Speaker Firms and Organization:
Presented By:
Joseph W. Koletar DPA, CFE
FBI Senior Executive - Retired
Anderson Terpening PLLC
Peter C. Anderson
Partner
Lauer & Associates
Steve Lauer
Partner
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1
May 12, 2011
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2
May 12, 2011
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3
May 12, 2011
Brief Speaker Bios:
Joseph W. Koletar
Over twelve years' experience as an Executive Director, Principal, and Director in the Fraud and Investigations practices of Ernst &
Young LLP and Deloitte & Touché LLP. During this time Dr. Koletar conducted and managed investigations in retail, manufacturing,
media, hospitality, health care, energy, banking, financial services, insurance, transportation, and not-for-profits. Matters addressed
included: executive defalcations, conflict of interest, revenue recognition, court-ordered monitoring of a business convicted of criminal
tax violations, channel stuffing, sales commission schemes, payroll and disbursement schemes, Foreign Corrupt Practices Act, vendor
integrity, grey market and product counterfeiting, anti-money laundering controls, protection of intellectual property, due diligence,
fraud vulnerability assessments, compliance testing, and crisis management preparedness.
Peter C. Anderson
Pete has extensive experience in federal criminal law, having been a federal prosecutor in both Charlotte and Washington, D.C., as
well as a defense attorney in various national law firms since 1996. Apart from his counseling and trial practice, he is an adjunct
professor at the Charlotte School of Law, and teaches courses in both Trial Practice and White-Collar Crime.
Pete also frequently writes and lectures on topics relating to federal business crimes, corporate compliance planning, trial advocacy,
and sentencing issues. Pete was also selected by U.S. Senator Hagan (D-NC) as one of the three finalists whose names were sent to
President Obama for consideration as the U.S. Attorney for the Western District of North Carolina.
4
May 12, 2011
Brief Speaker Bios:
Steve Lauer
As Principal of Lauer & Associates, Steven A. Lauer consults with law departments and law firms on the value of legal service. He
assists them to better align and recalibrate the cost and value of legal service delivered to corporations and other business entities.
Steve served as Corporate Counsel for Global Compliance Services in Charlotte, North Carolina, specializing in data protection and
privacy for that hotline and compliance services company. Before that, he served for over two years as Director of Integrity Research
for Integrity Interactive Corporation, in which capacity he conducted research, wrote white papers and otherwise worked with clients
and potential clients of the company on issues related to corporate ethics and compliance programs. Those two positions culminated
Steve’s approximately seven years in the compliance industry.
► For more information about the speakers, you can visit: http://knowledgecongress.org/event_2010_risk_mitigation.html
5
May 12, 2011
While we cannot eliminate all risk, we can do a much better job of mitigating it. Internal fraud risk alone is
estimated to cost the average organization six percent of revenue each year, regardless of its type or
industry.
The irony is that we have many of the tools at our disposal to mitigate risk, but do not use them effectively.
In this 2-hour, live webcast organized by The Knowledge Group, a panel of experts will discuss the most
critical issues, which include:
6
May 12, 2011
- How we think about risk.
- Who owns risk?
- The risk mitigation controls we use and why they can fail.
- A false sense of security.
- Why good news may be worse than bad news.
- We tend to protect against outside risk, while a greater threat may be inside.
- How do we improve risk mitigation – strategies, tools, and techniques?
- The consequences of failure.
The presentation will also focus on one of these consequences, albeit a major one – compliance. Another
highlight of this event is a discussion on the civil, administrative, and even criminal repercussions that can
follow failure to mitigate risk, which includes financial, litigation, regulatory, and reputational damages.
7
May 12, 2011
Featured Speakers:
SEGMENT 1:
SEGMENT 2:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Peter C. Anderson
Partner
Anderson Terpening PLLC
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
8
May 12, 2011
SEGMENT 1:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Introduction
Over twelve years' experience as an Executive Director, Principal, and Director in the Fraud and
Investigations practices of Ernst & Young LLP and Deloitte & Touché LLP. During this time Dr. Koletar
conducted and managed investigations in retail, manufacturing, media, hospitality, health care, energy,
banking, financial services, insurance, transportation, and not-for-profits. Matters addressed included:
executive defalcations, conflict of interest, revenue recognition, court-ordered monitoring of a business
convicted of criminal tax violations, channel stuffing, sales commission schemes, payroll and
disbursement schemes, Foreign Corrupt Practices Act, vendor integrity, grey market and product
counterfeiting, anti-money laundering controls, protection of intellectual property, due diligence, fraud
vulnerability assessments, compliance testing, and crisis management preparedness.
9
May 12, 2011
SEGMENT 1:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Dr. Joseph W. Koletar – Author – “Rethinking Risk”


