Folsom embraces the idea of rebuilding shaky companies. Before this job, she battled compliance demons at the troubled American International Group, Inc., and weathered a scandal that cost her boss his job at the World Bank Group.
“I don’t shy away from trouble,” Folsom acknowledged in a recent interview with CorpCounsel.com. “My mother would prefer I work for a washing machine company or do something less controversial. But personally I find [compliance] interesting and challenging.”
Though the defense industry is new to Folsom, the military is not. “Growing up in a military family, I believe strongly in Xe’s national security mission,” she said, “and I understand that this company performs a critical service for our country.” Folsom sees the work she is doing at Xe (pronounced ZEE) as similar to what she did at AIG. “I’m helping it overcome the challenges of its past and instituting best practices,” she said.
At AIG, general counsel Stasia Kelly brought in Folsom as deputy GC and chief compliance honcho. “She is a terrific professional and great compliance officer,” Kelly said last week. “If I had another job for her, I’d hire her in a second.” Kelly, now a partner at DLA Piper, adds: “She is the perfect person to accomplish Xe’s goal of a turnaround” from the dark days of Blackwater.
Blackwater, you’ll recall, was the military contractor whose guards were accused of killing 17 Iraqi civilians in Baghdad in the fall of 2007. Although manslaughter charges against the guards were dropped, an FBI investigation concluded that most of the shootings “were unjustified and violated deadly force rules in effect for security contractors in Iraq.”
Blackwater changed its name to Xe Services in early 2009 and then was acquired by a holding company, USTC Holdings, last December. The company focuses on providing training and other security services to its clients.
USTC hired Folsom in June as part of its turning-over-a-new-leaf phase, including new executive officers and a freshened-up board of directors. “The company has committed itself to creating an industry-leading governance and compliance program,” USTC said in a statement.
It didn’t hurt that Folsom has strong political ties. She has served as chief of staff to the co-chairman of the Republican National Committee; private secretary to Queen Noor in Amman, Jordan; special assistant to former First Lady Barbara Bush during the 1988 presidential campaign; Bush family liaison to the 1988 U.S. Presidential Inaugural Committee; and a behind-the-scenes leader for the 1984 and 1988 Republican national conventions.
Folsom now reports jointly to CEO Ted Wright and to the board of directors’ governance committee, which includes ex-U.S. attorney general John Ashcroft, along with Jack Quinn, former White House counsel under President Clinton and now chairman of Quinn Gillespie.
She also works with GC Christian Bonat. Xe hired Bonat in November 2009; he’s a former senior counsel to the GC of the U.S. Department of Defense under President Obama, and was deputy GC of DoD during the George W. Bush administration.
Ashcroft said in a company statement, “Having someone of Suzanne’s exceptional background and experience to lead compliance efforts speaks volumes about Xe’s commitment.” And Quinn added, “Xe’s hiring Suzanne Folsom, with her depth of experience, knowledge and judgment, . . .[will] ensure that Xe’s regulatory and compliance program leads the industry.”
Before Xe or AIG, Folsom found herself at the center of problems at the World Bank. They started when bank executives ignored names produced by a formal search process in 2005 and hired her to head the bank’s internal watchdog unit. Her title was counselor to the president.
Critics said she was chosen because of her close ties to President Bush and the U.S. Republican party, and was hired to help bank president Paul Wolfowitz impose conservative policies and strategies on the bank.
Wolfowitz resigned from the World Bank in June 2007 during a scandal over questionable raises and promotions for his romantic partner at the time, who also worked at the bank. Folsom came under heavy attack for her failure to investigate complaints about the pay raises/promotions, and she resigned the following January.
Criticism of her grew after a bank-commissioned report by Paul Volcker—despite it clearing her of any blame—and an independent review by the nonprofit Government Accountability Project. GAP later filed an ethics complaint against her with the Washington, D.C., Bar Association, but it was closed without action.
At AIG, Folsom also had her hands full. She joined the company in April of 2008—just before the great financial collapse that occurred later that year. At the time, AIG was already struggling through the heavy penalties and reforms demanded by numerous criminal and Securities and Exchange Commission investigations. It was also under the watchful eye of a corporate monitor.
According to whistleblower.org, several compliance attorneys and employees wrote to AIG senior management after the collapse, complaining about deficient compliance procedures. The whistleblowers were then terminated as part of a staff reduction, the website said, implicating Folsom in those layoffs.
Folsom left AIG along with Kelly in December of 2009 during a pay dispute with government bailout officials.
Folsom previously practiced law at O’Melveny & Myers in Washington, D.C., where she led the international regulatory practice group; and at Cadwalader, Wickersham & Taft in New York City.
Asked what companies will be most closely scrutinized in the coming year for compliance, Folsom replied that she thinks the defense and financial industries will be in regulators’ sights.
“Companies in these areas need to hire people of knowledge and expertise. Some companies don’t want to do that, don’t want to open Pandora’s box, but you have to,” Folsom advised.
She called it a fascinating time to be part of a company like Xe, “because of terrorism and ongoing wars, coupled with the downsizing of the military. There is an important role for companies like this, but there is no margin for error.”