On March 29, the U.S. Department of Justice announced that on March 28, a federal grand jury in the Central District of California indicted two senior corporate executives with two corporations on multiple counts for their roles in a scheme involving defective and dangerous dehumidifiers made in China. Simon Chu and Charley Loh, who served respectively as part owners, chief administrative officer, and chief executive officer of the same two corporations in California, were charged with (1) conspiracy (a) to commit wire fraud, (b) to fail to furnish information under the Consumer Product Safety Act (CPSA), and (c) to defraud the U.S. Consumer Product Safety Commission (CPSC); (2) wire fraud; and (3) failure to furnish information under the CPSA. The Department indicated this was the first time that any individual had been criminally charged for failure to report under the CPSA. Continue reading
In 2011, during NATO’s bombing campaign against Libyan ruler Muammar Qaddafi’s forces, NATO bombs hit a particular oil company’s storage facility containing thousands of barrels of chemicals used in oil drilling. While most barrels were destroyed, a substantial number were intact but their contents were permanently altered, due to extreme heat from bomb explosions and fires. The chemical changes made the barrels’ contents useless for their intended purpose.
Some days later, the oil company’s compliance lawyer with responsibility for the region was contacted by an oilfield operations manager for the company. The manager said that they had been approached by unnamed “authorities” in eastern Libya, who were offering millions of dollars to buy the chemicals to use for drilling for water. He explained that the company would not permit use of the altered chemicals to drill for oil because they no longer met company quality standards.
The oilfield manager also told the lawyer, “We need this deal” and “We haven’t had any significant revenue for years.” He showed the lawyer “photos of the damaged chemicals and the letters requesting the deal from the authorities,” as well as “the approvals from the commercial lawyers and a chain of emails from our leaders showing their desperation to screw some profit out of this situation.” The manager also asserted that “the authorities were running out of patience. They had a window in which they had to get drilling and if we couldn’t help them they would need to find someone who could. So time was of the essence and all that was lacking was the compliance seal of approval.” Continue reading
In a January 17 interview with the French news-magazine L’Obs, former French Prime Minister Bernard Cazeneuve argued that a European anti-corruption prosecutor is needed “to restore a balance, to correct the asymmetry of the Euro-Atlantic relationship in the fight against corruption from which European companies are currently suffering.”
In the interview, Cazeneuve — now a partner with the August Debouzy law firm specializing in compliance issues – stated that “it cannot be ruled out that in a context of rising protectionism under the Trump Administration, ‘compliance’ rules are also used to protect the economic and industrial interests of certain powers. Faced with such a reality, it would be very naive not to seek to protect our own interests!” At the same time, Cazeneuve said that “in a global economy, corruption is a long-term factor that impoverishes companies and distorts competition. Only the law can regulate what needs to be and create the conditions for a global level playing field. Preventing corruption in French companies is still the best way to protect them from the often intrusive procedures of U.S. prosecuting authorities.” Continue reading
One of the well-established concepts in social psychology and behavioral economics is loss aversion: i.e., “the idea that losses generally have a much larger psychological impact than gains of the same size.” Though usually discussed in the context of tangible gains and losses, loss aversion has some bearing on our response when a person who has made significant contributions in life passes away. Our immediate sadness at the loss of the person can distract us from thinking about and appreciating the gains that he or she provided to society or to specific people. For that reason, this post is devoted to a brief appreciation of Professor John Darley, focusing on aspects of his work that have applications to corporate compliance.
Professor Darley, who died several months ago at age 80, was not merely a distinguished Professor of Psychology and Public Affairs at Princeton University for many years, but “one of the foremost figures of social psychology.” He strongly influenced the growth and development of that field, in areas such as “morality and the law, the function of punishment, and the way organizations inadvertently promote evil.” Continue reading
FinCEN and Federal Financial Institution Supervisory Agencies Issue Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing
On December 3, 2018, the Financial Crimes Enforcement Network (“FinCEN”) and the four federal financial institution supervisory agencies (“the agencies”) issued a joint statement (“Joint Statement”) encouraging banks (i.e., banks, savings associations, credit unions, and foreign banks) “to consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their Bank Secrecy Act/anti-money laundering (BSA/AML) compliance obligations, in order to further strengthen the financial system against illicit financial activity.” Continue reading
As governments around the world watch the rising tide of public sentiment and law enforcement actions against corruption, some are looking to the United Kingdom Bribery Act 2010 (the “Act”) as a model for crafting their own criminal sanctions, including with regard to corporate criminal liability. Section 7 of the Act, which is captioned, “Failure of commercial organization to prevent bribery,” defines the offense in just 45 words:
A relevant commercial organisation (“C”) is guilty of an offence under this section if a person (“A”) associated with C bribes another person intending—
(a) to obtain or retain business for C, or
(b) to obtain or retain an advantage in the conduct of business for C.
Unless the company, as an affirmative defense, can “prove that [it] had in place adequate procedures designed to prevent persons associated with [it] from undertaking such conduct,” it faces a criminal fine without statutory limit. Continue reading