In this episode I podcast favorite James Koukios returns to discuss some of the highlights from the Morrison and Foerster newsletter on Top Ten International Anti-Corruption Developments for April 2018. Some of the highlights include:

  • D&B Declination for FCPA violations-how did the company get such a great result?
  • IMF “Steps Up” Engagement on Governance and Corruption. On April 22, 2018, the IMF announced that its Executive Board had endorsed a new framework for “stepping up” engagement on governance and corruption in its member countries. What does this mean for companies?
  • Individual prosecutions continue related to PDVSA. What does this mean, together with the tightening sanctions against Venezuela for US companies still trying to do business in that country or stuck it out hoping for regime change.
  • Aruban Official and Florida-based Telecom Executive Plead Guilty in Connection with Bribery Scheme. Use these guilty pleas to discuss the bookends of corruption; bribe payor and bribe receiver. How does the DOJ look at this problem and what tools are available to prosecutors?
  • Areas of the globe in which companies currently doing business need to take a close look at their operations. I have suggested South African and Malaysia. Are there others the DOJ might be looking at?.
  • As an added feature we move to a current event, the news of a Subpoena issued to Glencore by the Justice Department, in part related to a FCPA investigation. We consider what delivery of a Subpoena means from the DOJ and company perspective.

For the full Morriston and Foerster April Top Ten International Anti-Corruption Developments for April 2018, click here.

As we begin the post-holiday portion of our 4thof July week, Jay Rosen and myself are back in the saddle again to take a look at some of the top compliance stories from the past week.

  1. Credit Suisse settles with DOJ and SEC for its illegal hiring of family members of Chinese government officials, in violation of the FCPA. See Justice Department NPA here. Dick Cassin reports ion the SEC settlement in the FCPA Blog. See SEC Administrative Order here.
  2. What is Homeland Security Investigations and how does it help in FCPA Investigations. Clara Hudson reports in Just Anti-Corruption.
  3. ZTE starts its come back by changing its senior management. Sam Rubenfeld reports in WSJ Risk and Compliance Journal.
  4. Jim Beam goes down harshly with a FCPA violation in India. Henry Cutter reports in the WSJ Risk & Compliance Journal. See SEC Adminstrative Orderhere.
  5. The former Prime Minister of Malaysia is arrested for corruption around the 1MDB scandal. Hannah Beech and Austin Razmy report in the New York Times.
  6. Matt Kelly explores two parts of compliance in a discussion of Michigan State and Larry Nassar. The first is escalation and tone at the top. The second is institutional repair through procedure and transparency. See his article in Radical Compliance.
  7. Should there be a difference reimbursement/remediation program in the Och-Ziff matter. Africo Resources says yes and makes their case to the DOJ. Kelly Swanson reports in GIR. (sub Req’d)
  8. Why should investigators prepare for Artificial Intelligence? Peter Humphreys explores in Global Investigation Review(sub req’d)
  9. Two great compliance events in Houston next week and both events are free. First the Greater Houston Business and Ethics Roundtable holds in members’ only summer workshop Thursday July 12. For information and registration, click here. Second Jonathan Marks will present to the Houston Compliance Roundtable on Friday July 13 at 8-9 AM. For more information, contact Tom Fox.

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 continue my short series on what leadership lessons might be learned from four Presidents immediately preceding the Civil War with the presidency of Franklin Pierce the 14thPresident, who succeeded Millard Fillmore in 1853. Pierce is universally rated as one of our worst Presidents, much worse than even the man he succeeded who, in 1856, actually ran as the head of a political party named the “No-Nothings”. That is how poorly Pierce has fared over history. However even with that low rating on the Presidential scale, there are several lessons to be garnered in leadership from his Presidency.

Pierce is little known and little remembered today. Yet, he had quite an impressive political career. He was born in New Hampshire and served in the US House of Representatives and in the Senate until he resigned from the Senate in 1842. Moving back home to New Hampshire he practiced law. President Polk offered him the job of Attorney General but he turned it down because his wife absolutely loathed Washington and everything about it. He took part in the Mexican American war, as a particularly luckless Brigadier General who was seen as something less than the ideal 19thcentury soldier, in at least in terms of toughness, as he once passed out on the battlefield from a painful injury sustained in combat. He was seen by the Democratic Party as a compromise candidate in the election of 1852, one who was capable of uniting with the northern and southern wings of the party. He was nominated for President on the 49th ballot at the 1852 Democratic National Convention. His wife fainted on hearing the news.

Pierce was elected to the House at the age of 28 and to the Senate at the age of 32. When he became President he was only 48, making him the youngest man to be elected President until Jack Kennedy. However it is not his youthful age for which Pierce’s Presidency is remembered as here were three things which decidedly and negatively impacted him. They were depression, what we would now call PTSD and alcoholism. As a president Pierce was a noted, very heavy drinker. He died from what is believed to be cirrhosis of the liver. Numerous commentators have talked about his drunkenness, not for his outrageous behavior but for its incapacitation of Pierce at this critical junction of our country’s behavior. Although I think he started drinking at a much younger age, there are two seminal events which led to this heavy drinking while President: depression and PTSD.

