From Arizona to China, Businesses Must Comply with Anti-Bribery Laws

September 2011

From Arizona to China, Businesses Must Comply with Anti-Bribery Laws

By Richard C. Katz and Marshall P. Horowitz

Reprinted and/or posted with permission of Inside Tucson Business (January 27, 2011).

Many businesses in the Southwest have growth strategies that feature opportunities in

China. Since 2001, China has skyrocketed from being Arizona’s 17th highest export

destination to its third highest—currently behind only Mexico and Canada.

In the past decade, exports from Arizona to China have grown at an astounding annual

average of nearly 37 percent.

Similar narratives apply to the economies of California, Utah, Colorado and Nevada.

One of the inevitable risks of increased business with China is violating the U.S. Foreign

Corrupt Practices Act (FCPA), a post-Watergate law enacted in 1977 to curb overseas

bribery of foreign public officials by U.S. multinational corporations. Over the past few

years, the U.S. Department of Justice has greatly revved up its FCPA prosecutions. In

2005, the Justice Department brought five FCPA cases with $16.4 million in penalties;

by last year there were 34 cases and $435.3 million in penalties.

In addition to imposing monetary penalties, the Justice Department has recently served

notice that it will vigorously pursue prison sentences for executives who intentionally

violate the FCPA.

The FCPA contains both anti-bribery and accounting provisions. The anti-bribery

provisions prohibit any U.S. “person” (entity or individual) from offering or providing

money or anything of value to foreign public officials with the intent to obtain or retain

business.

The accounting provisions require public companies to have accounting practices that

make such payments difficult to disguise.

Given that the FCPA prohibits payments to foreign public officials, one of the major

challenges for U.S. companies doing business in China is the prevalence of state-owned

enterprises in that country. The pervasive presence of the government, both directly and

indirectly, in Chinese business makes business dealings there rife with potential FCPA

risks.

Another particular concern in China is that the FCPA also prohibits payments to a third

party when the U.S. company has reason to believe that such payments may be turned

over to a foreign official.

Since “going it alone” is not often a viable option for Americans doing business in China,

companies cannot turn a blind eye toward the intermediaries they regularly hire to help

conduct business abroad. If such payments raise any suspicion that they could find their

way to Chinese government, or other public officials, they must be carefully scrutinized.

A second area of FCPA compliance concerns the accounting provisions for public

companies. These rules require that companies keep books, records and accounts that

accurately reflect transactions and payments. Public companies must maintain

reasonable internal accounting controls to prevent and detect FCPA violations. This

includes a system of red flag warnings and accountability whenever overseas payments

appear suspect.

The FCPA penalty scheme is complex, including both civil and criminal fines and

imprisonment for individual violators. Suffice it to say the penalties are horrific. Given

that corruption of public officials in China remains a serious concern, it is essential for

companies to devise solid compliance programs which prevent, insofar as possible, FCPA

violations. As companies in Arizona continue to take greater advantage of business

opportunities in China, executives must develop a strategy to avoid violations of the

FCPA.

Past Issues

Snell & Wilmer

International Practice

©2011 All rights reserved. The purpose of this newsletter is to provide our readers with information on current

topics of general interest and nothing herein shall be construed to create, offer or memorialize the existence of

an attorney-client relationship. The articles should not be considered legal advice or opinion, because their

content may not apply to the specific facts of a particular matter. Please contact a Snell & Wilmer attorney with

any questions.

Snell & Wilmer L.L.P. | One Arizona Center | 400 East Van Buren Street | Suite 1900 | Phoenix, Arizona 85004

All rights reserved. The material in this newsletter may not be reproduced, distributed, transmitted, cached or otherwise

used, except with the written permission of Snell & Wilmer L.L.P.PRESENTED BY: Executive Leadership, LLC

================================================================
SPECIALIZING IN: Human Capital Transition and Executive Coaching - (908) 822-9655 WEBSITE: http://www.exec-leadershipLLC.com
If you are seeking an Executive Coach for yourself or your organization, consider contacting CB Bowman at Executive Leadership, LLC 908.509.1744 cb@exec-leadershipllc.com; http://www.exec-leadershipllc.com.
CB Bowman, MBA is the president, CEO of Executive Leadership, LLC. She is also the Chairperson and Founder for the Association of Corporate Executive Coaches (http://www.acec-website.org).
Among mid to senior level professionals Executive leadership LLC is the go to company for individuals and companies seeking human capital repositioning, development and/or growth through coaching, counseling, and strategic advice.
With her Fortune 500 business background, laser like precision, and a take no prisoners approach she swiftly narrows in on the issue, and unlike others, she presents financially sound, creative and action oriented solutions with infinite possibilities

The Company is sending me to their doctor! Do I have to go?!

