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FCPA Compliance Report

FCPA Compliance Report: The Boeing Plea Agreement – Culture is The Key

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. We take things in a different direction today as Tom Fox reposts the recent webinar with Sam Silverstein and Mike Volkov, where we took a deep dive into the Boeing Plea Agreement, the Monitorship, and why culture is the key to a Boeing turnaround.

We explore the recent plea agreement filed by Boeing, the outrage among victims’ families over the proposed penalties, and the appointment of an independent compliance monitor. Key issues discussed include the necessity of a culture overhaul at Boeing, the implications of excluding court jurisdiction over the monitorship, and the role of the board in fostering a culture of compliance and safety. The discussion highlights the critical need to focus on values, accountability, and transparent processes to rebuild trust and ensure long-term organizational integrity.

Highlights of this episode:

  • Details of the Plea Agreement
  • Compliance Monitor Appointment and Transparency
  • The Importance of Culture
  • The Role of Compliance Monitors
  • Board Involvement and Accountability
  • Victims’ Families and Organizational Accountability

Resources:

Sam Silverstein

Mike Volkov

The Culture Audit

Tom Fox

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Blog

The Boeing Monitorship: Memo to Attorney General Garland and Kelly Ortberg

To: Attorney General Merrick Garland and Boeing CEO Robert ‘Kelly’ Ortberg

From: Tom Fox

Re: The Boeing Monitorship

===============================================================

Gentlemen

I have written blog posts and articles about the proposed Plea Agreement negotiated between Boeing and the Department of Justice (DOJ). As the leaders of both organizations, I wanted to address you both directly.

To General Garland, this is the most important monitorship in the history of the DOJ.

To CEO, Ortberg-Boeing has to turn around its culture completely.

To both of you, business as usual will not suffice.

The DOJ must start with full transparency in the process, for sunshine in the light of day is always the best disinfectant. There must be full transparency in the selection process and the oversight of the Monitorship itself, with a party outside the DOJ and Boeing overseeing this process. In other words, it cannot simply be a process where the DOJ decides who will be the monitor, tells the court its selection, and then the DOJ goes off to oversee the process and, in three years, tells us whether Boeing has met the terms of the Monitorship.

First, completing the Plea Agreement by fulfilling the terms laid out must be a condition of the Probation, which the Court must approve. Second, this process must be overseen by the District Court. The Monitor should report to the Court or a court-appointed Special Master to determine whether Boeing has met the requirement to “create and foster a culture of ethics and compliance with the law in its day-to-day operations.” Both parties must realize that Boeing’s culture is broken and must be fixed. This is beyond policies and procedures and a best practices compliance program. This is fixing Boeing’s DNA.

The DOJ recognized that it is more than compliance at Boeing, which is broken; it starts with culture and moves to safety, QA/QC, and even down to record and document keeping. It is far beyond the current mandate of the Plea Agreement, which states that the Monitor should test “the effectiveness of the Company’s compliance program and internal controls, record-keeping, policies, and procedures as they relate to the Company’s current and ongoing compliance with U.S. fraud laws.”

At least this is a decent start, but there are so many other areas that Boeing, the DOJ, and the Monitor must fix. I urged the DOJ to ‘Think Big’ about this monitorship. It concerns not only fraud and record keeping but also culture, safety, QA/QC, compliance, Speak Up and Listen Up, Supply Chain, fraud, Export Control, Sanctions, and a wide variety of other areas not addressed in the Plea Agreement.

Put all of that responsibility on the Monitor but make sure the Monitor has the resources to oversee this work for all of the stakeholders involved: Boeing, its shareholders, the victims’ families, employees, third parties, the U.S. government, Boeing’s customers and the U.S. and global flying public. It all starts at the top of the organization. The Monitor must not simply assess the Board of Directors and senior management’s commitment to and effective implementation of the corporate compliance program “as necessary to address and reduce the risk of any recurrence of the Company’s misconduct”; both the Board and senior management must lead this effort by example.

Finally, the DOJ must get this right. Everyone knows the DOJ’s failures from the 2008 financial crisis to prosecute any bank meaningfully. The phrase ‘too big to fail’ has entered the Lexicon as a byword for corporate malfeasance that gets off with ZERO consequences. This matter is much more important than those banks. It concerns the U.S.’s flagship airline manufacturer and whether it can be turned around through government oversight. If the DOJ does not get this Monitorship right, it will demonstrate once and for a time the failure of this program as a tool to fix a broken business that violates the law multiple times.

