Over this week’s podcast series in Adventures in Compliance, I have used stories from The Casebook of Sherlock Holmes, mining each story for themes and lessons related to the compliance professional, leadership and business ethics. In today’s offering, I consider The Veiled Lodger. It is one of the shortest stories in this volume and one of the clearest which shows the influence Holmes can bring to bear on the participants in the tale. The final problem solved informs today’s discussion of empathy in compliance.

Holmes is visited by Mrs. Merrilow, a landlady from South Brixton who has an unusual lodger who never shows her face as it has been hideously mutilated. This woman, Mrs. Ronder, carries a terrible secret but will not involve the clergy or the police and will only talk to Holmes.

Holmes and Watson travel to see Mrs. Ronder and she is wearing her veil. The mutilation was caused by a planned murder gone awry. She and her lover, Leonardo, used a circus lion to murder her husband and the lion then turned on her, severely disfiguring her. Mrs. Ronder could not bring herself to implicate Leonardo in her husband’s murder at the inquest and is only now telling this story because she believes that she will soon die. Ever since the night of the incident, she has lived alone and veiled. Holmes can only offer advice in this situation; realizing that Mrs. Ronder is contemplating suicide, he reminds her that her life is worth something as an example of patient suffering in an impatient world. She responds to this by lifting her veil, and the sight is ghastly. However (and this is where the empathy comes in) Holmes see a bottle of prussic acid on her mantle and tells her “Keep your hands off it.” A few days later,  Holmes receives a bottle of prussic acid from Mrs. Ronder. In considering what Holmes told her, she apparently thought better of it.

Compliance Takeaways

  1. Empathy is an important habit for any CCO or compliance practitioner to not only practice but also master.
  1. Engaging in empathy does not mean shying away from difficult conversations.
  1. Do you look for empathy in the hiring process?
  2. One way that empathy manifests itself is courtesy.
  3. People rarely think of courtesy and respect as leadership skills but if you can bring these to bear in your compliance practice, you can garner greater influence as not only someone who cares but someone who cares and gets things accomplished.

I hope you have enjoyed another Holmes themed week as much as I have enjoyed rereading the stories and bringing the compliance and leadership insights to you.

Richard Lummis and I are back to continue our series of exploring leadership through the study of US Presidents. This episode begins a short series on Gilded Age Presidents, now largely forgotten. In this episode we take up Grover Cleveland.
Some of the highlights include:
  1. Educational and Professional-background of Grover Cleveland
  2. New York Politician including his term as Mayor of Buffalo and Governor of NY
  3. Election Campaigns, including Rum, Romanism and Rebellion
  4. Presidency including Reform (1st term); the Tariff (1st term); Military Policy (1st term); Labor unrest and Pullman Strike (2nd term) and Foreign affairs (2nd term)
  5. Leadership Issuesincluding (1) Why tone at the top matters? A Public Office is a Public Trust; (2) How Cleveland helped to return power to the Executive Branch; (3) When is the ‘vision thing’ needed? and (6) Servant Leadership- Officeholders are the agents of the people, not their masters.

As Donald Trump announces he is the “Chosen One” and the Business Roundtable stuns the corporate community with a new Statement on the Purpose of Corporations, Tom and Jay are back to discuss some of this week’s top compliance and ethics stories which caught their collective eyes.

