Corruption Crime & Compliance

The culture bandwagon is picking up steam.  Everyone is citing its organization’s “culture” as the foundation for its activities in the hope of meeting a rapidly evolving standard for organizations.  In its latest corporate compliance guidance, the Justice Department, along with numerous regulatory agencies continue to cite the importance of a company’s  “culture of compliance.” But when it comes to defining the terms, how to manage a company’s culture and how to measure, monitor and measure a company’s culture – everyone responds with a blank stare.  That is when we hear the Justice Potter Stewart famous definition of obscenity, “I know it when I see it.” To provide my own perspective on some of these issues, I am dedicating this podcast episode to corporate culture.  My answers may not be “correct” or even “persuasive,” but the dialogue has to begin.  I have long advocated for practical approaches to defining, managing and maintaining a company’s culture.  As I often write, culture is a company’s most important “internal control.”  

LRN recently issued its second of three annual reports on ethics and compliance program effectiveness.  The second report focuses on board engagement with ethics and compliance and lessons learned from the COVID-19 pandemic. David Greenberg, a Special Advisor to LRN, joins us to discuss the interesting results of the LRN report.   The LRN report can be downloaded at https://lrn.com/  

In two separate enforcement actions, OFAC announced settlements with Alfa Laval Middle East Ltd., a Dubai, UAE company (AL Middle East), and Alfa Laval, Inc., a Virginia-based company (AL US) for violations of OFAC’s Iran Sanctions Program. AL US enlisted its then subsidiary (now operating unit), Alfa Laval Tank, Inc, based in Exton, Pennsylvania (AL Tank), to participate in the scheme. The Alfa Laval enforcement action underscores the dangers for global companies in compliance with US-based sanctions programs as part of global operations.  The parent company, Alfa Laval AB is based in Sweden (AL Sweden). AL Middle East agreed to pay OFAC $415,695, and AL US agreed to pay OFAC $16,875. In this Episode, MIchael Volkov reviews the OFAC enforcement action and points out interesting aspects and trends.

The False Claims Act is a powerful enforcement tool.  The Justice Department with its partner agencies are ramping up enforcement efforts.  The Biden DOJ is preparing to implement an aggressive FCA program across healthcare, defense industries and other government contractors. The False Claims Act stands as a major risk – businesses that depend on government business, including healthcare, defense and other contractors, have to address proactively the risks associated with False Claims Act liability.  Compounding this situation is an active and major whistleblower bar that generates qui tam relators needed to fuel Lengthy and costly government investigations. In this Episode, Mike Volkov reviews the flurry of recent False Claims Act cases brought by the Justice Department.

The Justice Department and the Securities Exchange Commission are back in business.  The first corporate FCPA enforcement action in 2021 came after a six-month hiatus in 2021. The first case against a corporate entity in 2021 is an interesting one because it reflects a coordinated settlement not only between DOJ and the SEC but the U.K.’s Serious Fraud Office and Brazil’s Ministério Público Federal (MPF), the Controladoría-Geral da União (CGU) and the Advogado-Geral da União (AGU) in Brazil. Amec Foster Wheeler Energy, a subsidiary of the U.K. global engineering company, Wood Group, agreed to pay the United States $18.375 million to resolve criminal charges for bribery payments made in Brazil to win a $190 million contract to design a gas-to-chemicals facility.  Amec Foster entered into a three-year deferred prosecution agreement (DPA) in exchange for its payment of $18.375 million. In related settlements, Amec Foster agreed to pay the SEC approximately $22.7 million in disgorgement and prejudgment interest to the SEC to resolve FCPA charges.  The SEC agreed to offset up to $9.1 million paid to Brazil and $3.5 million to the SFO in the United Kingdom, leaving a minimum payment of approximately $10 million to the SEC. In this Episode, Michael Volkov reviews the Foster Wheeler FCPA enforcement action.

Under Armour settled its long-pending SEC investigation by agreeing to pay $9 million surrounding misleading statements and practices relating to its revenue growth and uncertainties as to future growth. As part of the settlement, the SEC declined to bring charges against its CEO, Kevin Plank, and its CFO, David Bergman. The Justice Department inquiry appears to have lost steam since the middle of last year, and DOJ likely declined prosecution. Under Armour had been the subject of a long-running probe since 2019 when Under Armour disclosed the DOJ and SEC investigations into its accounting practices. The SEC’s case eventually focused on its revenue projections and accounting practices. In this Episode, Jonathan Marks from Baker Tilly and Michael Volkov discuss the Under Armour case and financial accounting fraud.

In a far-reaching action, the Biden Administration elevated the global fight against corruption as a national security interest.  In an Executive Memorandum, the Biden Administration made a strong statement against corruption, citing the devastating impact that corruption has on democratic institutions, democratic governments, economic development, and other public interest objectives.  The Administration launched a robust inter-agency review of the anti-corruption battle, including increased international cooperation, anti-money laundering enforcement, increased support of the Anti-Kleptocracy Initiative, and increased focus on beneficial ownership. In this Episode, Michael Volkov reviews the Biden Administration anti-corruption initiative.

LRN and NAVEX Global recently released two important annual surveys.  LRN issues a yearly report on ethics and compliance program effectiveness.  NAVEX Global issues an important annual report on incident management trends based on its large database of hotline data. In this Episode, Michael Volkov review these two reports and the important ethics and compliance trends. The NAVEX Global report can be downloaded here. The LRN survey is here.

The ransomware attack on Colonial Pipeline demonstrated yet again the failure of government and business to anticipate cybersecurity issues through traditional tools – risk and vulnerability analysis, implementation of technology and planning to minimize a cyber event, and crisis response protocol.  In the aftermath of this debacle, the public lined up to purchase gallons of gasoline because of a short-term shortage in gasoline.  These scenes of panic were a reminder of the impact that poor government and business risk management can have on public reaction. The Biden Administration issued a response quickly to update the government’s cybersecurity practices.  Federal agencies were directed to take a variety of actions to share information, strengthen cybersecurity practice and use new technologies to reduce cyber vulnerabilities. All of that is well and good but until the private sector is subject to various requirements relating to cybersecurity, not much is going to change. For example, there still is no actual federal corporate disclosure requirement to notify law enforcement and the public after a company suffers a cyber-attack or suffers a cyber incident.  Similarly, there are no specific standards set for any industry sector that companies must meet to protect against cyber-attacks. Companies and corporate boards have to address the cyber risk situation.  To do so, careful planning, assessments and coordinated strategies have to be designed and implemented.

The Biden Administration is expected to increase antitrust enforcement against criminal cartels and bid-rigging conspiracies.  Global companies have to address this significant risk by implementing a compliance program that meets the Justice Department's 2019 Guidance on Antirust Compliance Programs. In this Episode, Michael Volkov reviews the Antitrust Division's Guidance and compliance program requirements.