When the Government Comes Knocking

I am attending the Global Ethics Summit 2010, hosted by Dow Jones and Ethisphere. Here are my notes, live from this session:

What’s the best course of action when addressing a regulatory inquiry? Many have suggested that having a better than average compliance program to showcase will certainly help your case. But what are some strategies for engaging with your lawyers in these unique cases? And how distant or directly should a company be involved in the discussions with DOJ or other regulators?
When the Government Comes Knocking panel

  • Ty Cobb, Partner, Hogan & Hartson
  • Thomas O’Neil, Advisor, Wellcare Health Plans
  • Eric Feldman, Senior Advisor to the Director for Procurement Integrity, National Reconnaissance Office
  • Hank Bond Walther, Assistant Chief, U.S. Department of Justice
  • Brady Long, Vice President, General Counsel & Secretary, Pride International

Hank started off by sharing his thoughts. It is always good to have a compliance program. When the DOJ comes in, they don’t look at the paper program for compliance, they want to see how it works in execution. The DOJ looks behind the facade. They want to know about training, they want to know what the risks are and how they addressed those risks. Off-the-shelf compliance will not make the DOJ happy.

Eric pointed out the the new Federal Acquisition Regulations require the agency to include ethics and compliance programs as part of their evaluation of potential contractors. Everyone focused on the mandatory disclosure requirements. The government is focused on the due diligence prior to entering into the contract. They want to prevent problems from occurring.

Thomas pointed out that abroad, they think about fear peddling. Largely because the US approach to compliance has not made its way abroad.  You need to have integrity, you need effective self-policing and you need to engage in responsible self-reporting. You need to integrate that into the “marrow” of your enterprise.

The problems at Pride came from acquisitions years earlier. Those organizations were not properly integrated into the overall organization.

Hank agreed that enforcement abroad is not as strong as the US. However, the US is no longer the “only sheriff in town.” Enforcement for corporate misdeeds is on the rise and sharply on the rise in some areas and some jurisdictions.

Hank also pointed out that he sees significant differences between the outcomes for companies that self-disclosed as opposed to those who got caught. (It sounds like there is room for some empirical studies on the treatment. Maybe there are some and I have not seen them yet.) Eric agreed that the end result would be dramatically better if they self-disclosed as a government contractor.

Thomas put a challenge back to Ty about how are big laws positioning themselves to really help companies, in-house counsel and compliance officers be better. The days of talking about waiving privilege and whether to report are over. Law firms need to prove their that their advice is an effective part of the compliance program.

Hank chimed in and agreed with Thomas’s take on the use of outside law firms. The DOJ sends FBI agents to interview executives, to seize records and run stings. They are less likely to do so when you self-disclose.