White Collar Defense & Compliance Moves!

White Collar Crime & Compliance has moved.


I am pleased to announce a new website, Corruption, Crime and Compliance, which is sponsored by Ethics360.


The address is  http://corruptioncrimecompliance.com

Private Equity and Hedge Fund Compliance Webinar November 8, 2011 at 1230 pm

 Join Michael Volkov, Andrew Hulsh and Richard Rosenfeld 
Mayer Brown LLP Partners --  November 8, 2011 at 12:30 pm  

In this era of aggressive enforcement of the Foreign Corrupt Practices Act and anti-corruption laws, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have now turned their attention to private equity and hedge funds. The implications of this new initiative are far-reaching and cut across all private fund operations, particularly when such funds are purchasing and acquiring foreign companies.

A recent survey of corporate executives, investment bankers, private equity executives and hedge fund managers found that 63 percent of respondents reported that the FCPA and anti-corruption issues caused their companies to renegotiate or pull out of planned business relationships, mergers or acquisitions over the last three years. Join Mayer Brown partners Andrew Hulsh, Richard Rosenfeld and Michael Volkov who will address the following issues:

• The focus of the DOJ and SEC on private equity and hedge funds and the implications of anti-corruption enforcement to the business operations of such funds;

• The extent to which officers, directors and employees at private equity and hedge funds can be held liable under the FCPA and other anti-corruptions law for violations;

• The impact of the FCPA and anti-corruption laws on the purchase and sale of foreign companies; and

• The need for private equity firms and hedge funds operating in the international arena to re-tool their compliance controls and mechanisms to protect themselves from enforcement.

Tuesday, November 8, 2011

Europe

6:30 p.m. – 7:30 p.m. CET
5:30 p.m. – 6:30 p.m. GMT

United States

12:30 p.m. – 1:30 p.m. EST
11:30 a.m. – 12:30 p.m. CST
10:30 a.m. – 11:30 a.m. MST
9:30 a.m. – 10:30 a.m. PST

CLE credit is pending.

Instructions for accessing the program will be sent prior to the event.

For additional information, please contact Jean Shim at +1 202 263 3885 or jshim@mayerbrown.com.

Article on FCPA Blog: Where the Ombudsman and the Whistleblower Meet

Where the Ombudsman and the Whistleblower Meet -- http://www.fcpablog.com/blog/2011/9/20/where-ombudsmen-and-whistleblowers-meet.html

The Gathering Storm: Anti-Corruption Compliance for Private Equity and Hedge Funds

Thursday, October 6, 2011
8:00 A.M. – 10:00 A.M.
New York, NY

Intensified enforcement efforts by international authorities and anti-corruption laws such as the Foreign Corrupt Practices Act and the UK Bribery Act have now presented an increased liability in the private equity and hedge funds sector.

A recent survey of corporate executives, investment bankers, private equity executives and hedge fund managers, found that 63 percent of respondents reported that the FCPA and anti-corruption issues caused their companies to renegotiate or pull out of planned business relationships, mergers or acquisitions over the last three years.

Private equity firms and hedge funds operating in the international arena must re-tool their compliance controls and mechanisms to adequately operate in this stringent environment.

Please join me, Tom Fox, and jim Feltman on October 6, 2011 in New York City for this complimentary breakfast briefing.

Session Agenda:
8:00 - 8:30 AM - Registration & Continental Breakfast
8:30 - 9:30 AM - Program
9:30 - 10:00 AM - Q&A Session

LINK HERE

On Vacation

I am on vacation.  White Collar Defense & Compliance will return soon.

Enjoy the last few weeks of summer.

Have fun!!

The Twists and Turns of DOJ's Corporate Charging Policies

One of the more tortured policy areas is DOJ policies relating to corporate charging policies and the attorney-client privilege.

The history reflects competing interests, political grandstanding and line prosecutors' aggressive attempts to enforce white collar laws against corporate law breakers. The Department’s motto reminds me of Month Python’s famous chant in “The Holy Grail” -- “Run Away! Run Away!”

Over the last 12 years, the Justice Department has issued five separate memoranda to describe its policies regarding corporate charging decisions. The first three (the Holder, Thompson, and McCallum Memoranda) sought to promote federal prosecutors’ ability to address corporate criminal wrongdoing by seeking waivers of attorney-client and work-product protections to receive cooperation credit. In response to firestorms of criticism, the last two memoranda (McNulty and Filip Memoranda) pushed the Justice Department’s policy against this trend and sought to restrain prosecutors from requesting waivers of attorney-client or work product privileges.

At the heart of the controversy is federal prosecutors’ conditioning cooperation credit or decisions not to charge corporations on whether a company waives its attorney-client privilege and work product protections, refrains from paying employee legal fees to defend themselves in a criminal case, or fires certain employees involved in corporate misconduct.

In response to criticisms of disparate treatment of similarly situated corporate actors, the Justice Department issued its first corporate charging policy statement in 1999, the so-called Holder Memorandum (issued by then Deputy Attorney General Eric Holder). DAG Holder had no idea what he was starting. The controversy focused on one factor in the analysis – the company’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation, including, waiving the corporate attorney-client and work-product protections. By gaining “cooperation credit” a company could potentially avoid an indictment, the death knell for any company.

The Holder Memorandum set forth eight factors to be considered in corporate charging decisions, including “the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of the corporate attorney-client and work-product privileges.” Significantly, the Holder factors were not binding on prosecutors.

