Compliance Bits and Pieces for October 8

Here are some interesting compliance related stories that I’ve run into recently:

Birthday Parties Not Enough to Support Inference of Discrimination; Shifting Reasons for Termination Get Case to Jury Though by Dan Schwartz in the Connecticut Employment Law Blog

First, beware the birthday parties. They may be good morale boosters but some people may find them distasteful. In any event, keep the age-related jokes to a minimum.

Explaining the AIG Exit by Felix Salmon in Reuters

There’s now an end in sight to a huge and enormously complex corporate restructuring, of an entity — AIG — which was too big to fail, too big to manage, and which had an enormous black hole at its heart known as AIG Financial Products. Today, AIG is set to emerge as a viable entity roughly half its former size, small enough to fail, with the black hole gone. That’s not only a substantial achievement; it’s also a good proof of concept when it comes to the FDIC’s new resolution authority.

This Week in Social Media & Employment Law: Facebook Privacy Settings, Stored Communications Act, Social Media Policies by Daniel Schwartz in the Connecticut Media and Employment Law Blog

As social media continues to dominate the world — or at least conversations about employment law — there are a few notable posts that are worth delving into this week that explore the topic further.

Image is courtesy of Cake Wrecks

Compliance Bits and Pieces for October 1

Here are some recent compliance-related stories that I found interesting:

The face of the financial crisis by Larry Ribstein in the Creative Destroyer

We need somebody we can send off to jail. Jail apparently provides the moral clarity necessary to wrap up a financial crisis. Bernie Madoff’s just an old-fashioned fraud from another era. The Justice Department has sent almost 3,000 people to jail for financial fraud between October, 2009 and June 2010, but no faces.

House Passes Impotent Debarment Bill by Mike Koehler in FCPA Professor

On September 15th, the House, by a unanimous 409-0 vote, passed H.R. 5366 (“Overseas Contractor Reform Act”) (see here). The Act generally provides that a corporation “found to be in violation of the [FCPA’s anti-bribery provisions] shall be proposed for debarment from any contract or grant awarded by the Federal Government within 30 days after a final judgment of such a violation.” The Act’s key trigger term for debarment – “found to be in violation” of the FCPA’s anti-bribery provisions – is a trigger that is not reached in nearly every FCPA enforcement action because of the façade of FCPA enforcement. Thus, the Act represents impotent legislation.

Small Change – Why the revolution will not be tweeted by Malcolm Gladwell in the New Yorker

Innovators tend to be solipsists. They often want to cram every stray fact and experience into their new model. As the historian Robert Darnton has written, “The marvels of communication technology in the present have produced a false consciousness about the past—even a sense that communication has no history, or had nothing of importance to consider before the days of television and the Internet.” But there is something else at work here, in the outsized enthusiasm for social media. Fifty years after one of the most extraordinary episodes of social upheaval in American history, we seem to have forgotten what activism is.

After Dodd-Frank, SEC Getting At Least One FCPA Tip A Day in WSJ.com’s Corruption Currents

The Securities and Exchange Commission has been receiving at least one tip a day about potential foreign bribery violations since a whistleblower bounty program became law in July, according to a person familiar with the matter.

A Tale of Two Strategies for SOX Compliance by Matt Kelly in Compliance Week‘s the Big Picture

Only that elite group can manage the responsibility of working with public investors—people so far removed from the corporation itself, that they have no choice but to trust in the accuracy of financial statements. SOX is one measure this country uses to determine which corporations belong in that group, and which don’t. Alloy Steel and Facebook both said today that they don’t, and they deserve praise for it. This is how the system is supposed to work.

Image of Bits & Pieces is By Thunderchild7.

Compliance Bits and Pieces for September 24

Here are recent compliance related stories from the past week:

In case you missed it:

Its Official: Recession Ended June 2009 by Barry Ritholtz in The Big Picture

The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II.

Reading the Fifth Circuit Opinion Reinstating the Mark Cuban Case by Professor Bainbridge

So the court is not resolving the difficult legal issues posed by the Cuban case, which we have explored many times before. Instead, they start by reading the “complaint in the light most favorable to the SEC” and then concluding that the complaint’s “allegations, taken in their entirety, provide more than a plausible basis to find that the understanding between the CEO and Cuban was that he was not to trade, that it was more than a simple confidentiality agreement.” I find this rather curious. If the law is, as I believe it to be, that a mere agreement not to trade is an insufficient basis for imposing insider trading liability, then shouldn’t the question of what Cuban did or did not do in that regard be irrelevant?