Pierce’s wife did not want to go back to Washington DC and because of her they delayed their trip to Washington after he was elected until early January of 1853. While traveling from New Hampshire to Washington via train, their train was involved in a derailment with both Pierce and his wife injured and their only surviving son,  Benjamin, killed literally while in his mother’s arms during the derailment. His wife went into a far beyond deep depression and deep mourning for a couple of years, staying in New Hampshire. Even after she moved to Washington, she would not receive visitors at the White House.

The effect on Pierce also put him in a very deep depression. We now had someone who drinks too much, medicating themselves with a depressive, which is alcohol. This only makes your depression worse. The final part is somewhat speculative, due to the understanding of concussions and head injuries at the time which was the injury cause of PTSD in Pierce. When you put these three factors together, we had a president who was probably not at his full capacity. Unfortunately for the country, this was a time when we needed a President at full capacity. Even with these hardships Pierce was able to accomplish a few things through decisive leadership.

Gadsden Purchase

While Texans and other people from the southwest may well be aware of the Gadsden Purchase treaty with Mexico other Americans may not be as familiar with it. It was negotiated by rail magnate James Gadsden with America’s (and Texas’) old nemesis, General Antonio de Santa Anna. Gadsden purchased some 55,000 acres from Mexico, which filled out the lower 48 states, for $15,000,000. Later the Senate reduced the amount of the price and the size of the purchase by some 11,000 acres and to $10,000,000. Pierce was able to get this amendment to the Treaty of Guadalupe-Hidalgo through the Senate at a time when sectional tensions were extraordinarily high. This purchase really was a commercial opportunity and it was the last piece of territory to which the southern a transcontinental railway would be built.

Cuba, yet again

There was still the old southern states desire to obtain Cuba from the crumbling Spanish Empire by hook, crook or nook. Pierce acceded by offering to purchase the island from the Spanish. However certain prominent southern members of his administration drafted a Memo which basically said that if Spain turned down the purchase price, the US needed to take the island over by force. When you couple this with the sectional tensions, this enraged northerners because they thought that Cuba would become a slaveholding state because it was a slave holding province of Spain. Pierce completely scotched the idea that the US would take Cuba from Spain by force, putting off an event which would not happen until 1898. 

Bleeding Kansas

The greatest challenge of the Pierce administration was the passage of the Kansas–Nebraska Act, which led to Bleeding Kansas. Organizing the largely unsettled Nebraska Territory was a crucial part of Senator Stephen A. Douglas’s plans for western expansion. He wanted a transcontinental railroad with a link from Chicago to California, through the vast western territory. Senator Douglas wanted to organize the territory and let local settlers decide whether to allow slavery. The territory would be split into a northern part, Nebraska, and a southern part, Kansas, and the expectation was that Kansas would allow slavery and Nebraska would not. Pierce was skeptical of the bill, knowing it would result in bitter opposition from the North. Douglas convinced him to support the bill. It was tenaciously opposed by northerners such as Ohio Senator Salmon P. Chase and Massachusetts’ Charles Sumner, who rallied public sentiment in the North against the bill. Pierce and his administration used threats and promises to keep most Democrats on board in favor of the bill. The Whigs split along sectional lines; the conflict destroyed them as a national party. The Kansas–Nebraska Act was passed in May 1854 and would come to define the Pierce Presidency.

However once the law was passed, Pierce believed in faithfully executing the laws of the United States and believed he should enforce it. What he was not seeing was the lawlessness on the ground, particularly in Kansas, which garnered the nickname of Bleeding Kansas. Moreover, he could not see how far this new law went in further alienating the North and South to the point where, in the 1854 midterm elections, the Democrats were basically wiped out in the House and Senate. There is one other event, while I do not believe you can lay on Pierce it did speak to the alienation of the country. This was the caning of Charles Sumner by Preston Brooks, a South Carolina congressman on the floor of the Senate, which led to the phrase a Bleeding Sumner. Now we had Bleeding Kansas and Bleeding Sumner. Then came the 1854 mid-term elections and the Democrats lost their majority. Up until that time, Pierce was able to keep the Democratic Party together but after that lost election, Pierce lost all effectiveness as President and was completely ineffective his last two years as President. 

Next up, James Buchanan.

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

I continue my short series on what leadership lessons might be learned from four Presidents immediately preceding the Civil War with the presidency of Millard Fillmore the 13thPresident, who assumed the office upon the death of President Zachary Taylor in July 1850.

