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Where I Am Now

6 Sep

I’ve moved!

Open Air Blog is now on the Svbtle platform.

It’s an easy fix: just go to!

Don’t worry, I’ll keep reminding you.


Counting to 10, Internet Fact-Checkers, and Integrating Acquisitions

6 Aug

My saintly mother used to tell me that when I get upset, I should count to 10 before I opened my mouth. It saves you, she would tell me, from saying something that you don’t mean, or that will make you look stupid. This wisdom applies doubly for a writer. Just like you shouldn’t shop when you’re hungry, you shouldn’t write when you’re riled up. I ignored that advice. But thanks to the wonder that is the Internet, I always have people fact-checking my work.

To this particular fact-checker—and you know who you are—thank you for pointing out what I should have caught the first time.

On Friday, I wrote about the Nordam Group non-prosecution agreement, and how Dan Kahn and Stephen Spiegelhalter at DOJ, along with their boss Chuck Duross, plus Nordam’s counsel Carlos Ortiz all had a brain freeze and included a requirement that Nordam train all their third parties.

Turns out, it was me who had the brain freeze, not them.

I wasn’t wrong: requiring a company to train all their third parties is stupid and unrealistic. Totally unworkable.

And if that’s what the Nordam Group agreed to, that would be ridiculous. This is an example of why it’s so important that you actually read all of the NPA, not just the single paragraph that generated so much ire. If I had bothered to actually research rather than just react, I would have written something entirely different, and much more complimentary.

As it turns out, both DOJ and Nordam’s counsel were actually pretty reasonable about training. More than that…very reasonable, incredibly reasonable, perfectly reasonable. Let’s look at what the Nordam Group NPA actually requires Nordam to do vis-a-vis training.

In paragraph 8, Nordam agrees that its compliance program needs to be communicated effectively both internally and “where necessary and appropriate” to agents and business partners. This requirement comprises training employees and, “where necessary and appropriate,” training third parties. It also requires annual certifications of compliance with the training requirements signed by its internal employees and by its third parties, but again, only “where necessary and appropriate.

In fact, I’d find it difficult to find another place where Dan, Stephen, and Chuck could have included “where necessary and appropriate” without it looking like subliminal advertising. “The company agrees to implement financial [cough…where necessary and appropriate…cough] controls that [cough…where necessary and appropriate…cough] ensure transactions will accurately [cough…where necessary and appropriate…cough] reflect….” You get the idea.

What the DOJ required of Nordam makes perfect sense, and allows for exactly the kind of flexibility I accused the Department of neglecting. I would also argue that it’s a loophole that you can drive a truck through, and I would suggest using the biggest 18-wheeler you can find, but that’s another post.

Upon reflection, and upon doing the work I should have done last Friday, I now think this was just the DOJ suggesting that training third parties is a good practice, but recognizing that third parties present their own challenges.

If I were in Chuck’s seat (or Dan’s or Stephen’s) I would likely take a different approach. I would probably require companies ensure that third parties have their own program; I wouldn’t make Nordam export their training to anyone. But the difference isn’t nearly the chasm that I thought it was on my reading of just the one paragraph—which I’ll get to in a second—that I wrote about in the last post.

We’re much closer together than I thought we were, as it turns out. Just a short hop, as it were. I can’t argue with an approach that doesn’t make it too prescriptive. The DOJ seems to recognize that each company in each market is different, and each company’s risk profile is something that can change over time. And the DOJ seems to be indicating that this is something companies should be thinking about based on what’s practical, the market risk, business risk, transaction risk, and other red flags. The DOJ is trying to thread the needle here, and does a damn fine job of it, IMHO (more H, now that I’ve actually read the thing).

As it turns out, the requirement as it’s actually written seems to prove a different one of my central contentions: that the DOJ is extremely reasonable and measured in how it prosecutes corporations.

So where does the offending paragraph from my last post come from?

In paragraph 13 of the NPA, the DOJ talks about how Nordam should integrate new acquisitions. The NPA requires Nordam to do appropriate due diligence [n.b. is “appropriate due diligence” redundant?]

It also requires that Nordam apply its policies to the new acquisition “as quickly as practicable.” Including requiring Nordam to “train directors, officers, employees, agents….” Even here, it only requires this training “promptly.”