  1. The Business Roundtable issues a new Statement on the Purpose of a Corporation. Overall commentary is mostly pro with some con. David Gelles and David Yaffeny-Bellany report in the NYT. Andrew Ross Sorkin says corporations are looking back to the future. (NYT)FT Editorial Board applauds and says America leads the way, yet again. (FT) Tom explains why it’s a new dawn for compliance professionals in a blog post.
  2. Mike Volkov takes a deep dive into the CCPA. Part 1-what does the law say? Part 2-key actions to ensure compliance. In a related blog post, he considers the role of the Chief Privacy Officer. All on his excellent resource, Corruption Crime and Compliance.
  3. Is Amazon liable for Capital One hack? John Reed Stark explores in a guest post on the D&O Diary.
  4. Is summer the right time to close FCPA cases? Harry Cassin analyzes in the FCPA Blog.
  5. You know it’s bad with BVI lawyer calls out the ABA for opposing UBO regulation. Martin Kenney in the FCPA Blog.
  6. Proactive assessments in health care ethics and compliance programs. Jay explores in another post on CCI.
  7. Trial judge rejects Alstom defendant 5thand 6thAmendment claims to toss case. Dylan Tokar in the WSJ Risk and Compliance Journal.
  8. UK goes after funds obtained through bribery and corruption. Jonathan Rausch in his Dipping Through Geometries blog.
  9. Monitor appointed in MTS FCPA enforcement action. Adam Dobrik reports in GIR.
  10. Sherlock Holmes is back in another week of Adventures in Compliance podcasts on the Compliance Podcast Network. Check out the following: Monday-The Three Garridebs and Monitoring Controls; Tuesday-The Problem at Thor Bridge and Monitoring Controls; Wednesday-theCreeping Man and Risk Management by Your Board; Thursday-The Lion’s Mane and Risk-Based Monitoring; and Friday-the Veiled Lodger and Empathy in Compliance. The podcast is available on multiple sites: the FCPA Compliance Report, iTunes, JDSupra, Megaphone,YouTube, Spotifyand Corporate Compliance Insights,  Compliance Podcast Networkand now on the C-Suite Radio Network.
  11. Join Tom and Jay and a host of other great speakers and guest at Converge19 in Denver October 2 & 3. Listeners to this podcast can obtain a complimentary ticket by using the promotion code foxvip, for registration and information, click here.

Tom Fox is the Compliance Evangelist and can be reached at tfox@tfoxlaw.com. Jay Rosen is Mr. Monitor and can be reached at jrosen@affiliatedmonitors.com.

For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.

I conclude my short exploration of the recent set of articles in the Harvard Business Review (HBR) White Collar crime special section. Today, I want to look at an article by Mary Jo white, entitled “What I’ve Learned About White Collar Crime”. White is about as well known a figure in the white-collar bar, both prosecution and defense. She is currently the senior chair of the law firm Debevoise & Plimpton LLP, is the former chair of the US Securities and Exchange Commission (SEC) and the former US Attorney for the Southern District of New York. All of these positions have given her keen insight into not only white-collar criminals but also the response companies have engaged in and the actions they should take when they find themselves under government scrutiny.

These are not the run of the mill fraudsters but senior executives who engaged in accounting frauds and fostered corrupt cultures that lead to bribery and corruption, illegal by the Foreign Corrupt Practices Act (FCPA) or participated directly in the bribery schemes.

Ego 

Interestingly, and channeling her inner Jonathan Marks, White first addresses the question of why senior executives would engage in financial fraud or engage in or facilitate bribery and corruption. She said, “Part of the motivation is greed, of course, but there’s more to it. The piece that the public underestimates is ego. Many of the people who commit these crimes have been successful, and they don’t want to fail. Very often the market has turned on them, but they need other people to still see them as successful. There’s often a financial motive, but in a highly charged business where there are temptations, you have to account for human nature and the need for status and continued success, too.”

How is that channeling her inner Jonathan Marks? Quite simply, it is one of the five points on Marks fraud pentagon.Marks calls it “arrogance” and defined it as “Arrogance or lack of conscience is an attitude of superiority and entitlement or greed on the part of a person who believes that corporate policies and procedures simply do not personally apply. This person, perhaps fueled by today’s obscene compensation structures, has complete disregard for the consequences bestowed upon his or her victims. Competence and arrogance play a major role in determining whether an employee today has what it takes to perpetrate a fraud.”

Mistakes in Remediation

Obviously, remediation of any compliance violation is critical from a prosecutorial perspective, as it is mandated for consideration under the US Sentencing Guidelines. Moreover, it is now enshrined in the FCPA Corporate Enforcement Policy as a key indicium for assessing potential liability. Yet, White believes that many companies miss the mark as, “The biggest mistake companies make in trying to prevent crime or misconduct is to ratchet up compliance simply by throwing more resources at it. They believe every extra dollar has the same incremental effect. That’s incorrect. Particularly when you’re dealing with potential violations of the Foreign Corrupt Practices Act (which targets bribery) or the Bank Secrecy Act (which focuses on money laundering), you need to be surgical and intelligent about where the biggest risks are. This is especially true in global organizations—very often problems are popping up far from headquarters, in overseas subsidiaries or with joint venture partners.”