The Company is sending me to their doctor! Do I have to go?!
September 6th, 2011 by jliace

The short answer in Illinois is yes. Under the Illinois Workers’ Compensation Act, the Employee has the right to treat with a doctor of their choice. However, the Employer can have the injured worker evaluated by a doctor of their choice. This evaluation is not for treatment and is often called an Independent Medical Examination (IME). However, it is important to remember, that even though it is called an IME it is anything but independent. This doctor was chosen by the insurance company to determine whether your injury is causally related to your employment, whether you are still in need of treatment and whether you can go back to work. This portion of the Act is still part of the recently amended Workers’ Compensation Act.
An employee who fails to attend this examination can have their benefits terminated by the insurance company for failing to cooperate. However, there are certain requirements that have to be met by the employer before the employee has to go. First, there has to be adequate notice before the examination. Adequate notice is not a definite term but one that is determined by the circumstances. If you are unable to attend for reasons that are unavoidable you must contact the insurance company, or whoever scheduled the examination, immediately.
Secondly, the Respondent has to provide PRIOR to the examination reasonable travel expenses. In most cases this means mileage costs. However in cases of flight attendants or other out-of-state employees, this may include flight costs, hotel expenses, and reasonable food costs. This all must be provided before the exam is to take place or the employee does not have to attend. The Commission recently confirmed in the case of Wright v. Alpha School Bus that if the Employer refuses or fails to provide pre paid travel expenses then the injured worker can rightfully refuse to attend the examination.
This is part of the Workers’ Compensation system in the state of Illinois and the workers’ rights in regard to these examinations is important to know. An experienced attorney can help you navigate this system.

KATZ, FRIEDMAN, EAGLE, EISENSTEIN, JOHNSON & BARECK, P.C.
Workers’ Compensation | Personal Injury | Illinois Injured Workers | Social Security Disability
Airline Employee Accidents | Medical Malpractice | Auto Accidents
Katz, Friedman, Eagle, Eisenstein, Johnson & Bareck, P.C.
77 W. Washington Street
20th Floor
Chicago, IL 60602-2904
Telephone: 312-263-6330
Fax: 312-372-5555
Toll Free in Illinois: 800-444-1525
National Toll Free: 888-626-5556
Website: www.kfeej.com
====================================================================


PRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Human Capital Transition and Executive Coaching - (908) 822-9655 WEBSITE: http://www.exec-leadershipLLC.com
If you are seeking an Executive Coach for yourself or your organization, consider contacting CB Bowman at Executive Leadership, LLC 908.509.1744 cb@exec-leadershipllc.com; http://www.exec-leadershipllc.com.
CB Bowman, MBA is the president, CEO of Executive Leadership, LLC. She is also the Chairperson and Founder for the Association of Corporate Executive Coaches (http://www.acec-website.org).
Among mid to senior level professionals Executive leadership LLC is the go to company for individuals and companies seeking human capital repositioning, development and/or growth through coaching, counseling, and strategic advice.
With her Fortune 500 business background, laser like precision, and a take no prisoners approach she swiftly narrows in on the issue, and unlike others, she presents financially sound, creative and action oriented solutions with infinite possibilities

5 ways to motivate employees (beyond stocks and salary)

