The Only Thing [In-House Counsel and CCOs] Have to Fear, Is Fear Itself

fearThe idea of legal “marketing” has been diluted in the last few years.  As businesses become smarter consumers of legal services, in-house counsel and Chief Compliance Officers are much better at deciphering legal mumbo jumbo.

Perhaps the best example of legal marketing as an oxymoron, was the roll-out of the UK Bribery Act.  Legal marketing was premised on one idea –fear and fear alone.  Client alert after client alert warned companies about the impending doom, the effective date of the UK Bribery Act.

Not to pat myself on the back (assuming my arm is long enough), but I wrote that the UK Bribery Act was a real non-event in the world anti-corruption compliance and that it was unlikely to have any real impact.  To this day, those words still ring true.

After writing the “truth” about the UK Bribery Act, I received a call from the firm’s London partners and was chastised for undermining their entire “marketing” program.  (In stark contrast, many clients wrote me and thanked me for my “honesty.”

In reality, in-house counsel and chief compliance officers understand what the real risks are.  After visiting recently with a company general counsel, I was reminded how important it is for companies to understand the real risks of enforcement actions, especially in the anti-corruption area.

A company which is committed to good faith implementation of an ethics and compliance program will rarely, if ever, suffer a systemic breakdown in compliance such as that experienced by Siemens, Daimler, or other major cases.imagesCA5WQ4T1

The real risk for companies in this category is two-fold: (a) a regional, country-specific breakdown, especially in high-risk countries such as China, Brazil, India and Russia, where economic opportunities are significant; and (2) acquisition of companies in high-risk countries when the company fails to integrate the new company into its existing controls and compliance program.

Even in these situations, criminal prosecutions are unlikely to occur unless there is a blatant disregard of compliance and internal procedures.  Isolated instances of bribery are unlikely to meet this threshold but must be immediately contained and remedied.

The true test of a company committed to compliance is to detect the ongoing misconduct, stop the bribery, and immediately remedy the problem with new, enhanced procedures designed to prevent the recurrence of bribery.

It is true that DOJ has reinvigorated FCPA enforcement.  DOJ prosecutors have done so in an aggressive and calculated way, with professionalism and determination.  Companies have to be realistic about compliance and when they may be subject to criminal and civil enforcement.

Mergers and acquisitions in high-risk countries require careful attention and compliance focus.  Expansion through internal growth into high-risk countries demand similar attention.  Companies need to prioritize their focus in this way and then allocate compliance procedures and monitoring activities in response to this reality.

corporationjailThe government’s enforcement effort continues to be fueled primarily by voluntary disclosures.  That will always be true – the question is whether it is required.  Sometimes companies are better off to detect the misconduct, stop the problem and then remediating the problem without any disclosure to the government.

So long as in-house counsel and CCOs follow their instincts in this area and do not get fuzzy-headed in response to legal “marketing” efforts, companies should be able to draw a good line between problems which require disclosure and problems which do not require disclosure.

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