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.  

Health care ethics and compliance officers

From: RDShatt@aol.com
To: rdshatt@aol.com
BCC:
Sent: 12/18/2013 8:24:09 A.M. Central Standard Time
Subj: J&J $2.2B fine; ethics and compliance 20 year mission program

To: Ethics and compliance officers in health care industry

This email is being sent to the health care industry ethics and compliance officers who are listed in this online document.

I think the recent $2.2 billion fine that the Justice Department imposed on Johnson & Johnson is an example that is supportive of my contention that there is a serious shortcoming in how the mainstream corporate ethics and compliance community has been pursuing and implementing its mission program for the past twenty years.

If you are interested in what I have to say, please read this letter I have sent to Ms. Kris Curry, Vice President, Health Care Compliance, of the Johnson & Johnson Pharmaceuticals Group, and follow the links to other entries in my blog.

If you would like to discuss this subject with me, please write me back.

Thank you.

Sincerely,
Robert Shattuck
Birmingham, AL

Email to J&J Chief Compliance Officer

From: RDShatt@aol.com
To: kcurry@its.jnj.com
CC: pat@ethics.org, KDarcy@theecoa.org, roy.snell@corporatecompliance.org
Sent: 12/13/2013 8:11:59 P.M. Central Standard Time
Subj: J&J $2.2B fine; Health Care Compliance and Ethics

Ms. Kris Curry
Vice President, Health Care Compliance
Pharmaceuticals Group
Johnson & Johnson

Dear Ms. Curry,

I wish to use the recent $2.2 billion fine that the Justice Department imposed on Johnson & Johnson (see Wall Street Journal article here) as a case example that is supportive of my contention that there is a serious shortcoming in how the mainstream corporate ethics and compliance community has been pursuing and implementing its mission program for the past twenty years.

The foregoing contention is set out in numerous entries in my blog How To Combat Plaintiffs' Lawyers. Recent entries I would particularly call to your attention are Are Ethics & Compliance Sidelined? and this email I sent to the Ethics Resource Center a month ago. Additional relevant entries in my blog can be easily found by clicking on links to other entries you encounter and otherwise through my blog's organization.

I have started my discussion of the Johnson & Johnson case here. I am very interested in conversing with you about the case if you would care to indulge me. If not, I will understand.

Thank you for your attention to this email.

Sincerely,

Robert Shattuck
Birmingham, AL

Johnson & Johnson case study

The below is the Health Care Compliance and Ethics section from the Johnson & Johnson 2012 Citizenship & Sustainability Report.

Alleged wrongdoing of Johnson & Johnson has resulted in a $2.2 billion fine, as reported in the November 4, 2013 Wall Street Journal article posted here.

This is a candidate for a case study by the ethics and compliance community.

I have written this email to the J&J Chief Compliance Officer.





