Today, I conclude my short series on Shakespeare’s problem plays by considering Measure for Measure. In the age of #MeToo this play has taken on a renewed and frankly disturbing existence. Seeing the play in the past year was a much difference experience for me than the 20 years or so ago when I last saw it. Once again while there are comic elements, largely around the switching out of partners in a bedroom farce and a marriage proposal to end the play, there are some dark, indeed very dark, parts in the middle of the play. These include demeaning and the debasement of the female protagonist Isabel, leading to what modern day critics see as a rape scene of Isabel.

The basic plot line is the Duke of Vienna leaves town ostensibly on a diplomatic mission but, in reality, goes undercover to see how the city fairs in his absence from his appointed Judge, Angelo, who will lead a moral crackdown. Claudio get his fiancé pregnant and although ready, willing and able to do the right thing and marry her, Angelo condemns him to death. Claudio’s sister, who is about to join a convent, goes to Angelo to plead for his life. Angelo offers to spare her brother if she will cede her virginity to Angelo. She refuses and says she will report his conduct and then is one of the most chilling lines in all of Shakespeare “Who will believe thee, Isabel?”

The farce part occurs when Isabel convinces Marianna, who loves Angelo, to perform the ‘bed trick’ and substitute herself for Isabel, which she does. The Duke, who never left, returns and bades Angelo must marry Marianna and pardons Claudio, who is allowed to wed his fiancé. The Duke also proposes marriage to Isabel, who in an ‘open silence’; says nothing, closing the play. This ambiguous ending is only one of the reasons Measure for Measureis seen as a problem play. The violence, both physical and mental, visited upon Isabel by Angelo in the middle acts of the play put directly to the fore what many women have had to put up with in the workplace.

I thought about Measure for Measure when reading an article in Bloomberg Business Week, entitled “How to Clean Up a #MeToo Mess”, by Mary Pilon. It details the story of Cynthia Marshall, the new Chief Executive Officer (CEO) of the Dallas Mavericks, who was brought in to the organization after the devastating Sports Illustrated article detailed both sexual harassment and sexual assault by Mavericks senior management upon female employees. While this conduct did not include owner Mark Cuban, he was clearly shown to be responsible for allowing a toxic culture to not only exist but foster under the prior CEO Terdema Ussery.

This story is not only important to show how the Mavericks turned things around in the face of witheringly negative publicity but Marshall’s roadmap is one that any Chief Compliance Officer (CCO) can use if they find themselves so similarly situated. According to Pilon, Marshall created a 100-day game plan to hit the ground running when she arrived on the job. It, “consisted of four parts: modeling zero tolerance, creating a playbook for women in the organization, transforming the culture, and improving operational effectiveness. After starting, she arranged for counselors to help the staff cope with what had happened—both the toxic culture and the public cloud surrounding it. She started a hotline for employees to submit anonymous reports of improper office conduct. And she created jobs and filled open ones, bringing in a new head of human resources and a chief ethics and compliance officer.”

This game plan included five steps that every CCO who faces a catastrophic Foreign Corrupt Practices Act (FCPA) investigation and enforcement action should use.

  1. Own the mistake(s) but move forward. Cooperate with the investigators. Obviously, this is a key requirement of the FCPA Corporate Enforcement Policy but Marshall used this step to demonstrate to multiple stakeholders that things really had changed. Make clear there are new values and you are going to support them going forward.
  2. Create supportive communities for employees. No company’s employees want to be known as the bribery company or the cheaters. Almost all employees do have pride in their organizations. Use that passion to create support for those employees who are sick and tired of unethical behavior by their co-workers or senior management. This can be a powerful tool to help unearth unethical or even illegal conduct.
  3. Make the new values clear.Continually drive home the message that unethical behavior will not be tolerated. Use internal social media to communicate with employees, literally across the world. Get out of the corporate office and let as many employees as possible see you and your commitment to doing business ethically and in compliance with laws such as the FCPA.
  4. Do not be afraid to ask for help, both inside and outside.If you need subject matter expertise, go get it. Use the talent inside your organization as well. You can ask for input, you can ask for help. Keep your door open and work with as many stakeholders to get as many ideas that you can winnow down.
  5. Invest in talent. The 2017 Evaluation of Corporate Compliance Programs and FCPA Corporate Enforcement Policy both made clear that the talent and expertise of the compliance function should be rewarded in terms of financial pay and opportunity for promotion in your company. If there is talent that has not been brought forward do so now.

