Tag: Tom Fox

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The Corruption Files

Episode 09: Odebrecht/Braskem with Tom Fox and Michael DeBernardis

Brazilian petroleum company Petrobras caught itself in an intricate bribery scheme involving top construction corporations like Odebrecht and Braskem and political parties. Tom Fox and Michael DeBernardis lay out the facts and share their insights on what lessons other companies can learn and practice to avoid similar compliance troubles.

▶️ Odebrecht/Braskem with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️Tom Fox gives a brief background on the Petrobras-Odebrecht-Braskem case.

✔️Michael DeBernardis clarifies more facts on the case, such as the bribery feedback loop and the increasing spending on litigation. Tom Fox adds that even if you “create bad law, it’s still a law.” It has also brought attention to compliance authorities and politicians in Brazil. More companies in other countries were also involved in the scheme.

✔️The bribery scheme was intricately designed to avoid compliance detection. Michael DeBernardis recommends ensuring maximum procurement controls. Petrobras employees benefited mostly in this case. This case has emphasized the importance of visibility in supply chains.

✔️Michael DeBernardis emphasizes the importance of having appropriate controls to mitigate supply chain risk despite being lower than other aspects of the business. It also exposed the massive scale of corruption.

✔️Michael DeBernardis and Tom Fox hit home their suggestions to companies: Do a deep risk analysis, get to know your joint venture partners, and any form of defense is helpful. Although the danger is not easy to detect up front, it can help lessen the risk. Also, you should not close the doors to working with businesses with a little bit of controversy.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 08: Banks Behaving Badly with Tom Fox and Michael DeBernardis

Tom Fox and Michael DeBernardis discuss the dubious bribery cases of financial institutions, specifically Deutsche Bank, Credit Suisse, and Societe Generale (SocGen), that utilized commission agents of significant political power. They also talk about why compliance committees should look closer into the backgrounds of company agents and how the Deutsche Bank kickstarted France’s fight against corruption.

▶️ Banks Behaving Badly with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

(00:00:36) Michael DeBernardis gives a brief background on the Deutsche Bank case.

(00:05:10) Tom Fox examines the compliance lessons to be learned from the Deutsche Bank case. Compliance professionals should consider not only families but friends of commission agents. The worst misconduct can gain reduced penalties when companies cooperate with investigations. Michael adds how Deutsche Bank took corrective action to achieve a significant discount.

(00:11:09) Two possible discounts companies may get for compliance are (1) a cooperation discount under the US sentencing guidelines and (2) a discount under the FCPA corporate enforcement policy.

(00:12:15) Michael DeBernardis’ standpoint as a lawyer to his clients: be forthcoming and argumentative when appropriate.

(00:13:54) Michael DeBernardis gives a brief background on the SocGen case.

(00:19:28) The SocGen case was the first US-France anti-corruption collaboration. Though bribery through agents has been done by others, it’s still an effective dishonest practice. Michael adds that companies have since improved in doing background checks on their agents.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

 

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The Corruption Files

The Sophisticated Conduct of Och-Ziff’s African Bribery with Tom Fox and Michael DeBernardis

In 2016, the DOJ and SEC served enforcement action against Och-Ziff Capital Management Group for inappropriate business practices in Africa. It seemed like only yesterday when this successful hedge fund was incriminated in a complex scheme of bribing government officials to maintain and get new business. The settlement was $412 million (and even more for restitution for the victims), making it one of the biggest payments for violating the Foreign Corrupt Practices Act (FCPA).

▶️ The Sophisticated Conduct of Och-Ziff’s African Bribery with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ A crisis can breed opportunities for corruption. Even as its red flags became increasingly apparent, the option remained for the Och-Ziff to stop its bribery and illegal action before and even after its activities were discovered.

✔️ Compliance professionals need to have their eyes extra peeled, not simply to vet due-diligence partners but to look deeply into the ongoing business relationships with joint-venture partners. Och-Ziff Subsidiary was involved in corruption issues tied to its mining projects in the Democratic Republic of Congo. What was blatantly amiss was the review and audit necessary to view the joint venture from the compliance perspective.

✔️ Find a joint-venture partner that approaches compliance the same way you do. In handling joint ventures, there is a need for ongoing due diligence — and ongoing management of the relationship beyond due diligence. In the lifecycle of a third-party agent, work starts when the contract is signed, and the joint venture is formed.