Health Care Compliance and Ethics

The ethical principles embodied in Our Credo are the lenses
through which our employees make thousands of business
decisions each day. To help ensure that we conduct business
according to these principles, we have an extensive list of
policies and procedures that define what we expect of our
people and our business partners throughout the world. Our
well-established policies and procedures cover all major
categories of corporate conduct and are consistent with the
legal requirements of all locations and constituents where
the Company conducts business. Policies and procedures are
supported by training and communication plans. Compliance
is achieved through controls, audits, reviews and certifications
ranging from company self-assessments to independent audits.
Policies related to codes of conduct are established at the
Corporate Headquarters and are communicated and executed
at all of the Company’s global business units. Policies and
procedures most often have established preventative controls
(policies, reviews and approval requirements) and detective
controls (after-the-fact reviews) with the requirement to escalate
to the Corporate Headquarters (Escalation Policy) violations that
may require investigation, potential disclosure and disciplinary
action.
The Company has an extensive Credo Hotline system where
access (by phone or website) is communicated to employees
annually and readily available to all employees, vendors,
distributors and customers. The Credo Hotline is anonymous
and executed through an independent third-party provider. A
well-documented process exists to ensure that all Credo Hotline
calls are reviewed, investigated (when needed) and responded
to according to protocol.
Codes of Conduct: Our primary policies and codes of conduct
include Our Credo, our Policy on Business Conduct and our
Health Care Business Integrity Guide. They are supported by
our Credo Hotline and in-person resources, and failures are
addressed with disciplinary actions.
Our Credo: This document defines the ethical values required
of all employees and business partners of the Company. The
annual and biannual anonymous Credo Survey, open to all
employees, gauges employee attitudes toward the Company’s
and their individual obligations to the Credo. Survey results are
reviewed at all levels (from individual operating unit departments
to the Executive Committee) and action teams are often formed
to address opportunities to improve Company culture.
Policy on Business Conduct: The principles of Our Credo
and requirements of the law are embedded in the Policy on
Business Conduct. The policy is communicated across the
enterprise and training on compliance is made available to
all employees. Compliance with communication, training and
execution of specific aspects of the policy are assessed by
Internal Audit. Each business unit and approximately 400 senior
executives are required to certify compliance with the Policy
on Business Conduct annually. Exceptions reported during the
certification process are independently reviewed, investigated
and documented by the Law and Audit departments; the results
of the certification are reviewed with the Regulatory, Compliance
and Government Affairs (RCGA) Committee of the Board of
Directors.
Health Care Business Integrity Guide: Legal requirements
of Health Care Compliance and the Foreign Corrupt Practices
Act are embodied in the Health Care Business Integrity Guide
(HCBIG). The HCBIG is available to all employees on the
Company’s website; training is required and documented for
all employees in health care–related positions. Adherence
is verified through ongoing independent audits and operations
testing conducted by Internal Audit and Health Care Compliance
& Privacy. Information on reviews are part of regular updates
to the RCGA Committee of the Board of Directors. Where
process reviews identify questionable activities, these issues are
escalated to the Triage Committee and for-cause investigations
commence.
Johnson & Johnson has a system for annual certification by
senior management on compliance with its anticorruption
policies and procedures. The results of this certification process
are also shared with the U.S. Department of Justice as part
of Company’s commitments under its Deferred Prosecution
Agreement.
Credo Hotline: Beyond the controls built into various policies
that define the Company’s code of conduct, all employees,
vendors, distributors and customers have the opportunity to
anonymously report potential violations of policy or law through
the Company Credo Hotline, available by telephone or website.
Additionally, anyone can report allegations through other methods
(phone calls, emails, etc.) within their local business unit or to
the Audit, Law and Security or Human Resource organizations.
All Credo Hotline reports are routed by the external vendor to
Corporate Internal Audit, which triages the reports to corporate,
business unit or operating company personnel on the basis of an
established algorithm for follow-up investigation and action. In
addition, a Triage Committee comprised of the Chief Compliance
Officer, Internal Audit, the Law Department, Worldwide Security
and Human Resources reviews the serious allegations to
determine the best means to investigate.

In-Person Resources: Each substantial operating company
has its own health care compliance officer, part of whose job is
to help ensure compliance with, and provide guidance on, the
Company’s policies. In addition, the Company’s Law Department
also provides direct guidance and training on the Company’s
policies.
Disciplinary Actions: Failure to comply with the Company’s
policies can and does result in disciplinary action, including, but
not limited to, warning letters, impact on annual performance
and/or compensation, and termination of employment.
Compliance with the Company’s policies is also embedded
within leadership imperatives for all senior leaders.
Anticorruption Training
Bribery of any form, including contributions and donations,
are part of the key elements of the Health Care Business
Integrity Guide.
Johnson & Johnson policies require anticorruption training for
employees who may present a compliance risk to the Company
and places a significant emphasis on the training requirement
to ensure compliance. In 2012, two courses were combined
into one and given to meet the requirement: “Health Care
Business Integrity for J&J Employees” and “Understanding
the U.S. Foreign Corrupt Practices Act (FCPA).” This training
emphasizes U.S. and international anticorruption and anti-bribery
laws and describes how to identify health care professionals
(HCPs), governmental organizations (GOs) and HCPs who are
deemed GOs. The training covers all aspects of the Health Care
Business Integrity Guide, including charitable contributions,
donations, third-party intermediary (e.g. distributors) and
cross-border interactions, all of which are deemed as high-risk
activities.
In 2012, Johnson & Johnson operating companies met the
training goal, as tracked by an online training application,
with training completed for more than 79,000 employees.
In addition to our own employees, we also hold many of
our critical third-party intermediaries, such as distributors,
accountable to the Company’s policies. Due diligence
and background checks are regularly conducted on sales
intermediaries to help ensure compliance with our policies. In
addition, the Company requires that its sales intermediaries
be trained in the requirements of the HCBIG, and that
contracts include specific contractual commitments to abide
by all applicable anticorruption laws, comply with our HCBIG
policies when interacting with customers on our behalf and
allow for auditing of their activities. Training is also provided
to third-party intermediaries to help ensure understanding of
the Company’s policies. Regulatory compliance of suppliers
and vendors is monitored and audited by our Regulatory
Compliance and Procurement organizations. Internal Audit
performs annual contract reviews of a number of key vendors
to ensure compliance with agreed upon contract provisions and
requirements. Any allegations of impropriety raised regarding

