Category: Compliance Bricks and Mortar

These are some recent compliance-related stories that caught my eye:

Take A Seat, and Other Bribes by Scott Greenfield in Simple Justice

And if you don’t think the FCPA matters to you, who do you think it paying the many millions of dollars forked over to lawyers and government, not to mention the opportunity costs of doing business overseas where only American corporations are subject to a constraint that flies against local culture and custom. Nobody is suggesting that actual bribery is a good thing and should be tolerated. It would be nice if this was pervasive attitude, but regardless, we can hold our corporations to a higher standard. However, the FCPA has put everyday business practices, with no quid pro quo to even the most fertile of young government lawyer minds, at risk. It’s going to be awfully hard for the United States to regain its position as an economic engine in the world with two hands and a foot tied behind its back.

Technology talk at ACC Annual Meeting by Susan Hackett in In-House ACCess

Brad Smith, the general counsel of Microsoft, and Kent Walker, the general counsel of Google were the featured speakers at the Chair’s Choice luncheon at the ACC Annual Meeting in San Antonio. A packed house of over 1,000 were on hand to listen to their vision of the future of technology and its impact on our clients and the legal practice. The session, hosted and moderated by ACC 2010 Chair Pat Hatler, was fed livestream and is available on the ACC website.

EU Agrees to Stronger Hedge Fund Regulation in Compliance Avenue

European Union finance ministers in Luxembourg reached unanimous agreement on a new set of rules regulating hedge funds in Europe.  The deal will create a single “passport” that allows approved hedge funds operating in one EU country access to investors across all other EU countries in exchange for more stringent regulation, which is to be governed by the European Securities and Markets Authority (“ESMA”).

Placement Agents Confused over Rule by Doug Halonen in Pensions & Investments

Many third-party placement agents were caught by surprise by the Oct. 1 deadline to register with the Securities and Exchange Commission. Some also were unclear whether they had to register, period.

FINRA Starts Social Media Audits from SocialWare

This past week we’ve heard multiple stories of FINRA starting to audit social media usage across regulated firms. The most interesting example we heard was of a FINRA auditor delivering printouts of LinkedIn profiles from registered reps of a firm. Attached to those was a letter instructing them to get usage “under control.”

Accessing an Adversary’s Public Social Networking Information — N.Y. Professional Ethics Opinion 843 by Robert D. Brown, Jr. in E-Discovery Law Alert

In Professional Ethics Opinion 843, issued on September 10, 2010, the New York State Bar Association’s Committee on Professional Ethics concluded that an attorney representing a party in pending litigation may access the public pages of another party’s social networking website to obtain publicly available information about that party.

Congressmen Dingell Bungles the FCPA by Mike Koehler in the FCPA Professor

In his letter Dingell asks Krafcik two FCPA related questions. The first – “[g]iven your comments about Hyundai’s being more American than U.S.-based automakers […] will Hyundai publicly commit to complying with all applicable parts of U.S. statute, including the Foreign Corrupt Practices Act (FCPA)?” Newsflash – Hyundai Motor America Corporation, a subsidiary of Hyundai Motor Co. of Korea, is a Florida corporation (see here) headquartered in Fountain Valley, California. In other words, it is a “domestic concern” under the FCPA and subject to the FCPA. Given this, I don’t see why Hyundai would be the least bit hesitant to publicly commit to complying with a law it is subject to.

Legal Implications of Cloud Computing — Part Five (Ethics or Why All Lawyers-Not Just Technogeek Lawyers Like Me-Should Care About Data Security) in the Information Law Group Blog

Here’s the reality:  Technology – whether we are talking cloud computing, ediscovery or data security generally – IS very much the business of lawyers.  This is true both from a legal ethics point of view and from a best practices data security point of view. …  [T]his post focuses on three recent documents, ranging from formal opinions to draft issue papers, issued by three very prominent Bar associations — the American Bar Association (ABA), the New York State Bar Association (NYSBA), and the State Bar of California (CA Bar).

Investment Advisor Registration Under Dodd-Frank: Implications For Securities Class Action Claimants by Luke Green of RiskMetrics

However, Dodd-Frank Act changes related to investment advisor registration may also have a notable impact on securities class actions, especially for private equity and hedge funds that currently enjoy exemption from registration. Generally speaking, many of these firms will be required to register with the SEC as investment advisors. Additionally, the regulatory oversight for firms that are already registered with the SEC will become more strenuous. The focus of this post is the impact that advisor registration changes will have particularly with regard to the securities class action claims filing process.

Learn from the Boy Scouts: be prepared by Jack Vinson

The Boy Scout motto is “Be Prepared.”  This idea shows up again and again in life and business.  For some reason, I pick up on it  right away when I am reading something new or hearing new ideas about how to organize or plan or get something done.  It’s usually in the form of “to succeed at _____, you must be prepared.”

Here are some recent compliance related stories:

Trusted Transactions, or Trusted Relationships? by Charles H. Green in Trust Matters

Much of the public dialogue today confuses these two distinctions. Is it Congress that people don’t trust? Or is it members of Congress who themselves are considered untrustworthy? To the average voter, it’s a distinction without a difference. I suspect the inability to tease them apart is itself a source of anger. But if we fail to separate them, we doom ourselves not only to nasty public discourse, but to failed solutions.