✔️ There are various means for auditing available that don’t include turning the place upside down. Here are some good ways to keep an eye on an entity like a joint venture:

-Do spot checks on certain transactions
-Do sampling from a distance
-Make the audit by interviewing the employees to ensure they understand and follow the compliance requirements.

✔️ Remember, it becomes more complicated when you are not in control. Regarding building contractual protections and having strict control, ensure that you find a joint-venture partner that approaches compliance the same way you do.

✔️ Companies have always had audit rights but haven’t exercised those rights. It’s almost a requirement when making high-risk transactions to not only build in the audit rights but also exercise them. Ask the right questions and gauge whether the third party has been honest in the due diligence process.

Many companies get scared off by the idea of the disruption and invasion involved, but that’s what takes away the potential problems and the unnecessary bouts with the SEC and the Department of Justice (which is responsible for enforcing the FCPA).

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Episode 06: The Instrumentality Ruling of United States v. Esquenazi

Welcome to another episode of The Corruption Files!

Tom Fox and Michael DeBernardis explore their biggest takeaways from the appeal of the conviction of former Terra Telecommunications Corp. executive Joel Esquenazi. He and other involved parties were proven to pay bribes to Haitian government officials in a grand scheme. The case remains an example of a significant conclusion from a defense involving the FCPA.

▶️ The Instrumentality Ruling of United States v. Esquenazi with Tom Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ The Esquenazi decision is vital in providing clear guidance for businesses to design robust compliance programs to address corruption, avoid making grease payments to foreign government officials, and remove the temptation to cull business favors and advantages for their company.

✔️ Companies doing business abroad should never forget the learnings from the Esquenazi decision in 2014. Following the conclusion of the Court of Appeals was identifying ownership and financial control to decipher the “instrumentalities” of foreign governments and to correctly identify that there were no red flags for FCPA compliance.

✔️ The 11th Circuit Court of Appeals’ opinion clarifies how a two-part test is crucial in determining the “instrumentality” of an employee, officer, agency, or department as an entity of foreign governments. The elements of “control” and “function” served as the two prongs that the US Court of Appeals for the Eleventh Circuit made in its decision for Esquenazi and the others involved in the case.

✔️ A key indicia of a governmental entity is it doesn’t have to make a profit. Think about the United States Postal Service — today; it still stands as a government service. Everyone uses it — and we don’t want it to go away even if it doesn’t make a profit. Indeed, non-earning can be the biggest indicator if you assess what constitutes any employee, officer, agency, or department as an “instrumentality” of foreign governments where clients are conducting business.

✔️ United States v. Esquenazi is a well-settled FCPA case that didn’t go to the U.S. Supreme Court. The Esquenazi decision is a significant case law that came out of a defense trial with the defendant paying heavily and sentenced to prison for 15 years — a landmark decision that remains relevant today.

✔️ Key lessons learned from United States v. Esquenazi:

1. Ownership/Financial Control – There is no percentage amount listed, but the inclusion of financial control would indicate that anything over 50% would be a significant factor.

2. Actual control is key in all three court decisions. In Lindsey and Esquenazi, it is characterized as the government’s right to appoint key officers and directors. In Carson, it is called government control. But this means that if the government exercises actual control, it may trump the 50% guidance stated above.

3. Privileges and Obligations are also mentioned in all three. Does the entity have the right to control its functions?

4. Financing – Is the entity a for-profit entity financed through its revenues, or does it depend on financing by its government?

5. Perception is Reality – André Agassi’s immortal words appear again. If it is widely perceived as providing an official function, it is an instrumentality under the FCPA.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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The Corruption Files

Hiring in the Financial Space

Welcome to another episode of The Corruption Files!

Thomas Fox and Michael DeBernardis discuss questionable hiring practices from JP Morgan, Credit Suisse, and Bank of New York (BNY) Mellon in employing relatives of high-profile clients to gain favor. They also discuss how companies can find a middle ground in hiring families, why Hiring can be a high-risk area, preventative questions to avoid a violation, and the significance of internal control and documentation.

▶️ Hiring in the Financial Space with Thomas Fox and Michael DeBernardis

Key points discussed in the episode:

✔️ Thomas Fox gives a brief background on the BNY Mellon case.

