I recently attended the SCCE Utilities & Energy Compliance & Ethics Conference in Houston and thought I would share some thoughts from what I believe was an excellent conference. Why? Because it never felt like the same old presentations regurgitated by essentially the same old people. Generally speaking, I was most impressed with new takes on old issues and new takes on new issues.
Here are some highlights.
Measuring effectiveness is on everyone’s mind these days. Amy Lilly from CenterPoint Energy did an outstanding job of sharing how CNP does just that. Yes, CNP sends out internal questionnaires and gathers feedback from training sessions, but the really smart thing they do is a series of roundtables with employees at different locations. They talk and gather anonymous, written feedback – yes, written. Once your survey is turned in you are free to leave. Think you will get 100% of responses this way? CNP leadership gets lots of value from these sessions.
Tom Fox and Mike Volkov spoke on Anti-Corruption Enforcement and Compliance Trends. While this is always a session at every conference, the fact that there are always new cases and trends keeps it fresh. My takeaways? Your initial due diligence must be robust and you need to be doing some sort of ongoing monitoring. You should also conduct 3-5 audits per year on your third parties. Not 3-5 each, but 3-5 total. The Yates memo was mentioned at most sessions and Mike and Tom agreed that compliance leaders need to shove Yates Memo principle #1 under senior management’s nose. “To be eligible for any cooperation credit, corporations must provide to the [DOJ] all relevant facts about the individuals involved in the corporate misconduct.” Get your Gifts & Hospitality house in order, too.
You know that session right after lunch? The one where you try not to get too comfortable because you may fall asleep? No way was that happening during Tameka Ramsey’s session. Tameka, from ConocoPhillips, delivered my favorite session of the conference. If any company ever does any sort of internal investigation ever again it needs to be handled like Tameka would do it. These things happen, but business does not have to come to a halt because someone may be tied up in a lengthy interview, extended absence or worse. Find out in advance who can cover for that person. Investigations can be stressful on employees. Do you prepare them in advance? Do you care for them after? Do you want someone that hasn’t slept for a couple of nights or is having trouble focusing to become a safety hazard to themselves or others? How will you manage communication in the office? There will be water cooler discussions and chatter to get out in front of.
I am a geek for this compliance stuff. I really do look forward to the sessions and try to take some nuggets out of each one so that I may speak more intelligently with my clients. But you can really have some great one-on-one conversations in the hallway while sessions are in progress. I had a really good one (or two) with Roy Snell, CEO of SCCE (Apologies to Steven and Adriana, I missed a chunk of their presentation but the part I caught I enjoyed). Roy and I had an interesting discussion on measuring the effectiveness of a compliance program and baseball. Keep your eyes out for something to emerge from this conversation soon.
Remember the old slogan, When E.F. Hutton speaks, people listen? The compliance industry version always seems to be, When GE speaks, people listen. And for good reason. I know, not every company had revenue over $148 billion dollars last year and a seemingly unlimited amount of resources devoted to compliance. But, a lot of what GE does is just plain smart. And a lot of what they do happens within small companies located in small towns. When it comes to Conflicts of Interest, remember this: An appearance of a conflict may be just as important as an actual conflict and must also be avoided. Be sure to educate employees on what a company resource is. It might not be okay to take a piece of unused material and make a custom smoke pit out of it. What about gifts? A nice bottle of wine may be an approved gift from a supplier at Christmas. But a nice bottle for every employee? Might have a problem there. Be sure to train employees on what conflicts of interest are and how they impact business. Whatever the potential conflict, your policy should require disclosure of all outside activities, financial interests or relationships that may either present a conflict or the appearance of one.
An emerging area of concern and enforcement is Human Trafficking. I am pretty sure the audience of Bill Shepherd’s presentation learned more new information during this session than any other. Please be sure you understand what human trafficking is. Components include how labor is recruited, transported, housed, compensated and so much more. Putting the disgusting way humans are treated aside, there were two key takeaways from this session. First is Federal Acquisition Regulation (FAR) 80 FR 4967. This regulates that government contractors submit a certification to the Contracting Officer on an annual basis stating that a human trafficking compliance plan has been implemented on qualifying contracts. The other key takeaway was a surprise to pretty much the entire room. In short, the California Transparency in Supply Chains Act requires California companies to certify that their supply chain is free of any trafficking activities or that appropriate remedial actions have been taken. No big deal if you are a Texas company registered in Delaware, huh? Care to know what makes you a California company? Do you have a storage facility in California? How about a sales rep? You may be subject to the Act and should respond accordingly. Ask Bill about having a Good Shepherd File.
In my opinion, the most surprising presentation came from Adam Turteltaub, Vice President of Membership Development of the SCCE. Not that I didn’t think he could do a great job, but that a session came from the conference organizer. Drawing on great minds like Jimmy Fallon and Stephen Colbert, Adam did an entertaining job of making us all feel like cheaters and worse at thinking than we think we are. The bottom line is, people are going to cheat to the level we can get away with and still feel good about ourselves, moral reminders don’t last very long, and we change our ethics to suit our needs. Now go do some FCPA training and set high expectations for retention and adherence!
Then came a session with some real audience participation. Severin Wirz from TRACE led a panel with more alternates than the NFL Pro Bowl on the topic of third party due diligence. (Full disclosure, I work for TRACE). While the topic of due diligence may be the most beaten dead horse in the history of compliance conferences, this one actually had a little twist. Each participant was given a polling device and was able to instantly benchmark their procedures against the rest of the companies in the room on a series of due diligence topics. Adding to the benchmarking was data pulled from survey responses from TRACE member companies. I got the sense some people left the room feeling good about the state of their programs. I also got the sense some people left the room wondering if they should beef up their approach.
Think of the finest business leaders you are aware of. Those people probably sit on the Board of Directors for a company or two. But on the Boards of 282 companies? Or 1,509? How about 4,043? Ryan Hubbs gave a rather unnerving presentation on shell companies and the masterminds behind them. Does your due diligence stop at identifying the first level of corporate ownership? I hope not, because the spider web of shells is behind billions of dollars in fraud. And much of it comes from the United States. When investigating third parties, be on the lookout for no discernible web presence, generic email addresses, multiple entities at the same address and payment information that is different from the initial setup information.
The final session I attended was a rather insightful one by Jacqui Beckett on finding gems in the course of an internal investigation. One point she made was to have an investigation Protocol AND a Plan. The Protocol sets standards and expectations, and assures consistency when investigations arise. The Plan creates the road map for a particular investigation. Who are the investigators? How will you gather data? What is the timeline? Where must you go? Once the interview has begun, look for opportunities to identify other issues you were unaware of or weak points in your program. Look for creative solutions and use examples as learning moments. Following protocol, communication with those involved, reporting and follow up can all lead to finding gems.
Thanks to the SCCE and many fine presenters for making this an excellent conference.