Fillmore grew up very poor in upstate New York, having been an indentured servant at one point in his life. He had almost no formal education, but became a clerk for local judge. Eventually admitted to the bar, he practiced law in upstate New York and became one of the more prominent attorneys in Buffalo. He became involved with the Anti-Masonic Party, was elected to the New York state assembly and later the US House of Representatives. In the House, he eventually rose to be Chairman of the Ways and Means Committee. He left Congress in 1843, moving back to Buffalo NY and there served as Chancellor of the University of Buffalo, which he helped to found. He then became Comptroller for the state of New York.

In order to balance out the 1848 Whig ticket geographically, Southerner Zachary Taylor asked Fillmore to be his Vice Presidential standard bearer. The offer was made by letter with the two men not meeting until 10 days or so before the Inauguration. Fillmore assumed office on Taylor’s death in July 1850. Prior to 1967, the US Constitution had no mechanism to replace the Vice President if he became President. This meant that Fillmore served alone and never had a Vice President at the time when both the Whig Party and the country as a whole were splintering as result of the slavery issue. Fillmore’s support of the Compromise of 1850 and especially his enforcement of the Fugitive Slave Act, using federal troops to support this law, alienated the anti-slavery wing of the Whig Party and Fillmore was not re-nominated in 1852.

Fillmore’s reputation, while personally one of integrity, is not one for our better presidents. In a New York Times article by Thomas Vinciguerra, entitled “Why He Gets the Laugh”, it really sets the tone of how people, even today, think about Millard Fillmore. Gora poses the question, “Why does everyone beat up on Fillmore?” He cited to Michael F. Holt, professor of American history at the University of Virginia and author of “The Rise and Fall of the American Whig Party”. “I think he’s gotten a bum rap. At least no one accused him of being an alcoholic like Franklin Pierce.”  Tyler Ainbinder, the chairman of George Washington University History Department, said the most obvious explanation was his name. “It didn’t help you added that Fillmore was the 1856 presidential nominee of the Know Nothings. Combine that with his name and he’s doomed, but perhaps the even worse is simply that at the time he was thought of as quote a Namby Pamby milk toast kind of guy.”

He came to the Presidency with the death a truly beloved figure, Zachary Taylor. Further, he had been hamstrung by President Taylor with not being part of any decision-making group or even consulted by the President. This had another effect which dogged Fillmore through his presidency. Taylor had kept him from delivering the patronage which was the grease for the mid-19thcentury wheels of American politics. Taylor was not able to overcome his political enemies back in New Nork to dole out the plum federal jobs expected from a Vice President. This made him seem like a politician who could not deliver even when he acceded to the Presidency and he did not have a natural political base to draw upon.

While Fillmore was not a part of the Administration’s work on series of bills which became the Compromise of 1850, he was the Presiding Officer of the Senate and therefore heard the debates. This allowed him to understand that Henry Clay’s omnibus bill detailing all issues was doomed to failure so when Clay split the bill into five constituent parts, Fillmore indicated that he would sign all the separate parts which reached his desk as President. Yet this omnibus bill did not pass precisely because it included all the parts needed to deal with the continuing crisis over slavery.

The heart of the Compromise was bringing in California as a free state. Next was the treatment of New Mexico and Utah and whether they would come in as territories, which Congress could then decide on whether they would have slavery or not, or whether they would come into states, in which case they would have a plebiscite to determine whether they were slave states or not. The part that at the end was the most controversial was the Fugitive Slave Act replacing the one signed in the 1790s by George Washington, which had fallen into disuse because as it was no longer enforceable and only applied if the actual owner showed up to repossess the slaves. The slave trade was outlawed in the District of Columbia. The final piece of legislation, which is largely forgotten today, is that it was a border adjustment between Texas and what would then become New Mexico in exchange for which Texas received a cash payment.

Finally, I end with some quotes from Fillmore which seem appropriate today:

“It is not strange… to mistake change for progress.” 

“Let us remember that revolutions do not always establish freedom.” 

“The law is the only sure protection of the weak, and the only efficient restraint upon the strong.” 

“Church and state should be separate, not only in form, but fact – religion and politics should not be mingled.”

Finally, and most appropriately for this July 4thholiday week: “The nourishment from barbecue is palatable.” 

Tomorrow Franklin Pierce.

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

Leading up to the 4thof July holiday, I want to consider the leadership lessons of the four Presidents immediately before the Civil War. Today, I consider what lessons might be learned from the presidency of Zachary Taylor the 12thPresident. Taylor only served 18 months, from 1849-1850. He died in office from over eating and drinking on the July 4thcelebration of 1850.

