U.S. Senate Hears About Madoff

On Tuesday, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing on the background and implications of the Madoff scandal: Madoff Investment Securities Fraud: Regulatory and Oversight Concerns and the Need for Reform.

Video Archive

Member Statements

Witness Testimony

International Data Privacy Day

data-privacy-day09-logo-web-resJanuary 28, 2009 is International Data Privacy Day. [Intel’s Collection of data privacy materials]. The United States, Canada, and 27 European countries will celebrate Data Privacy Day together for the second time. One of the primary goals of Data Privacy Day 2009 is to promote privacy awareness and education among teens across the United States. Data Privacy Day also serves the important purpose of furthering international collaboration and cooperation around privacy issues.

What can you do?:

  • Show a recent theater movie that addresses the issue of privacy, such as “The Net,” “Swordfish,” or any of a large number of others, then afterward discuss the privacy and information security issues from within the movie and how they relate to your employees’ lives and/or work.
  • Make a podcast available to your personnel that discusses privacy in general, or a specific privacy issue.
  • Have a contest for your employees that incorporates privacy. For example give an award/prize to the person who can identify the most significant employee privacy concern within your organization
  • Hold a “Privacy Jeopardy” event on 1/28 during lunchtime, perhaps right outside your cafeteria, and give small prizes or recognitions to the people who correctly answer a privacy related question.
  • Distribute some privacy related articles, or make them available on your information security and privacy intranet sites.

New I-9

Starting February 2, 2009 there is a new I-9 (.pdf) for new employees.

What’s new?:

  • All documents presented during the verification process must be unexpired.
  • Two new documents have been added that establish both identity and employment authorization
  • Three documents were removed from the list of acceptable documents

The Department of Homeland Security U.S. Citizens and Immigration Services has published a Questions and Answers about the New I-9 (.pdf)
Thanks to Mark Spring of the California Labor & Employment Law Blog for pointing this out: New I-9 Form Effective Next Month.

Encouraging Courage on the Job

G. Jeffrey MacDonald takes a look at whistleblower policies in business for the Christian Science Monitor:When courage is encouraged on the job: How workplaces can motivate employees to take a stand when trouble brews.

In business, the difference between a fixable mistake and an irreparable disaster sometimes hinges on whether employees dare to take a stand before habits of wrongdoing become ingrained.

In Whistle-blowing in Organizations Marcia P. Miceli, Terry Morehead Dworkin, and Janet Pollex Near looks at organizational behavior.They found that it is more important to empower your current workers to report wrong-doing than to hire heroes. They found that employees were more likely to become whistle-blowers when they knew where to go with allegations, knew their colleagues would support them and the would not have to confront their supervisor face-to-face.

According to Dr. Near: “they blow the whistle if: the wrongdoing they have observed is serious; they feel that telling somebody about it will actually make a difference, and they feel they’re going to get some support in the organization for doing that.”

Conversely, the enemy of workplace courage is the intense pressure to deliver short-term results. Business put workers in a workplace situation where they need to choose between doing what’s right and protecting their career when they focus on short-term results.

Tips for Getting Your GRC Program Running Quickly

ca_logoMike Hoefgen of CA put together some Tips for Getting Your GRC Program Running Quickly. Even if you do not put your compliance program into the GRC archetype there are some useful thoughts.

  1. It is not a project. GRC / compliance is an on-going business process. I encountered this when I was in knowledge management. Some saw it as a project with an end-date and a segmented group. To be successful with compliance you need to be embedded in the business processes.
  2. Cross-functional team. Compliance is a business challenge, not a discrete process. You need input, but-in and support from across the organization.
  3. Don’t boil the ocean. It is easy to get caught up in trying to solve all the problems at once. Start with something that can deliver some provable success. This builds credibility.
  4. Need for speed. You want to be able to show that credibility and success in the short term. If it takes you 2 years to show success, you will be forgotten and the business processes will have moved on without you.

Bingham’s Take on Compliance Reviews of an Extraordinary Year

Nancy M. Persechino of Bingham McCutchen LLP put together her take on the Compliance Reviews of an Extraordinary Year. She also includes a chart of the changes in law and rules, new guidance, and enforcement actions (.pdf).

Given the market turbulence of the past year and the rapidly changing business and regulatory environments, many CCOs may wish to do more than simply dust off last year’s review and update its contents. At least one thing remains the same: the purpose of the annual review is to assess the adequacy of the firm’s policies and procedures in ensuring compliance with securities laws and the effectiveness of their implementation. Nothing tests the adequacy of policies and procedures quite like a crisis. So, why not treat the extraordinary events of the last year as a great “forensic test” and ask, “What went right? What didn’t?”

Madoff Liquidation and Suits Filed Against Madoff

On January 2, 2009, the trustee charged with liquidating Bernard Madoff Investment Securities, LLC issued a notice outlining the requirements for filing SIPC claims. Notice of Commencement of Liquidation Proceeding for Madoff Investment Securities

Anyone having a claim or potential claim against BMIS should read that notice. It provides that customers of BMIS must file their claims with the trustee on or prior to March 3, 2009 to receive the maximum protection.

