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

How to Build a Culture of Ethics and Compliance: The Greatest Article Ever – Part I

Donna Boehme and Jim McGrath continually rail against the notion that a ‘rogue employee’ causes the majority of bribery and corruption charges under such laws as the Foreign Corrupt Practices Act (FCPA) and UK Bribery Act. Companies continually claim that they do business ethically and in compliance with such anti-bribery and anti-corruption legislation and that it is only one or a few of ‘them-those pesky rogue employees’ who have brought the company to grief. Even GlaxoSmithKline PLC (GSK) is now beginning to distance itself from its Chinese business unit and executives who confessed to engaging in bribery and corruption to sell GSK products in China.

The first problem with this ‘rogue employee’ claim is that it is wrong. The second problem is that by making this bogus claim and denying that it was a company failure; a company may well never correct the underlying problem which led to the compliance failure. However if a company does not recognize its role in any such compliance catastrophe, it will probably have a repeat of a similar event in the not do distance future. Once again witness GSK, which agreed, in 2012, to a $3bn fine for fraud in marketing of its products and within one year is caught up in allegations of corruption in China.

I recently read an article in the summer 2013 issue of the MIT Sloan Management Review, entitled “Designing Trustworthy Organizations”, by the quartet of authors: Robert F. Hurley, Nicole Gillespie, Donald L. Ferrin and Graham Dietz. In this article, the authors address the question of “How can companies recover from trust failures and create reputations for trustworthiness?” Let me put this as succinctly as possible – IF THERE IS ONLY ONE ARTICLE THAT YOU READ ON ETHICS AND COMPLIANCE IN 2013 THIS IS THE ONE TO READ. This the single best article I have ever read as it gives a specific road map to the compliance practitioner, in-house counsel or any other business executive on how to instill a culture of ethics and compliance in your company. I will be discussing the article over my next three posts. Today I will look at why such ethics and compliance failures occur from an organizational perspective; in Part II I will talk about how to build ethical organizations which do business in a compliant manner, and in Part III I will conclude with the steps a company can take to rebuild trust in an organization after a catastrophic failure.

Signals of an Ethical Business

In the FCPA Guidance, both the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) make clear that paper compliance which companies only employ to “check-the-box” on compliance with the FCPA are doomed to fail. The FCPA Guidance states, “A well-designed compliance program that is not enforced in good faith, such as when corporate management explicitly or implicitly encourages employees to engage in misconduct to achieve business objectives, will be ineffective. DOJ and SEC have often encountered companies with compliance programs that are strong on paper but that nevertheless have significant FCPA violations because management has failed to effectively implement the program even in the face of obvious signs of corruption.” This is a clear recognition that more than simply having a compliance program in place is required to make it effective. Unfortunately many companies seem to believe that simply having an ethics and compliance program in place is sufficient.

While the authors write about ‘trust’ I believe that their research, findings and framework all translate to ethics and compliance; so I will make that substitution throughout my discussion of their article. To begin their discussion, the authors believe that there are “six identifying signals” that employees consider when deciding to follow a company. They are:

1. Common values: does the company share our beliefs and values?
2. Aligned interests: do the company interests coincide, rather than conflict with ours?
3. Benevolence: does the company care about our welfare?
4. Competence: is the company capable of delivering on its commitments?
5. Predictability and integrity: does the company abide by commonly accepted ethical standards and is the company predictable in how it behaves?
6. Communication: does the company listen and engage in a dialogue or not?

Why Do Ethical and Compliance Violations Occur?

Here the authors begin with a definition. They define trust as “a judgment of confident reliance on another (a person, group, organization or system) based upon positive expectations of future behavior.” For the compliance practitioner a violation of that trust occurs and there is unethical behavior which is not in compliance with the norm, for example when “a party significantly deviates from positive expectations” by engaging in such conduct as bribery and corruption. The authors believe that they see such conduct condoned, explicitly or tacitly from management, they also lower their own personal expectations of the type of conduct they will personally engage in.