Plus, the DOJ includes a separate qualifier: it only requires training of employees of a new acquisition “who present corruption risk to the Company.” I would suggest that this qualifier has exactly the same effect as “where necessary and appropriate” that we saw above.

I’m actually blown away at how reasonable the DOJ is being in this thing, yes? [One assumption I’m making is that this wasn’t something that the DOJ didn’t want in there, but outside counsel did. It’s possible, but I would think, unlikely]. I hear outside counsel say all the time “train everyone.” Even the DOJ isn’t saying that. The DOJ is saying that companies need first and foremost to think. Where’s the risk? How does that risk impact my operations? What’s the most reasonable way to respond to that risk?

In this context, the requirement to train all employees who present corruption risk makes perfect sense. I would suggest the DOJ could have reasonably gone further and required training every employee in a new acquisition.

This requirement isn’t about training everyone in a third party, it’s training everyone in a new acquisition. One problem that we see over and over is companies not integrating new acquisitions. Watts Water comes to mind. If that new acquisition has or initiates problematic transactions, the DOJ has little pity (and rightfully so). Requiring Nordam to integrate “as quickly as practicable” and “promptly” seems eminently fair and reasonable.

I would love to blame Dick Cassin. After all, he made the same mistake. But what’s written on my site isn’t Dick’s responsibility, it’s mine. As soon as I hit “publish,” it became my error.

So, let’s just get past this little SNAFU, shall we, and back to our regularly scheduled ranting and raving? Just better informed.

“The Limit Should Be Zero Dollars”

16 Jul

If you don’t read Mark Herrmann’s column on Above the Law, you should.

Today’s column was on one of my favorite topics: the UK Bribery Act, and the semi-ridiculous advice that companies are getting from “experts.”  By the way, if you want an expert, go talk to Barry Vitou at Pinsent Masons.  There’s an expert.  Let’s remember that there hasn’t been a case brought under the UK Bribery Act yet.  (Yes, I know.  But no, there’s hasn’t been).  So most of the so-called experts are people who have just read the statute, and attended some conferences where other people who have no idea what they’re talking about talk about the UK Bribery Act.

Herrmann talks in today’s column about advice he got about complying with the UKBA.  His approach was that the firm who gave him the advice violated that advice about thirty seconds later.  He said “I could rant at this point about law firms giving utterly impractical advice, but I won’t.”

I will.

What was the advice that Herrmann got?  He attended a law firm presentation on the UKBA, and there was a question asked about what the right entertainment limits were.  The answer he got back exemplifies the problem I have with some outside counsel:

The limit should be zero dollars.  That will keep you safe.

Really?  Zero?

Leave out for a moment that the rest of Herrmann’s column is about how that same law firm sponsored a dinner for some in-house folk.  Let’s just talk about how advice likes this harms not just the giver, but the receiver too.  First, the giver.  The person who gives this advice will give it to one of two types of people: people who know what they’re talking about, or people who don’t.  I don’t know which comes out on the bottom.  If the lawyer is giving this advice to a knowledgeable person, that person will likely politely smile, nod, and then put the lawyer in the “idiot” box in his head, and not listen to another thing that lawyer says.  Which is a problem, because maybe in the future—even a stopped clock is right, twice a day—that lawyer will give some advice the client should listen to.  But getting out of the “idiot” box is a rare feat.

Or the recipient won’t know what they’re talking about.  In which case, like a wide-eyed doe, they’ll just accept what the lawyer says as a best practice.  Heaven forbid they go back to their own company and repeat that advice out loud.  (We’re back to the “Idiot” box).  Or even worse, that they’re in a position of authority, and could implement that advice.

Like I said, I don’t know who comes out worse.  Either way you go, someone’s in the Idiot box.

When it comes to hospitality—and here’s my opinion on this—everyone needs to calm down.

Zero is not the answer.  Herrmann’s concern about “killing the business” is probably also a little overblown, if someone wants to go that way.  It’s uncompetitive, certainly.  But you’d be amazed what the market will adjust to.  It’s not something I would recommend.

