Compliance Bricks and Mortar for November 30

These are some of the compliance related stories that recently caught my attention.

What’s the Solution for Boring and Ineffective Compliance Training? by Joe Murphy in Corporate Compliance Insights

My experience, having worked in depth with both live and online training, is that both have the potential to be done poorly and to fail in their missions. If online training is designed so it is boring and easy to click through, or has the opposite fault of being all fun with no lasting learning, it will fail. On the other side, online training, when done well, is unmatched in its ability to reach large numbers of employees and to use advanced adult learning techniques to have a dramatic impact. It is also excellent in assuring that all employees receive a consistent message and that the employees’ participation is measured and recorded. If live training is done poorly it can result in employees getting bad advice or being subjected to painfully boring and legalistic lectures that only breed resentment.

His Last Bow: Sherlock Holmes and Embracing Chaos To Build Compliance Programs by Tom Fox

First, the hierarchical model of leadership will not work, but more importantly “There exists no single model that leads to success.” This means that compliance leadership must be ready to throw aside previous assumptions and “embrace hierarchical top-down leadership and bottom-up systems.” But this requires time for reflection both by the leadership teams and those below who are on the ground. Companies must recognize the diversity in their companies on a global basis. Not everything can be accomplished by the corporate office in the US nor can everything be run from the home office, wherever that may be. Safian ended his article by stating that “”Deciders find it really hard to accept failure, but tinkerers and engineers are undeterred by it. Failure is part of the process. We can’t run from it.” Nor should we.”

Is The SEC’s Ponzi Crusade Enabling Companies To Cook The Books, Enron-Style? by Francine McKenna in Forbes

So what happened? Call it the Bernie Madoff effect. Embarrassed that it missed the Ponzi King’s $65 billion scheme, the SEC reorganized its enforcement division, eliminating an accounting-fraud task force and adding new units to pursue crooked investment advisors and asset managers, market manipulations and violations of the Foreign Corrupt Practices Act. Since then Pfizer, Oracle, Aon, Johnson & Johnson and Tyson Foods have all paid fines to settle foreign-payoff charges.

Private Equity Fund Is Not a “Trade or Business” Under ERISA by Morgan Lewis

In a significant ruling that directly refutes a controversial 2007 opinion by the Pension Benefit Guaranty Corporation (PBGC) Appeals Board, the U.S. District Court for the District of Massachusetts held in Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund that a private equity fund is not a “trade or business” under the Employee Retirement Income Security Act (ERISA) and therefore is not jointly and severally liable for millions of dollars in pension withdrawal liability incurred by a portfolio company in which the private equity fund had a substantial investment.

Bank of America CEO Brian Moynihan Apparently Can’t Remember Anything by Matt Taibbi in Rolling Stone

Thank God for Bank of America CEO Brian Moynihan. If you’re a court junkie, or have the misfortune (as some of us poor reporters do) of being forced professionally to spend a lot of time reading legal documents, the just-released Moynihan deposition in MBIA v. Bank of America, Countrywide, and a Buttload of Other Shameless Mortgage Fraudsters will go down as one of the great Nixonian-stonewalling efforts ever, and one of the more entertaining reads of the year.

Attorney Liable for Aiding Securities Fraud by Drafting False Opinion Letter by Barbara Black in Securities Law Prof Blog

According to the SEC’s summary judgment motion, in early 2006, Sourlis intentionally authored a materially false and misleading legal opinion, which Greenstone used to illegally issue over six million shares of stock in unregistered transactions. Among other things, Sourlis falsely described promissory notes, note holders, and communications with those holders, none of which actually existed. The SEC asserted that, contrary to Sourlis’ fraudulent opinion letter, the stock issuance did not qualify for an exemption from registration under the federal securities laws.

SEC Charges Chicago-Based Investment Adviser With Defrauding Investors In Failing Private Equity Fund

The SEC alleges that Joseph J. Hennessy and Resources Planning Group (RPG) raised more than $1.3 million by misrepresenting the Midwest Opportunity Fund (MOF) as a viable private equity fund that could offer high returns. Hennessy failed to tell investors about the fund’s poor financial condition or that their money was being used to repay MOF promissory notes that he had personally guaranteed. He therefore misappropriated client funds to make payments on the notes and prop up the fund. Hennessy used at least $641,408 to make partial payments to certain note holders, substantially reducing his personal liability on the notes.

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