Posted: 06 Sep 2011 06:00 AM PDT (Editor’s note: John Amato is CEO of Marketsharing. He submitted this story to VentureBeat.) In the highly competitive world of attracting and retaining the best and brightest employees, it’s understood that salaries, health care and vacation time top many perk wish lists. As things like raise freezes, bonus cutbacks and fewer stock options have become economically necessary, though, it has become harder to keep people motivated. Last month Challenger, Gray & Christmas reported that almost 20 percent of surveyed companies restored all pre-recession perks and only 40 percent brought back some of those that were cut. Yet even with some companies reporting this “benefit bounceback,” a sea change has occurred and the perks are returning — but in different ways. In both good times and bad, most companies want their employees to see that work is more than a paycheck, and ideally want workers invested in their organization’s corporate culture and future.  In turn, they have to create that environment and culture for their employees. In Fortune’s annual “100 Best Companies to Work For” 2011 rankings, the most popular words workers used when citing their company as a truly great place to work were people, family and time. Pay fell at number 81. While tech powerhouses Google and Facebook have become wildly successful, they have also created strong company cultures that have become equally popular. Not surprisingly, startups have adopted and fostered their model of casual yet hardworking offices where employees want to go every day. This model is becoming the future workplace for businesses of all sizes across the country. With that in mind, here are five surefire (and economical) ways to motivate employees besides salary and stock: Flexibility – There’s no price on time. In addition to offering the standard three paid weeks off, many companies are enhancing this benefit with paid sabbaticals after an established amount of time or the ability to work remotely. Summer hours, flex time and allowing pets at work, none of which are new, are still at the top of potential employees’ workplace benefit wish lists. The cost is little to nothing, but can help a good workplace become great in the eyes of employees. Food, glorious food – The concept of on campus/in office meal programs were conceived to create happy, satiated employees that don’t have to leave the office for an hour to hit up Taco Bell. While installing a state of the art Google cafeteria isn’t an option for most workplaces, providing meals on the company – or even offering free snacks and beverages – shows appreciation, encourages a healthy environment, and makes the workplace that much more enjoyable. Acknowledgement (and random acts of kindness) – Everyone likes to be acknowledged. A recent report by Success Performance Solutions revealed that 55 percent of employees agree or strongly agree that the quality of their company’s recognition efforts impacts their job performance. This can be something more than singling out a top performer with a Starbucks gift card. Bestowing your 20 person office with massages, a group happy hour at the nearby watering hole, or tickets to a Giants game will add an element of surprise and genuine delight to those bestowed this (relatively) inexpensive benefit. In turn, the gesture will encourage camaraderie, boost morale, keep employees feeling motivated and valued, and have them looking forward to the next office surprise. Encourage health – While it’s not realistic for most workplaces to install a gym, employers can still encourage and reward employees who wish to maintain an active and healthy lifestyle to keep their work/life balance firmly in check. Great discounts on gym memberships are one highly valued benefit in the workplace. Additionally, physical team building events and intramural leagues like dodgeball, soccer, softball and even bowling, add an element of physical as well as social activity for an alternative to the usual happy hour on any given night. The environment – Creative and imaginative employees need to work in an environment that reflects their skills and personalities. Studies (and many of your own offices) show that we’re dramatically shifting from offices and cubicle farms, to open, interactive spaces with light, color, positive energy and comfortable areas within the office to relax and take a break. About the author: John Amato is the CEO of MarketSharing, a premium business-to-business deals provider for exceptional business products and services. Follow @MarketSharing on Twitter for more information and the latest deals for businesses Filed under: Entrepreneur Corner This posting includes an audio/video/photo media file: Download Now

=================================================================




PRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Human Capital Transition and Executive Coaching - (908) 822-9655 WEBSITE: http://www.exec-leadershipLLC.com
If you are seeking an Executive Coach for yourself or your organization, consider contacting CB Bowman at Executive Leadership, LLC 908.509.1744 cb@exec-leadershipllc.com; http://www.exec-leadershipllc.com.
CB Bowman, MBA is the president, CEO of Executive Leadership, LLC. She is also the Chairperson and Founder for the Association of Corporate Executive Coaches (http://www.acec-website.org).
Among mid to senior level professionals Executive leadership LLC is the go to company for individuals and companies seeking human capital repositioning, development and/or growth through coaching, counseling, and strategic advice.
With her Fortune 500 business background, laser like precision, and a take no prisoners approach she swiftly narrows in on the issue, and unlike others, she presents financially sound, creative and action oriented solutions with infinite possibilities

Horrible Bosses, REALLY??!! YOU THINK!

 Salary.com Polled Its Readers to Find the Worst Real-Life Bosses

At some point in your career it’s happened to you. You get saddled with “that boss.” The boss who drives you crazy, mistreats you and takes credit for your hard work. A boss who is just horrible!