The number you come up with is entirely less important than the process by which you determine it.  The number can’t be outrageous, but here’s the thing: the DOJ has never brought a case against a company that came up with a reasonable number, and enforced it.  There are few cases where gifts play any role, none where they play a truly primary role, and absolutely none where the DOJ overruled a business decision.  That’s not something the DOJ does, as a rule.  They don’t take a reasoned decision and say “you made the wrong choice.”  Almost all of the time, the company failed to consider the problem, or considered it but said, “who cares,” or the equivalent.

So pick a number.  I’ve heard companies pick one number globally—say, $150 per person—or use different numbers for each region, or each market.  I’ve seen people use their own internal numbers—that is, whatever they’ll reimburse an employee for, that employee can spend on others.  That’s not a bad idea.

The point is, there is no “right answer” here.  It’s what’s right for you.

Just remember, as my friend and colleague Tom Fox always says, “document, document, document.”  Be prepared to tell the DOJ what your number is, why you chose it, who was involved in the decision, and how you’re enforcing it.  Remember, this is a company decision on how it wants to act.  People should know the number.

This applies not just to meals, but to gifts as well.  Same idea applies.  Whatever you decide, just decide.  Pick a number and stick with it.  Enforce it.

By the way, that “zero dollars” idea doesn’t keep you safe.  The business will ignore it, sidestep it, and will do that for just about any advice you give from now on.  You lose credibility with the business, and that’s the ball game!

I have to admit, though, I was always a softy when it came to gifts.  Absent some totally inappropriate gesture, most gifts are harmless, in my opinion.  Tickets to a ball game (or the Olympics) are not, absent something more, really a problem.  Where you need to be a little more careful is when you’re inviting someone where you have an open tender and that person is the decision-maker.  I’ve seen rules which say “here are the rules for everyone except people from whom we’re awaiting a decision, and for those people, they get gornisht.”  That’s a damn fine rule.  Sometimes, zero might be the answer.

But not usually.  And telling people that in a public setting, in my opinion, puts you in the idiot box.

He Wanted To Be Like Nolan Ryan: Roger Clemens and Why I Left Litigation

7 Jun

I don’t know if Roger Clemens is innocent.

I took some time from my enjoyment of Compliance Week to go watch the Roger Clemens trial.

I haven’t sat in a Courtroom and watched proceedings for a while; a long while.  In fact, I think the last time I sat in a Courtroom at all was when I moved my wife’s admission to the Southern District of New York.  I was a litigator for 12 years, first in Bronx County Criminal Court as an Assistant District Attorney, and then—with less frequency—as a senior enforcement attorney with the Securities & Exchange Commission.

If I learned one thing during the two hours I watched the prosecution and defense duke it out, it’s this:

it was time for me to stop being a litigator.

During the first 50 or so minutes of my watching, the two sides were arguing—outside the presence of the jury—over the admissibility of a slice of videotape.  I don’t know why, but Clemens’ presence on a golf course in early June of—I sh!t you not—1998, is important.  Or not.  Because here’s the thing: in litigation, even the most minor of points can become the focus of a significant amount of time and attention.

Because what the two sides were arguing about wasn’t videotape of Clemens on the golf course, it was tape of a baseball game where the announcer at some point mentioned—during the broadcast of the game—that he had seen Clemens on the golf course that morning.  The announcer was the witness.

The discussion was over the applicability of past recollection recorded, and whether the videotape could come in.  The questioning was ridiculous: “do you have any independent memory of whether your statement on that day was credible?”  I’m a lawyer, and familiar with the rules of evidence, and I didn’t understand what the heck the lawyer was asking.

The witness was incredible given the circumstances and the convoluted questions he was getting asked.  And like a lot of these situations, the potential introduction of the past recollection was short-circuited by the witness finally saying “I remember.”  (Whether he actually remembered or not.  Sometimes the rules are a little ridiculous.)  So he testified that he remembered seeing Clemens on the course on a morning in early June 1998. I call BS.

Anyway, even the defense attorney knew that all this arguing was for nothing: he came over to the people sitting in front of me, and said essentially that the whole thing was a stupid laser-focus on the tiny.  Not even the tree (instead of the forest), it’s the spot on the stem on one leaf on one tree.

