Enforcement

Finding FCPA Violations in Employee Expense Reports

May 01, 2012

Travel and entertainment expenses have long been a haven for abuse, but since the dollar amounts are often insubstantial, companies don't always pay close attention to them. Companies are now finding, though, that they can be a conduit for bribes. "If T&E goes unchecked, it can make a company susceptible to allegations of corruption," says Andrew Levi, head of the Miami office at investigation firm Nardello & Co. How to root out fraud? More inside.
 

How BizJet Convinced the Justice Department to Go Easy

March 27, 2012

After aviation maintenance company BizJet uncovered potential Foreign Corrupt Practices Act violations, the company reacted swiftly, launching an internal investigation and notifying the Justice Department. The actions earned the company goodwill for "extraordinary cooperation," and a 30 percent reduction in its FCPA fines. More details inside.
 

SEC Turns Up the Heat on Private Equity, Hedge Funds

March 06, 2012

The SEC has been taking a harder look recently at the business practices of hedge funds and private-equity firms, and now that the Dodd-Frank Act requires many more funds to register with the SEC, more scrutiny can be expected. "The SEC staff has been warning the private-equity industry that it plans to significantly step up enforcement actions," says Robert Burwell, a partner at law firm Latham & Watkins.
 

PCAOB Action Illuminates Returns Accounting

February 28, 2012

A recent disciplinary action against Ernst & Young provides a lesson for corporate accounting executives and auditors alike on how not to push accounting logic to improve reported financial results. The case centers on Medicis Pharmaceuticals' accounting for returned products, an area of accounting that relies heavily on judgment—which Medicis took too far, and ended up with a restatement. Details inside.
 

Rethinking Supply Chain Risk Management Strategies

February 22, 2012

Companies such as Cisco Systems are working to get more visibility into, and control over, supply chain disruption risks. The strategy: invest heavily in analytics and build risk management into the design and planning phase of that. Other businesses, alas, still lag. "Overall, most companies don't have a strategy for managing supply chain risks," says Jerry O'Dwyer, a principal at Deloitte.
 

Yet Another Mortgage Crisis Enforcement Task Force

February 07, 2012

During his State of the Union Address, President Obama unveiled the Residential Mortgage-Backed Securities Working Group. It's just the latest in a string of government units tasked with investigating abuses that led to the financial crisis. So what will this group do differently that others, such as the Securities and Exchange Commission, haven't done? That seems to be an open question. More details inside.
 

Fewer Companies Changing Auditors

January 31, 2012

Fewer companies changed audit firms in 2011, reflecting relative stability in the market for financial reporting. While second-tier audit firms made some inroads, picking up a net gain of 28 audit clients, the Big 4 firms saw little turnover, losing a net of only eight clients. Deloitte experienced the most turnover, with a net loss of 22 clients. More audit change analysis and data inside.
 

OCIE Provides Social Media Guidance for Investment Advisers

January 31, 2012

Investment advisers seeking clarity about the appropriate use of social networking Websites such as Facebook, Twitter, and LinkedIn now have some much-needed guidance. The SEC's Office of Compliance Inspections and Examinations has issued a Risk Alert to help them craft and enforce a social media policy. Others worried about social media risks would do well to give it a read, too. Details inside.
 

California Passes New Supply Chain Transparency Law

January 24, 2012

Retailers and manufacturers doing business in California, beware: state law there has just added supply chain exposure to slavery and human trafficking to the long list of corporate disclosures you must make. The risk for businesses is that if you don't ask your suppliers the right questions, "you don't get the right answers," warns Colette Simo, head of compliance for OfficeMax. Full coverage inside.
 

PCAOB Enforcement Hamstrung by Privacy, Says Review

January 20, 2012

An internal review by the Public Company Accounting Oversight Board found that the biggest obstacle to a more effective process is the Sarbanes-Oxley rule that keeps investigations and disciplinary proceedings private until settled. That gives firms and individuals an incentive to litigate cases regardless of merit to delay a settlement, the review found.
 

More FCPA Defendants Opting for Trials Over Settlements

January 10, 2012

Defendants in Foreign Corrupt Practices Act cases are increasingly opting to fight the Department of Justice in court rather than agreeing to prepackaged settlements, and more of them are winning. "For so many years, FCPA enforcement rarely saw the inside of a courtroom. Thankfully, that is beginning to change," says Mike Koehler, a law professor at Butler University.
 

Study: Whistleblowers Want Anonymity, Monetary Rewards

January 10, 2012

Whistleblowers are far more likely to report wrongdoing if they are given a monetary reward, anonymity, and protection from retaliation, says a recent survey by law firm Labaton Sucharow. Since only the SEC is paying a reward right now, that's bad news for compliance departments. But two-thirds of respondents said they weren't aware of the SEC's whistleblower program launched last year. More results inside.
 

Conducting Investigations in Executive Compensation

December 20, 2011

In response to pressure from investors, proxy advisory firms, and the public to curb excessive executive pay practices, many companies added new pay policies and rules. Now they have the task of ensuring that everyone abides by them—and violations of executive compensation rules often lead to difficult and sensitive internal investigations. Some tips on conducting them are inside.
 

Beware Compliance Pitfalls When Recruiting on Social Media Sites

December 13, 2011

More companies are using social media sites like LinkedIn to search for potential job candidates. While there's nothing inherently problematic about the strategy, companies need to be careful, since those sites often provide sensitive personal information. "Employers should be careful not to make decisions based on some information obtained via social media," says Susan Gross Sholinsky of law firm Epstein Becker Green.
 

Mobile Computing Raises New e-Discovery Challenges

December 13, 2011

More employees are accessing sensitive company data on mobile gadgets, such as smartphones and tablets, and many of them are doing it on their personal devices. This new reality is creating e-discovery challenges, since it makes it harder for companies to quickly produce required data. "To get to that data, they need to have it in an easily accessible place," says Philip Favro, a discovery attorney at IT security company Symantec.
 