business dealings with third parties are documented and
investigated by Internal Audit, the Law Department or other
appropriate organizations within the Company.
Reporting Breaches: Information is reported up internally
within the organization to senior management and, as
appropriate, also shared with the Executive Committee, the
Board of Directors and/or the external auditors. Many breaches
are subject to confidentiality, legal, privacy or other similar
restrictions and, therefore, are not publicly disclosed. However,
this information is reported externally in our public filings if it
meets the criteria for requiring public disclosure.

JPMorgan Chase settlement

From: RDShatt@aol.com
To: JPMCinvestorrelations@jpmchase.com, brian.j.marchiony@jpmorgan.com
CC: inboardroom@nacdonline.org, KDarcy@theecoa.org, pat@ethics.org, roy.snell@corporatecompliance.org
Sent: 11/30/2013 8:29:46 A.M. Central Standard Time
Subj: For Cindy Armine: re Nat'l Assoc. of Corp. Directors, Leading The Way initiative
(via email per the above addresses and via US mail)
Ms. Cindy Armine
Chief Compliance Officer
JPMorgan Chase & Co
270 Park Avenue
New York, NY 10017
Dear Ms. Armine,
I doubt you will be able to respond to this letter, but merely making this communication will advance my purpose.
This letter is prompted by the November 24th USA Today article entitled: JPMorgan settlement could pose legal risk. The legal risk in question is that possibly flowing from "admissions" made by JPMorgan in the settlement with the Department of Justice.
I have been pursuing the subject of "settlement admissions" with the ethics and compliance community, and more recently I have contacted the National Association of Corporate Directors relative to its Leading The Way national initiative to restore public and investor confidence. For more information about what I have been doing, please read this blog entry of mine and links to other blog entries you find in and through the first blog entry.
Getting corporations to admit wrongdoing, or their being able to avoid admitting wrongdoing, has the attention of regulators, prosecutors, management, judges and the public. There is a related, and perhaps more important, interest concerning holding individual officers and employees personally accountable for corporate wrongdoing.
You have a high profile in the ethics and compliance community, and JPMorgan's legal travails (and settlements) are a big 2013 news story.
I hope you are in a position to share your views with others in the ethics and compliance community, and further you think the community can and should have something to offer to the National Association of Corporate Directors, relative to its Leading The Way initiative to restore public and investor conficence.
I hope this letter encourages you in that vein.
Thank you.
Sincerely,
Robert Shattuck
Birmingham, AL.

Are Ethics & Compliance sidelined?

Caveat

My awareness is confined to big, publicized cases of alleged corporate wrongdoing, plus other legal cases I learn about.  I am not privy to the nuts and bolts of ethics and compliance programs carried out in corporations, or their observed effects on employee and corporate conduct, where such are not reported or reflected in the publicized news and other legal cases.

My contention that Ethics & Compliance are sidelined is limited to what I observe where I have information, and circumspection is needed about drawing any conclusions about the effect of corporate ethics and compliance programs in corporate and employee conduct in areas outside my realm of observation.

What is the sidelining of Ethics & Compliance

I contend that Ethics and Compliance are sidelined relative to big, publicized cases of alleged corporate wrongdoing and other legal cases I know about.

Ethics & Compliance are sidelined in these places, because there is avoidance of  determinations of whether there is in fact corporate wrongdoing and of what the particular actions of corporate officers and employees are that are wrongful. The main role of Ethics & Compliance is to promote ethical and compliant conduct by corporations and their officers and employees.  If no bother is taken to establish what is in fact wrongful and what is not wrongful, Ethics & Compliance are deprived their mainstay that they need to be able to say what is right and what is wrong under their ethics and compliance programs.  Unable to say what is right and wrong under their ethics and compliance programs, Ethics & Compliance are further impaired that they cannot bring to bear such tools as they may have under their programs to promote right conduct and inhibit wrong conduct.