In response to new corporate scandals in the early 2000s, DAG Larry Thompson revisited the Holder Memorandum and made the charging factors outlined in the Holder Memorandum binding on federal prosecutors rather than advisory.
The Thompson Memorandum was the height of DOJ's powers. After that, the white collar bar, criminal defense organizations, and political figures organized to push back against DOJ’s policies. In the face of such criticism, in October 2005, Deputy Attorney General Robert McCallum issued a one-page amendment to the Thompson Memorandum which required that each U.S. Attorney’s office adopt procedures mandating higher-level review of prosecutor requests for waivers of the attorney-client and work-product protections in criminal investigations.

The political opponents continued to fight. DOJ did not react. Congress started to conduct hearings on the issue and criticisms started to mount. Senator Patrick Leahy stated that the Thompson Memorandum had created a “dangerous culture of waiver,” adding that the policies underlying the memorandum were “coercive” and “may even rise to the level of a bludgeon."

On December 12, 2006, then Deputy Attorney General, Paul J. McNulty, issued a memorandum that further revised the Thompson Memorandum and retreated on the issue of waivers of the attorney-client and work product protections, pointing out that “[w]aiver of attorney-client and work-product protections is not a prerequisite to a finding that a company has cooperated in the government’s investigation.” Although the McNulty Memorandum provided significant changes to prior guidelines, the criticism continued and legislative action become a reality. On November 12, 2007, the “Attorney-Client Protection Act of 2007” was passed in the United States House of Representatives. And, on June 26, 2008, Senator Specter and twelve co-sponsors introduced the “Attorney-Client Protection Act of 2008” in the Senate.

In order to avoid legislative action, on August 28, 2008, then DAG Mark Filip issued a new Memorandum, which made significant changes in the DOJ’s guidelines for granting a company cooperation credit. DOJ stated that while a corporation remains free to voluntarily waive attorney-client or work-product protections, “prosecutors should not ask for such waivers and are directed not to do so.” The decisive factor is “whether the corporation has provided the facts about the events.” The analysis does not turn on whether the corporation actually discloses attorney-client or work-product materials. The Filip Memorandum included two exceptions – requests for waiver of attorney-client and work product protections can be sought when the company relies on an advice of counsel defense or when the communications are in furtherance of a crime or fraud.

Under the Filip Memorandum, prosecutors may not (i) consider “whether a corporation is advancing or reimbursing attorneys’ fees or providing counsel to employees, officers, or directors under investigation or indictment” or (ii) request that a corporation refrain from advancing attorneys fees.

While the Filip Memorandum appears to be a victory for the white collar defense bar and criminal defense organizations, the Memorandum still allows the government to hold a company accountable for failing to waive the privilege when the “relevant facts” regarding the conduct under investigation otherwise cannot be readily revealed.. Similarly, failure to disclose relevant facts because of the existence of a joint defense agreement may weigh against a company receiving cooperation credit. And, prosecutors may continue to consider “whether the corporation appropriately disciplined wrongdoers, once those employees are identified by the corporation as culpable for the misconduct” as part of remediation efforts. Thus, corporations must continue to be cognizant of developing practices to determine whether the de facto policy is inconsistent with the Department’s current policy pronouncements.

Leveraging AML Programs Into Anti-Corruption Compliance

With all due respect to Howard Sklar, the godfather of compliance convergence, the most obvious case for compliance convergence is leveraging anti-money laundering and anti-corruption compliance. Most members of the financial services industry already have an AML program, which is likely to be reasonably rigorous.

Let's start with some obvious overlaps.

Risk Assessment: A company’s AML risk assessment approach a company already has in place can easily incorporate FCPA issues to create a broader risk profile, including additional areas of inquiry for a due diligence questionnaire, interviews of key operations personnel in regions or significant countries of operations, and analysis of data.

Training: Companies with AML compliance programs have an AML training program for employees and officers (usually based on risk). The training infrastructure and record-keeping requirements can easily be expanded to include anti-corruption training for employees and senior management.

Compliance Officer: Companies have a designated AML compliance officer, as required by the USA Patriot Act, and this same person or perhaps a separate individual could be appointed to lead anti-corruption compliance programs. Even if a separate person is appointed, the compliance officers are likely to serve together and should be able to find efficient overlaps where efforts can be coordinated.

Corporate Governance: The core compliance functions in an anti-corruption compliance program, including policies, procedures and investigation, have significant overlap with AML, and governance and internal reporting and review issues should be handled in a similar way.

Financial Investigations Units (FIUs): Financial services companies usually have a FIU or equivalent office to: investigate alerts and report suspicious activity under the AML regulations, as well as a transaction monitoring system to identify transactions for possible alerts. The FIU can be expanded in several ways to address anti-corruption issues:

-- Anti-corruption flags can be implemented for existing alerts;

-- Transaction monitoring systems can be modified to add new data and new scenarios of concern – Anti-corruption issues can be identified from traditional sources such as accounts payable and general ledger entries, and gifts, meals and entertainment expenses can be added to this monitoring system since they are a significant bribery risk;

-- Politically Exposed Persons who are already identified as part of an AML program will be identified as government officials under anti-corruption compliance programs. This process can be expanded to include vendors, agents and third party intermediaries, especially those PEPs that are linked to specific vendors, agents and third party intermediaries.

Internal Audits: Both AML and anti-corruption compliance programs need to be tested and audited. Existing internal auditors can be trained to examine anti-corruption issues, or develop new procedures to ensure adequate auditing and monitoring. Conducting an independent audit of both programs is important.

Of course, there are many substantive areas where anti-corruption compliance requires different polices than an AML program, such as gift and entertainment policies, specific books and records requirements, a code of ethics requirement, an employee hotline, disciplinary procedures and other specific measures. AML programs may have more or less overlap with these specific areas. Similarly, the nature of risk assessments and other aspects of an anti-corruption program is different than AML counterparts. However, an AML program may be an effective starting point to leverage existing compliance resources to initiate an anti-corruption compliance program.