Taylor had a long career in the US Army prior to his election, during which time he successfully operated cotton plantations in Louisiana, Kentucky, and Mississippi. He was elected as a Whig, this despite refusing to commit himself to the party platform. He was the first President not to hold elective office. While Taylor is usually ranked in the bottom percentile of presidents, he is most generally described as more a forgettable president than a failed one. However, his biographer, John S. Eisenhower, argued he was the one man who could have hammered out a compromise on slavery that would have averted the civil war contemporaries. Finally, in the political realm, both Democrats and Whigs alike generally viewed his premature death as a national calamity.

Take a stand

One of the leadership lessons came from an inaction by Taylor. It began before he was even elected President, did not embrace the Whig political platform, or even declare himself a Whig until February of 1848 with the election only seven months away. This seems odd but it led to certain other consistent actions in his presidency. For leaders, however, the clear import is that sometimes you have to take a public stand and if you want to be President of United States in a two-party system, you have to declare for one of those parties.

This failure to take stands was reflected in his Presidential leadership style, where he attempted to stand  above the fray. The reality was that he did not lead either the Whig party or Congress directly. He thought the President should stand above party politics, even to the extent of not taking a public stand and declaring himself as a Whig. Still, for leadership, the clear message is that sometimes you do have to take a stand.

You must be engaged

As a business leader, you must be engaged. Taylor’s military training influenced this thinking but that training and those instincts did not serve him as President. He needed to lead both the country and the Whig party. Obviously, this was a critical time in American politics with a horrific war only 10 years away. Further, in a time where politics was driven largely by patronage, Taylor failed to grasp this principal and it was one of the contributing factors to the demise of the Whig Party in only four more years. A philosophy of trying to be above the fray just does not always work. As a Chief Executive Officer (CEO), a senior executive, a Board of Director, you must be engaged in your business. It does not mean you have to get into the weeds of tactical decision making but you must set the proper tone and then oversee it going forward.

Succession Planning

We have observed several times before the failure to plan for succession. In this case, we have that failure from a President who died in office, some 18 months into his presidency. Taylor and his Vice President, Millard Fillmore, did not even meet in person until only a week or two before the inauguration, so there was no time to build any sort of personal relationship.

Taylor had not brought Fillmore into any discussions around critical legislation, even though he was part of the Cabinet. This lack of engagement with Fillmore, if not to consult, at least air out his thoughts and let him know which way he was thinking about issues, was a critical failure.

This was most critical around the most important piece of legislation at the time, the Compromise of 1850, which was designed to allow California to come into the US as a free state, created territory status for New Mexico and Utah; all in exchange for strengthening the laws around fugitive slaves and protecting the rights of slave ownership. Taylor seemed to indicate that he would veto any such law, while Fillmore, as his Vice President, had said he would vote for the bill if it came before his role as President of the Senate and his vote was required to break a tie vote from the Chamber.

Conflicts of Interest

As a leader, you must be attuned to and stop conflicts of interest by your senior management. There was never any allegation that Taylor was personally corrupt. However, during the later days of his administration there was the Galphin affair. Before joining the Taylor cabinet, the Secretary of War, George W. Crawford, had served as a lawyer and had been involved in a 15-year lawsuit. During this lawsuit, he had represented the descendants of a colonial trader who worked for Great Britain but had not been repaid at the time of the American Revolution. In the Treaty ending the first war with Britain, the British debt to Galphin was to be assumed by the US government, but over the years, Galphin’s heirs only received payment on the debt’s principal. Even after years of litigation they had never received any interest payments. Taylor’s Treasury Secretary supported by the Attorney General Johnson, agreed to payment of the interest in April 1850. To Taylor’s great embarrassment, this payment included a compensation of nearly $100,000 to the President’s Secretary of War for his fee as counsel. The terms of the settlement meant that two Cabinet members had effectively offered a huge amount from the US treasury to a third member of the Cabinet. The House of Representatives expressed disapproval of his accepting the payment and it complicated the end of Taylor’s term in office.

Clearly, we had a conflict of interest by one of the decision makers in the judgement to approve the repayment. Clearly, there was no segregation of duties involved in this decision. This was a huge scandal at the time. I would once again emphasize that Taylor was never a part of the discussions of the scandal and he was even moving towards reorganizing his cabinet at the time of the scandal. Yet the damage was done or as Andre Agassi says “Image is everything” and perception is reality. If you are perceived to have a scandalous cabinet, that is what people will believe. Taylor allowed this to happen, literally at his feet. The amount of $100,000 in 1850 translates into about $10,000,000 now. It was a very large chunk of money then and an equally huge scandal.

A word on Taylor’s death. It seems that during the 1850 4th of July celebrations, Taylor consumed a large number of cherries, ice cream and milk. He subsequently came down with a severe stomach ache, which turned into something called cholera morbus. There is still a considerable debate over whether the doctors actually killed him with their treatment or whether he died from the intestinal ailment. Oddly enough, many of his cabinet members came down with very similar symptoms, so it seems most likely it was due to the sanitation in Washington DC at the time.

Next up Millard Fillmore.

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