I have used this short series on Shakespeare’s problem plays to discuss problems for every CCO that may not get as much discussion as other aspects of an effective compliance program. Just as the three plays reviewed provide excellent opportunities for learning, their messages still resonate today.

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

Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. In this episode, Matt Kelly (the coolest guy in compliance) and I take a deep dive into management review controls.

Some of the highlights include:

  • What are management review controls?
  • Will the PCAOB up its game in this area?
  • When will the SEC provide updated guidance on the issue?
  • Will it be up to COSO to formulate an appropriate new standard?
  • How does all of this apply to the compliance professional?

For additional reading see Matt’s blog posts Deloitte Inspection Report Released andTalking Compliance Analytics at AB-InBev in Radical Compliance.

This blog post opens a short series on Shakespeare’s Problem Plays. There are plays where the structure of comedy ends the plays; i.e. everyone gets married at the end of the day. Yet these were really not happy endings. Equally they are not tragedies either. Usually in the middle is some very dark part, which tests the reader, play-goer or listener with some very difficult subjects. The three we will consider for the remainder of this week are “All’s Well That Ends Well”; “Troilus and Cressida”; and, finally, “Measure for Measure”.

In “All’s Well That Ends Well” Helena is a low-born ward of a French-Spanish countess. She chases Bertram across Europe, sends another woman into bed with him and then captures his heart by all this aggressive stalking. Dr. Michael Delahoyde, in his summary of the play, wrote, “George Bernard Shaw called it a “bitter play with a bitter title”. He further cites, “Shakespeare’s satire upon the male propensity scarcely to distinguish one woman from another” (Bloom 354). But attempts to account for the play itself typically founder: what are we to make of the assertion that this is a play “in which people’s behaviour is explicitly related to abstract concepts and in which moral conflicts are explored though not necessarily resolved” (Wells 234)? Critical dissatisfaction stems from “the bitterness of the satire in a comedy, the disagreeable nature of the hero, and the forced, mechanical nature of the plot that ends unconvincingly” (Whalen 104).”

I thought about All’s Well That Ends Well when I read a recent article in the Harvard Business Review (HBR) by Roger L. Martin, entitled The High Price of Efficiency. In this article, he posited that the relentless pursuit of business process efficiency can actually make an organization less resilient. As they become less resilient, they are more at risk for a catastrophic failure or a likelihood of a control failure which could lead to something akin to a major ethical violation or even legal violation such as under the Foreign Corrupt Practices Act (FCPA). Most interestingly, for the compliance professional, the author’s prescription is what we would call operationalizing compliance through pushing out the structure to allow greater resilience, largely from a diverse group of stakeholders.

I was also intrigued by Martin’s ideas about moving a company toward resilience. This allows a more adaptable response but also has redundancy which can operate to stop anything which might get through the monoculture of too great efficiencies. The first is to limit scale. Here for the compliance professional, I think the clear message is that compliance needs to be in the regions not simply headed from the corporate headquarters on high. Dynamic power out in the regions would prevent this redundancy both in the regions going out and in the corporate headquarters coming back.

The second is to introduce friction. This is the situation where a company creates an artifice so clean that if something untoward enters the system, it can wipe it out. It comes from staring at your own navel so long, to the exclusion of all else. Another way to put it is to bring in someone from the outside to review your compliance program on a two- or three-year basis. If you are performing your own risk assessments on a continuous basis it may well become friction-free. You need to have not only an outside perspective but also some sand in your shoes at times.