That’s the premise of the recently released movie “Horrible Bosses,” starringJason Bateman, Jason Sudeikis and Charlie Day. Three friends with three wretched bosses (Kevin Spacey, Colin Farrell and Jennifer Aniston) get so fed up at work they devise a plan to rid themselves of their respective employers - permanently!

“How would you like it if your boss bragged about her Nazi grandfather at work in an official meeting? And, she continued with how wonderful it was to come across her family heirlooms that consisted of her grandfather’s Nazi SS Gestapo uniform.”

“Many years ago I worked for a retail store and my boss was a woman in her 50’s, never married, bitter and overly critical of anything her staff did. My now husband and I moved to the U.S. from Europe in 2000 and were engaged to be married. Our plan was to get married at the courthouse here in Colorado and then go back home to have our wedding. I cannot even describe how shocked I was when I was told by my boss I cannot take a day off to go to the courthouse. I actually had to get married and then go back to work at 1 pm.”

“I once had a boss who tracked everything we did in 15 minute increments; not excluding bathroom breaks. He would often stop by my desk to pick up my personal copy of a design magazine on his way to his 15 minute restroom break. Yes, I said 15 minutes! Fifteen minutes later he would stroll back from the restroom and drop it on my desk as he passed. I could see the restroom door from my chair, so I know he took it with him. EWWW!”

“I was once reprimanded for printing a proof of a 1-square-inch piece of black and white art on a clean 8.5 x11 laser printer page. He said I was ‘wasting paper.’ Also, there were a couple hundred light bulbs in our work area. One of my degree-holding coworkers had the daily task of dating light bulbs with sharpie ink and calculating how long each bulb had burned when they burned out.”

“My former boss was studying to get his doctorate in Theology. I was expected to type all his papers and had to bring them home to type them. He didn't pay me for doing it. It was a very low paying job and I was promised a raise after 90 days. After 6 months, he offered me a nickel an hour raise and I told him I thought the company needed it more than I did.”

“He'd promised all the holidays off but I had to fight to get them because he didn't want to miss any phone calls. My only vehicle broke down and I didn't have a way to work. It was 15 miles from my house and I had vacation time built up. I asked if I could take a vacation day while my car was being repaired and he refused to let me off. I couldn't afford a taxi and couldn't find a ride so I walked. I made it halfway and it began to storm. We had severe storm warnings and the sky really opened up. I finally was offered a ride and accepted. I was a late for work because of having to walk and he docked me for the time I was late!”

“A boss at a previous job had an office across the hall from me and my office mate. We were frequently called into her office to discuss business issues. One day, rather than call our names or use the phone, she whistled for us as if she was calling the dogs.”

“I quit soon after discovering that I was paying my FICA taxes as well as his FICA contributions on the $99.00 per month credit I received in my salary for health insurance. Can we say illegal? He said that I was too nice to do anything about it. When I finally walked out for good, he replaced me five times within the first six months. I heard that there was a Facebook group for all the ex-employees who told that man to shove it. There were 18 members by 2009 and surely still growing.”

“Several years ago, while my wife was pregnant, we made a decision to induce labor. I told my boss I would need Friday off that week to be at the hospital. His response is thing legends are made of.  He was angry that we would schedule labor on a Friday and said "Why wouldn't you make these plans for a Saturday? That way you don't have to miss any work." My manager then spent the next 45 minutes in a rant about how time and time again I put my family above work. He told me he was just not able to keep my pay at a similar rate of that of my peers due to my inability to make a total commitment my job. "Family has to come 2nd. You're here to work.” I zoned out when he started talking about replacing me. That Friday we had a healthy baby boy. After working there for 10 years I quit my job two months later and have never given it a second thought.”

“My husband died and then I was diagnosed with an illness a few months later. When I told my boss about the illness he said “It’s always something with you isn’t it?!”

“My knee locked up and I still showed up at the plant in pain and dragging my leg around tending to problems on the plant floor. The doctor scheduled knee replacement surgery at the end of month, which coincided with their monthly $10M sales push. I notified my boss and arranged for a coworker to cover for me in my absence. Even said I'd be available for phone support while I was hospitalized. My boss, who required assistance to open her laptop, sent me an email saying ‘I'm so disappointed you chose to have your elective surgery at a time when you're needed so badly here.’”

