They say the third time’s a charm, whoever “they” are. If that’s the case, then this must be a most charming article because it is the third time I have had the opportunity to write about the battle over whether an SEC Administrative Law Judge is an inferior officer who the Commission must appoint to the position or a mere employee who the human resources department can simply hire to preside over cases. This will be the last time I write about this issue because the U.S. Supreme Court just weighed in and resolved the dispute. The answer is definitive but the impact, practically speaking, will not be far reaching. Nevertheless, the Supreme Court has held that SEC ALJs are inferior officers of the United States subject to the Appointments Clause of the Constitution. Continue reading
Last week, the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) released an updated Cybersecurity Framework (PDF: 1,038 KB) that revises NIST’s baseline recommendations for the design of cybersecurity risk management programs. In announcing its release, Commerce Secretary Wilbur Ross described the updated Framework as “a must do for all CEOs” and recommended that “every company” adopt the Framework as its “first line of defense.” As with the prior version, the updated NIST Framework provides a useful tool to guide and benchmark company approaches to cybersecurity risk and will impact how regulators evaluate cybersecurity programs and incident responses across sectors. Continue reading
For a compliance program to be effective, employees must be willing to report suspected wrongdoing. But it cannot be assumed that employees who see or suspect something will say something. It has been estimated that less than half of all employees who witness wrongdoing report it. Wells Fargo is a good case in point. It is clear that a large number of employees recognized that something was not right. Some spoke up and were ignored. Others didn’t even speak up.
We all like to believe that we are ethical people and that when faced with a tough choice we will do the right thing. But the evidence suggests otherwise. Good people often find themselves in situations that create strong social cues or even overt pressures to withhold information about misconduct. The result is what’s known as “employee silence.” Continue reading
by Lee G. Dunst
We are now almost one year in since the DOJ announced with much fanfare its repackaged approach to corporate cooperation in the Yates memo in September 2015, followed months later with the much-ballyhooed release of the FCPA Pilot Program in April 2016. These highly publicized pronouncements reinforced the perception of DOJ’s focus on proactive corporate cooperation and voluntary disclosure with the enticement of the alleged benefits for companies. At the same time, DOJ clearly has been engaged in a deliberate effort to tout the apparent benefits of corporate cooperation with its very public announcements in spring/summer 2016 of declinations of prosecutions in some circumstances (for example, Akamai, Johnson Controls and Nortek) and reduced penalties in other cases (such as Analogic/BK Medical), citing voluntary disclosures and cooperation as one of the primary reasons for leniency. Continue reading
In a recent piece published in the Yale Law Journal Forum, I describe data collected concerning prosecutions of banks. I describe how while formerly quite rare, bank prosecutions have increased in numbers and in the size of penalties. I also analyze the approach of prosecutors and ask whether it is sufficiently effective. Continue reading
The compliance message to companies from Washington is practical and encouraging. Regulators are not looking to reward check-the-box programs or companies that simply say the right things about integrity in their Codes of Conduct. They are looking for innovative approaches that work to prevent misconduct in the real world, and can be measured.
The problem of course is identifying and measuring what works. We have lots of compliance metrics like training completion rates and the number of helpline calls, but none of them measures fully the impact of our programs on ethical decisions by individual employees. In fact, research shows that many of the activities credited under the federal sentencing guidelines may actually be counter-productive. For example, training that is regarded by employees as a check-the-box exercise is viewed as insincere and undermines compliance with policies.
So what works? Continue reading
Let’s say you’re a powerful foreign leader who has accepted millions of dollars in bribe payments, a “Kleptocrat.” You’ve got a problem: where to stash the loot? The stacks are too big to stockpile in your piggy bank or sock drawer. You need to be more creative. Here is one solution: set up an off-shore company, open a bank account in a jurisdiction with strict bank secrecy laws, load the account with the bribe payments you received, and then buy premium real estate in the United States. Voila – clean money.
Not so fast. Continue reading
FBI Director James Comey was grilled last week on Capitol Hill where Republicans condemned and Democrats lauded his decision to not recommend prosecuting presidential candidate Hillary Clinton for her actions of handling (mishandling) classified information. As I watched Comey’s testimony, I was struck by how two groups of people could look at the same acts of a person and have such polarizing views as to whether or not a criminal act had occurred. Politics aside, we need to have more of a consensus on what constitutes a crime. Continue reading
On April 5, 2016, the Department of Justice’s Fraud Section announced a new Foreign Corrupt Practices Act (“FCPA”) enforcement pilot program (the “Pilot Program”) designed to “promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs.” The memorandum announcing the Pilot Program sets forth four prerequisites for corporations seeking to obtain credit under the program—voluntary self-disclosure of the misconduct, full cooperation with the investigation, timely and appropriate remediation, and disgorgement of all profits related to the violation—and describes the additional cooperation credit available to companies under the terms of the Pilot Program. Continue reading
As teachers, we sometimes push our students to clarify their legal arguments by telling them that “subtlety isn’t rewarded.” As former prosecutors, we like to think that corrupt officials can’t avoid prosecution simply by avoiding B-movie exchanges that they will do “x” if they are given “y.” This week’s decision in McDonnell v. United States (PDF: 158 KB), however, could be a lesson that subtlety may indeed be rewarded, and that gentility could protect a high official from federal corruption charges. Continue reading