Such a failure leads to individual employees engaging in bribery and corruption. However, the authors make clear that this is not down simply to the individual or ‘rogue’ employee but such unethical conduct is “predictable in organizations which allow dysfunctional, conflicting or incongruent elements of their organizational system to take hold.” The authors cited three examples where this played out with devastating results for companies. The first was the Mattel Corporation, which had a strong reputation for quality but weak oversight of its supply chain led to production of contaminated toys and a massive toy recall. The second was BP and the Deepwater Horizon disaster, where the company’s strategy and culture of minimizing costs to enhance profitability conflicted with its stated emphasis on safety; all leading to a multi-billion dollar claim. Finally, Goldman Sachs and its role in the Abacus fund where “investigators found that Goldman’s stated values of client focus and integrity were at time overshadowed by a less formal culture that emphasized getting deals done with less than full disclosure.”

The authors noted that in all three examples they cited, each company had extensive systems processes and procedures in place to produce “trustworthy behavior”. However there were “other elements undermined the companies’ ability to deliver on their core responsibilities.” Recall that as part of its $3 billion settlement GSK agreed to a Corporate Integrity Agreement (CIA). The company had a Compliance Committee, whose job was to oversee full implementation of the CIA and all compliance functions at the company. The company had Integrity Champions within each business unit and management accountability and certifications from each business unit. Training of GSK employees was specified.

GSK’s Code of Conduct stated, “The GSK attitude towards corruption in all its forms is simple: it is one of zero tolerance, whether committed by GSK employees, officers, complementary workforce or third parties acting for or on behalf of the company.” The company had a Third Party Code of Conduct, which required that third parties shall conduct their business in an ethical manner and act with integrity.

All of this was backed up by “a Global Ethics & Compliance team which is responsible for providing oversight and guidance to ensure compliance with applicable laws, regulations, and company policies, as well as fostering a positive, ethical work environment for all employees.” The Code of Conduct also stated that “GSK has an active system of internal management controls to identify company risks, issues and incidents with appropriate corrective actions taken. Our Risk Management and Compliance Policy provides the framework for these internal controls, to ensure significant risks are escalated to the proper levels of senior management.”

The authors research led them to several different areas of organizational weakness which allow for ethics and compliance violations to occur. Company leaders “focused on fundamental aspects of how the organization functioned: organizational restructuring and instability; poor support and follow-through; poor talent management; lack of communication and information; and leadership and strategies.” Interestingly, when employees were interviewed they had the following thoughts on how to improve ethics and compliance, “improve communication, enhance senior management capability, provide more accountability for performance, empower employees and enhance collaboration groups.”

Yet in their examinations, the authors found “one type of incongruence that frequently led” to breakdowns in doing business ethically and in compliance. That breakdown came when the interests of one stakeholder group was favored over another stakeholder group. The authors identified some various stakeholders as shareholders, employees, customers, suppliers and communities. The authors said that this incongruence has “been defined as letting shareholder profits take precedence over core responsibilities to other stakeholders.” But it is simply more, than serving on stakeholder better than the others. It is favoring one stakeholder to the extent of “the expense of and even causing harm to” other stakeholders.

In other words, if profits are put ahead of all other measurements for an employee, that employee will get the message and make sure that he or she makes their numbers. The authors conclude this section by noting that with the current 24 hour news cycle and social media, what may have been yesterday’s event can rapidly spiral across the globe and out of control more quickly than ever. Once again witness just how quickly GSK seemed to be on notice of allegations of corruption and bribery in China to the time its Chinese employees admitted to such conduct on state TV. It was mere days.

In tomorrow’s post I will look at building high trust in organizations and how that relates to ethics and compliance.

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

A Cornucopia of Great FCPA Articles for Your Friday Consideration

It has been a great couple of weeks for article regarding the Foreign Corrupt Practices Act (FCPA). While I have resisted having a Friday Round Up of all things FCPA compliance related because both the FCPA Professor, on his site and Dawn Lomer on iSight.com have two of the best, some of the articles that I have read over the past are well worth a post about. So with a tip of the hat to both of these blogging colleagues, I submit for your Friday consideration the three following authors with their superior articles.