But this is not all on the backs of the DOJ or the Monitor. Boeing has an equally key role in this Monitorship. That is why the role of the new CEO is so important. Kelly Ortberg must fully embrace this monitorship and all it will entail to the company as the last and best way to turn it around. He comes from but is outside the organization, so he is not tainted with the company’s prior cultural miasma. Further, he comes from a former supplier to Boeing, Rockwell International. This means he knows the business, and he knows Boeing.

His main focus will be to turn around the company’s manufacturing side and create a culture where employees have enough trust in their employer to raise their hands and speak up when they see something wrong. They also know that the company will not harass or terminate them for doing so. In short, he must set the correct cultural tone and go into the weeds to fix how the company builds planes.

This focus requires Ortberg to fully embrace the Monitorship and a Monitor selected with full transparency and oversight by the Court. Ortberg should welcome the opportunity to turn Boeing around literally with all the help he can garner, not do as his predecessors did with so much opaqueness, where they clearly did not accept their responsibility to fix the company’s broken culture.

Finally, Ortberg must reach out to the victims’ families of the two 737 MAX crashes and listen to their concerns. The victims’ families’ interests are aligned with Boeing on one key point: They do not want any family to go through what they had to go through. Ortberg’s meeting with and listening to the victims’ families can go a long way toward their healing.

Boeing is a key component in U.S. national security. Boeing provides advanced missile defense systems, including the Ground-based Midcourse Defense (GMD) system, which protects the United States from ballistic missile attacks. The company also offers solutions for tracking and monitoring space objects, which is vital for maintaining the safety and security of space operations. Boeing is also involved in the Internal Space Station (ISS), orbital test vehicles, and deep space exploration.

In short, no single institution is as important to the U.S. in manufacturing as Boeing. Nearly 200 million Americans who fly in Boeing planes depend on Boeing to get it right. The U.S. (and the world) economy needs the drive that Boeing provides. The U.S. national security depends on a well-functioning Boeing to lead the technological drive to protect the U.S. for the rest of the 21st century and beyond. Boeing needs to continue its work as one of the leading companies in space exploration. Lastly, and indeed not least, the families of the victims of the two 737 MAX crashes should receive some justice for all they have been through and then seeing Boeing not live up to its agreement in the original DPA or worse for there to be more failures under this Plea Agreement.

So one final plea to General Garland and CEO Ortberg-Get it Right This Time

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Blog

The Boeing Plea Agreement – A Major Disconnect

In its proposed Plea Agreement, the Department of Justice (DOJ) lays out Boeing’s abject failures, which led the DOJ to conclude that the underlying Deferred Prosecution Agreement (DPA) from 2021 has been breached. The DOJ stated

  • Boeing failed to fully satisfy the requirement to “create and foster a culture of ethics and compliance with the law in its day-to-day operations”;
  • Boeing failed to fully satisfy the requirement to implement “compliance policies and procedures designed to reduce the prospect of violations of U.S. fraud laws and the Company’s compliance code”;
  • Boeing failed to fully satisfy the requirement to implement “compliance policies and procedures designed to reduce the prospect of violations of U.S. fraud laws and the Company’s compliance code”;
  • Boeing failed to fully satisfy the requirement to implement “compliance policies and procedures designed to reduce the prospect of violations of U.S. fraud laws and the Company’s compliance code” and
  • Boeing failed to fully satisfy the requirement to appropriately develop and adjust “compliance policies and procedures based on a periodic risk assessment addressing the individual circumstances of the Company” [citations omitted]

As the victims’ families noted in their Objections to the Plea Agreement, “The Government told the Court that the Justice Department was “best positioned to implement the DPA and evaluate Boeing’s compliance with these rigorous requirements. The Fraud Section has compliance experts who routinely evaluate compliance programs and oversee corporate monitorships and self-reporting.” And Boeing chimed in with a similar tale, recounting that “DOJ has been vigilant and thorough. They’re professional, they probe, and they make suggestions, and as you would imagine, Boeing accepts those suggestions. Boeing has been vigilant and thorough, too. We sincerely believe the system is working and that any further monitor or examiner, reporting, would be duplicative to DOJ oversight and counterproductive to the processes that are operative now.” [citations omitted]

There was a major disconnect between what Boeing agreed to in the DPA, meeting its obligations under the DPA, and the DOJ oversight. The DOJ and Boeing want the district court to approve the same process for a Compliance Monitor in this Plea Agreement. The Plea Agreement states

Probation Condition – Retention of Independent Compliance Monitor. A condition of probation shall be that the Defendant retain an Independent Compliance Monitor, as provided in Paragraph 7(j). However, the probation condition is limited to the retention of the Independent Compliance Monitor—not oversight of the Independent Compliance Monitor or the Company’s compliance with the Independent Compliance Monitor’s recommendations. Instead, the Independent Compliance Monitor will report to and be overseen by the Offices. The Independent Compliance Monitor’s selection process, mandate, duties, review, and certification as described in Paragraphs 29-37 and Attachment D, and the Defendant’s compliance obligations as described in Paragraphs 7(k), 8 and 9 and Attachment C, are not conditions of probation. [emphasis supplied]

This means Boeing agrees to retain a Compliance Monitor only under this Plea Agreement. The DOJ is asking the court to allow it to fully oversee the monitor selection process and the ongoing work of the Compliance Monitor, with no other involvement or oversight, just as the DOJ did under the original DPA, when, at least according to the DOJ, the original oversight was such an utter failure it leads to this guilty plea.