Culture

Here White brings real weight to the debate. While noting that compliance programs are important, she feels it really comes down to culture. She wrote, “Compliance programs are important, but what really matters is the culture and the tone that a leader sets for the organization—that’s often a more effective way to increase the odds that lapses won’t happen again.”

She provided the example of the ostrich-ridden chief executive, when she wrote, “In the aftermath of a scandal, some leaders will claim they didn’t know what was going on. Sometimes that’s true. But when it is, you have to ask if the leader built a communication system that’s designed to bring bad news up to his or her level, or whether the system is designed to insulate leadership.”

Every public company is mandated to have hotlines for whistle-blowers. The problem is that very rarely do the allegations reach up to the Board of Director’s, the Audit or Compliance Committee or the Chief Executive Officer’s (CEO) office. As Kyle Welch demonstrated in his seminal work, “Evidence on the Use and Efficacy of Internal Whistleblowing Systems”, companies with robust reporting systems, where senior executives are actively seeking out complaints and allegations have a much stronger compliance and ethics culture. Unfortunately, as White observed, “In contrast, some hotlines seem designed to give leaders plausible deniability: We have a system for reporting complaints, and there haven’t been many. Leaders have to ask, Why is that? Are employees reluctant to come forward for fear of retaliation?”

It is interesting to note that Wells Fargo suffered from both problems at the same time. First the company had a large number of employees who came forward to warn about the fraudulent accounts creation in the bank. However, that information was never sent up the line to the then CEO, Board of Directors or Audit Committee. Even worse, the whistleblowers were actively retaliated against by the company through terminations and then fighting these wrongful acts.

It Starts at the Top

White concluded that without senior leaders actually leading in the area of compliance and ethics, there is little chance a company can make a comeback from a white-collar incident. She concluded by stating, “If you’re a new leader in an organization, my advice is to let people get to know you—and your values. Let them know how serious you are about doing the right thing. Make it clear that if they see someone do something wrong, they must report it—and that by doing so, they’re supporting all the people in the organization. When someone strays, it diminishes the entire company, and employees can’t let that happen. That’s the message leaders need to deliver—and it’s how they must act, too.”

One vital marker of an ethical culture is whether there really is a zero-tolerance policy for wrongdoing. Many companies claim to have one, but when high producers or senior people break the rules, leaders may go easy on them, either for business reasons or out of loyalty. That undermines everything. You can’t rely just on compliance and audits; you have to be willing to punish people who cross the line. To build an ethical culture, you have no choice but to follow through on your no-tolerance promise. Don’t just talk the talk; walk the talk.

Perhaps I should have started this blog post with the maxim that when Mary Jo White speaks, you should listen. The ideas that she puts forward in her article are not new, revolutionary or in the least bit controversial. Yet her long and distinguished career, on both sides of the bar, should give every business leader pause to consider about their organization. With the Business Roundtable’s Statement of Corporate Purposecompliance and ethics has been driven to the forefront in the rasion d’etre of a corporation. White explains why failing to do so can lead to significant corporate calamity.

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, 2019

There is nothing more inspiring than hearing about someone who has been there and done that.  In today’s episode we feature Kris Robidoux who was involved in the first two anti-bribery cases in Canada and led the way for those after her. Kris is a decorated Legal and Compliance professional with the title of Queen’s Counsel to her name as well as being named one of the Top 100 Women in Investigations by Global Investigations Review and One of Canada’s Top 25 Most Influential Lawyers by Canadian Lawyer Magazine. Mary was introduced to Kris by Compliance colleagues Jay Rosen and Jonathan Armstrong.  It was the beginning of a wonderful friendship.  Kris, Jonathan and Mary would go on to work together as panelists at conferences sharing global Compliance updates with able assistance from Jay who facilitated the interactive aspects of their sessions.  Throughout her time knowing Kris, Mary has considered her to be one of her Compliance role models and knows that she will always be received with a warm smile and words of wisdom when meeting Kris.
In this episode, Kris shares her thought leadership on observing gaps in the market coupled with timing your moves to position yourself to lead the charge in new areas of the law, a top consideration for companies that may have to deal with the legalization of cannabis and its impact on company policies, her biggest lesson learned transitioning from a compliance and investigations practice in a global law firm to a compliance role in a corporation, dealing with possible retaliation cases when conducting investigations and working through challenges of colleagues undermining Compliance. We close this episode by canvassing the effects of microaggressions in the workplace and how you can play a part in lessening these detrimental effects.