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Getting Ahead of the Compliance Curve

Posted May 26, 2015

Speaking recently at the Compliance Week 2015 conference, Leslie Caldwell, assistant attorney general for the Justice Department’s Criminal Division, discussed the issue of corporate accountability in general and more specifically, how companies should be “holding themselves accountable by designing compliance programs that don’t just look good on paper but actually work.”

“Overall, our message is really a simple one: we really expect that corporations will take compliance risks as seriously as they take other business risks,” Caldwell said. “Compliance is a really significant part of a company. It’s critical, and a lack of compliance can be devastating to a company.”

Compliance programs however should not designed simply to avoid legal or regulatory violations, but should be aimed more broadly at protecting “the company’s reputation, employees, customers, third parties, and, frankly, the public.”

Some companies misdirect their compliance focus by targeting only areas where they have regulatory and criminal exposure, with the result that too many compliance programs “are little bit behind the curve,” Caldwell said, adding that “They’re effectively and carefully guarding against yesterday’s problems, but they’re failing to identify and prevent tomorrow’s problems.”

The foremost hallmark of an effective compliance program begins with the “tone-at-the-top” which is then manifested in explicit messages being given to employees in the field through factors such as compensation and incentives. In that regard, Caldwell said, the level of compensation should be appropriately commensurate with the degree of seriousness which the company claims to be taking the issue, as doing otherwise sends mixed messages.

Other hallmarks of an effective program including have compliance program that is “clear, simple, and straightforward.” Having adequate resources and an effective means of reporting potential violations are also essential, she said. “Sometimes the companies with the best compliance programs are the one that appear to have the most violations; that’s because their programs are actually working. If you’re a large company that had no compliance violations over the last two years, I can tell you that have a bad compliance program.”

Another crucial component of a compliance program is that it be a “living document” that’s reviewed periodically, Caldwell said. Additionally, mechanisms should be in place to enforce compliance, including incentivizing good behavior, as well as disciplining violators of laws or policies, no matter the level of the employee, she said.

When it comes to conducting internal investigations, the Justice Department will “evaluate the quality of company’s investigation when we’re deciding whether to bring charges against that company,” Caldwell said. The Criminal Division does not look favorably upon companies that attempt to whitewash the truth by presenting facts in the form of “talking points,” or that sound “spun,” she said.

Effective internal investigations should be focused on rooting out facts, identifying and interviewing knowledgeable people, gathering relevant documents, and identifying individuals responsible for the misconduct. Contrary to some reports, Caldwell said the Justice Department does not believe a company necessarily has to take a “boil the ocean” approach when conducting an internal investigation. “Make your investigations focused, targeted,” she advised. “We don’t expect a worldwide bill of health in every FCPA investigation.”

How thorough an investigation should be varies, depending on the type of problem and type of company, she said. For example, if a local employee in Russia paid a bribe to customs officials to get a shipment of automobiles into the country in an expedited fashion, “I don’t think there is reason to assume that same problem exists in every country,” she said. By contrast, if you discover a problem in Country A, and the same group of sales managers are operating in other countries, “we would expect you to look in those other countries.”

Click here for the complete text of the speech.