How We Think About Risk
•
Good Thing?
•
Bad Thing?
Risk In Our Daily Lives
•
Our Morning Routine
•
Risk Mitigation Becomes Invisible
10
May 12, 2011
SEGMENT 1:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Dr. Joseph W. Koletar – Author – “Rethinking Risk”

Who owns risk?
•
Board of Directors
•
Audit Committee
•
“C” suite executives
•
Middle management
•
Investors
•
Customers
•
Vendors
11
May 12, 2011
SEGMENT 1:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Dr. Joseph W. Koletar – Author – “Rethinking Risk”

Risk Mitigation Controls and Why They Fail
•
Performance Plans
•
Audit
•
Risk Department
•
General Counsel
•
A–B–C
12
May 12, 2011
SEGMENT 1:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Dr. Joseph W. Koletar – Author – “Rethinking Risk”

A False Sense of Security

Good News Versus Bad News

Outside Versus Inside Threats
13
May 12, 2011
SEGMENT 1:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Dr. Joseph W. Koletar – Author – “Rethinking Risk”

Getting Better

The Consequences of Failure

BALANCE!
14
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Introduction
Pete has extensive experience in federal criminal law, having been a federal prosecutor in both Charlotte
and Washington, D.C., as well as a defense attorney in various national law firms since 1996. Apart from
his counseling and trial practice, he is an adjunct professor at the Charlotte School of Law, and teaches
courses in both Trial Practice and White-Collar Crime. Pete also frequently writes and lectures on topics
relating to federal business crimes, corporate compliance planning, trial advocacy, and sentencing issues.
Pete was also selected by U.S. Senator Hagan (D-NC) as one of the three finalists whose names were
sent to President Obama for consideration as the U.S. Attorney for the Western District of North Carolina.
15
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
One Former Prosecutor’s Viewpoint
The Knowledge Group
May 12, 2011
Peter Crane Anderson
Anderson Terpening PLLC
16
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Unique Perspective

“Recovering” Prosecutor

Goals in Private Practice:
•
Help Clients Sail Through the Prosecutorial Storms
•
“Teach Lessons Without Slamming Jail Cell Doors”
•
Redefine Business Crimes Defense & Litigation = Risk Mgmt.

Proactive  Compliance  Reduce Risks

Reactive  Defense
 Minimize Harm
17
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Main Goals of Presentation

Recent Enforcement Trends in Business Crimes

Share Prosecutor’s Mindset & Perspective

•
A Peak Inside Opponents “Playbook”
•
Review Relevant Policies/Guidance
Practical Suggestions for “Effective” Compliance
•
Reducing Risks
•
Adding Value
18
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Telling Statistics @ Enforcement

New & Expanding Enforcement Priorities

Regardless of Administration/Party Politics
•
President Bush - Corporate Fraud Task Force (2002)

•
250 corporate fraud convictions within first year
President Obama - Financial Fraud Enforcement Task Force (Exec. Order – 2009)

Multi-Agency Involvement

Massive Resources
19
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Typical Assumption . . .
20
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
What Is Basis for that Assumption?

We Have Never Been Indicted Before

We are “Good People” – Not “Criminals.”

Pure Hope (?) – We Have Enough “Real” Problems

Auditing/Monitoring

Maintain a Healthy Skepticism

Remain Open to Possibility of Criminal Conduct !!
21
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
The Three Certainties in Life . . .

Death

Taxes

Corporate Crises
22
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Timing of Crisis Management Efforts
Before
During
After
23
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Focus of Effective Compliance
PREVENTION
RESPONSE
DETECTION
24
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
When a Crisis Erupts . . .

