Hunter S. Thompson once said that when the going gets weird, the weird turn pro. It turns out that amateurs can get weird too. The University of Mississippi football program, which is under a self-imposed postseason ban and is awaiting NCAA decisions on formal sanctions for recruiting violations has, as the Wall Street Journal (WSJ) recently reported, more salacious allegations surrounding the recently fired head coach Hugh Freeze. Andrew Beaton, in an article entitled “‘Burner Phone’ Accusation Marks New Chapter in Ole Miss Scandal”, wrote there are now allegations that Freeze and three of his assistant coaches purchased untraceable disposable “burner” phones for use in recruiting. They “used burner phones “on a regular basis” to hide communications with recruits that would violate NCAA rules.”
This allegation comes on the heels of the revelation that the now former head coach had made calls from his university provided cell phone to “escort services” while on recruiting trips. Initially the University said the calls were inadvertent (AKA ‘butt dials’) but within days the University and Coach Freeze parted ways when it turned out there was a pattern of such calls “over the course of several years.” The burner phone allegations were made in July and included “that coaches purchased phones with cash, sometimes at out of state locations or using fictitious names, that they used to conceal “communications with prospects that were prohibited by the NCAA’s rules.””
What makes this worthy of fratricides from the House of Atreus is that both allegations of phone misuses came from a former Ole Miss head coach, Houston Nutt. The University is under investigation by the NCAA for football recruiting violations and at least up until it dismissed Freeze in late July, stood by Freeze and blamed Nutt for the scandal. Nutt struck back with a defamation suit and in discovery obtained the phone records of Coach Freeze, as he is a state of Mississippi employee as the head coach. Those phone records revealed the calls to the escort services.
Nutt’s lawyer has told University officials he has a “sworn affidavit” backing up his claims on the burner phone use. The University has indicated that its “internal monitoring systems haven’t uncovered any evidence to support the claims about burner-phone use.” In August all of current coaching staff denied the burner phone allegations.
For the Chief Compliance Officer (CCO) and compliance professional there are some interesting lessons to be garnered from the weirdness at the University of Mississippi. The first lesson is when sales spike up from the ashes to the heights that the Mississippi football team achieved over the past few years, you might want to check into the reasons. Ole Miss football had not been relevant for many years and under Coach Freeze, “brought top-ranked recruiting classes to Oxford, Miss., beat Alabama in back-to-back seasons and won the Sugar Bowl just two years ago.” There might be a reason other than superior coaching for this renaissance. If you have a sales spike in a region which for 30 years or so has been an also-ran in marketing, you might want to inquire into what caused the change.
The response to such a sales spike requires that the corporate compliance function be made aware of such activity. That presupposes compliance has a seat at the senior management table, access to the data and the ability to interpret the data. This final point drives home why compliance officers need to have the ability to read a spreadsheet.
The second issue concerns the burner phones. While it may be conceivable that employees might still talk about paying bribes and engaging in corruption through work email, surely those types of employees have been consigned to the dustbin of Darwin Award winners. Instant messaging and other apps have become a favorite with many employees believing such communications are not archived. If college football coaches can think up using burner phones to avoid University detection and/or NCAA oversight so they can recruit illegally, it does not seem to be a stretch to think that an enterprising Business Development (BD) person to come up with the idea. You do not have to be Jason Bourne to use such a tool.
The first line of response here should be training. But more than simply compliance stand-alone training, such training should be a part of ongoing sales training. In an interview with Compliance Week Editor-in-Chief Bill Coffin, Hui Chen said “I think that in the ideal scenario I want there to be no dedicated compliance training because all of the compliance training is actually integrated into the different on the job training that every function does. If I am a sales person, for example, when I come into the company, I will be trained on how to do my job. This is our product, how we sell it…and part of that training, together with how to sell, is also how to not to sell. You incorporate anti-competition and anti-corruption training, price fixing…all the components are there. They’re just not called compliance training. They’re called how to do your job training.”
Next is the source of the allegations against the University and former coach Freeze. Nutt has sued Freeze and other school officials for defamation and engaged in discovery against them. The Department of Justice (DOJ) has previously communicated one source of information on potential Foreign Corrupt Practices Act (FCPA) violations is competitors. There is nothing that prevents a competitor (or former employee) from providing information to the Securities and Exchange Commission (SEC) and potentially receiving a bounty under the Dodd-Frank Whistleblower program.
Consider the case of Net1 UEPS Technologies, Inc. (Net1). In a client release from the law firm of BryanCave LLP, entitled “FCPA Investigations – Competitors Dropping the Dime”, it reported in a SEC EDGAR filing, “Net1 a company based in South Africa but listed on NASDAQ, filed an announcement that the Department of Justice had closed its investigation into possible FCPA violations. That investigation “was initiated largely as a result of one of the losing bidders for the contract, . . . referring unsubstantiated South African press articles to the DOJ, alleging or implying that the  tender process [for a government contract] was tainted by corruption involving [Net1]’s subsidiary . . . .”” In other words, a competitor who lost a bid accused the company of violating the FCPA to win the award. While Net1 eventually received a Declination, it was five-year process with the legal costs not reported. Further, there is always the possibility of a state based unfair competition lawsuit.
The imbroglio that is currently engulfing the University of Mississippi football program may be a long way from conclusion. Yet even at this early stage of the Nutt lawsuit there are multiple and varied lessons for the compliance professional to synthesize and incorporate the lessons into his or her compliance program. And it is only going to get weirder.
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© Thomas R. Fox, 2017