role and responsibility of the chief compliance...
TRANSCRIPT
Role and Responsibility of the Chief
Compliance OfficerSession 610: Compliance and Ethics
PRESENTERS
Barbara Barrett Stephen Daoust
Chief Compliance Officer V.P., Legal & Compliance
Reliant Care Management Company, LLC Iridium Satellite, LLC
(314) 543-3821 (703) 287-7447
[email protected] [email protected]
Suzanne Rich Folsom Christopher Hall
General Counsel, CCO, Chair, White Collar & Government Investigations
SVP- Government Affairs Saul Ewing, LLP
United States Steel Corporation 215-972-7180
SRFolsom @uss.com [email protected]
Traits of a “Great” Chief Compliance
Officer1) Ethical
2) Courageous
3) Respectable
4) Analytical
2
Traits Of A “Great” Chief Compliance
Officer
5) Detail Oriented/Global Visionary
6) Approachable
8) Savvy
9) Cooperative
10) Proactive
3
DIFFERENCES BETWEEN
IN-HOUSE COUNSEL &
CHIEF COMPLIANCE OFFICER
What’s the Difference?
“The General Counsel defines the lanes in a
road; and the Chief Compliance Officer is
responsible for processes and systems designed
to ensure that the corporation stays within
those lanes.”
-- Michael Volkov, CEO and owner of The Volkov Law
Group, LLC
5
Educational and Licensing
Requirements
IN-HOUSE COUNSEL
• Law Degree Required
• Must Be Professionally
Licensed
• Must Act in Accordance
with Rule of Professional
Responsibility
CHIEF COMPLIANCE OFFICER
• Law Degree Preferred, But Not Required
• No licensing requirement
• No rules of professional responsibility*
*Healthcare Compliance Association has adopted a Code of Conduct for compliance professionals in healthcare industry. No enforcement mechanism in place for failure to comply (i.e., disbarment or suspension of license).
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Compliance Responsibilities
In-House Counsel
• Identify statutes and regulations
applicable to client
• Assist in internal investigation
• “Zealously defend” company in
the event of legal noncompliance
– Retain outside counsel
• Advise Senior Management/BoD
of Legal Obligations/Defenses
and/or Litigation Strategies
Compliance Officer
• Develop compliance risk assessments
• Develop Code of Conduct
• Develop compliance awareness and training program
• Monitor/Audit compliance
• Investigate Disclosures of Noncompliance
• Determine Compliance/Noncompliance
• Advise on Penalties for Misconduct
• Disclose Noncompliance to Senior Management/BoD/Government
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CHIEF COMPLIANCE OFFICER
REPORTING STRUCTURES
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Most Common Reporting Structures
• Chief Compliance Officer (CCO) to Chief
Executive Officer (CEO)/President (38%)
• CCO to General Counsel (GC)/Chief Legal
Officer Including General Counsel and CCO in
the Same role (21%)
• CCO to Board of Directors or Sub-Committee
of Board of Directors (19%)
9
CCO Reports to CEO/President
PROS
• Signals Importance of “Compliance”
• Raises Stature and Perceived Authority of Compliance Officer
• Add an extra voice to the conversation
• Compliance expert spending all of his or her time on compliance matters
CONS
• CEO/President may not fully
understand nature of job
– No legal/compliance
background expertise
• Role not seen as
“independent”
– May reduce “whistleblowing”
• Communications not subject
to attorney/client privilege
10
CCO Reports to General Counsel
PROS
• Centralizes legal/compliance regime
• Better understanding of legal/investigatory nature of position and its requirements
• Increases direct access to legal experts within and outside company
• Communications may be subject to attorney/client privilege
CONS
• Role my not be seen as “senior” or “independent”
• Non-compliances may be filtered/suppressed
• May create false impression that Compliance Officer is an attorney or acting in a “legal” role
• Often lacks understanding of non-legal aspects of Compliance Officer’s role
• May cause GC/CLO to become a “fact witness” in litigation
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CCO is the General Counsel
PROS
• Compliance and legal issues
often overlap
• Consistency of advice
• Gives CCO a “seat at the table”
• Signals to employees that
compliance is a top priority
• Efficiency
• Communications protected by
attorney/client privilege
CONS
• Resources: the general counsel’s work load is inherently heavy
• Role of CCO and GC are different and in particular situations advice may differ
• Having two different perspectives can be useful
• Not all GCs have sufficient compliance background to serve as CCO
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CCO Reports to Board of Directors
(BOD)/Board CommitteePROS
• Signals Importance of
“Compliance”
• Raises Stature and Perceived
Authority of Compliance Officer
• Role seen as “independent”
• Receive “extra credit” under the
U.S. Federal Sentencing
Guidelines
CONS
• CCO may not be fully integrated
into Senior Management
• BoD has no ability to
manage/supervise “day to day”
activities
• BoD may not fully understand
nature of job
– No legal/compliance background
expertise
• Communications not subject to
attorney/client privilege
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Best Practices?