✔️ Michael DeBernardis mentions how Hiring based on connections has existed for a long time and doesn’t directly violate any laws. It’s all up to a company’s intent. For BNY Mellon, it was to maintain close connections with major clients. He recommends compliance professionals look into their company’s hiring process.

✔️ Hiring unqualified people means you’re hiring them for other reasons. JP Morgan took in ineligible candidates for leverage with high-profile clients and free advertising in their respective home countries. Documentation stopped JP Morgan in its tracks.

✔️ JP Morgan structured hiring program managed to override compliance controls, revealing regulation flaws. Being discovered next to BNY Mellon’s case, it was not the last instance of son-and-daughter corruption.

✔️ Thomas Fox retells the Credit Suisse case. Retracing the company’s spreadsheets revealed their inner workings.

✔️ The risk of hiring relatives can be minimized when there is a middle ground. Thomas Fox shares questions to ask to prevent violations. He also adds strengthening internal control can put a company on the good side of regulators.

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Do you have a podcast (or do you want to)? Join the only network dedicated to compliance, risk management, and business ethics, the Compliance Podcast Network. For more information, contact Tom Fox at tfox@tfoxlaw.com.

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Everything Compliance - Shout Outs and Rants

Everything Compliance-Shout Outs and Rants from Episode 102

Welcome to our fan-favorite Shout Outs and Rants.

  1. Matt Kelly rants about the LIV exhibit golf tour and the insane amount of money being spent by Saudi Arabia to rehabilitate its reputation through sports.
  2. Jonathan Marks shouts out SEC Chairman Gary Gensler on the 20th anniversary of the enactment of SOX.
  3. Tom Fox shouts out to Vin Scully, the former play-by-play announcer for the Los Angeles Dodgers.
  4. Jay Rosen shouts out to Celtic great Bill Russell, who died this week.

The members of Everything Compliance are:

  • Jay Rosen– Jay is Vice President, Business Development Corporate Monitoring at Affiliated Monitors. Rosen can be reached at JRosen@affiliatedmonitors.com
  • Karen Woody – One of the top academic experts on the SEC. Woody can be reached at kwoody@wlu.edu
  • Matt Kelly – Founder and CEO of Radical Compliance. Kelly can be reached at mkelly@radicalcompliance.com.
  • Jonathan Armstrong is our UK colleague, an experienced data privacy/data protection lawyer with Cordery in London. Armstrong can be reached at armstrong@corderycompliance.com.
  • Jonathan Marks is Partner, Firm Practice Leader – Global Forensic, Compliance & Integrity Services at Baker Tilly. Marks can be reached at marks@bakertilly.com.

The host and producer, ranter (and sometime panelist) of Everything Compliance is Tom Fox, the Voice of Compliance. He can be reached at tfox@tfoxlaw.com. Everything Compliance is a part of the Compliance Podcast Network.

Categories
The Corruption Files

The Corruption Files Introduction


This is Tom Fox. I want to welcome you to an exciting new podcast series that I’m premiering on the Compliance Podcast Network, The Corruption Files, together with my co-host Thomas Fox and Michael DeBernardis, an artist partner at Hughes Hubbard & Reed LLP. We will be looking at some of the top corruption enforcement actions in the United States and beyond.
In our first five episodes, we’re going to focus on some key industries inside the United States which had important FCPA actions. We’re going to focus on the background of each of the enforcement actions.
What did it mean from the prosecutorial perspective, the Department of Justice, and the Securities and Exchange Commission? And then, what did it mean at the time of the enforcement action? What does it mean today, and what does it continue to mean for the compliance professional in the future?
I know you’ll enjoy this great new series, The Corruption Files.

Categories
Corruption, Crime and Compliance

Episode 233 – Tom Fox and Michael Volkov Discuss Recent DOJ Criminal Trials


In this episode, Tom Fox and Mike Volkov review recent DOJ trial successes and stumbles — Tom and Mike review DOJ trial strategy, successes and failures, and the approach of the antitrust division.