But that’s litigation.  You go from the important to the collateral, to the ultra-meaningless in a heartbeat.

That was most of my time at the trial.

The rest of the time was the testimony of Mike Boddiker, former pitcher.  Again, I don’t know the facts of the case—it’s not a trial I’ve been keeping up with—but this guy was good.  Only, he was good for both sides.  He was friends with Clemens, and talked about what an amazing work ethic he had, and how competitive.

The prosecution’s cross can be summed up with one question: “for someone so incredibly competitive, how far would he go to remain at that level?”

The pictures the defense showed Boddiker, of Clemens pitching over the years, could go both ways, too.  Did he maintain his speed and strength because he worked hard, or did he get “help?”  Because all Clemens wanted, according to Boddiker, was to be like his hero, Nolan Ryan.  Better than his hero.

Plus, Boddiker testified that he saw Clemens get a B12 shot.  I don’t know what the story is there.  But I loved his answer to whether he ever got B12 shots: “No.  I’m scared of needles.”

Intensely boring, the whole thing.

It would be bad enough to be the prosecutor.  I can’t even imagine how the second seat prosecutor (or the third, fourth, fifth, and sixth seats) stayed awake.  Yes, there were five or six of them at the table.  Some of these trials last for months.


Time Out For a Little Technology

16 May

Time for a little off-topic technology for you. My friend and colleague Tom Fox always tells me that I need to write this post: what iPad apps I find useful. I’m a voracious user of the iPad. In fact, I’m traveling on business right now, and didn’t even bring my laptop, I find the iPad so completely enough. Just my bluetooth keyboard and my iPad.

But before we get to the iPad, let’s talk about my iPhone 4S, and my Samsung Galaxy Nexus. I recently changed my phone. I got rid of my iPhone 4S. Understand, I’m an Apple guy. I love their products. Which is why I was so disappointed with the 4S. It didn’t work as a phone, and it didn’t work as an iPod. It worked as a computer, for a little while, until the battery ran out, which it did remarkably quickly. And Siri…don’t even get me started.

So I switched.

I went to the Galaxy Nexus for a couple of reasons. I honestly lusted after it as soon as I saw it, but couldn’t justify the expense. But what a great deal I got from Amazon Wireless. $49 bucks for a $299 phone. And on Verizon at that. Yes, AT&T is just that bad.

After a couple of weeks of using Android, what have I found?

1. Flexibility: Winner–Android. What I really like about the operating system is that I can do pretty much whatever I want with it. I love putting a widget on my home screen showing my Evernote notes. And my open emails. And a one-button call-my-wife button. None of this is available on Apple’s system.

2. Ease of Use: Winner–Apple. But all that crap takes some getting used to. And after several weeks, I still haven’t figured out how to do all the things that I could do with one or two swipes on iOS. This is especially true when it comes to sharing video. It was really easy on Apple. Not so easy on Android (but once you figure out how to do it, it’s more powerful…you can share on more places than with Apple).

3. E-mail: Winner–Android. Why Android? One word: attachments. You can attach files to an Android email much easier than you can on the Apple. It would have to be easier: you can’t actually attach a document to an Apple email. But there’s one thing that Apple has that I wish, really wish, Android did. You can switch your “from” field email account from within an email. I found that incredibly helpful when I got an email from one account and wanted to respond from another. On Android, there’s no way to do that, at least not that I’ve found (see #2).

4. Camera: winner–Apple. Hands down. Better camera, better video.

5. Screen: winner–Android, by an inch (actually, by 1.15 inches). The sharpness on the Apple is better. That retina display is just that good. But at 3.5 inches, there’s just not enough of it. The huge, mammoth, neverending 4.65 inch screen on the Nexus is awesome.

6. Interoperability: winner–Apple (but not by much). I use my iPad a lot—a LOT—so one benefit of the iPhone was that it sync-ed seamlessly with my iPad. That whole iCloud thing really worked, in the background, without my having to worry about it.

7. Overall: Android, by a hair. The two things I really wish would be better are the camera/video, and the ability to change email “from” fields. That said, battery life on the Android sucks worse than that on the iPhone. On the whole, though, I can do things easier and faster on the Android than I could on the iPhone. Apple is smoother, and that screen resolution! But I think I’m going to grow into my Android, especially as I get more familiar with the operating system and learn how to do stuff.

