FCPA Compliance and Ethics Blog

June 19, 2014

What a Long Strange Trip It’s Been – The First 1000 Blog Posts

1000Yes, indeed the Grateful Dead can and does inform your compliance regime as today is my 1000th blog posting on the FCPA Compliance and Ethics Blog. To say that I ever thought I would see this day or this many blog posts, would portend a level of clairvoyance that even Carnac the Great could not conceive of pontificating upon. I had struggled with a theme for this momentous accomplishment but my sublimely-grounded English wife brought me down from the ethereal clouds with the following suggestion, “Even an old dog can learn new tricks.” Nothing like being married to a younger woman.

So today, I want to write about some of the things I have learned on this 4+ year journey, which began in late 2009/early 2010 after a serious automobile/bicycle event (Box Score: Hummer-1 Tom-0) where about the only thing I had on my hands was time while I was at home convalescing. I started to explore the world of social media, engaging on Twitter, webinaring from my home office and blogging. I was so un-savvy in this arena that about the only positive thing my teenaged daughter could say about me was “Dad, you are so unhip, you are retro. But that is cool too.” The first thing I learned was that even a complete computer misfit and social media idiot could set up a blog on WordPress. It is not only easy but free. I cannot say with any pride that some of my early blogs were very good but I can say that for a lawyer, whose only skill was to be able to perform word processing in Microsoft Word, I could type and then upload a blog post into WordPress. At that point in my blogging career, that was a major accomplishment.

Although it did take some time, I learned how to stop writing like a lawyer, with full citations in each blog, coupled with as much lawyerese as I could manage, by finally adjusting to a blogging format. I also relearned an old lesson, which says that if you really want to learn about a subject, write on it. I remember one of the first things I learned when researching the Travel Act was that this Kennedy era law, passed largely through the efforts of Bobby Kennedy, was designed to help in the fight against organized crime. So who would say a 60 year old law cannot be used for a 21st century purpose? Or maybe even a Watergate-era like the Foreign Corrupt Practices Act (FCPA) could not have an expansive use, beyond that for which it was passed in 1977? I also learned that if you put out solid content people will read and listen to what you have to say.

I learned there are some great people out there blogging in the ethics and compliance space. I have met some fabulous colleagues through my blogging who have not only been incredibly supportive but whom I now cherish as good friends. Some of them include Mike Koehler, the FCPA Professor, for his scholarly rigor and continued intellectual challenges. Dick Cassin, the Dean of FCPA bloggers, for his unflinching support to myself and so many others. Mike Volkov, former prosecutor and DC-insider, who is always around to bounce a tough question off. Howard Sklar, who was my This Week in FCPA podcast partner, until we lost him to the corporate world. Francine McKenna, a great and generous mentor for myself and many others and the go-to person all issues in and around the accounting world. Jim McGrath, the internal investigations guy, who brings a former state prosecutor’s perspective to how investigations should be handled and critiqued. Matt Ellis, whose focus on and insights into South America (as in – it’s not a country) continue to shine a light on anti-corruption issues south of the border. Matt Kelly, Editor of Compliance Week, who saves some great witticisms for his weekly blog posts. These are but a very few of the folks I am now privileged to call friends because of my blogging.

I learned that there is way too much white noise in the FCPA space. The FCPA Professor calls them FCPA Inc. and Mike Volkov derides them as the FCPA paparazzi. Whatever you might call them, they put out reams and reams of information, sometimes useful but many times not. What I have tried to do is synthesize some of the most useful for the Chief Compliance Officer (CCO), compliance practitioner or anyone else who does the day-to-day work of anti-bribery/anti-corruption compliance. There are many, many things you can know but a far smaller subset of what you need to know. I try to bring to the compliance practitioner what they need to know. That is why the subtitle of my blog is ‘The Nuts and Bolts of FCPA Compliance’. I have tried to write about things which the compliance professional can use in the everyday practice of compliance.

I have learned that blog posts, which I thought were the most important, may turn out to be the least viewed blogs. Conversely, posts I did not think would be of great interest turned out to have the largest number of one-day hits. For instance, the largest single number of one-day hits I had was an article from two years ago about the SNC-Lavalin corruption investigation in Canada. [For a blog about FCPA compliance-go figure.] The second largest number was a recent blog post using the GM internal investigation as an exploration in the differences between a corporate legal function and its compliance function.

I have learned that by committing to something, you become much better at it. My first year of blogging, I tried to put out 2-3 blogs per week but beginning in 2011, I committed to a daily blog post. Once I made that commitment, blogging became a part of my workday. Once it became a part of my workday, it was like any other project or assignment. I had to set aside the time to work on it. It has made me a much more efficient and better writer to know that I need write something, during my workday. Yes there have been times I was up at 5 AM to write a post or stayed up way past my school-night bedtime trying to crank something out but those situations have become few and far between as I became more disciplined about my blogging.

But most of all I have learned that blogging is fun. It is fun because it is a challenge to write about something in an informative and engaging manner. It is fun to tie a Shakespeare play to a compliance and ethics theme. It is fun to read a week’s worth of Sherlock Holmes’ stories and tie a compliance topic to a story each day for one week. It is fun to find out what happened this day in history and use it as a hook to grab your readers’ attention. It is fun to engage in a debate with the FCPA Professor on a topic of mutual interest, where we look at the same thing, yet see it from different perspectives. And it is fun when you meet someone for the first time and after you introduce yourself, they say to you “When is a rose, not a rose? When it’s a FCPA violation”.

