The Greatest Compliance Show on Earth!
Last week, the University of Houston Law Center hosted its second Ethics and Compliance Symposium before a packed house. The event is designed as an open forum where attendees can share ideas about their companies’ compliance programs and issues. Panelists fielded questions on organizational reporting structures and compliance officer independence, topics surrounding data security and privacy, maintaining privilege during an investigation, and emerging issues in Latin America including a brilliant explanation of Brazilian corruption law by Luiz Sampaio of Petrobras. But at this Greatest Compliance Show on Earth, two speakers really stole the show.
Dr. Philip Tetlock (supported by University of Virginia's Greg Mitchell) impressed the audience with his discussion of forecasting. The author of Expert Political Judgment (Princeton University Press, 2006) began by convincing us that we are all forecasters (mostly covert, and often inadvertent) and then discussed his participation in the Intelligence Advanced Research Projects Activity (IARPA) forecasting tournament, titled Aggregate Contingent Estimation (ACE).
IARPA is a center that conducts research to give United States intelligence agencies an advantage over their adversaries. The ACE tournament focuses on increasing the accuracy and timeliness of forecasting using a broad range of worldwide events. Tetlock explained that his team was able to destroy the tournament competition by a wide margin by choosing good forecasters, training them how to turn hunches into probability metrics, holding team members accountable, and adjusting forecasting algorithms to focus on the team’s better forecasters—a so-called super-fox strategy.
When conference attendees checked in, Tetlock had them guess at the number of marbles in a medium-sized jar. During his presentation, he demonstrated that the group average was a better indicator than individual judgments. The total number of marbles in the jar was 505; the group’s average estimate was 428, with guesses ranging from less than 100 to over 1,000. Super-forecaster Shane Kimzey (deputy chief legal officer from CEVA Logistics) was the winner with a guess of 485 and was rewarded with a bottle of Napa Cabernet. Tetlock noted that the group average also benefits from different knowledge bases, illustrated with a scene from Zero Dark Thirty in which intelligence analysts predict the likelihood of Osama Bin Laden living in Abbottabad, Pakistan. With each analyst predicting a 70 percent likelihood—but with each bringing a different knowledge base (and setting aside the heroine's view) to the forecasting—Tetlock explained the actual probability using the group consensus was closer to 85-90 percent.
As companies engage in risk assessments that look backward at historical events such as the number of third parties in a particular market or types of client interactions to gauge anticorruption risk, Tetlock's approach is forward looking. It takes the known information and makes an educated guess about what it means for the future by weighting it and using a Bayesian approach to forecast risk across different markets or business units. Tetlock's approach is the future of risk-based compliance programs as compliance officers must learn to be good forecasters, or at least find the Shane Kimzeys (the best forecasters) of their organization and turn historical information about their program into probabilities about future risk. This forecast should guide allocation of resources to mitigate risk.
After Tetlock’s star turn, former GlaxoSmithKline in-house lawyer Lauren Stevens gave the lunch speech. And not to be outdone by Tetlock, she was simply fantastic. Within two minutes, Stevens silenced crinkling chip bags and other lunch noise and commanded the room’s total attention. Stevens is the ex-VP and lawyer who was charged by the Department of Justice for signing documents GSK submitted in response to a Food and Drug Administration inquiry into GSK's marketing of Wellbuturin.
She recounted her trial in Maryland and how U.S. District Judge Roger Titus threw out her case after the government rested, finding that—viewing the evidence in a light most favorable to the government—no rational juror could convict her. After the judge tossed the case, the jury gave a standing ovation.
More than a cautionary tale for in-house lawyers dealing with the government, her story was also one about how people treat one another—whether as lawyers, businesspeople, or just as citizens. She noted how important it was that people who were close to her—her friends, family, colleagues—stood by her as she went through the court proceedings. She said that it is often easier to sit on the sidelines as someone we know goes through a personal challenge, but that the people that supported her helped her emerge successfully through a terrible process.
There were many other great speakers at the conference, but Tetlock and Stevens dazzled and left behind plenty for compliance professionals to think about. That's the news from the University of Houston—where the students are smart, the professors are fair, and the temperature in June is well above average.
Ryan McConnell is partner at Morgan Lewis and former federal prosecutor in Houston. He teaches both criminal procedure and corporate compliance at the University of Houston Law Center. If you would like a copy of the conference materials or have ideas for next year's conference, please him at email@example.com.