For The Defense, February 2012 - DRI Today

suggest a corporate intent to both enable
and benefit from an employee’s or agent’s
errant conduct.
In addition, compliance has now become
a part of the statutory and regulatory landscape.
Section 404 of Sarbanes- Oxley Act
(SOX) requires that certain management
of issuers file an internal control report
regarding the effectiveness of the company’s
internal controls structure with the
SEC. Section 404 also requires the company’s
auditor to attest to and report on the
company’s assessment of its internal controls
over financial reporting.
An “effective” compliance program is
also necessary to mitigate the sentence
arising from some errant corporate misconduct.
The United States Sentencing
Guidelines identify several factors that
constitute an “effective” compliance program.
See U.S.S.G. §8B2.1(b). In addition,
amendments to the guidelines allow a company
to obtain credit for an effective compliance
program, even where a high-level
executive was involved in the misconduct,
so long as the head of compliance reports
directly to the board, among other factors.
Notwithstanding this emphasis on compliance
programs, more recent actions by
the government appear to undermine the
efficacy of corporate compliance efforts.
For example, the SEC implemented rules
designed to incentivize employees to take
advantage of the Dodd-Frank Act’s whistleblowing
protections and benefits. These
rules now offer huge awards for reporting alleged
violations of the securities laws to the
SEC, without a requirement of first resorting
to existing corporate compliance programs.
See Rule 21F-6 (17 C.F.R. §240.21F-6). Some
have argued that this regime may turn
company employees into bounty hunters,
thereby undermining the role and effectiveness
of corporate compliance procedures
that companies put in place after SOX.
Similarly, the SEC requires that any
qualifying disclosure be “voluntary,” which
excludes information provided to the SEC
pursuant to a contractual duty to the SEC.
See Rule 21F-4 (17 C.F.R. §240.21F-4). The
SEC’s commentary underscores that the
definition of “voluntary” excludes a statement
made to the SEC pursuant to a cooperation
or similar agreement with the
Department of Justice obligating the individual
to provide information to government
agencies in general. Although the SEC
identifies participation in internal compliance
systems as a factor that can increase
the bounty (Rule 21F-6 (17 C.F.R. §240.21F-
6), a whistleblower may rationally elect not
to risk such preemption by disclosing the
alleged violation to the company.
One way to vindicate, and not undermine,
compliance programs is to make
effective compliance programs an affirmative
defense to criminal wrongdoing. This
is exactly what occurs under the UK bribery
bill, which creates an affirmative defense
for “adequate procedures” to prevent
bribes. As a result, a corporation can escape
criminal liability if it can demonstrate that
any failings were not systematic. In the past,
however, the United States Department of
Justice has specifically objected to an analogous
procedure. The government’s opposition
is entirely consistent with its good faith
interest in achieving greater and greater leverage
over corporations and their individual
officers and directors.
The heart of the matter is this: the
government’s attitude about how best to
achieve corporate compliance has changed.
Today, there is a real suspicion on the part
of federal regulators that entity- driven penalties
and agreements are insufficient to
deter corporate wrongdoing. Regulators
now feel compelled to go after individuals
to effect greater corporate compliance. As
a result, the government will continue to
use various tools at its disposal, including
not only bounty programs but also corporate
monitors and elastic statutes to obtain
maximum leverage over those individuals
whom the government targets in its
investigations.
The following articles submitted by the
Government Enforcement and Corporate
Compliance Committee (GECCC) underscore
this theme. Aaron Danzig’s article,
“In Search of a More Flexible Approach:
Uneven Practices in False Claims Act Settlements,”
analyzes how the Department
of Health and Human Services Office of
Inspector General uses corporate integrity
agreements to monitor corporate conduct,
even where less draconian remedies would
be equally consistent with OIG guidance. In
addition, GECC Steering Committee Member
Julianne Balliro’s article, “The Detention
Provision of the National Defense
Authorization Act for Fiscal year 2012: Is It
Worth the Cost to Liberty,” examines the
Act’s elasticity to demonstrate how American
citizens may become subject to indefinite
detention based on little more than
suspicion of terrorism or suspicion of failing
to report another person suspected of
terrorism.
Thank you to our authors and to GECCC
Publications Chair Patrick Sullivan for
their efforts in helping our committee
sponsor this month’s For The Defense.
For The Defense ■ February 2012 ■ 53