The third prescription should be high on every Chief Compliance Officer’s (CCO’s) game plan. It is to “create good jobs.” From the compliance perspective, this was mandated in the Department of Justice’s (DOJ’s) 2017 FCPA Corporate Enforcement Program, where one of the factors listed around the compliance function of a best practices compliance program was , “The compensation and promotion of the personnel involved in compliance, in view of their role, responsibilities, performance, and other appropriate factors”. Additionally, the 2017 Evaluation of Corporate Compliance (Evaluation) asked, “How has the compliance function compared with other strategic functions in the company in terms of stature, compensation levels, rank/title, reporting line, resources, and access to key decision-makers? What has been the turnover rate for compliance and relevant control function personnel? What role has compliance played in the company’s strategic and operational decisions?”

Yet CCOs must also work to teach resilience in their organizations. Some may call this simply a “Can-do” spirit but I think the better approach is that as a compliance professional, you are only limited by your imagination. The Evaluation mandated, “How have decisions been made about the allocation of personnel and resources for the compliance and relevant control functions in light of the company’s risk profile? Have there been times when requests for resources by the compliance and relevant control functions have been denied? If so, how have those decisions been made?” In short, the compliance function must have well-received, well-compensated jobs and those in compliance cannot be shunted off to the same corporate function forever.”

From the CCO perspective, a key component of your corporate capital is the use of your compliance resources. Delivering a compliance solution to the front lines of the business is another manner of saying operationalization of compliance. From the corporate capital perspective, Martin see it as “the optimal capital structure for this year’s operating environment is what defines the efficient employment of capital.” Martin ends his piece by citing to democratic capitalism. He, like I, believes that a combination of both democracy and capitalism can make countries, businesses and people better over time. The ideas Martin sets out suggest that the ability to adapt through resiliency is one of them.

Just as Shakespeare’s problem plays hold a dark middle to a usually comedic beginning and end, the continued resiliency of the corporate compliance function, even if it is not always as efficient as may be desired, can be a valuable lesson going forward.

Tomorrow, Troilus and Cressida.

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

Today, we honor one of my and Adrian Lurssen’s, co-founder of JDSupra, favorite musician’s – Earl Scruggs. January 6 would have been his 95thbirthday. How big was Earl Scruggs in the world of bluegrass? Last Friday, Google’s homepage paid homage to Scruggs with a colorful “Google Doodle” featuring an animated depiction of the North Carolina native’s lightning-fast digits plucking banjo strings. (So big even my daughter texted to tell me Google had honored Scruggs.) Scruggs was a legendary banjo picker and Country Music Hall of Fame member, who revolutionized the three-finger style of banjo picking. He played with Bill Monroe and later paired with Lester Flatt to form one of the most beloved bluegrass duos, Flatt and Scruggs. He later formed the Earl Scruggs Revue and played with musicians as varied as Bob Dylan to Johnny Cash to Doc Watson. See the end of this blog post for my top five Earl Scruggs playlist.

In a special five-part podcast series, I interview John Gill, Vice President for Education at the Association of Certified Fraud Examiners (ACFE). In this series, John discusses five well-known fraudsters, including what caused them to engage in fraud, the fraud scheme they employed and how they were caught. More significantly, we tie this to what compliance professionals need to have in place to detect and prevent corruption.

In episode 1 we consider the case of Nathan Mueller. Mueller embezzled nearly $8.5 million from his employer, ING Group (ING), over four years and three months. When he was caught, he was sentenced to 97 months in jail. We use Mueller as an introduction into and explanation of the fraud triangle. Each leg of the triangle must be satisfied in any fraud so it is an excellent introduction into an incessantly fascinating topic. Pressures to commit fraud can arise from a variety of areas and compliance practitioners and fraud examiners must remain ever vigilant. Finally, never forget to maintain robust anti-fraud controls before, during and after the mergers and acquisition (M&A) process.

In episode 2, we consider Mark Whitacre, the whistleblower from Archers Daniel Midland (ADM) who was made famous by Kurt Eichenwald in his book The Informant and was played by Mark Damon in the movie of the same name. Whitacre was the president of ADM’s BioProducts Division and was the highest-level corporate executive in U.S. history to become a Federal Bureau of Investigation (FBI) whistleblower. For three years, Whitacre acted as an informant for the FBI, which was investigating ADM for price fixing. Unfortunately for Whitacre, at the same time he was embezzling some $8.5 million from ADM and went to prison for 8.5 years for those crimes.