What are the contributing causes to the foreging

There are several contibuting causes to why there is avoidance of  determinations of whether there is in fact corporate wrongdoing and of what the particular actions of corporate officers and employees are that are wrongful.

First, there is great complexity in corporate conduct and there are large numbers of officers, employees and other actors who play a role in particular corporate conduct.  Black and white can frequently be hard to see, and much is grey.

Given the complexity, it can be very time comsuming and expensive to ferret out such information and facts to allow for determinations  about what is wrongful or not wrongful in corporate and employee conduct.

Some of the important actors have personal interests that are better served if less bother is given to making determinations of whether wrongdoing has in fact taken place and of what particular actions of officers and employees are that consitute wrongdoing.

Plaintiffs' lawyers are masters at forcing defendants into making payments without determinations of wrongdoing, and it is in the interest of plaintiffs' lawyers to keep that system going and to avoid a system in which there are actually made determinations of corporate wrongdoing and the particular actions of officers and employees that are wrongful.

Management of corporations is willing to go along with the plaintiffs' lawyers because the payments in question are not coming out of their own pockets but out of the pockets of stockholders.  Also, if determinations of actual wrongdoing were pressed for, that might lead to more attention being paid to making determinations of what particular actions of officers and employees comprised the wrongdoing, and this, in turn, might lead to greater individual accountability and liability for corporate wrongdoing.  Management has a personal interest in avoiding the latter.

Government prosecutors, regulators and attorneys general have political agendas and power grabs that can frequently be better served by avoiding having to make determinations of actual wrongdoing .

Diversion of corporate resources

A good case can be made that there is a significant waste of corporate resources associated with the foregoing, which Ethics & Compliance could contend would be better utilized by Ethics & Compliance in trying to carry out their missions.

Undermining of standing of Ethics & Compliance

If Ethics & Compliance are sidelined as described above relative to big, publicized cases of alleged corporate wrongdoing and relative other legal cases, the standing and authority of Ethics & Compliance may be undermined in the eyes of employees in the regular course of Ethics & Compliance implementing corporate programs.

Ethics & Compliance have not fought back

If Ethics & Compliance have been sidelined as described above, Ethics & Compliance have done little to try to assert themselves in the matter.

I have, for more than five years, been urging Ethics & Compliance to consider the substantial failure in there being determinations of what is and is not corporate wrongdoing and what particular conduct by officers and employees is wrongful, whether and how that failure affects Ethics & Compliance in carrying out their mission, and, if it is concluded that there is an adverse effect, whether Ethics & Compliance should endeavor to advance a position to change the situation.  For more than five years, Ethics & Compliance has evidenced no interest in this.

It is acknowledged that Ethics & Compliance is under corporate management, and that may be an explanation of why Ethics & Compliance has expressed no interest, because management does not want Ethics & Compliance to take this matter up.

What do ethics organizations think?

From: RDShatt@aol.com
To: KDarcy@theecoa.org, pat@ethics.org, roy.snell@corporatecompliance.org
Sent: 11/2/2013 11:21:22 A.M. Central Daylight Time
Subj: Admitting corporate wrongdoing
Dear Mr. Darcy, Dr. Harned, and Mr. Snell,
The question of whether corporations should be required to admit wrongdoing, or not, had a lot of publicity over the summer related to the SEC possibly changing its practice of "no admit" settlements and related to the views of the new SEC commissioner Mary Jo White. Russell Ryan published a second op/ed piece in The Wall Street Journal in September (which I have copied and pasted in my blog here), and Bloomberg Business Week just two weeks ago had this article, entitled "Mary Jo White Is the Woman Who Makes Wall Street Admit Guilt"
I have the following questions for you as the respective directors of the Ethics & Compliance Officer Association, the Ethics Resource Center, and the Society of Corporate Compliance and Ethics (which questions should not surprise you):
1. Do you consider the matter of corporations admitting, or avoiding admission of, wrongdoing as having any bearing on making corporations more ethical and more compliant with the law (which your respective organizations have missions to promote)?
2. If your answer to question 1 is yes, does your organization have any ongoing activity concerning the matter, such as investigating, researching, evaluating and formulating positions on the matter, and/or publicizing the same for the benefit of your members? If so, has anything in writing been produced that you can provide to me, and/or can you give me contact information for persons in or connected with your organizations who are individually active in such ongoing activity of your organization (for purposes of my communicating with such persons)?
Thank you.
Sincerely,
Rob Shattuck

