We continue our Hunter S. Thompson themed week in honor of Michael Cohen and his Essential Consulting LLC entity. Today we honor Thompson’s alter ego Uncle Duke. For those who might not know just who Uncle Duke might be, you should immediately consult your Doonesbury thesaurus. He is Garry Trudeau’s caricature of Hunter S. Thompson.

Uncle Duke is a fictional character in the comic strip Doonesbury who is Zonker Harris’s uncle “by courtesy”. Uncle Duke is an epic consumer of drugs and alcohol, an amoral trickster with a fondness for firearms, most notably used against (then) Aspen resident John Denver and a well-known user of greased palms to get things done. Thompson himself said of the parody “some people grow up and want to be firemen, and some want to be president; nobody wants to grow up and be a cartoon character”. Thompson said of Trudeau, he did not want to meet him “because I might set the little bastard on fire.”

Uncle Duke seems like a great way to close out this three-part series on Michael Cohen and the compliance perspective on his consulting services. In our most recent Compliance into the Weeds podcast, Matt Kelly and myself raised the question of whether the payments made by AT&T and Novartis might violation the Foreign Corrupt Practices Act (FCPA); not from the foreign official/bribery perspective but from the Accounting Provisions, both the books and records and internal controls.

Compliance practitioners will recall the United Airlines, Inc. (UA) FCPA enforcement action where the company garnered a Non-Prosecution Agreement (NPA) from the Department of Justice (DOJ) while paying a $2.25 million penalty. The Securities and Exchange Commission (SEC) prosecuted UA for a civil violation of the FCPA and they paid a fine for $2.4 million. The violations were on the actions of UA’s former Chief Executive Officer (CEO) Jeff Smisek, in personally approving a benefit granted to favor a state government official, in violation of the company’s internal controls around gifts to government officials.

The internal control violated was the company’s Code of Conduct. In the cases of AT&T and Novartis, both companies have strong language against bribery and corruption in both their Codes of Conduct and in the case of Novartis, in other written standards as well.


 Code of Business Conduct

We do not make improper payments.

We follow ethical business practices throughout the world in our dealings with public officials, other companies, and private citizens. We do not seek to influence them, directly, indirectly, or through a third party, through the payment of bribes or kickbacks or any other unethical payment. Such activity erodes our integrity and, in most cases, violates the law. We strive to avoid even the appearance of improper influence. In particular, we are extra vigilant when dealing with government officials.


 Ethics, Risk and Compliance

Building a culture of integrity

We do not tolerate unethical behavior by our associates anywhere, and we will take all necessary steps to ensure compliance with our Code of Conduct and all applicable laws. At the same time, with more than 120,000 associates, we cannot exclude the possibility of misconduct by individuals. We therefore have extensive measures in place in an effort to ensure that reports of suspected misconduct are investigated thoroughly. Where misconduct is found, we work to take swift and appropriate action.

  Code of Conduct

Anti-bribery and corruption

We do not tolerate any form of bribery or corruption. We do not bribe any public official or private person and we do not accept any bribes.

Anti-Bribery & Anti-Corruption

Novartis doesn’t tolerate bribery. Bribery means giving, offering, or receiving an improper benefit with the intention of influencing the behavior of someone to obtain or retain a commercial advantage. Bribery can take a variety of forms – offering or giving money or anything else of value. In fact, even common business practices or social activities – such as hospitality – can constitute bribes in some circumstances.

It is still not clear what services Cohen provided to AT&T, other than perhaps helping to facilitate a dinner between the Chair of the Federal Communications Commission (FCC) and top AT&T executives.

Novartis, however, has admitted that it continued to make payments to Cohen even after it terminated its meetings with him on the Affordable Care Act because he did not know anything about it. Ed Silverman, writing in a statnews.com piece entitled “Trump’s lawyer pitched himself as a fixer to Novartis and got paid $1.2 million”, said a Novartis employee told him that Cohen “reached out to us”; “Cohen promised access to not just Trump, but also the circle around him. It was almost as if we were hiring him as a lobbyist.” Further, it was the company’s former CEO Joe Jimenez who personally ordered Cohen be hired.

Most interestingly, this same un-named Novartis employee also noted that after the company determined Cohen did not know the subject matter they were interested in engaging him on, they decided not to cancel the contract “not run the risk of ticking off the president. “It might have caused anger,” this person said.” This comment certainly begs the issue that if cancelling the contract would upset the President, he must have known about it in the first place.

At this point, there may not be enough information to indicate a FCPA violation for either company’s actions and their internal controls. Mike Volkov has wondered if companies create internal controls and then do not follow those internal controls, they will be prosecuted for such action (or perhaps inaction). This could be the basis of a SEC enforcement action against one or both companies. For AT&T, did it violate the proscription that “We do not seek to influence them, directly, indirectly, or through a third party, through the payment of bribes or kickbacks or any other unethical payment”, which is set forth in its Code of Business Conduct? Novartis says three time and in three different documents that it does not engage in bribery and corruption. Yet did its actions not to upset President Trump, by continuing to pay Cohen violate the proscription against giving “an improper benefit with the intention of influencing the behavior of someone to obtain or retain a commercial advantage”. Moreover, as a Swiss company, there may be liability under Swiss law. Swissinfo.ch reported that both federal and local prosecutors are looking into the payments made by Novartis.

The fallout continues around the payments made to Cohen. Every compliance practitioner needs to study this matter and determine how your compliance function can work to help stop your company from getting into this type of briar patch long before the entire story goes public. Uncle Duke, where are you when we really need you?

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2018