According to the Plea Agreement,  “the Independent Compliance Monitor will evaluate, in the manner set forth below, the effectiveness of the Company’s compliance program and internal controls, record-keeping, policies, and procedures as they relate to the Company’s current and ongoing compliance with U.S. fraud laws, particularly in connection with interactions with any domestic or foreign government agency, with a focus on the integration of its compliance program with its safety and quality programs as necessary to detect and deter violations of anti-fraud laws or policies, and take such reasonable steps as, in his or her view, may be necessary to fulfill the foregoing mandate (the “Mandate”). This mandate shall include an assessment of the Board of Directors and senior management’s commitment to, and effective implementation of, the corporate compliance program described in Attachment C of the Agreement as necessary to address and reduce the risk of any recurrence of the Company’s misconduct,”. Note that the Monitor will only ‘assess’ whether the Board and senior management are committed to such a program, not make it so.

What does this mean for the Monitor? This means that the Monitor will oversee Boeing’s integration of its ethics and compliance program with its safety and quality programs into a single system that treats safety and quality issues as defects in the corporate culture. This will occur while the Monitor oversees Boeing, creating and fostering a culture of ethics and compliance with the law in its day-to-day operations. Yet again, it will only happen with DOJ oversight of the entire process.

What is needed here is transparency. Unfortunately for the victims’ families and all other stakeholders in getting Boeing uprighted, this Plea Agreement does not bring the most effective disinfectant that can be brought to bear on corporate misconduct to the light of day.

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Compliance Into the Weeds

Compliance into the Weeds: The Boeing Plea Agreement – Questions, Questions, Questions

The award winning, 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.

Looking for some hard-hitting insights on compliance? Look no further than Compliance into the Weeds!

In this episode Tom Fox and Matt Kelly take a deep dive into the Plea Agreement filed by the DOJ in the Boeing criminal case.

Today we delve into the proposed plea agreement between the Department of Justice and Boeing, following violations of the company’s 2021 Deferred Prosecution Agreement (DPA). We discuss the detailed aspects of the plea, including a $243 million criminal penalty, a $455 million compliance investment plan, a three-year prosecutor probation with a compliance monitor, and a unique interaction between Boeing’s board and the families of crash victims.

Matt and Tom also explore Boeing’s obligations to integrate safety and quality programs with its ethics and compliance initiatives, and the implications of these stringent new requirements.

Key Highlights:

  • Boeing’s Compliance and Safety Issues
  • Expansion of Corporate Compliance Role
  • Implications for Boeing’s Compliance Culture
  • Monitor, Oversight, and Victim’s Families
  • Role of the Board and Compliance Spending
  • Future Considerations and CCO Certification

Resources:

Matt in Radical Compliance

Tom in the FCPA Compliance and Ethics Blog

 Tom

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Blog

The Omnibus Monitor for Boeing: Representing all Stakeholders

In probably a move that will surprise no one, the families of the victims of the two Boeing 737 MAX crashes have objected to the Department of Justice’s (DOJ) announced approach to a monitorship for Boeing. Having been so badly mistreated by Boeing and then the DOJ, it is hardly unexpected that these families would find the DOJ’s announced approach unacceptable. In an article in the Financial Times, Claire Bushy reported that the DOJ announced that it would solicit proposals and then “pick from among them “with feedback from Boeing,” with the court having 10 days to object to the department’s choice.”

The victims’ families vehemently objected with comments such as those from “Javier de Luis, an aeronautics professor at the Massachusetts Institute of Technology whose sister was killed in the second Max crash, [who] said the justice department’s proposed process to choose a monitor is essentially Boeing “picking its probation officer.” “Giving Boeing a say as to who is responsible for monitoring them goes against first principles for how justice is done,” he said.” The article also noted that “the families want Judge Reed O’Connor to select the monitor, said Erin Applebaum, one of the lawyers on the case. They would like the judge to consider names they suggest but believe anyone picked by the court would do a better job than a choice from the DoJ and Boeing.”