From: RDShatt@aol.com
To: roy.snell@corporatecompliance.org, paul.mcnulty@bakermckenzie.com, patrick.gnazzo@gmail.com, mdoyle@aegis-compliance.com, corporate.ethics@lmco.com, jemurphy@voicenet.com
CC: rryan@kslaw.com
Sent: 6/3/2013 2:30:58 A.M. Central Standard Time
Subj: 5/21/13 WSJ op/ed piece "Why the SEC Needs 'No-Admit' Settlements"
Via email to above addressees  
Via U.S. Mail to below persons 
Mr. Denis McInerney
Chief, Fraud Section, Criminal Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001 
Mr. Stephen L. Cohen
Associate Director, Division of Enforcement
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549 
Re: SCCE Government Compliance Conference June 10, 2013 
Dear Government Compliance Conference speakers,
In follow up to my prior emails to you, it seems appropriate to mention Russell G. Ryan's op/ed piece "Why the SEC Needs 'No-Admit' Settlements," which appeared in the May 21/22 Wall Street Journal (and which I have copied and pasted in my blog here).
The ongoing issue of whether or not society's formal legal machinery will or will not yield unambiguous determinations of what constitutes or does not constitute wrongdoing by corporations should, it seems to me, be troublesome for those in the business ethics and compliance domain. If the formal legal machinery does not make those determinations, what basis does there exist for agreement about what actions by officers and employees of the corporation are wrongful and are not to be engaged in?
Further, if the formal legal machinery does not yield determinations that something is wrongful, how does that affect, for example, the imposition by corporations of "discipline" on individual officers and employees under Sec. 8B2.1(b)(6) of the Federal Sentencing Guidelines for Organizations?
I do not expect to attend the June 10 conference, and I renew my solicitation that, if there is anything you will say in your presentations at the conference that address these matters I have been emailing you about (the subject of entity level liability versus individual officer and employee liability for purposes of deterring corporate wrongdoing, and whether the formal legal machinery makes unambiguous determinations about what constitutes or does not constitute corporate wrongdoing), I would very much like to publish the same in my blog. If you are willing, please send me a transcript of what I might publish. 
Thank you.
Sincerely,
Rob Shattuck
Birmingham, AL

 From: RDShatt@aol.com
To: roy.snell@corporatecompliance.org, paul.mcnulty@bakermckenzie.com, patrick.gnazzo@gmail.com, mdoyle@aegis-compliance.com, corporate.ethics@lmco.com
Sent: 5/2/2013 7:21:59 A.M. Central Standard Time
Subj: SCCE Government Compliance Conference June 10, 2013
Via email to above addressees
Via U.S. Mail to below persons
Mr. Denis McInerney
Chief, Fraud Section, Criminal Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001 
Mr. Stephen L. Cohen 
Associate Director, Division of Enforcement 
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: SCCE Government Compliance Conference June 10, 2013
Dear Government Compliance Conference speakers,
In February I emailed (or mailed) you concerning your upcoming conference, which communications are set out in my blog at http://robertshattuck.blogspot.com/2013/02/scce-government-compliance-conference.html. I very much appreciate the reply that Joe Murphy gave to me, but I did not hear from anyone else. I do not expect to attend the conference. If there is anything you will say in your presentations at the conference that address the subject of entity level liability versus individual officer and employee liability for purposes of deterringr corporate wrongdoing, I would very much like to publish the same in my blog. If you are willing, please send me a transcript of what I might publish.
Thank you.
Sincerely,
Rob Shattuck
Birmingham, AL


From: RDShatt@aol.com
To: pat@ethics.org
Sent: 5/18/2013 5:44:21 A.M. Central Standard Time
Subj: Re: Citigroup- Former Judge Phillips' declaration- deterrence
Dear Dr. Harned,
Thank you very, very much for replying to me.
As I think you know, I have been trying to agitate about "discipline" under FSGO Sec. 8B2.1(b)(6), including, recently, in emails to the speakers at the upcoming SCCE Government Compliance Conference (per this blog entry).  
It would seem to me that investigation and research by the ERC about the actual use of such discipline by corporations, and its effectiveness (or problems), in "advanc[ing] high ethical standards and practices" in corporations, would be well within the purview of the ERC's mission.
If the ERC should initiate any project in that vein (or any other project which my blog manifests that I would have an interest in), I would be very pleased to make a contribution to the same however I can.
Sincerely,
Rob Shattuck

 In a message dated 4/1/2013 3:01:52 P.M. Central Daylight Time, pat@ethics.org writes:

Dear Rob, 

Thank you for your efforts to keep the Ethics Resource Center apprised of your communications regarding various corporate compliance matters.   

