If we were playing “Two Truths and a Lie,” we would say the following: (a) settlement agreements are used in a variety of jurisdictions as an alternative to litigation; (b) settlement agreements can offer parties the opportunity to save time and resources while securing a predictable outcome; (c) there is a book that will tell you everything you need to know about settlements in bribery cases. The last, of course, is the lie. But only until Spring 2020.
What do settlements within the World Bank Group Sanctions System look like? Why do entities and individuals choose to enter into settlements with the Bank Group? How do settlements support the Bank Group’s mission to further development impact and contribute to safeguarding donor funds in the projects it finances worldwide? These and other questions will be addressed by the chapter “Settlements Within the World Bank Group Sanctions System” to be published in spring 2020 in the forthcoming book from Edward Elgar Publishing, “NEGOTIATED SETTLEMENTS IN BRIBERY CASES – A Principled Approach,” edited by Tina Søreide, Norwegian School of Economics (NHH), Norway and Abiola Makinwa, The Hague University of Applied Sciences, the Netherlands. Continue reading →
In a recent speech at the annual ABA White Collar Crime Conference in New Orleans, Assistant Attorney General Brian Benczkowski of the Criminal Division of the Department of Justice (“DOJ”) announced certain changes to the FCPA Corporate Enforcement Policy (“the Enforcement Policy” or “Policy”) to address issues that the DOJ had identified since its implementation. These and other recent updates have since been codified in a revised Enforcement Policy in the Justice Manual.
The Enforcement Policy, first announced by the DOJ in November 2017, was initially applicable only to violations of the FCPA, but was subsequently extended to all white collar matters handled by the Criminal Division. The Policy was designed to encourage companies to voluntary self-disclose misconduct by providing more transparency as to the credit a company could receive for self-reporting and fully cooperating with the DOJ. Among other things, the Enforcement Policy provides a presumption that the DOJ will decline to prosecute companies that meet the DOJ’s requirement of “voluntary self-disclosure,” “full cooperation,” and “timely and appropriate remediation,” absent “aggravating circumstances” – i.e. relating to the seriousness or frequency of the violation. For more information on the Enforcement Policy, read our blog post explaining it.
The most significant recent changes to the Enforcement Policy include eliminating the prohibition on a company’s usage of ephemeral instant messaging applications to receive full credit for “timely and appropriate remediation.” Additionally, the modified Enforcement Policy (1) now makes clear that one requirement of cooperation, de-confliction of witness interviews, should not interfere with a company’s internal investigation; (2) confirms based on an earlier announcement, that the Policy applies in the context of a merger and acquisition (“M&A”), if an acquiring company discovers and self-discloses misconduct in a target; and (3) implements a change announced months before by the Deputy Attorney General that a company only needed to provide information about individuals “substantially involved” in the offense. These changes are discussed in greater detail below. Continue reading →
In a recent submission (PDF: 2.36 MB) to Congress, the U.S. Securities & Exchange Commission (SEC) reported that, for fiscal year 2018, the SEC paid the largest whistleblower awards since the institution of its program in 2012 following the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Specifically, in FY 2018, the SEC awarded 13 individuals over $168 million collectively for tips that led to actions by the SEC to protect investors.
Other statutes likewise provide financial incentives to whistleblowing. Under the False Claims Act (FCA), for example, persons who report fraud in government contracting can receive up to 30 percent of the government’s recovery in an action. Many states, including New York, have enacted state-level equivalents of the FCA. For many decades, the FCA has contributed to large recoveries to the U.S. Treasury, with an expansion of recoveries in part due to the reporting of violations by whistleblowers. Continue reading →
In 2014, the Securities and Futures Commission (the “SFC”) commenced an investigation into share trades undertaken by the First Applicant in 2013, after receiving a report from another licensed corporation indicating suspected market manipulation activities by a fund managed by the First Applicant. The trades concerned shares in Nitto Denko Corporation, a Japanese company listed on the Tokyo Stock Exchange.
During the course of the investigation, the SFC sought and obtained various materials from the First Applicant and its majority shareholder and responsible officer, the Second Applicant, pursuant to section 181 of the Securities and Futures Ordinance (the “SFO”). This section empowers the SFC to require the production of information including information about a client, details of a transaction and instructions relating to a transaction from a licensed person. Failure to comply with a demand from the SFC under section 181 without a reasonable excuse is a criminal offence.