We use Whitacre to explore how and why tone at the top does matter, in both anti-corruption compliance and in fraud prevention. The very top of ADM made short shrift of price-fixing legal violations as well as other laws and even at Whitacre’s level, ADM employees took their cues from this attitude. Fraudsters as well as those engaged in bribery and corruption can rationalize their behaviors based upon the conduct of senior management.

In episode 3 we consider the matter of Andrea Baxendale. What makes her fraud so interesting is that she is not famous but her fraud was just as illuminating as the others for the fraud prevention expert and indeed the compliance practitioner. Her case illustrates why institutional fairness and justice are not only critical for a good work environment but are also a part of a fraud prevention program and anti-corruption compliance regime as well. Baxendale worked for a family owned manufacturing business. She was passed over for promotion several times when the promoted candidate did not have her credentials, work and professional experience. The last straw was when she found out her pay was lower than several other similarly situated employees.

This unfair and disparate treatment worked to undermine Baxendale’s individual integrity and lead to her to commit fraud against her employer. This means that your employees may not be as loyal as you think as loyalty runs down a two-way street in most employees eyes. It also is another reminder that the basic fraud prevention controls such as segregation of duties should always be employed.

In episode 4 we consider the case of James Brandolino, who was a financial services advisor. He ran a $5 million Ponzi scheme which defrauded 60 investors. He also had futures trading losses of $850,000 and, equally importantly, misappropriated more than $2 million, using the money to purchase a BMW, Rolex watch and a piano. This Ponzi Scheme bilked about 60 investors, many of them family and friends, according to a statement released by the US Attorney’s Office. The statement went on to say, “He lured investors with promises of healthy returns and principal safety, and he fabricated account statements showing steady gains, convincing investors to keep their money with him and to invest additional funds.”

Before there was the massive Ponzi Scheme of Bernie Madoff there was James Brandolino, albeit on a much smaller scale. He was a financial services provider who ran an elaborate scheme but, unlike Madoff, he did not create an entire set of false documents to hide what he was doing. He went in the other direction and simply never provided any documentation. The clear lesson is that you must be vigilant or as Gill said, “a little trust can be a dangerous thing.”

Finally, we take up the case of Joseph Grmovsek, a securities trader in Canada. He ran an insider trading scheme for over 14 years, netting himself more than $9 million in ill-gotten gains. As reported in 2009 by  CBC News, “Grmovsek and a law school classmate Gil I. Cornblum exchanged confidential information on numerous corporate transactions between 1994 and 2008… The pair tried to disguise their activities by using numerous brokerage accounts in the Bahamas before repatriating their illicit profits back into Canada, the regulator says. In total, Cornblum tipped Grmovsek to material in advance of news releases on 46 separate publicly traded companies.”

Grmovsek’s fraud is an excellent reminder that confidential information must be protected. This was true when he was actively engaging in fraud and even more so now with the penalties under GDPR and other data protection laws. As a fraud examiner and compliance professional, have you assessed your data controls to protect sensitive data. If you do not, the cost could be a huge fraud perpetrated or it could be the situation that the UK company Morrisons Supermarkets plc now finds itself in. It is facing a class action suit for a disgruntled employee’s release of confidential information to a UK newspaper, which actually returned the data without accessing it. Yet that alone is enough to bring potential civil liability to Morrisons.

Finally, the Grmovsek case is a cautionary tale about the human cost of fraud. The lawyer Grmovsek was in league with committed suicide over his actions in this matter.

All of the episodes are currently available on iTunes,YouTube and Megaphone and will be released daily this week on the FCPAComplianceReport and JD Supra. Check them out, they are rollicking fun and great lessons for both fraud prevention specialists and compliance professionals.

Tom’s Top 5 Earl Scruggs’s playlist (all from YouTube):

  1. Foggy Mountain Breakdown;
  2. Love is Just a Four-Letter Word;
  3. Rollin’ in My Dreams;
  4. If I Was a Carpenter and
  5. Bleeker Street Rag.

For Rolling Stone’s take on Scruggs’ top five, check out this great article by Stephen Betts, Earl Scruggs: Five Great Performances.

Leave your top five playlist in the blog’s comment section. 

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