Accusers Always Have 20/20 Hindsight

Corporate Leaders Must Be Prepared to Answer (& Document) the Following Questions:
•
What did you do to prevent/detect?
•
How could you NOT have known?
25
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Convergence to Two Major Risks – Enforcement Leverage

Low Legal Threshold for Organizational Liability

Broad Prosecutorial Discretion
26
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Low Legal Threshold for Culpability

Broad Criminal Liability for Organizations
•
Anytime an employee commits a crime within the apparent scope of employment
•
Even if the employee acted directly contrary to company policy or instructions
27
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Broad Prosecutorial Discretion
What conduct should be prosecuted?
----- Higher Standard
Zone of Discretion
----- Low Threshold
What conduct can be prosecuted?
28
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Tremendous Prosecutorial Discretion:
Potential Targets:
Individuals &
Corporations
Potential Charges:
Wide Variety of
Substantive &
Process Crimes
29
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
In View of Two Dangers
Goal: Understand & Influence Prosecutorial Discretion

Demonstrate “Good Corporate Citizenship”

Avoid Being Perceived by Government As a “Bad Actor”

Government “Perception” is Reality
30
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
How Do You Establish a Compliance Program?

Review legal requirements

Identify areas of focus

Ensure program meets Guidelines requirements

Upgrade program where necessary

Tailor-Fit Program to Unique Operations
31
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
7 Criteria for “Effective”
Corporate Compliance Plans
1.
Establishing compliance standards and procedures that are reasonably capable
of reducing the prospect of criminal conduct (i.e. written company policy
statements and policies approved by senior management or board);
2.
Assigning overall oversight responsibility to specific individuals within high-level
positions (i.e. centralized compliance activities and a compliance officer with
authority to monitor);
32
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
7 Criteria for “Effective”
Corporate Compliance Plans
3.
Exercising due care not to delegate responsibility to individuals who are
predisposed to illegal activities (accomplished with a careful and welldocumented screening process for key employees);
4.
Effectively communicating the program's standards and procedures to all
employees (i.e. adequate employee training);
5.
Taking reasonable steps to achieve compliance with the standards (i.e.
monitoring, auditing, establishing best practices benchmarks, etc.);
33
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
7 Criteria for “Effective”
Corporate Compliance Plans
6.
Consistently enforcing the standards through appropriate disciplinary
mechanisms (i.e. disincentives policy, range of disciplinary measures including
termination, etc.);
7.
Responding appropriately to an offense and taking all reasonable steps to
prevent similar offenses, including any necessary program modifications (i.e.
authorizing or conducting internal investigations)
34
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Federal Sentencing Guidelines - Criteria for Effective Programs

Size of the organization
•

Nature of the business
•

Highly regulated activities require greater effort
Prior compliance history
•

Formal program for larger companies
Previous problem areas should be addressed
Industry standards
•
Must meet or exceed industry standards
35
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
“Good Faith” Oversight

Confirm Procedures Are In Place & Used:
•
Reporting Misconduct or Violations;
•
Documenting Complaints;
•
Investigating Complaints / Responding to “Red Flags”
•
Upper Management Reporting & Response
•
Enforcing Program
•
Complying with Stated Policies
•
Improving Training (i.e. Self-Correcting)
36
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Overview of Top Priorities for Board Oversight of Crisis Management

Maintain Open Lines of Communication
•
Internally - Within Corporation

•
Employees / Vendors / Customers = “Helplines”
Between Chief Compliance Officer & Board

Affirmative Reporting & Documentation
37
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
A Peak Inside the
Government’s Playbook
Viewing a Case From the Other
Side’s Perspective –
“Thinking Like a Prosecutor”
38
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Sources of Insight/Guidance

“Principles of Federal Prosecution” (General)

“Factors to Be Considered in Charging Corporations”

Statutory Sentencing Factors (18 U.S.C. 3553)
39
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
“Principles of Federal Prosecution of
Business Organizations” (Sec. 9-28.300)
General Factors To Consider in Charging:

Nature & Seriousness of Offense

Pervasiveness of Wrongdoing w/in Corporation

Corporation’s History of Wrongdoing (Crim/Civ/Reg)

Corporation’s Timely & Voluntary Disclosure

Existence & Adequacy of Corp’s Compliance Program

Corporation’s Remedial Actions

Collateral Consequences

Adequacy of Prosecution of Individuals or Civil Actions
40
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Focus on Compliance Programs
Factors in Evaluating a Compliance Program (among others):

Corporate governance mechanisms to detect and prevent misconduct, such as director’s
oversight of compliance.

Staff sufficient to audit, document, analyze and use the corporation’s compliance efforts.

Employee’s knowledge of – and “buy-in” regarding the compliance program.
41
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Goal: Understand & Influence Prosecutorial Discretion
What is Root Cause of Problem ?
–
A “Bad Apple” (Employee)
–
A “Bad Orchard” (Organization / Culture)
42
May 12, 2011
Goal: Understand &Influence Prosecutorial Discretion
43
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
DOJ’s “Filip Memo” (8/28/08)
Two Criteria Unique to Board Oversight:

Do the corporate directors exercise independent review over proposed corporate
actions, rather than unquestionably ratifying recommendations?