It further provides that a first meeting of BMIS’s customers and creditors will be held on February 20, 2009, at 10:00 a.m., at the Auditorium at the United States Bankruptcy Court, Southern District of New York, One Bowling Green, New York, New York 10004.

The trustee also has established an official website [http://www.madofftrustee.com] to provide public information about the bankruptcy court proceeding.

Typical lawsuits that one might expect to see in a situation such as this one are those filed by investors against Madoff and his entities. The most notable of such actions filed to date include class actions Kellner v. Madoff [No. 08CV05026 (E.D.N.Y. filed Dec. 12, 2008)] and Chaleff v. Madoff ( No. 08CV08260 [C.D. Cal. filed Dec. 15, 2008)] and individual action Sciremammano v. Madoff [No. 08CV11332 (S.D.N.Y. filed Dec. 30, 2008)].

  • The Kellner case asserts a class action on behalf of all persons and entities who invested with Madoff, BMIS, or other selling agents affiliated with Madoff or BMIS, from as early as the formation of BMIS in the 1960s. The complaint alleges violations of the securities laws and related federal laws, including the Racketeer Influenced and Corrupt Organizations Act  and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, violations of New York General Business Law provisions concerning deceptive acts and practices, fraud, negligent misrepresentation, breach of fiduciary duty, conversion, and unjust enrichment.
  • In the Chaleff case, a class action was brought against Madoff, BMIS, Brighton Company and its general manager, Stanley Chais, alleging securities law violations on behalf of all persons or entities that invested through or in Chais or Brighton, had capital invested with Madoff or BMIS on December 12, 2008.
  • The plaintiffs in the Sciremammano case are individuals who began investing with Madoff in 1995. They seek injunctive relief to stop the alleged fraud and preserve assets, disgorgement of gains with interest, and civil monetary penalties. The alleged violations include fraud under the federal securities laws, fraudulent practices under New York state law, violations of the Investment Advisers Act of 1940, and breach of fiduciary duty.

Employer Notices to Employee Under the Family and Medical Leave Act

An employer must provide written notice to an employee each that an employee gives notice of the need for FMLA leave. The employer has to give the notice within a reasonable time after notice of the need for
leave is given by the employee (within one or two business days if feasible.) [See 29 CFR 825.301 (c)]

The employer has to provide the employee with written notice detailing the specific expectations and obligations of the employee and explaining any consequences of a failure to meet these obligations. The written notice must be provided to the employee in a language in which the employee is literate (see Sec. 825.300(c)).

Section 29 CFR.301(b) provides that the written notice must include, as appropriate:

  1. that the leave will be counted against the employee’s annual FMLA leave entitlement (see Sec. 825.208);
  2. any requirements for the employee to furnish medical certification of a serious health condition and the consequences of failing to do so (see Sec. 825.305);
  3. the employee’s right to substitute paid leave and whether the employer will require the substitution of paid leave, and the conditions related to any substitution;
  4. any requirement for the employee to make any premium payments to maintain health benefits and the arrangements for making such payments (see Sec. 825.210), and the possible consequences of failure to make such payments on a timely basis (i.e., the circumstances under which coverage may lapse);
  5. any requirement for the employee to present a fitness-for-duty certificate to be restored to employment (see Sec. 825.310);
  6. the employee’s status as a “key employee” and the potential consequence that restoration may be denied following FMLA leave, explaining the conditions required for such denial (see Sec. 825.218);
  7. the employee’s right to restoration to the same or an equivalent job upon return from leave (see Secs. 825.214 and 825.604); and,
  8. the employee’s potential liability for payment of health insurance premiums paid by the employer during the employee’s unpaid FMLA leave if the employee fails to return to work after taking FMLA leave (see Sec. 825.213).

The notice may include other information–e.g., whether the employer will require periodic reports of the employee’s status and intent to return to work, but is not required to do so. A prototype notice is DOL Form WH-381 (.pdf).

Fact Sheet 28 for The Family and Medical Leave Act

In addition to putting up the new FMLA poster, covered employers must  give notices to employees about their rights under the Family and Medical Leave Act. Section 29 CFR 825.301 describes the required notices.

If you have written guidance to employees concerning employee benefits or leave rights, such as in an employee handbook, information concerning FMLA entitlements and employee obligations under the FMLA must be included in the handbook or other document. For example, if an employer provides an employee handbook to all employees that describes the employer’s policies regarding leave, wages, attendance, and similar matters, the handbook must incorporate information on FMLA rights and responsibilities and the employer’s policies regarding the FMLA.

If you company does not have handbooks or other written material, then you need to provide general written guidance about employee rights and obligations under FMLA whenever an employee requests leave. According to the Department of Labor FMLA website, delivering a copy of Fact Sheet No. 28 will fulfill this requirement.