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Compliance Week Conference Podcast

Tom Fox on Why You Should Attend Compliance Week 2022

In this episode of the Compliance Week 2022 Preview Podcasts series, I discuss some of my presentation at Compliance Week 2022 “EU Whistleblower Protections and Responses”. Some of the issues we tackle in this podcast are:

  • Understand how to comply with both the EU Whistleblower Directive and GDPR requirements around call recordings, interview notes, records, and whistleblower rights to privacy
  • Learn how to run a Data Privacy Impact Assessment (DPIA)
  • Discover where requirements between the EU Whistleblower Directive and data privacy regulations conflict with each other

In this first full compliance conference in over 2 years, I hope you can join me at Compliance Week 2022. This year’s event will be May 16-18 at the JW Marriott in Washington DC. The line-up of this year’s event is simply first rate with some of the top ethics and compliance practitioners around.

Gain insights and make connections at the industry’s premier cross-industry national compliance event offering knowledge-packed, accredited sessions and take-home advice from the most influential leaders in the compliance community. Back for its 17th year, compliance, ethics, legal, and audit professionals will gather safely face-to-face to benchmark best practices and gain the latest tactics and strategies to enhance their compliance programs. and many others to:

  • Network with your peers, including C-suite executives, legal professionals, HR leaders and ethics and compliance visionaries.
  • Hear from 75+ respected cross-industry practitioners who are CEOs, CCOs, regulators, federal officials, and practitioners to help inform and shape the strategic direction of your enterprise risk management program.
  • Hear directly from the two SEC Commissioners and gain insights into the agency’s areas of enforcement and walk away with guidance on how to remain compliant within emerging areas such as ESG disclosure, third-party risk management, cybersecurity, cryptocurrency and more.
  • Bring actionable takeaways back to your program from various session types including ESG, Human Trafficking, Board obligations and many others for you to listen, learn and share.
  • The goal of Compliance Week is to arm you with information, strategy and tactics to transform your organization and your career by connecting ethics to business performance through process augmentation and data visualization.

I hope you can join me at the event. For information on the event, click here. As an extra benefit to listeners of this podcast, Compliance Week is offering a $200 discount off the registration price. Enter discount code discount code TFLAW $200 OFF.

Compliance Week 2022 podcast series is a production of Compliance Week, which is the sponsor of this podcast series.

Categories
The ESG Report

Implementing ESG Programs


 
Tom Fox speaks on important issues to note in designing and implementing ESG programs. He shares an overview on the structure of ESG programs and explains why they should be led by compliance.
 

 
ESG Internal Controls
ESG programs must be tailored to fit your company’s risk profile, Tom explains. Companies must be able to identify, measure, and address all risks within ESG. “The ‘E’ is going to be more focused on climate and the environment, but this means understanding your company’s environmental footprint and your risks.” Rather than assigning this to the audit committee, Tom recommends ethics and compliance, as they have a similar responsibility and similar processes. “This tends to show how compliance lends itself to either leading or being a significant part of an overall ESG corporate response,” he adds. From an operational perspective, it makes more sense to then report directly to the board after these operations are put together.
 
Measuring ESG
ESG operations consist of a cross section of corporate operations, environmental concerns, and social issues. Companies must identify issues falling under the ESG umbrella, tailor an ESG program, and select key measures of performance. “ESG disclosures open up an entire new set of standards, controls, and requirements around setting proper disclosure of ESG relevant information and performance,” Tom tells listeners. DEI is just one; climate change and environmental issues will raise another set of requirements. Companies will have to determine what information shareholders, stakeholders, investors, and others will focus on for the ESG evaluation process.
 
ESG and Compliance
Both ESG and compliance programs involve risk assessments, policies and procedures, and controls to mitigate risk, to name a few similarities. Tom advocates that compliance is uniquely suited to lead a corporate ESG effort, as this new world “shares many operational principles with an overall ethics and compliance program.” Issue programs must be designed around five basic operational issues:

  1. Information collection,
  2. Accuracy and reliability of information,
  3. Data collection procedures,
  4. Coordination with the disclosure procedures, and
  5. Testing, auditing, and monitoring the process to ensure accuracy and effective operation.

 
Resources
Tom Fox’s email
 
Implementing ESG Programs: Structure and Responsibilities (Part I of III) – Corruption, Crime & Compliance
 
Building an ESG Structure and Program (Part II of III) – Corruption, Crime & Compliance
 
Basic Operational ESG Program Issues (Part III of III) – Corruption, Crime & Compliance