Have the directors established an information and reporting system in the
organization that is reasonably designed to provide management and directors
with timely and accurate information sufficient to allow them to reach an
informed decision regarding the organizations compliance with the law?
44
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Earning Your “Good Corporate Citizenship” Merit Badge

Does your corporation have compliance plans / ethics policies?

Demonstrated commitment from management?

Who is in charge of compliance? Centralized? CCO?

Do you do sufficient background checks?

Training?

Anonymous Hotline?
45
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Earning Your “Good Corporate Citizenship” Merit Badge

Implementation? Benchmarking?

(objective monitoring /audit/enforce)

Documentation?

Plans to Respond to Incidents?

Continual Improvements?
46
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Pyramid of Possibilities re: Compliance Programs
“No Hope”
10%
Shades of Gray
80%
Need a Tie-Breaker
“No Need”
10%
47
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Reasons for Setting Up A Compliance Program?

Fiduciary Duties (as noted)

Influence Prosecutor’s Discretion
•

Argument for not bringing criminal charges (both company & individuals)
Proof of “Good Corporate Citizenship” Merit Badge
•
“If the Prosecutor Won’t Listen . . . Perhaps a Jury Will”

Improve corporate image with public, employees, and community

Increase value of company

Provide for efficient management of compliance costs

Reduce penalties or fines
48
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Why Does Compliance Really Matter?

Penalty Reductions?
•
(Only Part of the Story)

Much More Significant

Broader Applications –
•
“Ethical Barometer” or “Surrogate”
•
Better Management
49
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Key Decision Points – Equal Relevance
Investigate ?
Indict?
Liability?
Convict ?
Degree of
Punishment?
(Prosecutor)
(Jury)
(Judge)
What is Organizational Culture?
“Effective” Compliance?
50
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Measuring “Organizational Culture?”

What an Organization SAYS?
•

Written Materials?

Code of Conduct

Plan & Procedures
What an Organization actually DOES?
•
Measures/Monitors/Records
•
Invests
•
Incentives – Punishments & Rewards
51
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
A Former Prosecutor’s Twist on Anonymous Hotlines
Resistance & Perspectives
Justifications/Rationale:

You want to learn @ “bad news”
If they don’t call you, they will call someone.

Discredit whistle-blower who never called

Inconsistent with “bad orchard” status
Willingness to Listen & Respond
Be Prepared to Document
52
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
A Former Prosecutor’s Twist on Anonymous Hotlines


Don’t Assume Low # of Calls is a Good Thing
•
No Calls = No Problems.
•
Could Mean:

EE’s Are Potentially Unaware

Concerns @ Retaliation/Anonymity

No Real “Buy-In” By Mgmt.
Don’t Assume Waste of Time & Money !!
•
Value of Such Tools is in What It Conveys @ Commitment
•
NOT merely the Information Conveyed / Received
53
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
A Former Prosecutor’s Twist on Background Checks


Don’t Assume “No Need” . . . Based on:
•
Nice Appearance
•
Very Professional Demeanor
•
Great Pedigree
•
Strong References
Myth: Waste of Money Due to Low % of “Hits”
•
The Real Value = The Checking.

Willingness to Look & Document.

What Does that Say About the Corporate Culture.
54
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Establishing a Proactive Attitude About Compliance

Vigorous and visible management support

Compliance made a part of doing business

Consistent communication and diligent implementation

Targeted at high risk areas

Empowered employees supported by standards and training
55
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
On-Going Debate – ROI for Effective Programs

Traditional View:
• Cost Center (vs. Revenue Center)
• Limited Value Added

On-going Studies/Research

Recent Announcements – Public Filings
• “Costs” of Enforcement/Defense/Fines
• 25% decline
56
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
On-Going Debate – ROI for Effective Programs

Recommendations to DOJ:
• Go Beyond Mere Guidance & Policies
• Document & Report Sanitized “Declinations” Based Upon
Effective Compliance/Ethics Programs
• “The Carrot”
57
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
“Near Irreparable” Harms From Criminal Investigation/Conviction

Mandatory Jail Time for Executives

Massive Criminal Fines

Corporate Probation & Monitoring ($$)

Low Employee Morale

Adverse Impacts on Shareholders & Customers

Horrible Publicity

Devaluation of Company

Degraded Reputation

Increased Regulatory Scrutiny in Future
58
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
On-Going Debate –
ROI for Effective Programs

