Today is May Day, the day traditionally celebrated by workers across the world. If you read my blog post yesterday, you might ask if Jack Ma and the employees of Alibaba are celebrating losing the shackles today? Yet there is one other event which occurred on May 1 which celebrates the US worker which we honor today. It is the dedication of the Empire State Building, which occurred on this day in 1931 when President Herbert Hoover pulled a switch lighting the building.
According to This Day in History, “the Empire State Building, at 102 stories and 1,250 feet high (1,454 feet to the top of the lightning rod), was the world’s tallest skyscraper. The Depression-era construction employed as many as 3,400 workers on any single day, most of whom received an excellent pay rate, especially given the economic conditions of the time.” Perhaps equally important, “The new building imbued New York City with a deep sense of pride, desperately needed in the depths of the Great Depression, when many city residents were unemployed and prospects looked bleak.”
Today at the Ethics and Compliance Initiative (ECI) Impact 2019 Conference, Assistant Attorney General Brian Benczkowski delivered the afternoon Keynote Address. He gave some significant comments around the corporate compliance function. However his speech will no doubt most likely be remembered as the place the Department of Justice (DOJ) announced an update to the 2017 Evaluation of Corporate Compliance Programs, released in February 2017. This new document is entitled Evaluation of Corporate Compliance Programs – Guidance Documentand is available for download at no charge. It is 19 pages and I did not have time to fully read and digest it so I will be blogging about it in subsequent blogs. However, Benczkowski had some real gems in his speech for the compliance practitioner.
He began by stating, “The importance of corporate compliance cannot be overstated.” He went to relate that the DOJ works very diligently on “what companies can do to achieve the best result once the company or the Department learns of misconduct.” Benczkowski then turned to why a compliance program is so important. It is the “first line of defense that prevents the misconduct from happening in the first place. And if done right, it has the ability to keep the company off our radar screen entirely.In fact, of all of the Principles of Prosecution of Business Organizations that prosecutors are instructed to consider by the Justice Manual in determining an appropriate resolution of a corporate case, an effective compliance program is the only principle that has the ability to prevent the crime from occurring in the first place.”
But there is another reason Benczkowski articulated for the significance of an effective compliance program. The three prongs of effective compliance are prevent, detect and remediate. He said that the detect prong is very significant for the DOJ; the reason being an effective program is more likely to have the types of controls in place which would pick up bribery and corruption which might occur within an organization. In other words, a “compliance program can play a significant role in the Department’s investigation of criminal wrongdoing.”
This goes a long way in explaining the reasoning behind the Cognizant Technology Solutions Corporation (Cognizant) declination. Even with the C-Suite involvement of the Chief Executive Officer (CEO) and General Counsel (GC) the company was still able to obtain a declination. The reason was that the company’s compliance program had detected the issue and the Board of Directors had taken charge and self-disclosed to the DOJ within two weeks of being notified.
Benczkowski further explained that when there is an early self-disclosure, it provides a better opportunity to secure documents and other evidence of illegal acts which the DOJ can use to prosecute culpable individuals. He stated, “Likewise, when a company maintains an effective compliance program, it makes it that much more difficult for company employees and agents to engage in unlawful conduct. As a result, it is more likely that evidence will be generated when those employees and agents circumvent the program to carry out their illegal scheme. The better the compliance program, the clearer the footprints that are left from the crime, and the easier for the Department to follow the tracks to the culpable individuals.”
For those compliance professionals who read the Cognizant declination and were left wondering about the basis for it, Benczkowski laid it out. He stated, “It is for these reasons – the ability of a compliance program to prevent misconduct, and to detect it early and allow the government to more effectively investigate and prosecute the wrongdoers – that the Department has strived to incentivize and reward companies that implement effective compliance programs.”
The DOJ weighs a company’s compliance program thoroughly when determining whether and how to resolve the case. First, “prosecutors assess the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision.” This is critical because under the FCPA Corporate Enforcement Policy, a company is not eligible for the full range of benefits if it has not implemented an effective ethics and compliance program. Second, the DOJ will assess “a company’s compliance program at the time of the misconduct to determine the company’s culpability score under the U.S. Sentencing Guidelines, which determines the company’s ultimate fine range. If the company maintained an effective ethics and compliance program at the time of the misconduct, the company would also be eligible for a significant reduction in its overall fine.” Finally, the DOJ will consider a “company’s compliance program at the time of the resolution to determine whether an independent compliance monitor is necessary to prevent the reoccurrence of misconduct, or whether the compliance program is sufficiently effective to permit the company to self-monitor.”
This speech was one of a series that Benczkowski and his team at the Criminal Division have made over the past 18 months regarding the importance of corporate compliance programs. Their remarks and the direction of the DOJ are welcomed by compliance practitioners.
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© Thomas R. Fox, 2019