The FCPA Professor

The FCPA Professor has published two excellent articles over the past two weeks on the FCPA. The first was his 80 page tome, “The Story Of The Foreign Corrupt Practices Act”. In this article, published in the Ohio State Law Journal, the Professor explored the more than two years of investigation, deliberation, and consideration, which led to the passage of the FCPA in 1977. Noting that it was  “a pioneering statute and the first law in the world governing domestic business conduct with foreign government officials in foreign markets” the Professor wove together “information and events scattered in the FCPA’s voluminous legislative record to tell the FCPA’s story through original voices of actual participants who shaped the law.” In his article I learned who supported legislation aimed at stopped the bribing of foreign government official and how the final legislation came into being after a long and arduous process.

This week, the Professor published his review of the Department of Justice FCPA Guidance, which came out last month, entitled “Grading the Foreign Corrupt Practices Act Guidance“. It was published in Bloomberg / BNA’s White Collar Crime Report. As you have come to expect from the Professor, his review is proactive. His abstract details some of the items he discusses, such as “(i) the enforcement agencies’ motivations in issuing the Guidance and the fact that it should have been issued years ago; (ii) the utility of the Guidance from an access-of-information perspective and how the Guidance can be used as a measuring stick for future enforcement agency activity; (iii) how the Guidance is an advocacy piece and not a well-balanced portrayal of the FCPA as it is replete with selective information, half-truths, and, worse information that is demonstratively false; (iv) how, despite the Guidance, much about FCPA enforcement remains opaque; and (v) how, despite the Guidance, FCPA reform remains a viable issue.”

As I once said about Dick Cassin and his FCPA Blog, “If the FCPA Blog didn’t exist, someone would have to create it and fortunately for us Dick has done so.” To this list I now must add the FCPA Professor, so to paraphrase Paul Samuelson, when asked to comment about Milton Friedman winning the Nobel Prize in Economics, “if the FCPA Professor didn’t exist, we would have to invent him.” You can agree or disagree with the Professor but he stirs debate and puts out topics for dialogue, which as the son of Professor, is what I think that academicians should do.

 Alexandra Wrage

For the longest time, my This Week In FCPA colleague Howard Sklar crowed to me about Alexandra and how he was such a big fan. Of course I knew of her and her work as President of Trace. Like many of us, I bemoaned the fact she no longer blogs on a regular basis. She does speak on a regular basis and early this year I heard her speak at the Beacon Events Corruption and Compliance South and Southeast Asia Summit. Fortunately she spoke after I did because she is a very dynamic speaker. In addition to her numerous speaking engagements, she does publish articles from time-to-time and yesterday we were treated to a most timely article on gift giving and gift receiving. It was published on the Corporate Insider blog site of Corporate Counsel and was entitled, “‘Tis the Season When Gifts Become Bribes”. In her article, Wrage explored the receipt of gifts by employees in the context of corruption. The article is certainly worth your time to read but she listed the points that any company or compliance professional needs to consider in a gift giving or gift receiving policy:

• Gifts should be modest, tokens of esteem.
• Ideally, they should bear the corporate logo or reflect the company’s products and they should be provided openly and transparently.
• Delivering to an office is preferable to sending to a home address.
• One gift-giving holiday or event should be observed. It doesn’t matter if it’s Diwali, Eid, the Lunar New Year, July 4th, or Christmas, but pick (only) one.
• Perishable gifts of flowers or food are generally thought to be less risky, in part because they can’t be resold.
• Give consistently and without regard to pending or recent procurement or other official decisions.
• Follow corporate policy.
• Document everything.
• Give in good faith and without expectation of any quid pro quo.
• A moderate annual affirmation of both new and longstanding relationships is not a bribe.