Report Says More Work Needed on Climate Risk Disclosure by by Melissa Klein Aguilar in Compliance Week’s The Filing Cabinet

Despite the attention it’s getting from some investor groups and new guidance aimed at compelling more reporting, corporate climate risk disclosure still has a long way to go, according to an analysis of 100 large-cap U.S. companies’ climate risk disclosures. Very few companies address all of the issues outlined in the Securities and Exchange Commission’s climate risk guidance in their most recent Form 10-K disclosures, an ISS Corporate Services report shows.

Nov. 10 Webcast: FCPA Investigations–The Pitfalls and the Pendulum from Securities Docket

On Wednesday, November 10, Securities Docket will host a webcast in which top current and former SEC officials will discuss FCPA investigations from every angle. Our terrific panel for this discussion will be:

• Cheryl Scarboro, Chief, SEC FCPA Unit;
• John Reed Stark, Managing Director, Stroz Friedberg, a digital forensics firm (former Chief, SEC Office of Internet Enforcement)
• Jonathan Barr, Partner, Baker Hostetler (former SEC Senior Counsel, DOJ Trial Attorney and AUSA).

Free Anti-Bribery & Corruption Masterclass from the Bribery Act

The workshops will take place in early 2011, in our office in London. Each will be geared to a specific industry sector (Pharmaceutical & medical device, construction, defence, oil & gas/extractive and information technology) and will look at the specific risk areas in each sector covered. The focus of the workshops will be the practical implications of the new law and compliance with it in that sector.

The FCPA Mulligan Rule by Mike Koehler in FCPA Professor

[O]ften times, when the requestor senses that it will not receive a favorable DOJ opinion, it simply withdraws the request. I confirmed that this practice does indeed occur with a former high-ranking DOJ FCPA official and others.

Call it the FCPA mulligan rule.

These are some compliance-related stories that recently caught my eye:

A Mansion, a Lamborghini, and Cocaine in Investor’s Watchdog

I often get the question, “How can we spot a financial scamster?” I always answer that, without training, you cannot spot them by sight and that the very best scamsters look just like the face in the mirror. But there is one exception to that rule. If he drives a Lamborghini, he’s running a con. Don’t give him your money.

New York Bans Manatt Law Firm From Pension-Fund Placements for Five Years

Law firm Manatt Phelps & Phillips LLP agreed to be banned for five years from appearing before any New York public pension fund and will pay $550,000 to the state, Attorney General Andrew Cuomo said. The accord stems from Manatt’s representation of financial firms seeking investments from public pension funds without a securities license, Cuomo said today in an e-mailed statement.

D&O Insurers Relieved of Advancing Allen Stanford’s Criminal Defense Fees by Kevin LaCroix in The D&O Diary

The insurers had denied coverage in reliance on the D&O policy’s money laundering exclusion. The exclusion applies if insured persons took any of a number of specified actions with respect to “criminal property,” which is a benefit the Plaintiff knew of suspected , or reasonably know or should have suspected was obtained through “criminal conduct.”

DOJ: Contractor Asked For $180,000 Bribe In A $10 Suitcase by Joe Palazzolo in WSJ.com’s Corruption Currents

Neil P. Campbell, an Australian citizen, was a senior construction manager for the International Organization for Migration, an intergovernmental group that has worked closely with the
Afghan ministries of Public Heath and Education to erect hospitals and schools. Since 2002, IOM has received more than $260 million in contracts from the U.S. Agency for International Development. Campbell sat on the IOM panel that awarded an Afghan construction company, identified in court documents as Sayed Bilal Sadath Construction Co., two subcontracts worth a total of about $15.5 million, one for a training college and the other for a hospital, according the indictment. Prosecutors say Campbell met with a person he believed was a representative of the Afghan company in July and demanded the $190,000 in return for allowing SBSCC to continue its work under the contracts.

SEC’s Proposed “Family Office” Rule and Rule 260.204.9 by Keith Paul Bishop in California Corporate & Securities Law blog

In The Snows of Kilimanjaro, Ernest Hemingway wrote: “‘The very rich are different from you and me.’ And how someone had said to Julian, ‘Yes, they have more money.’” That is certainly true in the case of the families described in the Securities and Exchange Commission’s recently proposed family office rule.

Ukraine Gov’t, Backed by US Law Firms, Files Second Corruption Suit by Joe Palazzolo in WSJ.com’s Corruption Currents

Plato Cacheris and his well-known Washington law firm Trout Cacheris PLLC announced in May that they had been been selected by the government of Ukraine to audit the country’s spending under former prime minister Yulia Tymoshenko, now opposition leader. The selection of white-collar specialists rather than Big Four auditing firms suggested that ”audit” in this case meant “corruption investigation.”

Caught Spying on Student, FBI Demands GPS Tracker Back by Kim Zetter in Wired.com’s Threat Level

A California student got a visit from the FBI this week after he found a secret GPS tracking device on his car, and a friend posted photos of it online.

Image:

Lamborghini Diablo. Work done … resprayed from metallic pearl green to shocking pink
Some rights reserved by Bobasonic

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

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.

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.

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.

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.

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

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.