Welcome to Compliance Hot Spots, our briefing on compliance, enforcement and government affairs. Under Trump-appointed leadership, the Justice Department has taken business-friendly steps to reward companies for strong compliance systems and self-disclosure of misconduct—and the top lawyer at Caterpillar has some thoughts about it all. Plus: a former UBS compliance officer is on trial, and the FTC making more noise about incorporating fines into enforcement actions.
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Cooperation Perspectives from Caterpillar’s GC
In early March 2017, Suzette Long was just weeks into her role as Caterpillar’s interim chief legal officer when federal agents raided three of the equipment manufacturer’s facilities in Illinois. More than a year later, is she sour toward federal law enforcement? Far from it.
Speaking at a recent U.S. Chamber of Commerce Event, Long, now Caterpillar’s chief legal officer and general counsel, stressed the need for companies to strike up “collaborative relationships” with government regulators. In the United States, specifically with the Justice Department, Long said she was pleased to see “many signs of collaborative relationships between companies and government regulators.”
“In my experience, businesses are intensely focused on compliance—both because it’s the right thing to do and because their reputations depend on it. As a result, I work hard to ensure all governments see Caterpillar as a willing partner in compliance and everything, and I believe my peers are doing the same,” she said.
Long continued: “Like Caterpillar, I’m confident that every company wants to support actions to address illegal activities and encourage a level playing field for us to engage in business fairly. And to achieve this, all companies want effective compliance programs that meet the expectations of governments, and for that we need clarity and open communication with the governments where we do business.’
Long said she was “pleased to see many signs of collaborative relationships between companies and government regulators.”
One recent sign: The memo issued earlier this month by Brian Benczkowski, head of the Justice Department’s criminal division, emphasizing the importance of strong compliance programs. The memo instructed prosecutors to refrain from imposing outside monitors on companies with effective compliance programs.
Government agencies are “making encouraging remarks about the importance of corporate compliance and ethics programs—internal steps that every corporation relies on to avoid violations,” Long said. “This is great cooperation that we’re seeing from the Justice Department,” she added.
Another sign: Last year’s revision to the Justice Department’s policy for enforcing the Foreign Corrupt Practices Act, which called for rewarding companies for reporting their own misconduct, cooperating with the investigation and taking steps to improve their compliance programs.
“When I read that after 20 years working as a lawyer, I thought, ‘This is wonderful news, this is a great step forward that the Justice Department understands businesses are working very hard to do the right thing and they’re giving us credit for that.’ So we welcome the broadening of this approach to other government enforcement priorities as well,” she said.
Who Got the Work
>> Orrick, Herrington & Sutcliffe partner Antony Kim, co-chair of the firm’s cyber, privacy and data innovation practice, helped SoFi resolve the FTC’s allegations that the company inflated the savings borrowers could expect from refinancing their student loans. As part of the FTC’s 5-0 vote approving the resolution, Commissioner Rohit Chopra called for increased collaboration with the Consumer Financial Protection Bureau and state attorneys general to achieve something missing from Monday’s settlement: a fine. “In future matters where we are unable to obtain monetary remedies, we should carefully consider whether partnering with other law enforcement agencies can lead to better results for consumers and deter bad actors from violating the law,” said Chopra, a former student loan ombudsman at the CFPB. Read my report here on the FTC’s action.
>> A team from Baker McKenzie, led by partner Jennifer Ancona Semko, is representing the Conference of State Bank Supervisors in its challenge to the Office of the Comptroller of the Currency’s move to create a special-purpose national bank charter for fintech companies. The conference, a nationwide organization of state banking regulators, argues that the OCC has “gone far beyond the limited authority granted to it by Congress” in creating the charter. Read the complaint here. Caroline Spiezio has more here at Corporate Counsel.
>> “The New York law that legalized online fantasy sports games—allowing FanDuel Inc. and DraftKings Inc. to do business in the state—runs afoul of the state Constitution, a judge ruled.” Bloomberg has the full story here. David Boies of Boies Schiller Flexner represents DraftKings.
>> When the compliance officer is, well, non-compliant … A former UBS Group compliance officer, Fabiana Abdel-Malek , is facing insider-trading charges in the U.K. for allegedly searching the bank’s internal database for sensitive takeover deals and passing the information to a friend using a burner phone, Bloomberg reports. “Ms. Abdel-Malek effectively abused the trust that UBS placed in her when she disclosed the inside information to Mr. Choucair,” said John McGuinness, a prosecutor for the Financial Conduct Authority.
>> “Five months after the U.S. Treasury Department’s Financial Crimes Enforcement Network implemented new due diligence rules to crack down on money laundering, compliance teams have started adjusting to the rules,” my colleague Caroline Spiezio reports at Law.com.
>> A “clear understanding” is not enough. It takes a “deep appreciation” of a company’s definition for ethical behavior to reduce instances of misconduct—and weather scrutiny when bad apples subject the company to regulatory attention. “The disruption such events bring is lessened in companies with a strong ethical culture because the culture acts as a unitive force that conveys the company’s true essence, regardless of the actions of one or two outliers. It’s something all stakeholders, inside the organization and out, can see,” Valerie Charles, chief strategy officer for GAN Integrity, writes in Corporate Counsel.
>> And then there were three. After receiving letters from the Office of the Comptroller of the Currency, two Wells Fargo executives took leave from the bank—meaning just three of the 10 members of Wells Fargo’s operating committee in February 2016 remain there today. The departures come as Wells Fargo continues to grapple with the fallout from its $100 million settlement in September 2016 resolving allegations tied to the sales practices scandal. Bloomberg has the story here, and the New York Times has more.
>> For the last two years, the Privacy Shield framework has enabled enormous data flows from Europe to U.S. companies that otherwise would not have been possible under E.U. privacy laws. With that deal up for review, Andrew Smith, the FTC’s consumer protection chief, argued that U.S. regulators have been upholding their side of the bargain by ensuring companies involved in the agreement live up to data privacy requirements, the NLJ reports. In Brussels, FTC Chairman Joseph Simons said the agency would “continue to take action against companies that fail to honor a substantive commitment to the Privacy Shield principles, as well as those that make false claims of participation in the framework.”
Comings and Goings
>> Audrey Harris, formerly chief compliance officer for global mining and oil company BHP in Melbourne, Australia, has rejoined Mayer Brown in Washington. Harris will be a co-leader of the global anti-corruption and Foreign Corrupt Practices Act group. My colleague Sue Reisinger has more here at Corporate Counsel.
>> Campbell Soup’s top in-house lobbyist is out after tweeting that George Soros’ foundation was assisting the caravan of refugees making its way through Mexico to the United States. Kelly Johnston, now-formerly vice president of the soup maker’s government affairs, had arranged for “troop carriers” and “rail cars” to support the caravan. Campbell said the company and Johnston discussed his eventual departure in the summer, and that the tweet hastened his exit, CNN reports.
>> Joseph Benkert, a former assistant secretary of defense for global security affairs, has joined Morrison & Foerster as a senior advisor in the firm’s growing national security group. He arrives from former Defense Secretary William Cohen’s consulting firm, where he advised clients—including Morrison & Foerster—on transactions subject to review by the Committee on Foreign Investment in the United States.
Thanks for reading Compliance Hot Spots. Your feedback is appreciated—what’s on your plate, observations, trends, new clients and new colleagues. I’m at email@example.com and 202-828-0315, or follow me on Twitter @cryanbarber.