“My boss got drunk at a Christmas party and fired the employee who was playing Santa Claus in front of a room full of kids.”

“My former boss was a computer moron and he did not know how to use a search engine at the time. All day long he was deleting or otherwise losing important documents that I had to forensically retrieve from the temp folder or the deleted files folder---sometimes two and three times a day! He was an email distribution list moron as well. He crafted an email invitation---on company time---to his friends about a big bash that he was hosting with titillating details about the more noteworthy physical attributes of a few of the invited guests, which he subsequently sent to the entire team at the office. Oops.”

“My boss explained his management philosophy this way (and this is verbatim): ‘People are tools. When you wear a tool down or it gets broken, you throw it away and get a new one.’ WOW! That was an eye-opening conversation. Looking at how he treats people, all I can say is that he lives out his philosophy.”

“Before I switched jobs I had a boss who called me in her office and yelled at me for playing poker over the weekend at my friend’s house. She said she had heard that I lost a lot of money and wanted me to know that she was appalled to hear that as a person in the public eye (my job is very visual and media driven). She said she would not like me to play poker on my personal time because it gave the agency a bad name. As if that was not bad enough, she also said that she was going to write that in my personnel file, and she made me cry all the way home. What a tyrant! I did lose $100, but what’s that to her?”

“A co-worker’s father died. The boss asked me if I knew when she was going to return to work. I said that she would probably use the allotted five days of bereavement. He replied that the five days of bereavement were only if you NEEDED it. I couldn’t imagine not needing (only) five days of bereavement when your father died. The interesting thing was his son died in a car accident a couple of years later and I heard he didn’t come back to work for over three weeks.”

“Our boss is an unqualified pathological liar and has terrible body odor that actually lingers long after this individual has left the room. We have, on occasion, resorted to coating our nostrils with Vicks to try to block the smell. Unlike on CSI, this trick is not all that successful and mostly just makes your nostrils burn like hell.”

“My boss would time how long people were in the bathroom and if he thought you had been in there too long, he would pound on the door and tell you to get out of there and get back to work. Also, you were not allowed to use the restroom for the first hour you were at work or the first hour after you came back from lunch because you should have used the bathroom on your own time. This charmer of a boss would also photograph the top of the desk with his Polaroid and then come in and check what he been moved so he knew you were working. He would also rifle through your drawers and he allowed NO personalization of your cube/office because, ‘This is work. It shouldn’t feel like home and no one wants to see your family anyway!’ Needless to say, I left skid marks getting out of there!”

“I disagreed with my boss in a meeting and he threw a dart that stuck in my knee, then he asked if I had a tetanus shot recently and sent me to the doctor because I hadn’t. It was more than 20 years ago, but it’s one of the most memorable boss moments I’ve ever had.”

=========================================================================
PRESENTED BY: Executive Leadership, LLC


SPECIALIZING IN: Human Capital Transition and Executive Coaching - (908) 822-9655 WEBSITE: http://www.exec-leadershipLLC.com
If you are seeking an Executive Coach for yourself or your organization, consider contacting CB Bowman at Executive Leadership, LLC 908.509.1744 cb@exec-leadershipllc.com; http://www.exec-leadershipllc.com.
CB Bowman, MBA is the president, CEO of Executive Leadership, LLC. She is also the Chairperson and Founder for the Association of Corporate Executive Coaches (http://www.acec-website.org).
Among mid to senior level professionals Executive leadership LLC is the go to company for individuals and companies seeking human capital repositioning, development and/or growth through coaching, counseling, and strategic advice.
With her Fortune 500 business background, laser like precision, and a take no prisoners approach she swiftly narrows in on the issue, and unlike others, she presents financially sound, creative and action oriented solutions with infinite possibilities