Where will the next 1000 blogs posts take me? I have no clue but if they are as much fun as the first 1000 posts have been I hope that you will continue to join my on This Long Strange Trip.

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

May 3, 2011

Warren Buffet, Berkshire Hathaway and the End of Armageddon-Some Lessons Learned

We have previously written about the importance of getting your investigation right before publicly announcing the results.  In other words, do not allow your CEO, as Renault did, to go on national television and decree that three (former) executives had foreign bank accounts filled with money from the sale of company trade secrets, unless you have such facts in your possession. This lesson has been recently driven home here in the US by the Oracle of Omaha, Warren Buffet with his remarks at the time of the resignation of company executive David Sokol.

As quoted in the Wall Street Journal, on when company executive David Sokol resigned back on March 30, Buffet said that he thought Sokol’s actions were not “in any way unlawful” when Sokol purchased stock in a company, Lubrizol, that he later recommended that his employer, Berkshire-Hathaway, purchase. However, the WSJ reported that this past Saturday, Buffet said that Sokol’s purchases violated the company’s insider trading rules and its own Code of Conduct. Further, Buffet was quoted as saying the company had found some “very damning evidence, in my view” about the trades and had turned this over to the Securities and Exchange Commission (SEC). According to today’s New York Times, Sokol’s lawyer denied this claim and was quoted as saying, “At no time did Mr. Sokol violate any law or any Berkshire policy.”

What caused Buffet to change his view on this matter? As reported in the New York Times, on April 27 the Board of Directors “released a scathing report accusing Mr. Sokol of misleading Berkshire about his Lubrizol trades and violating the company’s ethics and insider trading policies.” In other words, it appears that Buffet’s initial statement back in March was made before the facts had been fully investigated. Sound familiar?

So how does all of this relate to the compliance world? We believe that there are at least three lessons to be learned from this matter.

1.     Aim Before You Fire Off

As with L’Affaire Renault, we believe that a company needs to get the best handle on the facts that it can before going public or disclosing to the SEC any allegation of violations of US Securities Laws. Any allegation of conduct by any senior management official, which violates US laws, must be taken seriously but a thorough investigation must occur. Just as Renault fired off too early by proclaiming facts that have never been found to exist, here Buffet claimed there was nothing to be concerned about less than one month before his own company’s Board came to the opposite conclusion after an investigation.

2.     Process and Procedure Apply to Everyone

As also noted in today’s New York Times, this matter “reveals a lack of appropriate corporate governance and controls nonetheless.” My friend Francine McKenna has written an excellent piece on this matter which is entitled, “Slippery People: Corporate Governance at Berkshire Hathaway.” One of her points is that with the decentralized governance and control structure present at Berkshire Hathaway, the company operates “at low levels of internal controls.” In any best practices compliance program, internal controls are a key mechanism to detect violations. Even if a company’s business model is successful due to lack of internal controls, it may fail a compliance examination if there is no oversight of senior executives.

3.     What Did You Do When You Found Out?

Fairly early on in my compliance career I heard Paul McNulty speak and provide his thoughts on how the Department of Justice (DOJ) looks at Foreign Corrupt Practices Act (FCPA) issues. His remarks have stuck with me. He gave his perspective on the three general areas of inquiry the DOJ would assess regarding an enforcement action. First: “What did you do to stay out of trouble? Second: “What did you do when you found out?” and Third: “What remedial action did you take?

So what did Buffet and by extension, his company Berkshire Hathaway, do when they found out. Initially, they announced Sokol was resigning and Buffet made the statements of support. This is certainly not what the DOJ or SEC expect. If there is evidence of misconduct which could violate Securities Law, they expect that the company would self-report the incident and there would be company sanctions against the employee.

This second point is also critical in setting the “Tone at the Top”. Buffet is viewed by many literally as the “Oracle of Omaha” but the message he sent in his supportive statements in March may well have sent the wrong message to company employees. This message may have been corrected by the release of the Board report last week and by the actions of the company going forward. However the damage may have been done. Berkshire Hathaway may have to work very hard to remedy the company’s own internal perception now.

We can only hope that all of this will drive home to all company’s the need for rigorous enforcement of its own Code of Conduct as a first line defense against FCPA violations. However, this episode shows the vital role that internal controls plays in an overall compliance program. I am always reminded of then President Reagan’s words to General Secretary Gorbachev regarding the agreement to reduce and dismantle each country’s nuclear arsenal, “Trust – but verify.”

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If you are in Phoenix or San Diego, the World Check FCPA Tour will be in your city this week. Please come out and here about the most current FCPAbest practices.

Tuesday, May 3 from 8-10 AM PDT at McCormick & Schmick’s Seafood Restaurant, in Phoenix, AZ. For information and registration details click here.

Wednesday, May 4 from 8-10 AM PDT at San Diego Marriott Del Mar: Santa Fe Ballroom, in San Diego, CA. For information and registration details click here.

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My colleague Howard Sklar had an interesting idea. It was that he and I do a video chat each week on the past week’s stories from the world of compliance. We have begun this journey and the results are “This Week in FCPA“; which can be found here.

Every week, Howard and I will get together and talk about the week’s events in FCPA. This week, we talk about the UK Bribery Act, and how companies should react; we discuss the Johnson & Johnson deferred prosecution agreement and J&J’s added undertakings; and we discuss the recent challenges to the idea that state-owned entities can be foreign officials. We also talk about what contract provisions should be in every contract, and whether audit rights are a good thing or not.

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, 2011

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