• Regardless of title or position within org chart, CCO must be a member of Senior Executive Management Team
• CCO must have direct and unfettered access to both the CEO and BoD or appropriate committee
• CCO should be required to report to BoD annually on the adequacy of compliance program and major activities
• Termination of CCO must be approved by the BoD
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CCO Liability Insurance
Do I Need It?
• In-house attorneys are
in the “crosshairs” of
both the SEC and other
regulators
– Tenet
– GSK
– Moneygram
– Buckingham Capital
Mgmt
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CCO Liability Insurance
Do I Have It?• Check your corporate bylaws for indemnification and
state indemnification laws
– Are you included? What is included? Mandatory
or permissive?
– Limits in state law
• Check Your Corporate D&O Policy
– Are you considered a corporate officer?
– What is the scope of the policy?
– Are their any exclusions?
– What is the deductible? What are the limits?
CCO Liability Insurance
Do I Have It?
• Will employed lawyer insurance protect me?
• Need to check with insurance carrier to determine
whether it includes “non-legal” duties of a compliance
officer?
• Will not apply to CCOs who are not active lawyers able
to practice law in the jurisdiction where they are
working.
CCOs and the A/C Privilege
• Are Compliance Activities
Subject to A/C Privilege?
– Compliance audits
– Investigations
• Does it matter if the CCO
is an attorney?
• Does it matter if the CCO
reports to the GC?
• Do you want the
information Privileged? 18
Lessons Learned from Barko v. KBR
• Case involved a discovery request filed by a
qui tam relator to obtain witness statements,
witness interview summaries and compliance
investigation reports arising from an internal
investigation of fraud.
• D.C. District Court originally held that
documents should be produced as they were
created for “business purposes”.
Lessons Learned from Barko v. KBR
• D.C. Circuit vacated the order and held that
proper rule for privilege is “whether obtaining
or providing legal advice was one of the
significant purposes of the attorney-client
communication.” held these documents
generally are privileged (given involved
activity of KBR’s Legal Dept.)
• D.C. District Court agreed with holding but . . .
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• Ruled that the documents nevertheles should
be turned over on the theory of “implied
waiver” because:
– KBR’s had used the documents to argue their
position that no fraud had occurred in an SJM.
– KBR had used the documents to refresh the
recollection of a 30(b)(6) witness prior to a
deposition in the case.
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Best Practices to Preserve A/C
Privilege• Define separate legal and compliance roles
• Investigations should be performed by Legal
Department or directed by Legal Department
• When needed, actively communicate the
confidentiality regarding documents and
discussions
• DO NOT mark all compliance related
documents as “privileged”22
How to Be an Effective CCO
• Add value to your company by being a
strategic thinker/leader
• Be creative as you lead and implement
compliance initiatives
• Be able to take a stand and communicate why
one course of action is better than the other
• Be persistent when you address difficult
situations 23