The Ethics & Compliance Initiative has released a discussion draft of a report defining the principles and practices of high-quality ethics and compliance programs.
The report was funded by the U.S. Chamber of Commerce’s Institute for Legal Reform.
The discussion draft was written by a “blue ribbon panel” and “identifies five principles common to high-quality programs.”
The Initiative is seeking public comment and expects the panel to consider the input and finalize the report in the coming weeks.
The members of the blue ribbon panel?
Patricia Harned, CEO, Ethics & Compliance Initiative, Lee Augsburger, Prudential Financial, Lanny Breuer, Covington & Burling, Maryann Clifford, BP plc, Thomas Donaldson, Wharton School, Kurt Drake, General Cable Corporation, Suzanne Rich Folsom, U.S. Steel, Billie Garde, Clifford & Garde, Gary Grindler, King & Spalding, Peter Jaffe, AES Corporation, Jo Levy, Intel Corporation, Leo Mackay, Lockheed Martin, Paul McNulty, Baker & McKenzie, Suzanne Hassell Milton, US Foods, Haydee Olinger, McDonald’s Corporation, Michael Oxley, Baker & Hostetler, Matthew Pachman, FTI Consulting, Scott Roney, Compliance Systems Legal Group, Alfred Rosa, GE, Larry Thompson, University of Georgia School of Law, Larry Walker, Louis Berger Holdings, Ashley Watson, Merck & Company, and Alan Yuspeh HCA Holdings.
The draft report says high quality programs distinguish themselves because they not only seek to comply with legal and regulatory expectations; they integrate ethics and compliance thinking and practice into everyday operation of the organization, they are not satisfied with a mere “check-the-box” effort, they assess and mitigate risk and prioritize the creation of a culture where concerns can be raised, they hold themselves accountable – both internally and externally – for prompt, responsible action when misconduct occurs, and they implement strategies that are continually documented, measured, evaluated and improved.
Patrick Burns of Taxpayers Against Fraud was not impressed.
Harned, the Initiative’s CEO, reached out to Burns to get his input on the draft report.
“Thanks for sharing a copy of your draft report,” Burns wrote. “I am glad to have read it, but I have to say I did not find much of substance.”
“Let us start at the beginning: No one gave this panel a blue ribbon, and so calling it a ‘blue ribbon panel’ is a bit presumptuous,” Burns wrote. “More accurately, it is a panel almost entirely dominated by people who are being paid to defend and apologize for companies facing fraud charges.”
“This ‘blue ribbon’ panel includes no whistleblowers and no False Claims Act-, SEC-, IRS-, FCPA-, or CFTA- whistleblower lawyers. None of the whistleblowers fired by companies whose representatives are on this ‘blue ribbon panel’ were interviewed, nor is there an analysis or appendix reviewing the amounts settled or litigated by panel-member companies. This was pretty low-hanging fruit, as most of your panelist companies have case histories of wrongdoing of one type or another, including the company associated with one of its principal authors. Perhaps you can add a short description of these fraud stories, and an analysis of where the company went wrong, as an appendix?”
“This report was commissioned, and paid for, by the U.S. Chamber Institute for Legal Reform, an arm of the U.S. Chamber of Commerce, whose major donors are among the largest repeat fraudsters in the history of the United States. In short, this is a report, commissioned by foxes, on how to guard the chicken house. It would be a very interesting report if it discussed the use of motion sensors, shotguns, and leg-hold traps, but instead we hear a great deal about ‘risk mitigation’ and nothing at all about increasing the penalties for wrongdoers, or increasing the rewards for integrity.”
“The bottom line is that this report lacks substance.”
“There are no examples of successful compliance programs, nor are there examples of failed compliance programs. One wonders how anyone can identify an “exemplary” ethics and compliance program when your team seems to have never found one? And how, in a world that is run-over with failed compliance programs, is there no analysis of where any failed company went wrong? Surely an autopsy on common failure is called for, even if a clear photo of success remains elusive?”
“The language of this report is illuminating.”
“The term ‘risk’ is used 156 times, but it is never defined. Risk of what? What are the penalty options for government, consumers, and taxpayers? If the fear of a ‘risk’ is what drives ethics and compliance programs, then how can we increase the chance of a fraud being caught, a meaningful penalty being levied, and integrity being rewarded?”
“While the word ‘risk’ is used all the time, and never defined, the word ‘fraud’ appears only once, while the words ‘lying’ and ‘cheating’ do not appear at all, nor do the words ‘punishment,’ ‘jail,’ or ‘exclusion. The word ‘fine’ appears only once.
“Let me know if you want further information or comments. I think grounding your work in real case examples of where things have gone wrong, and where things have gone right, would be illuminating and instructive to all. I do not think broad aspirational statements wrapped in corporate-speak does much to move the ball forward.”