Nontraditional Workplace Harassment Lawsuits Increasing

Nontraditional Workplace Harassment Lawsuits Increasing 

5/18/2011  By Joanne Deschenaux  REPRINTED from SHRM online CHICAGO—Nontraditional workplace harassment lawsuits “seem to be popping up all over the country—not just in California,” Matthew Effland, an attorney in Ogletree Deakins’ Los Angeles office told attendees May 13 at the firm’s 2011 Workplace Strategies seminar here. In the last 10 years, there have been increases in the number of lawsuits claiming female-on-male harassment and same-sex harassment, as well as an increase in claims of religious harassment and intra-racial harassment, according to Trina LeRiche, an attorney in Ogletree’s Kansas City office.  This is true despite the fact that the total number of harassment charges filed with the federal Equal Employment Opportunity Commission (EEOC) has declined during that time period. In addition, claims of workplace bullying, not involving a class covered by anti-discrimination laws, have resulted in verdicts for employees under state tort laws, which protect employees from assault, battery and infliction of emotional distress, added attorney Alfred Southerland, from Ogletree’s Houston office. And these claims can get quite expensive for employers, noted Southerland. For example, a California jury awarded $18 million dollars to James Stevens, who was described as a devout Christian who did not discuss sex at work. Stevens claimed that a female co-worker harassed him at work daily for almost two years, assuming suggestive poses and making crude remarks. When he complained, he was transferred and eventually fired. The jury awarded Stevens $1.67 million for economic loss and emotional distress and $16.73 million in punitive damages. In March 2011, a jury awarded $451,000 in a same-sex harassment case, LeRiche said. The employee alleged that a construction superintendant engaged in verbal abuse and taunting gestures of a sexual nature and exposed himself. The evidence at trial showed that the boss thought the employee was too “feminine” and not a “rough ironworker.” The company in this case lacked a sex harassment policy and did not conduct anti-harassment training, LeRiche noted. The Indiana Supreme Court, in 2008, upheld a jury award of $325,000 in an assault case filed by a male nurse against a male surgeon. Evidence indicated that the surgeon was a “known bully” who terrorized other employees, Southerland said. Intra-Racial Color Harassment and Religious Harassment Claims Also Increasing  Title VII includes “color” in its list of protected characteristics, LeRiche noted, adding that not all employers are aware of this fact and that claims of discrimination based on color are also on the rise. In 1992, the EEOC received 374 charges of color discrimination. In 2006, the number had risen to 1,241, she said. A restaurant chain, in 2003, settled a lawsuit filed by a dark-skinned African-American waiter who claimed discrimination by his light-skinned African-American manager. The employee claimed that his manager called him a “tar baby” and “black monkey” and told him to bleach his skin, she noted. Claims of religious harassment are also more common, Southerland said, noting that these claims have increased by 95 percent since 2001. More than 33 percent of employers reported an increase in religious diversity in the 1990s, he added. Lawsuits involved factual situations such as a supervisor continually urging an employee to join the supervisor’s church and an employee who felt persecuted based on a belief in Native American spirituality. Employer Can Minimize Risk Employers can take steps to minimize the risk of being on the wrong end of a nontraditional harassment suit, Southerland advised. In the case of female-on-male harassment, a common mistake is to assume that the treatment was, at some point, welcomed by the victim, he said. LeRiche added that this is a common mistake even among sophisticated HR people. Every claim must be treated seriously, she stressed. Remember that discrimination “because of sex” doesn’t mean that physical intimacy was the end goal. Another common mistake, made in the case of same-sex harassment is treating the conduct as “horseplay.” Make sure that your harassment guidelines include same-sex harassment, she advised. Investigate all harassment claims, even those not involving a protected class, Southerland said. Don’t forget that state law protects employees from bullying that rises to the level of assault, battery or intentional infliction of emotional distress. A common mistake is to focus only on “protected” types of harassment. In addition, make sure that you have “color” in your harassment policy, LeRiche added. In fact, regular training and policies should cover all forms of harassment, not just sex harassment, Southerland stressed. “A common mistake is failing to keep up with the changing legal environment,” he concluded. Joanne Deschenaux, J.D., is SHRM’s senior legal editor.