Now, on to the iPad.

First, the most useful app I’ve found is called CloudOn. As near as I can tell, it turns your iPad into a thin client into a server running an slightly older version of Word/Powerpoint/Excel. And it syncs automatically and often with your Dropbox account. You can read native Word and Powerpoint documents (I use those much more often than I do Excel spreadsheets), and edit them as if you were in a Windows environment. It’s awesome! I understand there are a couple of different apps that do this now, but I found CloudOn before I found those, and I love the dropbox integration.

Second, Notability. I’ve used just about every notetaking app there is. Yes, just about all of them. So take my word for this, Notability is the current champ. I say “current” champ because until not too long ago, NoteTaker HD had the title. But in the most recent version of Notability, they really improved the handwriting piece, making it pretty cool looking, and easy to use.

Third, Goodreader. If you’re like me, you spend your life reading PDFs. Goodreader makes it easy to (1) read, (2) annotate (including signing a PDF), and (3) email PDFs. In fact, one downside of Dropbox for iPad (which you also need) is that, as far as I can tell, you can’t email a document directly from Dropbox. What I do is open it in Goodreader and email it from there.

Fourth, Pages. I have a bunch of writing apps: Storify, Pages, WordPress (for blogging), and a couple more. I like Pages the best because it syncs to iCloud, and it does everything I need it to do. The only thing I really wish Pages would get is keyboard shortcuts. It’s strange having to touch the screen every time I want to bold or underline something. I don’t really like the WordPress app (I’ve lost two almost-done posts because of battery issues, and because it doesn’t autosave), even though I’m writing this post on it. I’m plugged in, so I’m not as worried about losing data. The WordPress app also doesn’t have a word count feature, which I find more and more irritating.

Evernote. If you don’t know about Evernote, Google it. If they would add due dates, I’d be in Heaven. I love that it’s everywhere: mobile, desktop, iPad, and on my Android phone. And it all syncs effortlessly. It’s about as perfect an app as you can get.

I need due dates in Evernote, though, because I haven’t found a to-do app that I like, at all. I’ve tried a dizzying number of them. I’m partial to Scrumboard if any, but any of them require a good deal of care and feeding.

Some runners-up? Instapaper, for saving web pages (although, I’m just as good with saving the web address to Evernote.) Skype is a must. If you’re a lawyer, look at FastCase HD. It’s free, if I remember correctly, and you can look up just about any court case. LogMeIn works really well on the iPad too. And I love the full computer functionality I get. Navigation within it is a pain, but ultimately worth the hassle.

Three other things you need: a stylus (I like the Bamboo stylus myself because it’s got the smallest nub, which means more precise writing); a keyboard: I like the standard Apple bluetooth keyboard; and a stand: I like the Origami stand: it’s actually a keyboard holder and case which folds up and out to hold your iPad too. Portrait or landscape. And I love that it folds into a keyboard protector.

So there you go. I have lots of other apps, but those are the ones I use regularly (I won’t bore you with the Hulu+ or Netflix apps). I also keep some financial apps on there, like Chase and American Express, both of which have really good mobile solutions.

Oh yeah, Twitter clients. I like a couple. Right now I’m all about the Tweetbot. But on my Android phone, I use Tweetcaster. I used that on my iPad a lot too. It was a little buggy for me, but I’m sure they have that figured out. I’m also fine, honestly, with the native Twitter app. It does the job. I’m not a really what you’d call a “power user” of my twitter clients. If I can read, and post, and retweet, from my one account, I’m happy.

Which apps do you like?

Defending Wal-Mart

23 Apr

I’m thinking that if I wanted to cement my standing as the reigning anti-corruption iconoclast, a headline like this one would do it.  In the face of the indefensible, let me offer a defense.  Or, at least, some mitigating facts which you should take into account.

The overriding thing I thought of when I read the New York Times article was a quote from the New Testament:

When they kept on questioning him, he straightened up and said to them, “Let any one of you who is without sin be the first to throw a stone at her.”