Reflections from Prosecutorial Days:
• “Peek Behind the Curtain” – Near Miss/$$

Sustainability

Strengthens the brand, and customer loyalty

Enhances financial performance, and shareholder value
59
May 12, 2011
SEGMENT 2:
Peter C. Anderson
Partner
Anderson Terpening PLLC
Any Questions?
Peter Anderson
Anderson Terpening PLLC
Office:704.372.7370
Cell: 704.756.8800
pa@HouseofDefense.com
www.houseofdefense.com
60
May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
Introduction
As Principal of Lauer & Associates, Steven A. Lauer consults with law departments and law firms on the
value of legal service. He assists them to better align and recalibrate the cost and value of legal service
delivered to corporations and other business entities.
Steve served as Corporate Counsel for Global Compliance Services in Charlotte, North Carolina,
specializing in data protection and privacy for that hotline and compliance services company. Before that,
he served for over two years as Director of Integrity Research for Integrity Interactive Corporation, in which
capacity he conducted research, wrote white papers and otherwise worked with clients and potential
clients of the company on issues related to corporate ethics and compliance programs. Those two
positions culminated Steve’s approximately seven years in the compliance industry.
61
May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
The Business Judgment Rule
vs.
The Sentencing Guidelines
Uneasy Bedfellows or
Intractable Foes?
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May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
The Business Judgment Rule

Directors have a duty of attention or care in connection with their oversight of corporate
management.

Directors represent and owe responsibility directly to shareholders.

Directors should understand generally the risks inherent in the business or unique to the
company (including fraud-related risk).

The business judgment rule is a judicially created protection for directors of corporations,
insulating from review decisions by directors made in good faith in the course of
managing the company.
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May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
Recent Judicial Decisions

In re Caremark International (1996): directors sued for breach of duty of attention on
account of company’s payment of significant fines due to violation of
Medicare/Medicaid reimbursement statutes.

“the Board was to some extent unaware of the activities that led to liability” though the
company had a functioning corporate information system designed to detect criminal
conduct.

The court cited approvingly the Sentencing Guidelines for Organizational Defendants
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May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
The Sentencing Guidelines

Sentencing Guidelines for Organizational Defendants issued in 1991 and revised in 2004.

One element of an “effective” compliance and ethics program is a hotline or similar means
by which individuals can report actual or suspected fraud or criminal activity.

Guidelines indicate that the board “shall be knowledgeable about the content and
operation of the compliance and ethics program and shall exercise reasonable oversight”
of that program.
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May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
Director Ignorance

In Caremark, because the directors claimed that they were unaware of the criminal
activity and had no reason so suspect its occurrence, the court applied the business
judgment rule and found them not liable.

Under the Guidelines, directors should receive reports of actual compliance history
whether or not they suspect any wrongdoing.
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May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
Sarbanes-Oxley

The Sarbanes-Oxley Act includes a directive that directors of public corporations
“establish procedures for … the receipt … and treatment of complaints … regarding
accounting, internal accounting controls, or auditing matters”.

This establishes a channel by which the directors should receive reports of illegal
conduct more quickly than previously.

This parallels the requirement in the Sentencing Guidelines for a mechanism for
reporting actual or suspected criminal activity
67
May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
Prosecutors’ views
United States Department of Justice expects corporate directors will
“establish … an information and reporting system … reasonably
designed to provide management and directors with timely and
accurate information sufficient to allow them to reach an informed
decision regarding the organization’s compliance with the law.”
68
May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
Steve A. Lauer

Expert in role of lawyers in compliance

Former in-house lawyer (privacy/data protection; environmental law; lit. mgt.)

Consultant to law departments/firms on value

Speaker

Author of The Value-Able Law Department and Managing Your Relationship with
External Counsel and dozens of articles.
69
May 12, 2011
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
Contact Information
Steve A. Lauer
Lauer & Associates
973-207-3741
slauer@carolina.rr.com
www.thevalue-ablelawyer.com
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May 12, 2011
Q&A:
SEGMENT 1:
SEGMENT 2:
Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
Peter C. Anderson
Partner
Anderson Terpening PLLC
SEGMENT 3:
Steve Lauer
Principal
Lauer & Associates
► You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type
your question in the box that appears and click send.
► Questions will be answered in the order they are received.
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May 12, 2011
Notes:
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May 12, 2011
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May 12, 2011