Expand The Corporate Miranda Warning by the FCPA Blog

On her way to be interviewed by her employer’s outside lawyers about alleged overseas corruption, Rose Carson, the government says, stopped by the ladies room and flushed some relevant documents down the toilet. Because of that, she’s charged with obstructing a federal investigation under 18 U.S.C.§ 1519, which carries up to 20 years in jail. Did anyone warn her that concealing information from company lawyers conducting an internal FCPA investigation could be a federal crime?

Default Rate Nears ’08 Level by Mike Spector in the Wall Street Journal

The great debt storm has passed. And the damage is a lot less than feared. Corporate debt-default rates are expected to fall to the same levels that preceded the financial crisis of September 2008, marking a swift turnaround for the fate of the most troubled U.S. companies.

Compliance Bits and Pieces for September 17

elizabeth warren
Here are some recent compliance-related stories that I found interesting:

Fighting to Protect Consumers by Elizabeth Warren in the Huffington Post

The president asked me, and I enthusiastically agreed, to serve as an Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau. He has also asked me to take on the job to get the new CFPB started — right now. The president and I are committed to the same vision on CFPB, and I am confident that I will have the tools I need to get the job done.

(Who thinks she is going to pull a Cheney and put herself in the job?)
Whistle Blowers Redux by Charles H. Green in Trust Matters

[T]here’s another whistle blower in town, and he deserves a look-see as well. In this case, his name is Ilya Eric Kolchinsky, and the company he’s blowing the whistle on is his former employer, Moody’s Investors Service. When Kolchinsky used to work for Moody’s, he criticized some of their practices. Moody’s resisted to some extent, and to some extent changed practices based on his criticism. Or so it seems.

Barack Obama to authorise record $60bn Saudi arms sale by Ian Black in the Guardian

Barack Obama is to go ahead with plans to sell Saudi Arabia advanced aircraft and other weapons worth up to $60bn (£39bn), the biggest arms deal in US history, in a strategy of shoring up Gulf Arab allies to face any military threat from Iran.

In Search Of Good Red Tape from the FCPA Blog

But does red tape bring any benefits? The one most commonly cited is that governments need information, and the way to collect it is through regulations. Assuming the amount of red tape that’s actually needed can be determined, the problem is that bureaucracies tend naturally to propagate more and more regulations, increasing contact with users and opportunities to extract bribes. But not everyone would agree that all red tape, or even all bribery, is always bad.

Visualize your success by Bill Piwonka in Integrity at Work

That data can come from EthicsPoint products (such as the location of your remote offices and all the associated reports of misconduct), RSS and other public feeds (such as weather data), premium data feeds (eg subscription data highlighting corruption trends in third world countries) and proprietary feeds (eg point of sale data from your internal financial applications). By layering data on a map, you can then begin to visualize patterns and trends that simply wouldn’t be possible if you were trying to accomplish the same thing through spreadsheets or other methods.

Compliance Bits and Pieces for September 10

It’s back-to-school week for me (well … my kids). That means summer is over and time to re-focus on good compliance and ethics. Here are some stories on those topics that popped up recently:

Boards of directors: Clueless, but not criminal, mostly by Matt Kranz in USA Today

Directors are rarely charged with fraud. The SEC doesn’t maintain a count of outside directors accused of fraud. But since 1996, the SEC has brought only about nine significant actions against outside directors, the agency says.

Unintended Consequences by Bill Piwonka in Integrity at Work

[A]s governments worldwide enact legislation to decrease the incidents and impacts of unethical behavior, there is a greater chance the various laws will be inconsistent across boundaries. For instance, Sarbanes-Oxley requires publicly held US companies or those listed on US exchanges to offer a way for employees to anonymously report financial misconduct, yet Portugal and Spain have outlawed anonymity. The FCPA allows for facilitation payments in certain circumstances, but the UK Bribery Act forbids them entirely. And so on.

The SEC Departs from an Important Safeguard by Wayne Carin in The Harvard Law School Forum on Corporate Governance and Financial Regulation

Recently, the SEC made permanent the delegation of its statutory formal order investigation authority to the Director of the Division of Enforcement. This delegation, which the Enforcement Director has sub-delegated to senior enforcement staff, essentially transfers the SEC’s broad authority to invoke its subpoena power to numerous of its enforcement staff without any apparent oversight.

My Two Cents On The FCPA’s Affirmative Defenses by Mike Koehler in FCPA Professor

For starters, I respectfully disagree with Sheahen’s statement that “business and businessmen accused of giving bribes to foreign officials have fared poorly in federal courts” as well as the implication that this somehow supports his thesis. The three FCPA trials cited from 2009 – Frederick Bourke, William Jefferson, and Gerald and Patricia Greene were a mixed bag for the DOJ, not slam-dunk successes.

Image of a Thomas Saf-T-Liner HDX school bus is by Joedamadman.