I remember the first thing I thought of when I heard about the Madoff case, and how it was a closed investigation that came back to bite someone.  I thought, “please Lord, let it not be one of my closed cases.”  Because I knew that it could have been me, easy peasey.

For all the trashing of Wal-Mart that’s going on right now, let he who is without sin cast the first stone.

Because while I don’t agree with the FCPA Professor—shocking, I know—that there was barely a violation, I do believe that Wal-Mart’s actions weren’t as uncommon as you’d think.  Parts of them, anyway.  Let me explain.

I would guess that about 95% of corporate internal investigations remain undisclosed to the regulators.  That number may be a bit low.  And while the allegations that the Mexican subsidiary—it’s not really a subsidiary, I suspect, as it’s all just Wal-Mart—changed the reports, and then got assigned, and quickly scuttled, the investigation seem pretty bad, it’s not something that doesn’t happen, and more frequently than you’d think.

So what’s the normal path of an investigation?

Let me digress here for one minute to disclose my own bias.  My background is in prosecuting, and later in creating and managing compliance programs for, large multinational corporations.  My bias when I describe investigations—and compliance in general—is to describe life in large corporations.  Not just the ones I’ve worked at, but at others against whom I’ve benchmarked and with whose compliance officers I’ve spoken informally.  But even then, my extended experience is similarly with large corporations.  Keep that in mind.

The normal investigation path is this: something comes to the attention of legal or compliance.  This can be just about anything: a call from the Wall Street Journal, a formal whistleblower complaint, a “quick question” from someone in the field, or an email.

Assuming that the person receiving the initial information works in the general area of the complaint, he or she might do a little preliminary digging to see if there’s anything worth really looking into.  Just a couple of phone calls, or checking generally available company resources (like who reports to whom kind of stuff).  Then, thinking, “oh, crap!” the person goes to his or her boss and says, “here’s a new issue; I think we need to look into this.”

The case then gets sent to someone to investigate.  Some companies have dedicated investigation resources, some don’t.  Assuming not—I tend to think it’s rarer to have a dedicated investigation staff than not to have one—the person doing the investigation will be in legal or compliance for the affected business unit.  That person may or may not have real investigative experience.  Conducting an investigation isn’t something that comes naturally, even to lawyers.  It’s a skill, and like all skills, disuse causes atrophy.  This assumes, of course, that the person doing the investigating ever knew how to do it properly.  I’ve seen people conduct interviews, and it’s often a combination of NYPD Blue episodes, Matlock, and Columbo.  I learned from the best, starting with Bronx ADAs Linda Tacoma and Bill Zelenka and going through to some incredible people at the SEC.  I learned the art—yes, it’s an art—of the interview from a couple of first-grade detectives, and plenty of second-grade detectives (first and second grade are ranks within the detective bureau; first-grade detectives are the best of the best that the NYPD has to offer).

But since I don’t do it every day, I’m incredibly rusty.  If I were to start up again, my first 10-20 interviews would be awful.  This is my point: a lot of times the person doing the investigating isn’t an investigator.  Besides that this kind of investigation is even more difficult: multi-national, different languages, specialized financial knowledge.  How many lawyers had even heard of the term “gestores” before the article?

Of course, Wal-Mart had internal investigators, but the unit was mired in political haggling.  I’m sorry, but that doesn’t particularly shock me either.  If you don’t think there are politics flying around during an investigation, especially an investigation of a high-performing person or unit, you’re out of your mind.  And remember the all-important distinction: investigators are a cost center.  Wal-Mex was a profit center, and an important one at that.  So those investigators had the chips stacked against them to begin with.

Even so, they found enough to generate some worry.  Here’s where there are some things we don’t know.  Were the results ever disclosed to the Chief Compliance Officer?  Did the CCO go to the Board?

In any event, they reassigned the investigation back to the Mexican subsidiary.  It’s hard to see the thought process behind that, now that we know how things turned out.  On the front end of that decision, who better to investigate the alleged misconduct within the Mexican subsidiary than the people who traditionally probably did investigations in Mexico?  One of the key questions, from a blame perspective, is what did the person who made that decision know before he or she made it.  Was that decision-maker aware of specific and credible information linking the illegal conduct with the person proposed as the new investigator?  If so, that’s a bigger problem.  I suspect, however, that it’ll be somewhat less black-and-white than that.