======================================================================
PRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Human Capital Transition and Executive Coaching - (908) 822-9655 WEBSITE: http://www.exec-leadershipLLC.com
If you are seeking an Executive Coach for yourself or your organization, consider contacting CB Bowman at Executive Leadership, LLC 908.509.1744 cb@exec-leadershipllc.com; http://www.exec-leadershipllc.com.
CB Bowman, MBA is the president, CEO of Executive Leadership, LLC. She is also the Chairperson and Founder for the Association of Corporate Executive Coaches (http://www.acec-website.org).
Among mid to senior level professionals Executive leadership LLC is the go to company for individuals and companies seeking human capital repositioning, development and/or growth through coaching, counseling, and strategic advice.
With her Fortune 500 business background, laser like precision, and a take no prisoners approach she swiftly narrows in on the issue, and unlike others, she presents financially sound, creative and action oriented solutions with infinite possibilities

Can the SEC Guard Against 'Unintended Consequences' of Whistleblower Rules?

August 26, 2011 by Joshua Horn

On August 12, the SEC's final whistleblower rules went into effect pursuant to which the SEC is

authorized to provide whistleblower who provide "original information" 10 to 30 percent of

monetary penalties where those penalties exceed $1 million; other known as the bounty

program. The SEC whistleblower rules have not been without controversy.

Among other things, the corporate community has expressed its concern that the rules undercut

internal compliance programs that have been developed at high expense and, in turn, generate

additional litigation and costs. The industry has also expressed concern that the program allows

a whistleblower to go directly to the SEC without first reporting a violation to the company, even

though there are incentives for informants to internally report first. The ability to avoid internal

reporting, it is argued, defeats the very purpose of internal compliance programs. In other words,

what is the point of having an internal reporting compliance program where a whistleblower can

circumvent that process altogether.

Yin Wilczek, of the BNA Securities Regulation & Law Report, recently reported on comments by

Sean McKessy, Chief of the SEC's Office of the Whistleblower, made contemporaneously with

the implementation of the SEC whistleblower rules. These comments were meant to quash some

of the concerns that the industry has raised. Unfortunately, his comments only lead to further

concern that informants may abuse the program with the implicit endorsement of the SEC.

According to Wilczek, McKessy represented that the SEC will carefully monitor the program for

"unintended consequences" and will ultimately implement "improvements" and "tweaks" where

necessary. Although the SEC is committed to monitor and improve this program, McKessy also

stated that he did not "have any preconceived notions about how that may play out". As such,

McKessy has left a large door open as to what he meant by monitoring the program for

unintended consequences.

McKessy's further comments, however, should raise grave questions regarding the "monitoring,"

"improvements" and "tweaks" that the SEC may contemplate. McKessy stated that, "If even one

fraud is stopped before it gets to the Madoff situation, the effort would have been worth it." This

statement can be seen as simply as a perverse twisting of the old criminal maxim paraphrased

as: better a guilty man go free than an innocent man go to jail. The SEC's version, however,

should state, better a company be improperly charged with securities violations so that the SEC

will no longer be faced with the embarrassment it sustained when it failed to act on the tips of

whistleblowers regarding the Madoff Ponzi scheme.

Taking McKessy's comments to heart, the corporate community should be concerned how the

SEC will monitor and improve a program where it appears as though the SEC's primary concern

is avoiding future embarrassment. In the end, the unfortunate consequence of an overly

aggressive program will be unnecessary costs for the corporate community in dealing with bounty

hunters instead of true whistleblowers. The only way to protect yourself is to make sure your

corporate governance policies and procedures are kept current and enforced so that you can

address issues as they arise so that you can avoid becoming the next trophy on the SEC's

mantle.

=========================================================================


PRESENTED BY: Executive Leadership, LLC SPECIALIZING IN: Human Capital Transition and Executive Coaching - (908) 822-9655 WEBSITE: http://www.exec-leadershipLLC.com
If you are seeking an Executive Coach for yourself or your organization, consider contacting CB Bowman at Executive Leadership, LLC 908.509.1744 cb@exec-leadershipllc.com; http://www.exec-leadershipllc.com.
CB Bowman, MBA is the president, CEO of Executive Leadership, LLC. She is also the Chairperson and Founder for the Association of Corporate Executive Coaches (http://www.acec-website.org).
Among mid to senior level professionals Executive leadership LLC is the go to company for individuals and companies seeking human capital repositioning, development and/or growth through coaching, counseling, and strategic advice.
With her Fortune 500 business background, laser like precision, and a take no prisoners approach she swiftly narrows in on the issue, and unlike others, she presents financially sound, creative and action oriented solutions with infinite possibilities