Landmark Ruling Limits SROs' Authority to Collect Fines

October 25, 2011

A recent federal appeals court ruling that halted the Financial Industry Regulatory Authority's power to collect old disciplinary fines via lawsuit has effectively called into question the power all self-regulatory organizations have in enforcing fines through court action. The verdict may not have much practical effect, experts say, but it does clip SROs' wings in a way rarely seen. More inside.
 

Ruling Increases Protections for Whistleblowers

October 11, 2011

A ruling by the Department of Labor's Administrative Review Board increases protections for whistleblowers, meaning companies will have to be even more vigilant about how they treat those who allege misconduct. The ruling faulted Halliburton for disclosing the identity of a whistleblower. It sets "a new standard for what constitutes an adverse employment action," says Steve Pearlman, a partner with law firm Seyfarth Shaw.
 

Universities Face New Whistleblower Liability Over Pay Rule

September 13, 2011

Colleges and universities could be exposed to greater risk of whistleblower lawsuits under the False Claims Act, thanks to new rules adopted by the Department of Education this summer meant to restrict employee incentives for boosting enrollment and financial aid recipients. The changes end many safe-harbor provisions that existed for years and largely shielded schools from government action. Details inside.
 

(Dis)Closing in on Perfection?

September 07, 2011

Pushing social policy by way of corporate disclosure is not exactly new to federal securities law. It is, however, becoming more common. From conflict minerals to executive pay to supply chain transparency, more activist groups (including Congress) are asking the SEC to compel companies to speak up. Is it worth the cost? Full details inside.
 

Court Ruling Could Limit SOX Whistleblower Retaliation Claims

August 30, 2011

Good news for companies concerned about lawsuits based on allegations of retaliating against whistleblowers: A recent district court ruling could make it harder for employees to claim whistleblower protection under the Sarbanes-Oxley Act. The court affirmed that employees have to show the allegations involve activity covered by SOX. Details inside.
 

HHS Reversal Shows Path for Execs to Keep Their Jobs

August 23, 2011

Good news for executives at companies mired in government corruption probes: Your careers might not entirely unravel after all. At least, that seems to be the case for the CEO of Forest Labs; healthcare regulators recently dropped their demand that he leave the company as part of a fraud settlement. A look at how Forest won the argument is inside.
 

GAO Report Lends No Support to 'Secondary Actor' Liability

August 02, 2011

The Government Accountability Office recently issued a report on the legal liability of professional service firms that help companies commit fraud. The neutral stance of the report may influence regulators to maintain the status quo, which would be a victory for those who oppose "secondary actor" liability. More details inside.
 

How Tyco Manages Third-Party Risk

August 02, 2011

After settling allegations of violating the Foreign Corrupt Practices Act several years ago, Tyco decided to get a better grip on its third-party business partners. Building a system to monitor more than 32,000 relationships was no easy task, but the benefits go far beyond compliance: "It's dramatically changed the culture of the organization," says Matthew Tanzer, chief compliance counsel. An in-depth look is inside.
 

An Interview With Former Delaware Court Chancellor Chandler

July 19, 2011

In the latest of our Q&A interviews, we catch up with William Chandler, former chancellor of the Delaware Court of Chancery. Inside, Chandler looks back on his 22-year tenure on the court, and discusses the most significant cases that he has ruled on and some of the most recent developments in corporate law.
 

FSA Hitting Firms With Smaller Fines, On Average

July 16, 2011

The UK Financial Services Authority has hardened its enforcement strategy over the last two years, but when a few record cases are set aside the average fine imposed by the regulator against firms has actually fallen, according to a new analysis.
 

Canada Takes Landmark Anti-Bribery Enforcement Action

July 12, 2011

Move over, FCPA—your northern cousin, the Corruption of Foreign Public Officials Act, just took a big step into adulthood. Canadian officials have reached their first-ever plea deal with a company for overseas bribery, and more enforcement is ahead. "For a U.S. company that may have thought anti-bribery was not an issue in Canada ... it is now," Toronto lawyer John Boscariol says. More inside.
 

Supreme Court Splits Decisions on Two Securities Cases

June 28, 2011

Corporate America and shareholder activists have split two recent decisions from the U.S. Supreme Court about class-action lawsuits. One ruling could clear the path for shareholders to bring class actions without first demonstrating causation of losses; the other could shield companies from lawsuits based on the actions of their affiliates. Details inside.
 

Lessons From SEC's First Deferred Prosecution Agreement

June 21, 2011

Last month the SEC signed its first-ever deferred-prosecution agreement with a company. The intent of the SEC's DPA is "essentially to create incentives for corporate self-policing, self-reporting, and self-remediations," says John Sturc, partner at law firm Gibson, Dunn & Crutcher. But is self-disclosing your way into a DPA really worth the risk? Not everyone is sure.
 

The Summer of FCPA

June 14, 2011

Enforcement actions of Foreign Corrupt Practices Act violations are intensifying as the summer begins. In May alone, several notable FCPA cases transpired, including the first ever jury conviction of a corporation, the first deferred-prosecution agreement by the Securities and Exchange Commission, and challenges to the law's defining language. Inside, Columnist Bruce Carton recaps the latest.
 

India Privacy Rules Raise Alarms

June 14, 2011

Companies that outsource data processing or other back-end operations to India should be aware of a sweeping change in the country's data privacy rules that could leave them saddled with extensive notice-and-consent burdens. "There are some provisions in this law that may make it difficult to proceed with business as usual," says Heather Egan Sussman, a partner at law firm McDermott Will & Emery. Details inside.
 

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