In July 2014, the SFC received and acceded to a request for assistance from two Japanese regulators, the Financial Services Agency (the “FSA”) and the Securities and Exchange Surveillance Commission (the “SESC”). In particular, the SFC permitted the Japanese regulators to attend an SFC interview with the Second Applicant and provided them with materials previously disclosed by the Applicants in response to the SFC’s requests for information. Continue reading →
In 2018, two cases illustrated the potential hazards that can arise when companies’ efforts to cooperate with the government later provide a basis for individuals questioned during internal investigations to claim that their Fifth Amendment rights against self-incrimination were compromised. While these cases, which we summarize below, have the greatest impact in connection with the representation of individuals in such investigations, companies responding to white collar inquiries need to keep these new developments in mind, particularly in conducting internal investigations and working in a cooperative mode with the government. Companies and their counsel must be mindful of these issues both to insure that individual employee rights are protected and to protect as much as possible the confidentiality and integrity of the company’s review. Continue reading →
Since leaving the Securities and Exchange Commission in 2004, I’ve done my share of critiquing SEC enforcement policy. So it’s only fair, nearly two years into the tenure of current SEC leadership, to give credit where it’s due.
And as it happens, plenty of credit is due in at least six areas of SEC enforcement policy:
About ten years ago, the SEC departed from historical practice by delegating to senior enforcement staff the commissioners’ legal responsibility for launching formal investigations and unleashing the power to issue subpoenas. Some of us publicly expressed concerns at the time about this dilution of political accountability, given the severe reputational harm and financial expense that can result from investigations, even if no wrongdoing is ever uncovered. Continue reading →
All views here represent the authors’ own views and not their organizations.
There is a cultural moment in the world of corporate compliance. Following recent major corporate scandals, there is now growing recognition among corporate boards and beyond that truly changing corporate misconduct means addressing the toxic elements within cultures.
The central question for companies and regulators is how to assess toxic cultural elements.
Toxic corporate culture exists when organizations, whose chief business and business means are legal, develop structural violations of rules over a period of time.
Our recent paper (PDF: 1.06 MB), published in Administrative Science, offers an in-depth analysis of what toxic cultural elements played a role in three major corporate scandals: BP’s polluting and unsafe oil exploration practices, VW’s diesel emission cheating practices, and Wells Fargo’s fake and unauthorized accounts schemes. In all three cases, the illegal behavior spanned over a decade and investigators concluded that corporate culture was to blame. Yet in all three cases, no one had yet systematically sought to understand what toxic cultural elements sustained the illegal conduct. We developed an analytical framework to examine toxicity in organizational cultures on three levels: structures, values, and practices (see Table 1 below). Continue reading →
Most managers will say that they want to receive information about issues and problems in their organization, including information about misconduct. They wish to see themselves as the type of manager who is open to input from employees, and they know that it is important to receive information about problems in a timely manner. They claim to have “an open door policy.” Nonetheless, when it comes to actual behavior, far too many managers are not nearly as open as they aim or profess to be. Rather than responding in a receptive manner when employees raise concerns, they respond with annoyance, hostility or defensiveness. They deny or dismiss the information. They pretend to listen, but then fail to act.
A consistent and disturbing theme from people who have internally reported misconduct is that the information “fell on deaf ears,” or worse, that they suffered negative career consequences for speaking up. Studies have also shown that it is common, across many different types of workplaces, for employees to feel that speaking up is futile, or that they cannot speak up about a suspected violation without fear of reprisal. As a result, regardless of how open managers think that they are, employees often choose to keep mum when they have concerns.
What accounts for these beliefs and behaviors related to raising issues? In some cases, they may stem from poor management or lack of ethical leadership. There are managers who truly do not want to know what is going on in their organizations. Yet even managers with good intentions, who care about ethics and open communication, may find it hard to be receptive and responsive to information about misconduct. What they do when confronted with such information diverges from what they believe or say that they would do. Continue reading →
Beginning next month, Democrats will control the House of Representatives for the first time since 2010. Given the pent-up demand for House Democrats to make robust use of their oversight and investigative authorities, the current relative lull in congressional investigations of corporations is expected to end. Corporations across sectors should anticipate an uptick in investigative activity.
In addition to holding the majority for the first time in nearly a decade, this will be the first time that Democrats control the House since a 2015 rule change that empowered a number of committee chairs to subpoena witnesses or documents unilaterally. The chairs of the following committees, among others, have this authority: Energy and Commerce; Financial Services; Intelligence; Judiciary; Natural Resources; and Oversight and Government Reform.Continue reading →
In an important speech, Deputy Assistant Attorney General Matthew Miner of the Department of Justice’s Criminal Division announced on Thursday that DOJ will “look to” the principles of the FCPA Corporate Enforcement Policy (PDF: 50.6 KB) in evaluating “other types of potential wrongdoing, not just FCPA violations” that are uncovered in connection with mergers and acquisitions. As a result, when an acquiring company identifies misconduct through pre-transaction due diligence or post-transaction integration, and then self-reports the relevant conduct, DOJ is now more likely to decline to prosecute if the company fully cooperates, remediates in a complete and timely fashion, and disgorges any ill-gotten gains. Continue reading →