At the heart of the compliance profession lies the complex, entrenched problem of serious criminal misconduct by senior executives. That’s why I have suggested that for some multinationals, the “problem of overseas corruption is not overseas. It’s in the corner office.”
Misconduct at the top is now receiving the increased scrutiny it deserves. In a May 2013 symposium, the think-tank Rand Center for Corporate Ethics and Governance asked for analysis and recommendations from compliance experts and leading professionals from the SCCE, ECOA, high-level government officials, FCPA law firms, prosecutors, judges, accountants and veterans of the “C-Suite” (i.e., CEOs, CFOs, COO and other “Chief” or senior executives.)
The Rand Report’s nearly 100-page, comprehensive analysis of C-Suite criminal misconduct is a landmark in the growth of the compliance profession. It’s a tightly-argued set of recommendations to fix what is not working despite the best efforts of the compliance profession. I hope every compliance officer and DOJ and SEC prosecutor will study it.
Consider these points from the Rand Report:
- Since 2002, the DOJ has convicted 200 CEOs, 120 VPs, and 53 CFOs; another survey indicates that in more than 4 out of 5 incidents of corporate fraud studied, the senior managers either knew about or committed the crime or misconduct; the trend of C-Suite criminal misconduct is unmistakably rising and many senior executives have the means, motive and opportunity to engage in criminal activity (pp. 1, 9, 11, 14, 69-73)
- Most compliance programs are designed to drive compliance in other parts of the company but not for senior executives; the C-Suite, as Scott Killingsworth so aptly put it, is a “Crucible” for misconduct and lack of attention to it is a fundamental gap in compliance programs; risk assessment, monitoring and internal controls fail to address C-Suite officers (pp. 7, 9, 16-18, 74, 78-79)
The Rand Report makes it clear why the DOJ and SEC need to come to the defense of compliance officers in enforcement actions. Standing up to criminal misconduct fostered in the C-Suite is indeed a power struggle; for COs it is a role full of stress and hazardous working conditions.
The DOJ and SEC should send a message to the C-Suite that obstruction and intimidation of COs, as alleged in the Wal-Mart investigation, will be met sooner or later with powerful sanctions and that companies must reform their compliance programs to close the gap in compliance. The Rand symposium recommendations can jump-start and guide the DOJ and SEC toward the kind of far-reaching settlements that deliver these messages.
Michael Scher is a contributing editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He is affiliated with ethiXbase, the owner of the FCPA Blog. He can be contacted here.
One of the actions that could be taken is to redraw §3C1.1 of the Sentencing Guidelines to provide for enhancement if the relevant officer takes action to conceal, interfere, obstruct or frustrate the actions of the compliance officer with respect to investigation or corrective action with respect to an offense.
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