As you may recall from previous communications with our staff, ERC is a nonprofit research organization.  Our mission is to conduct independent research to advance high ethical standards and practices in public and private institutions.  While we do occasionally develop reports to share the findings of our research with policymakers and federal enforcement officials, it is not the mission of our center to become involved in legal matters regarding any specific organization.  In this instance, it is beyond the mission and expertise for the ERC to comment on the Citigroup case.   

Again, thank you for your email.   

Kind regards, 

Pat 

Patricia J. Harned, Ph.D., President

Ethics Resource Center

From: RDShatt@aol.com [mailto:RDShatt@aol.com]
Sent: Sunday, March 31, 2013 10:00 AM
To: Pat Harned
Subject: Citigroup- Former Judge Phillips' declaration- deterrence

To ethics and compliance community:

In the pending Citigroup Securities Litigation, former United States District Court Judge Layn R. Phillips submitted to the Court this Declaration Regarding Approval Of Settlement.  I sent an email to Mr. Phillips inquiring of him whether the parties made argument to him about whether the lawsuit had a deterrence value. Mr. Phillips replied that I should serve my email on the parties to give them an opportunity to comment, and then Mr. Phillips would respond. For further information about this, go here.

I hope those in the ethics and compliance community whom I have been importuning will take interest in what the parties in the Citigroup case have to say about deterrence and what Mr Phillips says in response.

Thanks.

Sincerely,

Rob Shattuck

 

Is FSGO discipline a nullity?

From: RDShatt@aol.com
To: hpgoldfield@hoganlovells.com
Sent: 2/26/2013 12:41:29 P.M. Central Standard Time
Subj: Is discipline under FSGO Sec. 8B2.1(b)(6) a nullity?
Dear Mr. Goldfield,
I am contacting you in your capacity as a Board member of the Ethics Resource Center.
I am trying to establish whether or not there is any substance to "disciplinary measures" under FSGO Sec. 8B2.1(b)(6).
Thus far. I have not been able to elicit any contention by any ethics/compliance organization or professional that there is any meaningful implementation of practices and procedures for, and actual use of, "disciplinary measures" under Sec. 8B2.1(b)(6); and, based on inquiries I have made and the non-responses thereto, I have tentatively concluded that discipline under Sec. 8B2.1(b)(6) is, practically speaking, a nullity.
For an indication of the inquiries I have made, see these Comments for FSGO panel, these Emails to FSGO panel members, and the emails here related to the upcoming SCCE Government Compliance Conference.
I am sorry I cannot get much of a response from anyone on this, and I am possibly relegated to inferring, if no interested E&C organization or professional is willing to speak on this, that discipline under Sec. 8B2.1(b)(6) is, for all intents and purposes, a nullity.
I trust you can appreciate my effort to get information.
Thank you.
Sincerely,
Rob Shattuck

From: RDShatt@aol.com
To: Henry.Hart@shrm.org
Sent: 2/26/2013 12:44:46 P.M. Central Standard Time
Subj: Is discipline under FSGO Sec. 8B2.1(b)(6) a nullity?
Dear Mr. Hart,
I am contacting you in your capacity as a Board member of the Ethics Resource Center.
I am trying to establish whether or not there is any substance to "disciplinary measures" under FSGO Sec. 8B2.1(b)(6).
Thus far. I have not been able to elicit any contention by any ethics/compliance organization or professional that there is any meaningful implementation of practices and procedures for, and actual use of, "disciplinary measures" under Sec. 8B2.1(b)(6); and, based on inquiries I have made and the non-responses thereto, I have tentatively concluded that discipline under Sec. 8B2.1(b)(6) is, practically speaking, a nullity.
For an indication of the inquiries I have made, see these Comments for FSGO panel, these Emails to FSGO panel members, and the emails here related to the upcoming SCCE Government Compliance Conference.
I am sorry I cannot get much of a response from anyone on this, and I am possibly relegated to inferring, if no interested E&C organization or professional is willing to speak on this, that discipline under Sec. 8B2.1(b)(6) is, for all intents and purposes, a nullity.
I trust you can appreciate my effort to get information.
Thank you.
Sincerely,
Rob Shattuck

