Saturday, December 21, 2013

More data re ethics and compliance mission program

Business news keeps coming that points out the failure of the mainstream ethics and compliance community to face up to significant questions about the mission program it has been propagating for twenty years.  [Numerous entries in this blog explain and document that failure.  Quick access to these entries may be initiated  by starting with this entry and by following the links.  More in depth access may be achieved by further links in this entry below or navigating through the blog using the labels on the left hand side.]

This entry is prompted by several recent Wall Street Journal articles.  I have posted these articles on the blog, and I will make links to the articles in this entry.

No amount of prodding (as best I can tell) has been able to budge the mainstream ethics and compliance community to do crtitical thinking about enity level liability versus individual officer and employee liability for trying to deter corporate wrongdoing.  The nonresponsiveness of the Ethics & Compliance Officer Association, the Ethics Resource Center, and the Society of Corporate Compliance and Ethics, and of many others in the field, is well dcoumented in this blog.  See, e.g., these entries collected under Label F1.

The recent business news of Ex-Banker Gets Prison Term and JPMorgan's huge corporate fines begs again for ethics and compliance professionals to delve into the subject of entity level liability versus individual officer and employee liability to try to deter corporate wrongdoing, and to wrestle with very difficult questions that are presented.  As indicated, thus far there has been virtually no willingness to do that.

As reported in the article, JPMorgan's top lawyer Stephen Cutler has spoken out publicly criticizing what has gone on in the levying of these fines.  One can well ask whether the thoughts of JPMorgan's ethics and compliance officers were sought by Mr. Cutler in formulating and taking his public stance?  Or are they on the sidelines regarding this important JPMorgan corporate matter?  (See my blog entry Are Ethics & Compliance sidelined?)

The article says that Mr. Cutler was chief of enforcement for the Securities and Exchange Commission from 2001 to 2005.  For at least a couple years, the ethics and compliance community has been importuning federal enforcement officials to pay more attention to corporate ethics and compliance programs.  In February, the Ethics Resource Center had a summit in Washington DC about this, entitled  "Improving Corporate Conduct Through Pro-Compliance Enforcement Practices."  I believe the ERC was too narrowly focused on its own agenda and lacked appreciation that the federal enforcement officials had other more important considerations on their mind.  (See this email I sent to the ERC.)

Relating this back to JPMorgan, I don't see from the article that Mr. Cutler was much occupied with whether JPMorgan's corporate ethics and compliance program was or was not adequately considered by the Justice Department, and I conclude that was very minor, or a nullity, in Mr. Cutler's mind, and he had bigger other issues in his head about the way the Justice Department was trying to deal with corporate wrongdoing.

Note further that the article talks about how Mr. Cutler, when he was with the SEC, went after JPMorgan for helping Enron commit fraud.  Up again pops the question about the efficacy and approrpirateness of entry level liability to deter corporate wrongdong.  See my own writing Enron's smartest guys, crooks, victims and other saps.

The Caterpillar news story about possible dumping of train parts in the ocean as part of defrauding railroad owners and operators begs for informaation about whether there will be "discipline" of culpable officers and employees under Sec. 8B2.1(b)(6)  of the Federal Sentencing Guidelines for Organizations. I have tried to inquire in the ethics and compliance community about whether any surveying has been done about the utilization of discipline under Sec. 8B2.1(b)(6),  iin order to try to evaluate its efficacy, but I could not find any interest in the ethics and compliance community about this.  See, e.g., the April 24, 2012, email to Dr. Harned of the ERC that is reproduced in this blog entry.

An interesting contrast is provided by Microsoft deploying corporate assets to combat real criminals and real wrongdoing, as reported in the "Web Fraud 'Botnets'" article, contrasted with this editorial (concerning Facebook), which illustrates how the plaintifffs' lawyers harrass corporations with abusive lawsuits that are ultimately counterproductive to the deterrence of corporate wrongdoing, including that they waste and divert corporate assets (either to fight real criminals on the outside or to improve corporate ethics and compliance programs internally).  For almost ten years I have been trying to purvey to the ethics and compliance community my article Does the Civil Liabilty System Undermine Business Ethics?, but there has been no meaningful response from that community.  

I posted the editorial about Mississippi Attorney General Hood because, on the one hand, I believe state attorneys general are a better societal tool for deterring corporate wrongdoing than plaintiffs' lawyers, and, on the other hand, state attorneys general may get conflicted by their own personal interests and fail to fill their role properly in helping society deter corporate wrongdoning.  

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