After so many years of hard work and good people entering and progressing in the field of compliance, including its standing in the organization, why is it that good companies continue to get into trouble?
Every time I see a new enforcement action or reflect on the “big ones” still fresh in our memory, I ask myself this question. Luckily I’m not the only one thinking about this.
Hank Shea, pictured above, was a federal prosecutor for nearly 20 years. Now he’s a professor at the University of St. Thomas School of Law in Minneapolis, Minnesota.
He’s traveling to schools (Fordham, Columbia, Harvard..) speaking with white collar felon Leigh Sprague about Sprague’s slide down the slippery slope of ethical lapses into the arena of white collar crime.
Professor Shea (BA Georgetown, JD Harvard) and Leigh Sprague will be at Fordham Law School on October 10 at 6:30pm. Space is limited.
Please contact me at [email protected] for details.
Professor Shea has also studied corporate behavior after accusations of wrongdoing.
Here’s part of talk he gave (published here with his permission) about reasons companies suspected of wrongdoing make things worse:
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Reason No. 5 – Failure to accept responsibility and remedy the problem when a breakdown or wrongdoing occurs.
Not every misstep or breakdown involves wrongdoing. Employees are human; they make mistakes and mess up. Such mistakes are an inevitable part of doing business. The critical point is how an organization and its leadership respond.
In dealing with wrongdoing, a company has two general choices: 1) it can ignore it, bury it, and hope it goes away (and usually get burned again and worse) or 2) it can acknowledge it, fix it, and learn from it.
Reason No. 4 – Hiring the wrong attorney when problems arise.
Be careful in deciding who a company turns to for help when problems come to light.This is often the most important threshold decision for any company that comes under investigation. Given my experience, I believe that it is essential to retain outside counsel who can fully represent your organization’s interests and work with the government to identify and expeditiously resolve issues.
The bottom line: if your company gets into trouble, find an attorney who government lawyers respect and trust if you want to avoid expense and delay, or even worse.
Reason No. 3 – Failure to be candid and open with the government from the outset of any inquiry or investigation.
As with many relationships in life, how you and your company initially respond when the government comes calling will often dictate the future course of events between the parties. If you are respectful and upfront, trying to be as cooperative as you are able to be, you can expect reciprocal treatment by the government. If not, you risk setting the tone for a prolonged, difficult relationship.
I have investigated many companies and have charged relatively few. Nothing is more effective or powerful than being up front with the government. Nothing is more disarming than an apology. That is what voluntary disclosure is all about. It is the opposite of hunkering down and circling the wagons and adopting a scorched earth policy.
Reason No. 2 – Attacking the government instead of tackling the problem.
Search warrants are always tough calls for the government. It is always a sensitive matter for an organization getting searched. It is frustrating for the company and its executives because they often cannot find out the reasons why the judge authorized the search — but experienced attorneys will explain to their clients how and why the government takes these steps and the role of the court in approving the search.
The key point for any company: find out the nature and extent of the problem. Do this internally. Meet with the government as soon as possible and often. Let me also tell you what not to do. Do not tell newspaper reporters that the government’s investigation is “bizarre” or describe allegations as “absurd” or make up facts about the search that get printed in the paper.
No one likes being ridiculed, even public servants. Government agencies have long, institutional memories.
Reason No. 1 – Committing the same mistake or misconduct more than once.
Committing the same wrongful act more than once shows that you have learned nothing. I once investigated a successful company employed more than 1,000 people. It committed not one, not two, but three separate violations — demonstrating a pattern of breakdowns that often is prosecuted as felony conduct. It was apparent to all that charging and convicting the company of a felony could put them out of business. Yet the government was beyond the point of handling the violations as simply an administrative matter, which is what could have been done if there was only one violation. The multiple misdemeanor charges as well as administrative penalties were a fair and just resolution for all parties.
The situation was made worse for the company because, even after it brought in outside counsel early in the investigation, communications made by it and on its behalf to the Department
of Commerce did not disclose all of the important facts that company employees (and outside counsel) knew about. This is cardinal error material.
Any time there is possible attorney knowledge or involvement in a matter under investigation, investigators and prosecutors engage in a much higher level of scrutiny because of several factors, including a possible defense of reliance on advice of counsel.
Alice BrightSky is the senior director of Fordham Law’s compliance programs. She manages the School’s corporate compliance initiatives, including the LL.M. and M.S.L. degrees and executive education programs in corporate compliance. She can be contacted here.