As government agencies float more opportunities for cooperation credit and increase their calls for voluntary self-disclosure, the distinction between companies that do right or wrong during enforcement proceedings becomes more apparent.
In this environment, it’s easier to put together an annual recap of laudable ethics and compliance accomplishments. My list for this year includes examples of companies singled out for doing the right thing, in addition to a couple entries I perceived as being a win for the industry at large or a business in a specific scenario.
Here are five compliance-oriented triumphs from 2023:
I’ll start this list off with an unconventional pick: A company that blatantly admitted it did not provide enough support to its compliance function.
That happened at Discover Financial Services in August, when Chief Financial Officer John Greene said during a business update call the company had “historically underinvested” in compliance and that it was “paying the price right now.”
“We do need to make sure that we invest enough to achieve compliance and risk management excellence, and we’re going to do that,” Greene said.
Everything Discover has faced since then, including an investor lawsuit and a consent order with the Federal Deposit Insurance Corporation, can be traced back to that underinvestment in compliance publicly acknowledged by the CFO. If that isn’t a trump card for any chief compliance officer struggling to receive resource support from the C-suite or board, I don’t know what is.
Though the road ahead for Discover’s compliance department will be more difficult given the situation the business put itself in, the stated guarantee of additional funds from company leadership moving forward will go a long way. So, too, will Discover’s story for other compliance teams seeking to avoid the same fate by using the company’s mea culpa as a bargaining chip.
I give credit to Greene and Discover for providing that possibility.
When the current head of the Department’s of Justice’s (DOJ) Criminal Division describes your company’s enforcement case as “an example for companies considering how to achieve the best result under our policies,” there’s no questioning your place on this list.
Albemarle earned the highest penalty reduction—45 percent—recorded under the DOJ’s revised corporate enforcement policy as part of the $218 million it agreed to pay in settlements with the agency and the Securities and Exchange Commission (SEC) in September for alleged violations of the Foreign Corrupt Practices Act (FCPA) across Vietnam, Indonesia, India, China, and the United Arab Emirates (UAE).
What earned the chemical company the praise of Acting Assistant Attorney General Nicole Argentieri? Its “extensive” cooperation and “significant and timely” remediation, including:
- Disciplining employees involved in the misconduct, including 11 terminations and 16 withheld bonuses;
- Strengthening its anti-corruption compliance program, including through use of data analytics to measure effectiveness;
- Providing extensive training to sales agents and restructuring compensation and incentives to no longer be tied to sales amounts; and
- Engaging in continuous testing, monitoring, and improvement of all aspects of its compliance program.
Albemarle further received the DOJ’s first detailed discount under its compensation clawback pilot program launched earlier this year. The company was granted a penalty reduction of more than $760,000 for bonuses it withheld from qualifying employees—actions Argentieri said it took even before the pilot program was announced.
I’m sticking with the DOJ and the FCPA for my next entry on a company setting a high compliance bar.
In November, pharmaceuticals firm Lifecore received a declination from the DOJ regarding apparent FCPA violations in Mexico. The company satisfied multiple factors of the agency’s voluntary self-disclosure policy updated in February and agreed to disgorge $406,000 believed to be financial benefit attributable to the alleged bribery of government officials in the country.
But the most striking of its cooperative actions was the timing of its voluntary self-disclosure. Lifecore reported to the DOJ’s Fraud Section “within three months of first discovering the possibility of misconduct and hours after an internal investigation confirmed that misconduct had occurred.”
If hours is what the DOJ is expecting when it says it seeks prompt self-disclosure, that’s a tall ask. Though the facts considered in every case are unique, the Lifecore declination does offer companies a benchmark for the path to avoiding prosecution—even if it doesn’t seem feasible to repeat.
When Construction Specialties agreed to pay more than $660,000 in a settlement with the Treasury Department’s Office of Foreign Assets Control (OFAC) announced in August addressing apparent sanctions violations in Iran, one aspect of the case stuck with me.
While senior managers at the business allegedly worked to conceal the exportation of goods to Iran, a U.S. person working at UAE-based affiliate Construction Specialties Middle East raised suspicions to one of the senior managers involved in the scheme. For coming forward, that individual was dismissed.
Instead of backing down, the whistleblower flew to the United States and reported the apparent misconduct to Construction Specialties headquarters, which opened an internal review, terminated all Iran-related business activity, and voluntarily reported the matter to OFAC.
The whistleblower deserves all the credit in this case, especially when you consider their information helped Construction Specialties avoid a base penalty of approximately $1.1 million. That figure is notable in light of the Treasury’s sanctions whistleblower program’s requirement that awards of 10 to 30 percent of the monetary penalties collected only apply when a penalty exceeds $1 million.
Still, the story ended well for the whistleblower. Construction Specialties reimbursed them for their expenses in flying to the United States, restored their job, and later promoted them, as detailed by the company’s Vice President and General Counsel Chuck Almer.
Perella Weinberg Partners
When the SEC and Commodity Futures Trading Commission have combined to bring more than 40 enforcement actions regarding employee use of off-channel communications for conducting business, it’s easy for one relatively small firm to get lost in the shuffle. But officials at the SEC are making sure that’s not the case with Perella Weinberg Partners.
In September, Perella and two of its affiliates received the smallest fine to date—$2.5 million—from the SEC in its off-channel communications sweep. The reason the firm earned more of a break than its counterparts was because it self-reported to the agency.
“Prior to approaching commission staff … Perella had begun a program of remediation, which included issuing firm-issued devices to all employees; strengthening its self-policing procedures by making investments in new technologies to improve surveillance efforts; and conducting trainings and sending firm-wide reminders that emphasized the importance of complying with recordkeeping obligations,” the SEC detailed in its order. “Perella also took proactive steps to onboard and preserve off-channel communications.”
In an October speech, SEC Enforcement Director Gurbir Grewal praised Perella as a notable example of cooperation. As more financial firms consider their circumstances regarding employee use of off-channel communications and whether they’re at risk of SEC enforcement, the agency is promoting Perella as an example of what to do, rather than waiting to get caught.
- compliance triumphs
- compliance winners
- Construction Specialities
- Department of Justice
- Discover Financial Services
- Ethics & Culture
- Financial Services
- Foreign Corrupt Practices Act
- good compliance
- Gurbir Grewal
- Internal Investigations
- Lifecore Biomedical
- Middle East
- Nicole Argentieri
- off-channel communications
- Office of Foreign Assets Control
- Perella Weinberg Partners
- Regulatory Enforcement
- Regulatory Policy
- Risk Management
- Securities and Exchange Commission
- Surveys & Benchmarking
- United States
- Voluntary Self-Disclosure