From: RDShatt@aol.com
To: glhinchman@f-a-f.org
Sent: 2/27/2013 8:12:51 A.M. Central Standard Time
Subj: Is discipline under FSGO Sec. 8B2.1(b)(6) a nullity?
Dear Ms. Hinchman,
I am contacting you in your capacity as a Board member of the Ethics Resource Center.
I am trying to establish whether or not there is any substance to "disciplinary measures" under FSGO Sec. 8B2.1(b)(6).
Thus far. I have not been able to elicit any contention by any ethics/compliance organization or professional that there is any meaningful implementation of practices and procedures for, and actual use of, "disciplinary measures" under Sec. 8B2.1(b)(6); and, based on inquiries I have made and the non-responses thereto, I have tentatively concluded that discipline under Sec. 8B2.1(b)(6) is, practically speaking, a nullity.
For an indication of the inquiries I have made, see these Comments for FSGO panel, these Emails to FSGO panel members, and the emails here related to the upcoming SCCE Government Compliance Conference.
I am sorry I cannot get much of a response from anyone on this, and I am possibly relegated to inferring, if no interested E&C organization or professional is willing to speak on this, that discipline under Sec. 8B2.1(b)(6) is, for all intents and purposes, a nullity.
I trust you can appreciate my effort to get information.
Thank you.
Sincerely,
Rob Shattuck

To government officials re "Too Big To Regulate"

From: RDShatt@aol.com
To: Criminal.Division@usdoj.gov, publicinfo@sec.gov, KGrilli@ussc.gov
CC: pat@ethics.org
Sent: 6/15/2011 7:00:07 A.M. Central Daylight Time
Subj: For Greg Andres (Justice Dept.), Lorin Reisner (SEC), and Kathleen Grilli

Re: ERC white paper "Too Big To Regulate"

Dear Mr. Andres, Mr. Reisner, and Ms. Grilli,

I am writing to comment on the Ethics Resource Center white paper Too Big To Regulate: Preventing Misconduct in the Private Sector that resulted from the presentations of the three of you to the ERC Fellows in July of 2010.

I cannot tell from the white paper how extensive was the dialogue between you and the ERC Fellows on the question of entity level liability versus officer and employee individual liability for achieving deterrence. The white paper brushes on this matter in a few places. I think the dialogue between business and government that the white paper advocates would benefit from a full exchange of views on entity versus individual liability.

First, what does each side believe about the effectiveness of entity liability versus officer and employee individual liability for achieving deterrence? If the business ethics community and the government have significantly different, that could impair the dialogue that the white paper advocates. If the two sides lay out their views and discover that they are not in agreement, the question might be further thrashed out, and greater agreement might be reached on the subject that could help in the dialogue.

On this matter, three Wall Street Journal articles in the past six weeks have been suggestive to me that the Obama administration has, or is moving to, the view that entity level liability is not sufficient and there needs of be officer and employee individual liability. See this, this, and this. Is this true? If it is true, what does the business ethics community think?

Whatever the foregoing current developments signify, dialogue on the question between the two sides should include digging into the literature and research that is extant. Perhaps more research is needed.

Let's say the outcome of the dialogue is that there is agreement that more officer and employee individual liability is needed. What then? Is there legal machinery in place for carrying that out? Is it simply too difficult, too time consuming and too expensive, or is it politically impossible, to have adequate legal machinery that will, in a standard way in cases of corporate wrongdoing, undertake determinations about, and impose punishments on, responsible officers and employees?

Management might say such machinery will make a corporation's officers and employees too cautious and impair the development and carrying out of valuable and useful business activities.

Management may oppose machinery for identifying and punishing responsible officers and employees because wrongdoing can be profitable, that profitability can justify greater compensation of officers and employees so long as it goes on undetected, and, if it is uncovered, management would want the protection that only the corporation is punished.

I do not know if there is a formalized dialogue that is going on between government and business as advocated by the ERC's white paper. If there is, and there is someone on the government's side that it would be better to address this email to than the three of you, please let me know.

Thank you.

Rob Shattuck

Ethics field and "corporate governance" field

[Email to Professor Jill Fisch  related to her 2010  law review article 

The Overstated Promise of Corporate Governance]

Subj:  Business ethics community and your "Overstated Promise" aricle

Dear Professor Fisch,

As your first sentence says in The Overstated Promise of Corporate Governance, "Corporate governance is in trouble."