Compliance Bits and Pieces for September 3

You are either getting your kids back to school, enjoying a vacation, or enjoying everyone else being out of the office on vacation.

Me? I’m out of the office.

There was still some interesting compliance news this past week:

SEC employees win battle to dress casual By Zachary Goldfarb for Market Cop

Some of the Securities and Exchange Commission’s rank-and-file employees have won a quiet battle with top officials: They no longer have to wear formal business attire when out on the job.

Trust Me – I’m from HR/ IT/ Legal/ Finance ! by Charles H. Green in Trust Matters

These internal staff have exactly the same challenge that their outside brethren have—to successfully persuade and influence others, over whom they have exactly zero direct authority. But it’s worse for internals: first, because they eat in the same lunchroom as their clients and are known by their first names, they tend to not get the same respect that outside experts do.

The Impact of Dodd-Frank – And a Warning to Rating Agencies by Thomas O. Gorman in SEC Actions

The Moody’s Investors Services, Inc. Section 21(a) report released on August 31, 2010 gives an indication of the potential impact of Dodd-Frank. It is based on an existing limitation of the enforcement program, but reflects the removal of that impediment by the legislation. Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: Moody’s Investors Services, Inc., Exchange Act Release No. 62802 (Aug. 31, 2010).

Image is Lone Tree. Footpath from Tealby Thorpe to Willingham Woods. The tree is a relic of a lost hedgerow.
By Kate Nicol

Compliance Bits and Pieces for August 27

Here are some recent stories I found interesting:

A Red Flag on G.M. Internal Controls by Peter J. Henning in the New York Times’ DealBook

General Motors filed its S-1 on Wednesday, and its list of potential risks to the company contains the usual array of obvious market threats and uncontrollable events that might be harmful to prospects, like the admonition that “our business is highly dependent on sales volume” – what a surprise.

After listing 30 different risk factors for its business, G.M. then drops this on investors: “We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.” That is quite a risk to put at the end of the list.

4,000 Investment Advisers Bound for State Regulation from Investor’s Watchdog

Among the myriad changes wrought by the Dodd-Frank Act, approximately 4,000 registered investment advisers (RIAs) will soon be examined by state securities regulators, rather than the SEC. With a few narrow exceptions, by this time next year state regulators will handle RIAs managing less than $100 million (the cut-off point under the old law was $25 million). This will help the SEC focus on the biggest funds, but it throws state securities regulators a Herculean challenge. As it is, state-regulated RIAs see examiners, on average, only once every five years.

Financial Reform Leaves New York Investment Advisers Unsure Where to Register by Compliance Avenue

The Dodd-Frank financial reform bill, signed into law by President Obama on July 21, 2010, has left behind an odd but important ambiguity for investment advisers located in New York state. The law requires most investment advisers with less than $100 million in assets under management to register with the securities commissioner of the state where the adviser maintains its principal office and place of business, provided that the adviser “would be subject to examination as an investment adviser” by such commissioner. Unlike most other states, however, New York has never conducted examinations of investment advisers and currently its General Business Laws provide no specific authority for such examinations.

Six Keys to Being Excellent at Anything by Tony Schwartz in the Harvard Business Review‘s Conversation

If you want to be really good at something, it’s going to involve relentlessly pushing past your comfort zone, along with frustration, struggle, setbacks and failures. That’s true as long as you want to continue to improve, or even maintain a high level of excellence. The reward is that being really good at something you’ve earned through your own hard work can be immensely satisfying. Here, then, are the six keys to achieving excellence we’ve found are most effective for our clients:

Promotional Expenses Defense under the FCPA by Tom Fox

So what is the problem with a US company paying for travel, room and board for foreign governmental officials to travel to the United States? The problem is that payment for such travel, lodging and expenses may run afoul of the prohibition against corrupt payments (or promises of them) made to obtain or retain business. The Foreign Corrupt Practices Act (FCPA) allows payments to foreign officials for expenses related directly to “the promotion, demonstration, or explanation of products or services” that are “reasonable and bona fide” 15 U.S.C. §§ 78dd-1(c)(2)(A) and 78dd-2(c)(2)(A). This affirmative defense, however, is notoriously hard to use (and easy to abuse), mainly because no one is quite sure what reasonable and bona fide really mean.

Compliance Bits and Pieces: Ground Zero Mosque Edition

One part of compliance is investigation. Find the facts. Don’t rely on opinion or self-interest statements. With all the hullabaloo about the Ground Zero Mosque I thought I would gather some factual information.

First off. It’s not at Ground Zero.