Good ideas to follow any time of the year.

Jim McGrath

Jim is a former prosecutor and chief legal officer of a federally funded drug task force so he comes with a different perspective than my civil law background. Jim blogs on his own site, the Internal Investigations Blog and as you may discern from the name of his blog, he tends to look at the investigative side of things. He did so again in a post entitled, “Little Things Mean A Lot: The FCPA Guide on Internal Investigations”. McGrath looked at the DOJ FCPA Guidance from his investigative perspective and came up with the following nugget: “An effective compliance program should include a mechanism for an organization’s employees and others to report suspected or actual misconduct or violations of the company’s policies on a confidential basis and without fear of retaliation. Companies may employ, for example, anony­mous hotlines or ombudsmen. Moreover, once an allegation is made, companies should have in place an efficient, reliable, and properly funded process for investigating the allegation and documenting the company’s response, including any disciplinary or remediation measures taken.” From this he wrote that the “text mandates that companies not only have “in place an efficient [and] reliable . . . process for investigating [an] allegation”, but that it be “properly funded” as well.  [italics in original]

McGrath believes that this language should raise concerns for Chief Compliance Officer “across the land, since “properly funded internal investigation” has now been added to the pile of ill-defined terms such as “foreign official”, “instrumentality”, and “anything of value”. Further he raised the following questions:

• What happens if the unforeseeable occurs and the wheels come off in far greater severity than anticipated when the CCO stocked the internal probe war chest?
• Will that shortcoming be considered a hallmark of a less-than-effective compliance program and militate against a non-prosecution or deferred prosecution agreement or will it factor into a higher culpability score and greater penalties?
• And who – as if practitioners didn’t know – will decide these issues?

I recommend all of these articles and authors to you. Each brings a different perspective and each can help you build, create or enhance your compliance program to meet best standards. A good Friday to all and let us hope that the Texans can recover from their debacle in Boston.

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, 2012

Football, Compliance and Blogging-Jim McGrath

Ed. Note-in this post I continue my interviews of persons I read and follow in the social media world related to FCPA and compliance. In this article I post an interview with Jim McGrath, well known and long suffering Cleveland Browns fan who blogs at The Internal Investigations Blog.

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

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.

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, 2012

15 (FCPA) Blogs Sites to Check Out on April 15

For some time now I have wanted to write about who I read and why, so in honor of April 15, I thought it might be a good idea to list 15 favorite blog sites. Below is a list of my favorites and as this blog provides my spin on all things related to the Foreign Corrupt Practices Act (FCPA) arena here we go…

The First Blog I Read Each Day

FCPA Blog/FCPA Professor – I know I said “the” first but it is always one of these two, depending on how early in the morning it is and where the mouse pointer ends up when I make the first click. But regardless of which I read first, here is why they are the first.

FCPA Blog – Richard Cassin is the ‘Dean’ of FCPA bloggers. If you want to know what is going on in the FCPA, or wider compliance world on a once, twice or thrice times daily basis, this is the blog for you. In addition to Dick’s own posts, he gets the crème-de-la-crème of the world’s anti-bribery and anti-corruption writers to send in posts. If the FCPA Blog didn’t exist, someone would have to create it and fortunately for us Dick has done so.

FCPA Professor – Professor Mike Koehler on all things ‘legal’ in the FCPA world. If you want to know the latest Department of Justice (DOJ), Securities and Exchange Commission (SEC), federal court or anything else FCPA-thinking, from the law perspective, this is the blog for you. Always insightful, and provocative, if you want to hone your Socratic method, parry and thrust via email with the Professor. I guarantee you will learn quite a bit, I know I have.

After I get through these I tweet about them so everyone else can enjoy their collective wit and wisdom then it’s off to the following sites…

Corporate Compliance Insights – A collection of all things compliance, with a starting rotation and bullpen of great authors and contributors. But more than simply blogs, it has job postings, career advice and a broad list of resources for the compliance practitioner. And here’s the best part-it’s all free. Maurice Gilbert and his team have put together an outstanding compliance resource.