You write from the investor perspective that emphasizes the importance of corporate profitability, business performance, and "efficiency of capital markets," including avoiding the detriments thereto stemming from financial fraud.

The business ethics community is very concerned about financial fraud and also about corporate wrongdoing that adversely affects non-investor parties like consumers, customers, the public at large (e.g., regarding the environment), and others (such as governments) that do business with corporations. Some corporate wrongdoing that harms non-investor parties can benefit investor parties unless the wrongdoing is discovered and the corporation is sufficiently penalized. Examples of this include "cutting corners" in ways that make products unsafe, violating environmental laws, and defrauding the government.

I don't know whether you think narrowly of "corporate governance" as concerned only with "bad" corporate behavior that affects investors and "capital markets" adversely, or whether you think "corporate governance" should be thought also to encompass mitigating "bad" corporate behavior that harms other parties besides investors and "capital markets."

In your article, you discuss several mechanisms for restraining "bad" corporate behavior from the investor perspective (for which purpose "bad" includes poor business performance). These include independent "monitoring" boards of directors; shareholder voting; litigation; “market-based” disciplining provided by the takeover market, initial public offering constraints, and hedge funds; gatekeepers such as auditing firms and rating agencies; whistle-blower incentives; and government regulation.

"Corporate governance," as articulated in your article, covers a lot of territory.

Those in the business ethics and compliance field also cover a lot of territory in their quest for corporations to be ethical and to lessen corporate wrongdoing.

For business ethicists, there is a bifurcation, or duality, of internally oriented approaches and of externally oriented approaches. An internally oriented approach seeks the inculcation of an ethical sense or ethos in individual employees or in an organization that will by itself engender ethical behavior. An externally oriented approach entails looking to the application of externally imposed punitive sanctions to affect corporate behavior.

The quest of business ethicists has been wending. In the criminal law, the federal government initiated in the 1990's the Federal Sentencing Guidelines for Organizations and the Justice Department’s Principles of Federal Prosecution of Business Organizations. These provided incentives for corporations to be proactive in preventing criminal behavior and to assist prosecutors in uncovering and prosecuting the commission of crimes. Professor Boatright, a noted business ethicist, called this devleopment (referred to as the "cooperative model") a "sea change in the legal approach to corporate crime", and an extensive literature has been produced about how effective the cooperative model is for improving corporate behavior, or not.

The resort of the government to whistleblower incentives as a tool to ferret out corporate wrongdoing is a frontal challenge to business ethicists, particularly those who advocate "internally oriented" approaches. Either they must acknowledge that their corporate ethics and compliance programs are not so effective as they wish, and the use of "spies" by the government is reasonable and legitimate; or, alternatively, the business ethicists have a daunting task of persuading the government and others that their programs can indeed do the job and the government does not need "spies."

What is my purpose in laying out the foregoing?

I very much agree that "corporate governance is in trouble" and that the mitigation of corporate wrongdoing is in need of many experts researching, developing, testing and advocating ideas, theories, and mechanisms for improving corporate behavior in the best way possible.

The foregoing discussion in this email is indicative of the work that you and others in the "corporate governance" field are doing and also of the work that the business ethics and compliance community is doing.

My special interest regarding corporate wrongdoing is the issue of entity level liability versus officer and employee individual liability for purposes of achieving deterrence. This issue has been around for many years and has received a lot of consideration by experts of numerous stripes. It is probably fair to say that the issue has not yet been resolved with a needed amount of consensus. Also, if it could be resolved, that would be a significant step forward. To the extent it is not resolved, it, in my view, leaves very incomplete the theories, ideas and mechanisms that are propounded for improving corporate behavior.

Also, for the past several years, I have been especially trying to push the business ethics community on the issue.

Finally, in terms of writing you at this time, I think there is currently going on something significant in the Obama administration relative to entity versus individual liability for purposes of achieving deterrence. At least three Wall Street Journal articles in the past month or so have been suggestive to me that this is the case. See this, this, and this.

I have previously had email correspondence with you on the entity versus individual liability issue. I am writing again to try to meld the work that is going on in the business ethics and compliance field, with your work in "corporate governance" field, and thereby possibly to elevate in your mind the significance of the issue of entity level liability versus officer and employee individual liability.

Thank you very much for reading this email if you have gotten to the end here.

Sincerely,

Rob Shattuck