Once the investigation got turned over to the people allegedly involved in the wrongdoing, it’s clear to us that the investigation would be scrapped.  But that’s a certainty that comes again from hindsight.

And corporate headquarters took that conclusion and said, “fine, we’re closing this out.”  Again, in hindsight, that looks horribly bad.  But look at it from their perspective: they turned over the investigation to the proper in-country team, and heard back that there were no issues.  What was HQ supposed to do?  Yes, certain people within Wal-Mart knew that the watchers needed watching, and it’s an open question who knew what, and when.

Again, what doesn’t shock me is that an investigation—even one started with serious allegations—ended internally.

Because let’s face it, what if they had found illicit conduct?  Does that mean that there’d be an automatic self-disclosure to the regulators?  Not on your life.  Investigations that end with a finding of wrongdoing are hardly ever reported to the government.  I think the small subset of self-disclosed internal investigations generally get reported because there’s a calculus that they can’t keep it quiet.

I think “we’ll be found out” is more of a self-disclosure motivator than “we did something wrong.”

Normally, investigations where wrongdoing was found end with some sort of discipline against the offending party, some remedial actions like additional training, maybe a change in controls, and likely an increased audit periodicity.  Maybe suspension or, less likely, termination for an employee.  A low-ranking employee.  Rarely, if ever, a high-ranking one.  And a high-performer?  Almost never.

Do I sound a bit cynical?  Maybe so.

So the investigation ends.  And the question is raised: do we self-disclose?

Ask any outside counsel and certainly any in-house counsel whether their default position is disclose or not to disclose, and you’re sure to hear “not to disclose.”  I don’t know whether, when push comes to shove, that opinion holds up, but it’s certainly the starting point.

A colleague of mine put it very well: not disclosing is like loading one bullet in a gun with 1,000 chambers and pointing it at your head; disclosing is like putting six bullets in a six-shooter, and pointing it at your leg.

You have a 1-in-1,000 chance of getting found out—like Wal-Mart just has been—and suffering a worse fate (like they will).  Those are betting odds.  But disclosing?  You’ll definitely get stung.

Most companies facing that decision will take the odds.

As did Wal-Mart, according to the article.

Some of what was reported seemed pretty bad.  I don’t think it spells the death knell for the reform-the-FCPA movement.  Nor do I think that it’s another example of the need to eliminate corporate subsidiary liability.

I think that it’s nothing out of the ordinary.  A company conducted an investigation, decided there was nothing to the charges, and didn’t disclose.

Happens every day.


Post Script: One personal story about Wal-Mart.  Several years ago, I reached out to one of their anti-corruption people—at the time, it was a guy named Martin Montes—to benchmark.  Incredibly generous.  So much so, in fact, that two of our people got invited to Bentonville to see it firsthand.  I forget why I couldn’t go, but there was some conflict that sent two others instead of me.  Our people went down there and saw how they worked.  They were open with their processes and policies, and it really helped in the development of our program.

Letter from the DOJ to the 5th Circuit

6 Apr

Yes, Marbury v. Madison is still the law of the land.

And unlike the FCPA Blog’s Dick Cassin, the first time I read the case, I got one thing wrong: who won.  No kidding.

But I have to say that as I read the letter and having listened to the recording of the argument, and the Judge’s request, I don’t think the letter really answers the Judge’s concern.  It’s a thoughtful letter.  I’m sure that the higher-ups at the DOJ were talking about how to handle it.  The President’s initial words were probably harsher than he meant.  Or just as harsh as he meant, with the explicit purpose of “clarifying” the remarks later.  Either way, it was one of those things that probably sounded better in his head.  Once out, I’m just surprised the Judicial Branch didn’t react more strongly.

The letter pretty much ignores the entire piece about what the President said.  It doesn’t, for example, quote the President’s words—neither the initial statement nor the clarification.  It just says “[t]he President’s remarks were fully consistent with the principles described herein.”

No response yet from the Fifth Circuit.


And here’s the recording (the interesting part goes from 18:00 through about 22:00):