige of credibility that you may have developed.

The Martin/Incognito affair will continue to play out for us all to see. However for the compliance professional, now is the time to review your whistleblower program and other mechanisms for employee reporting of complaints. For if employees do not believe that they are being treated fairly, they can easily become a government whistleblower under the Dodd-Frank Whistleblower provisions or act like the disgruntled employee in China, who blew the whistle on GSK.

And one last thing, do not order a ‘Code Red’ for that employee who is not viewed as a ‘team player’.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2013