Open Air Blog – How can one best describe Howard Sklar’s blogging; withering, skewering, contrarian; he describes himself as “a crusty, irascible curmudgeon.” Here’s how I would describe Howard – one of the best compliance practitioners and commentators around. His insights are great and he uses the right touch of humor and real-world examples to get his point across. His blog is great and a ton of fun to read so saddle up and enjoy the (compliance) ride.

Corruptions Currents – From the Wall Street Journal, Sam Rubenfeld and Joe Palazzollo blog all-day on all things related to the anti-corruption world; FCPA, AML, Whistleblowers, Sanctions and General Anti-Corruption are all covered in this blog. Both journalists were jointly named by Ethisphere as one of the 100 most influential folks in the anti-corruption world. Great coverage, great insight AND it’s from the Wall Street Journal.

From across the pond…

thebriberyact.com – If you only have one resource for all things UK Bribery Act related, you could not find a better site. Barry Vitou and Richard Kovalevsky have put together that rarest of all blog sites, one that covers an entire subject in-depth, with both practical insight and 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.

From North of the Border…

i-sight investigation blog – Lindsey Khan provides excellent insight on a wide variety of compliance topics. As with most advice we Americans receive from our Canadian cousins, her blogging is direct with practical guidance on how to navigate compliance challenges. She often provides Templates with her blogging to give you specific guidance on the ‘how to’ of compliance. So get thee to the Great White North and check out i-sight.com

The Business Ethics Blog – Chris MacDonald teaches Philosophy, including business ethics, at Saint Mary’s University and fortunately for the rest of us, he blogs. If you believe either “a) that corporations have a god-given right to accumulate as much capital as possible without regard for who gets hurt along the way; or b) that all corporations, and all people who work for them, are inherently evil, you will probably be irritated by [his] blog.” However, the rest of us can learn quite a bit from this thought provoking blog.

For Export Control…

International Trade Law News – My favorite site for all things trade compliance. Fellow UT Longhorn Doug Jacobsen has put together a great site for export controls, sanctions, customs law, FCPA, antidumping and other international trade issues. He touches on the FCPA from time-to-time but he is “The Man” for me to catch up with all issues relating to export control.

Subscription Required – Sorry but you have to pay to read these great blogs…

Compliance Week Blogs – Matt Kelly has put together a plethora of all-star bloggers for his publication Compliance Week. Bruce Carton on the SEC; Melissa Aguilar on Regulatory Developments; Tammy Whitehouse on Accounting and Auditing; Neil Baker with his Global Perspectives; Jaclyn Jaeger with the Scuttlebutt and the Man, Matt Kelly himself. Any of these bloggers would be worth a solo listing but to have them on one site is fantastic.

JustAnti-Corruption – Editor Mary Jacoby and Reporter Chris Matthews blog throughout the day on anti-corruption and anti-bribery issues from a DC perspective. Both are great journalists and both have first-class sources. It puts information to us out in the provinces (as in ‘Outside the Beltway’) on what the DOJ is doing and thinking on all things FCPA.

Aggregators-they put it all together for you.

MyCorporateResouce-Nick Montgomery is the hardest working man I know of in the blogosphere world. He manages to post literally hundreds of blogs each day, all focused for the in-house corporate lawyer. He has a specific FCPA site, which is found in the Client Memos, International Trade Sub Menu, Foreign Corrupt Practices Act. He posts blogs from Blue Chip law firms so the information is well, blue chip. It is a fabulous resource for all things an in-house counsel would need to know and a wonderful FCPA resource.

Law Agents-this site announces that “With over 1,400 subscriptions by users, lawgents.com is the internet’s largest free law related news and blog aggregator.” How is that for an opening line. Best of all, its free and you can join, post or just use as a resource.

New Kids on the Block – Note I didn’t say young but these two guys have recently started blogging and from what I know of them, their stuff will be high quality.