As I have previously noted, the traditional DOJ approach to a Boeing monitorship needs to be rethought entirely. A standard monitorship involves the appointment of an independent monitor who oversees the company’s compliance with legal and regulatory requirements. This oversight ensures that the company adheres to the terms of its settlement and implements necessary reforms. The monitor acts as an impartial third party, reporting to the DOJ on the company’s progress and adherence to ethical standards. However, Boeing’s needs go far beyond ethics and compliance.

The DOJ needs to revise its approach to Boeing’s monitoring to consider all stakeholders’ interests. These include the US government, the victims’ families, the worldwide flying public, Boeing employees and suppliers, Boeing shareholders, and Boeing itself. The DOJ needs to create the most comprehensive monitoring plan ever used. Why? Because there has never been a corporate case more important to the United States than getting Boeing back on track. It is the approach I have dubbed the “Omnibus Monitorship.”

The reason is simple: we all want Boeing to get its remediation right. Boeing must turn around from a culture where employees fear stepping forward. There are acceptable slipshod work and work practices, where employees who do report problems are actively harassed, where employees lie and mislead federal regulators over fundamental safety issues, and where the almighty dollar is put so far above safety that hundreds of lives were lost. This means a monitorship where multiple areas are monitored, overseen, and thoroughly remediated to pass the most potent form of testing and controls at the end of a lengthy period (at least 3 years). The DOJ and Court need to stay actively involved in the monitoring, not simply reviewing annual claims but testing any claims by Boeing through rigorous data analytics. Boeing has demonstrated that it cannot turn itself around, and a new and daring approach is needed for the company.

The victim’s families have suggested reporting at one-month intervals or perhaps three-month intervals. While it may be difficult to see progress in 30 days, the victims’ families are right to demand real progress, real transparency, and, most importantly, real change at Boeing. This is where Boeing comes into the equation. Boeing must fully embrace the biggest, most comprehensive, and even most expensive monitorship ever.

One of the most significant benefits of this Omnibus Monitor approach would be restoring trust and credibility for Boeing. The 737 Max incidents have deeply tarnished Boeing’s reputation among regulators, the public, investors, and other stakeholders. Accepting this Omnibus Monitor would demonstrate a commitment to transparency and accountability, demonstrating that Boeing is willing to undergo rigorous scrutiny to regain its standing.

Transparency is a cornerstone of trust. By allowing this Omnibus Monitor to evaluate and report on its practices, Boeing can show that it has nothing to hide and is dedicated to making genuine improvements. This openness can help rebuild confidence among customers, suppliers, and the aviation community.

This Omnibus Monitor would have multiple monitors under it. A critical area where Boeing must improve is its internal culture. A monitor can play a pivotal role in this transformation of culture. The Culture Monitor can help Boeing develop a robust compliance program that prioritizes safety and ethical conduct by providing unbiased assessments and recommendations. An external perspective is invaluable in identifying blind spots and areas of resistance within the organization. Boeing has demonstrated that it cannot recognize and address deeply ingrained cultural issues. A Culture Monitor can provide the objectivity and expertise needed to drive meaningful change, ensuring that safety and compliance are ingrained in every aspect of Boeing’s operations.

The DOJ cannot take the usual approach to this Boeing Monitorship. It needs to not simply rethink its approach but incorporate the critiques of the victims’ families and the Court’s oversight role into this monitorship. A business-as-usual approach will not have the support or the strength to make the necessary changes.

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FCPA Compliance Report

FCPA Compliance Report – Albemarle FCPA Enforcement Action – Internal Controls

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. Today, we begin a short podcast series on the Albemarle FCPA enforcement action. Today, we have Karen Moore on the internal controls failures and other areas identified in the SEC enforcement action.

The recent FCPA enforcement action against Albemarle has sparked a lively debate in the compliance community, particularly regarding the company’s internal controls, imposed penalties, and the lack of monitorship. While Karen is surprised at this development, Tom believes it is consistent with the new DOJ FCPA policy.

One of the key takeaways from the episode is the importance of thorough due diligence and stronger measures to prevent corruption. The case highlights the need for compliance officers to operate beyond their comfort zones and ensure that the right people receive the right training to spot issues. It also raises questions about the credibility of messages about risk tolerance from senior leadership and the effectiveness of deal reviews. Join us as we dive deeply into these issues in this FCPA Compliance Report podcast episode.

 Key Highlights:

  • Albemarle’s Penalties
  • Identifying Red Flags in Due Diligence
  • Including Monitors in Plea Deals for Compliance

Resources:

Tom Fox blog post series on the Albemarle FCPA Enforcement Action.

Tom Fox

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