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Strengthening your C&E program through behavioral ethics

A new post in the FCPA Blog.

I hope you find it useful.

Expanding Compliance Liability for Directors?

A post a few weeks ago discussed the issuance of an important recent judicial decision in Delaware regarding board liability for compliance failures, and specifically the fact that the claim against the directors had survived a motion to dismiss.  Given how few decisions  support claims such as this – what are generally called Caremark cases – it is worth noting that  a second such decision  has been issued only a few weeks later.

As noted in a post this week in the Harvard Law School corporate governance blog by attorneys from the Wachtell Lipton law firm:  Further extending the practical reach of the Caremark doctrine, the Delaware Court of Chancery this week upheld claims against directors of a life sciences firm for failing to ensure accurate reporting of drug trial results. In re Clovis Oncology, Inc. Derivative Litig., C.A. No. 2017-0222-JRS (Del. Ch. Oct. 1, 2019)…. The Clovis directors argued, and the court accepted, that duty-to-monitor claims require a showing of scienter—that is, evidence that the directors knew they were violating their duties. But the court did not require the plaintiff to allege particular facts showing such knowledge. Instead, reasoning that Clovis had a board “comprised of experts” and “operates in a highly regulated industry,” the court concluded that the directors “should have understood” the problem and intervened to fix….Clovis thus highlights the widening risk to boards of directors of fiduciary litigation when bad news can be tied to an alleged compliance failure. …A compliance program is no longer enough. Courts now look for engaged board oversight, and directors should consider implementing procedures to ensure that the board itself monitors “mission critical” corporate risks.

Of course, while such procedures are themselves important, equally key is having a boardroom culture that encourages robust monitoring of compliance risks. For this reason (as well as others) board members should have strong relationships with their respective companies’ chief compliance officers, as CCOs  can – by word and deed – help develop and maintain a culture that is up to this task.

 

The big compliance news of 2019

In my latest column in Compliance & Ethics Professional I discuss the Department of Justice’s new policy of rewarding antitrust compliance programs.

I hope you find it interesting.

CECO reporting relationships

Here is a just-published article from Compliance Week on compliance & ethics officer reporting relationships.

I hope you find it useful.

Come to the Advanced Compliance & Ethics Workshop

I am honored to have been selected to chair the Practising Law Institute’s Advanced Compliance & Ethics Workshop in NYC on October 28 and 29.

Information about program topics and our stellar faculty is available here.

I hope to see you then and there.

See you at SCCE?

Later this month I’ll be speaking at the SCCE  18th annual Compliance & Ethics Institute in National Harbor Maryland.  I’ll be presenting in sessions on 100 + Years of Business Ethics: Learn About the Future from Masters of the Profession (together with my long-time colleagues Steve Priest, Carrie Penman and Ed Petry – Sunday morning, session P7) and on Leverage Legal Developments to Advance Your Program (together with my law partner Rebecca Walker – Tuesday afternoon, session 705).

Readers of the COI Blog attending the conference  are encouraged to use the occasion to say hello.

Free webinar on risk assessment

On September 11 at 1 Eastern I’ll be presenting a free webinar  on best practices in compliance and ethics risk assessment. The webinar is  sponsored by Syntrio  and my co-presenter will be  Jason Lunday. He and I hope you can attend.

How deep is the ocean? The latest on Trump’s conflicts of interest

In a report on President Trump’s conflict of interest published last week, the Citizens for Responsibility and Ethics  in Washington  (CREW)  noted that it had “tallied 2,310 conflicts resulting from President Trump’s decision to retain his business interests.” Highlights include the following:

– The president has visited his properties 362 times at taxpayer expense during his administration, sometimes visiting more than one of them in a single day. In 2019 alone, he has visited his properties 81 times, helping to further establish them as centers of political power. The number of days where President Trump has spent time at a Trump-branded property account for almost a third of the days he’s been president.

– One-hundred eleven officials from 65 foreign governments, including 57 foreign countries, have made 137 visits to a Trump property, raising the question of how much foreign money has been spent at Trump’s properties.

– Additionally, CREW has recorded 630 visits to Trump properties from at least 250 Trump administration officials. This includes high-level White House staff, members of Trump’s cabinet, and individual agency employees. So far this year, CREW has recorded 198 visits by White House officials. Ivanka Trump—who has an ownership interest in the Trump hotel in D.C.—and her husband Jared Kushner, both senior White House advisors, are the most frequent executive branch officials to visit Trump properties, other than the president himself. Jared has made 28 known visits, while Ivanka has made 23.

– Members of Congress have flocked to President Trump’s properties, despite their constitutional oversight responsibility to provide a check on the executive branch as it relates to President Trump’s conflicts of interest. Throughout his two and a half years as president, 90 members of Congress have made 188 visits to a Trump property.

– Forty-seven state officials, including 20 Republican governors, have made 64 visits to Trump properties, sometimes resulting in state taxpayer funds being spent there.

– President Trump has used the presidency to provide free publicity for his properties, which he still profits from as president. Over the course of his presidency, Trump has tweeted about or mentioned one of his properties on 159 occasions, and White House officials have followed suit: Members of Trump’s White House have mentioned a Trump property 65 times, sometimes in the course of their official duties.

– Political groups have hosted 63 events at Trump properties since President Trump took office, selling wealthy donors access to the administration while also enriching the president. Seventeen of these have been for Trump-linked groups, and another six have been hosted by groups linked to Vice President Mike Pence. Trump Victory, the joint fundraising arm of Trump’s 2020 election committee and the RNC, has hosted six events at Trump properties just this year, four of which were attended by the President himself. In all, the RNC and other Republican Party groups have had 28 events at Trump properties.

– Twenty Trump administration officials have attended 38 political events at a Trump property, giving wealthy donors who fund spending at the president’s businesses access to top officials to discuss their pet issues while they enrich President Trump personally.

-Political groups have spent $5.9 million at Trump properties since President Trump took office. So far this year, political groups have spent $1.1 million at Trump properties. In more than a decade prior to his run for president, Trump’s businesses never received more than $100,000 from political groups in a single year.

– The Trump Hotel in Washington, D.C. is the top beneficiary of this political spending. In just over two and a half years, the hotel has raked in $2.4 million in traceable political spending.

– Foreign governments and foreign government-linked organizations have hosted 12 events at Trump properties since the president took office. These events have been attended by at least 19 administration officials.

This is a stupendous record of corruption – and one that, as the report notes, is likely incomplete. CREW is performing an important public service by keeping track of and analyzing this sordid mess.

But will it matter? The presidential election next year and how voters respond to Trump’s conflicts of interest may prove to be the most consequential ethics test in our country’s history. And it is not Trump who will be tested in  that contest –  it is us.

(Postscript:  less than a day after my posting the above piece Trump made an overt and sustained public pitch for the next G-7 meeting to be held at one of his hotels. A morally normal person would feel some sense of disgrace if found doing this sort of thing.  But Trump seems to view it as a badge of honor, as proof that he  – like a modern-day Raskolnikov – is above the morality of the “little people.”) 

20 best practices in conducting risk assessment

A new whitepaper published by Syntrio.

I hope you find it useful.

DOJ Issues New Compliance Program Evaluation Standards

My latest column in Compliance & Ethics Professional.

I hope you find it useful.