Internal Investigations Blog – Cleveland attorney Jim McGrath focuses on all aspects of investigations relating to anti-corruption, anti-bribery, corporate fraud and employee-related theft. His blog is broader than simply the FCPA but just imagine the results of L’Affaire Renault if that company had read Jim’s blog before firing the soon to be multi-millionaire ex-employees.

White Collar Defense and Compliance – and finally… Mike Volkov has started up his own blog. For anyone who has heard Mike speak or read any of his Client Alerts you know this guy knows his stuff. I often wonder how he puts out so much material and manages to practice law, but he does and we, and the greater compliance world, are better for it. So check him out, as in now.

So that is my 15 ‘faves’ list. If you are not on it, please don’t take it personally, I’m sure that I read your blog and tweet about you.
So while you sit and contemplate my 15 favorites remember its April 15th and if you haven’t done your taxes yet…get that extension filed…

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

UK Bribery Act Guidance: the Six Principles of a Non-Skewered Compliance Program

The UK Bribery Act guidance is out and the reaction has been across the board. Here is just a sampling of it. Mike Volkov, in the FCPA Blog brought up Yogi Berra by noting, “If you don’t know where you are going, you might wind up someplace else.” He used this quote to lead into a piece entitled, “Life after Guidance: No Change”. This complimentary use of an American icon, whose use of the English (American version) language is legendary stands in contrast to Bill Waite, a founder of The Risk Advisory Group, also writing in the FCPA Blog, went further and termed the guidance “questionable”.  Jim McGrath, writing in his Internal Investigations Blog, says that companies subject to the Bribery Act had better “put on a (crash) helmet” for it may well be a bumpy ride. Even the Wall Street Journal got into the act, with an article entitled, “Britain Backpedals on Bribery Act.”

However all of these pundits pale next to the skewering given the Guidance by our colleague Howard Sklar, who is working through the Case Studies on his OpenAir Blog. They make for great reading by the way, so head on over to the Open Air Blog with a tall “cool one” and watch him skewer the Case Studies and then enjoy “Bar-Be-Que Case Studies ala Howard”. You should note that Howard has promised that “I’m going to write my own version of the Guidance. The guidance as it should have been written.” That, my friends will be well worth the wait.

However we do not feel that the Guidance deserves quite so harsh a judgment and indeed welcome the Guidance. The reason is that we welcome any interpretation of new legislative from one of the world’s strongest anti-bribery and anti-corruption regimes; as it puts into the hands of compliance professionals information on current best practices of an anti-bribery and anti-corruption program. We believe that the Guidance fulfills that mission. In this posting we will set out the Six Principles and in subsequent postings we will discuss each Principle in detail.

The Guidance provides valuable information on not only what the UK Ministry of Justice considers a best practices program but it is also a benchmark by which any US compliance practitioner can use to assess their company compliance program. Further they are not, as Lanny Breuer has suggested, “formulaic” but are intended to be “flexible and outcome focused.” With this in mind, we set out the Six Principles listed in the Guidance.

I. Proportionate Procedures-A company’s procedures to prevent bribery by persons associated with it should be proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organization’s activities. They are also clear, practical, accessible, effectively implemented and enforced.

II. Top-Level Commitment-the top-level management of a company, be it a board of directors, the owners or any other equivalent body or person must be committed to preventing bribery by persons associated with it. They foster a culture within the organization in which bribery is never acceptable.

III. Risk Assessment– a company should assess the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.

IV. Due Diligence-a company should apply due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organization, in order to mitigate identified bribery risks.

V. Communication (including training)-a company should seek to ensure that its anti-bribery and anti-corruption policies and procedures are embedded and understood throughout the organization through internal and external communication, including training, that is proportionate to the risks it faces.

VI. Monitoring and Review-a company should monitor and review its procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.

So there you have it. Is it useless, good only for a bar-be-que or make you want to put on a crash helmet? I hope not but even if it does, please stay tuned for out next couple of segments on the Guidance.

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