Just How Far Is the “Ground Zero Mosque” From Ground Zero? by Matt Sledge in the Huffington Post

From 45 Park Place, the former Burlington Coat Factory building that will make way for the Cordoba House, it’s two blocks, around a corner, to get to the WTC site. Park Place doesn’t lie between the construction site and any mass transit stations, so you would need to go out of your way to have it offend you.

Mosques And A City Block (Update) by Scott Greenfield in Simple Justice

If someone was trying to build a Mosque on the Site, there would be one debate. But building a Mosque where the old Burlington Coat Factory used to be isn’t the Site. Not even close. It’s the equivalent of building it ten miles away in Houston. It’s a different neighborhood, climate, time zone. There are a couple of nudie bars, even another tiny Mosque, that far away, not to mention dozens of stores selling cheap junk. It’s not a pretty neighborhood. It’s not what people who don’t know Manhattan think it is. Not even close.

There’s a reason all the elected officials of both stripes in Manhattan think this whole debate is nonsense. They’ve been there and know what they’re talking about. This is being used by politicians to manufacture a debate that doesn’t exist. They are selling a fantasy to people who don’t know any better. This Mosque has absolutely nothing to do with the Site. It doesn’t besmirch anyone’s memory. It might as well be in another country for it’s impact on anything.

The Wikipedia page for Park 51 is full of links to great primary source material and (at least when I read it) mostly avoids opinions on the controversial project.

Park51, originally named Cordoba House and sometimes referred to in the media as the “Ground Zero mosque”, is a planned $100 million, 13-story, glass and steel Islamic community center and mosque. Plans are for the facility to include a 500-seat auditorium, theater, performing arts center, fitness center, swimming pool, basketball court, childcare area, bookstore, culinary school, food court serving halal dishes, and Islamic prayer space for 1,000–2,000 Muslims. It would replace an existing 1850s Italianate building that was damaged in the September 11 attacks, and is located two blocks (about 600 feet, or 180 meters) from the World Trade Center site in Manhattan, New York City.

Muslim Prayers and Renewal Near Ground Zero by Ralph Blumenthal in the New York Times

The location was precisely a key selling point for the group of Muslims who bought the building in July. A presence so close to the World Trade Center, “where a piece of the wreckage fell,” said Imam Feisal Abdul Rauf, the cleric leading the project, “sends the opposite statement to what happened on 9/11.” “We want to push back against the extremists,” added Imam Feisal, 61.

Mosque-erade from The Daily Show with Jon Stewart

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Mosque-Erade
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

Compliance Bits and Pieces for August 6

Here are some recent stories that I found interesting:

The FCPA’s Long Tentacles by FCPA Professor

One reason is that mere existence of an FCPA inquiry can significantly throw a wrench into a company’s ability to sell itself. Another reason is that mere existence of an FCPA inquiry can cause an analyst to downgrade a company’s stock.

How to Fail as a Compliance Officer by Frank Sheeder in the Healthcare Compliance Blog

In my view, compliance professionals must establish themselves as leaders, whether formal or informal, in their organizations. If they don’t, they are destined to fail. Here are some ways to botch the effort to become a leader: …

Changes in Securities Enforcement Thanks to Dodd-Frank by Bruce Carton in Securities Docket

Only a portion of the Dodd-Frank Act is directed at enforcement of securities laws by the Securities and Exchange Commission. Nevertheless, that portion contains numerous important provisions that will affect public companies, regulated entities, and professionals in the enforcement and compliance areas. Let’s take them all in turn.

No Good Deed Goes Unpunished from the FCPA Blog

As a part of a yet unpublished paper, [Bruce Hinchey considers] the data from 40 FCPA cases from 2002 through 2009 and the differences between bribes paid and penalties levied against companies that do and do not self-disclose.

Squid is by Laughing Squid and used under a Creative Commons License.

Compliance Bits & Pieces for July 30

Here are some recent stories that I found interesting:

When Compliance and Legal Functions Collide by Matt Kelly in Compliance Week‘s Big Picture

The general counsel is still the boss. Yes, I know, the revised U.S. Sentencing Guidelines say companies should have an independent compliance function, with a chief compliance officer who answers to the CEO or (ideally) the board. Well, that’s not happening yet. Fourteen of our 20 attendees said they report into the legal function; only two reported directly to the audit committee.

SEC Expects Massive Staff Increase Needed to Implement FinReg in Compliance Avenue

SEC Chairman Mary Schapiro, during her Testimony Concerning Oversight of the U.S. Securities and Exchange Commission: Evaluating Present Reforms and Future Challenges, which she gave before the United States House of Representatives Committee on Financial Services Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, stated that the Commission expects to hire approximately 800 new positions during the course of the implementation.

Criminal Provisions in the Dodd-Frank Dodd-Frank Wall Street Reform & Consumer Protection Act by NACDL’s White Collar Crime Section