Tag Archives: compliance

War Against Global Warming Creates Major Enforcement Risks to Grantees

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Despite what you hear about United States withdrawal from the Paris accords and increased grant enforcement from Inspector Generals at the EPA, Department of Energy, and NASA, government and corporate action and funding continues to coalesce around this issue cluster and that is not likely to change quickly if at all, even as the U.S. government reduces its “green” footprint.

However quickly you dismiss the political fight’s effect on the ultimate outcome of the war that is currently raging between global warming advocates and global warming deniers, you should not dismiss the effects this battle has on the risk profile of current government contractors and government grantees.  In short, pushback by the current administration policy against “green” initiatives increase the perceived value of these grant fraud cases to enforcers.

Why?  Cases against grantees that received money under the last Administration’s priorities helps undermine the moral case for global warming. In fact, undermining the case for global warming through the development of “green” grant fraud cases is a smaller mountain to climb than having to disprove the so-called scientific consensus which, from their vantage point, was created through government grant funding.  While it is hard to “prove the negative” (that man-made CO2 has no effect on temperature) it is easier to show that “green” research and development was subject to fraud, waste and abuse.  Once the case is made that “green” grants involved fraud, waste and abuse, it is but a small step to establish in public opinion that the “green” technologies themselves are fraudulent.

The Trump Administration can pursue a blue print in the current struggle that was drafted by the Iraq anti-war movement that many believe adversely impacted what was then called the “War on Terror” resulting in what may be viewed as hasty withdrawal from Iraq.  In 2005-2006, media accounts began circulating about fraud, waste and abuse in the “war zone.”  In October 2006, the National Procurement Fraud Task Force was formed to marshal the efforts by agents and prosecutors.  A similar effort involving Grant Fraud has already started today.  In January 2007, there were perhaps a half-dozen “war-zone” cases filed. Within three years, there were over 100 warzone cases filed.  The vast increase spilled over into fraud generally and in 2010 there had been perhaps 700 cases filed across the Department of Justice involving procurement fraud and grant fraud.  There were probably ten to twenty times that number of inquiries, investigations, and qui tam suits filed.

Although it is impossible to factor the effect the public perceptions of fraud and corruption had on public opinion regarding the War in Iraq, no one can argue that its effect was negligible.  Here the current Administration wants to undermine resolve in continuing to fight the “War Against a Heating Planet” so prosecutors looking to advance their careers under the new Administration already have begun beating the investigative bushes to see what complainants, informers, complaints and investigations are coming into the “green” fraud enforcement pipeline.

Compliance: it starts at the top

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GeyerGorey LLP draws upon Janet Labuda’s contacts and experience to understand trade enforcement trends.  Here she is with her latest on the importance of compliance. Janet can be reached at the FormerFedsGroup.

By [email protected]

Whether you are a small to medium sized enterprise, or a large multinational corporation, creating a culture of compliance starts at the top. This compliance culture should permeate your entire organization starting with the Chief Executive, the Chief Financial Officer, and the corporate counsel.

Compliance is not something that can be compartmentalized, rather, it must be ingrained in the consciousness of every employee from the executive suite to the shop floor. This is one area where a top down driven process is vital. The compliance officer is responsible for implementing the compliance focused program that is established by the corporate ownership and top management.

However, all aspects of the company, whether sourcing, transportation, production, marketing, or sales must work together to support the compliance operation. Leaving just the compliance office to establish the ethic and carry the entire company is an accident waiting to happen.

I often hear that various departments in a company do not understand the compliance aspect of the operation, which sometimes leads them to negate the guidance of the compliance department.  This can lead a company down a slippery slope.

The corporate culture must embrace compliance across the entire company and all must understand the risk of potential regulatory violations.  A once a year training program is not going to cut it.  Compliance is something that everyone must  live, day in and day out.  Workplace evaluations should include a compliance segment for each and every employee. Every department head needs to understand and communicate compliance procedures to their direct reports.

The compliance department must keep a finger on the pulse of risk.  The compliance officer should be responsible for communicating these risks throughout the organization and information should be refreshed and disseminated as often as necessary.  To this end, the CEO must make time for compliance officers, and not leave this critical function on auto-pilot.

Once a vibrant internal compliance driven operation is rooted in the day-to-day operation, companies must push their ethic out to their entire supply chain.  This includes interaction with foreign suppliers, agents, and transporters.  Everyone in the supply chain needs to understand that by doing business with your company, they accept the strict standards that support adherence to the laws and regulations governing trade and all aspects of how the business conducts itself.  This should be reflected in all corporate negotiations, contracts, and purchasing agreements.

By taking this position, senior corporate management supports the highest levels of business ethics and integrity throughout the supply chain.  Compliance is not a skate on thin ice, or a fly by the seat of your pants exercise.  A culture of compliance provides that  sure footing needed when regul

Trade compliance–why bother?

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by Janet Labuda

I worked in Customs for over thirty years and met regularly with importers to discuss trade risk, compliance, and enforcement. Often, companies would express their concerns about the cost of compliance–the proverbial cost benefit analysis. If money is spent to create a compliance department, what will the benefits be? Do the risks of possibly getting caught by Customs outweigh the investment in corporate trade compliance? How can there be an effective response to risk without the associated high costs?

Just as with most things, there are rules that govern our behavior. When we drive to work there are lane markings on major thoroughfares, and traffic light systems, and posted speed limits to guide us in an orderly fashion. The same can be said for international trade rules. They are meant to make order out of potential chaos. No person or company can operate successfully in an atmosphere of chaos. Business seeks out predictability, and stability. The rules and regulations governing trade provide a needed stable structure that can help companies weather shifts in the global economy or changes to the legal or regulatory framework.

More importantly, the rules help to level the playing field, and enhance and improve the competitive business dynamic. When companies fail to operate using these rules the underpinnings of trade policy collapse. Trade preference program become endangered, national economies become threatened, sourcing models get upended, business relationships are uprooted.

In addition, companies can get swept up in enforcement actions. Customs assesses risk using somewhat broad parameters. It could be driven by product, country of origin, manufacturer, preferential trade program usage, or combinations of these elements. There are also those instances when very specific information reaches the agency.

The better question to ask is what price is paid if my company does not invest in a culture of compliance? Getting enmeshed in Customs or other regulatory enforcement actions can tarnish your brand, lead to expensive law suits and penalty actions, and divert your resources away from your corporate mission and goals.

Ensuring a strong compliance structure in your organization ensures greater facilitation of product entering the commerce which supports just in time inventory practices. Costs are reduced for both government and business by focusing limited resources to enhancing productivity. A compliance driven operation is a win-win.

Connolly’s Cartel Capers: A Look at Other Significant Submissions to the Sentencing Commission on Possible Reforms to the Antitrust Guidelines (2R1.1)

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A Look at Other Significant Submissions to the Sentencing Commission on Possible Reforms to the Antitrust Guidelines (2R1.1)

 by Robert Connolly

I’ve posted recently on my concerns with the Antitrust Sentencing Guidelines (2R1.1) as they relate to individual defendants (here).  Other submissions have been made to the Commission by people/institutions with great insight and influence in the cartel arena.  I’ve summarized a few of these below.

Click Here For the “Rest of the Story” (hat tip to Paul Harvey)

Antitrust Division Increasing Procurement Fraud Footprint Once Again

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The Antitrust Division announced that a former owner and operator of a Florida-based airline fuel supply service company was sentenced today to serve 50 months in prison for participating in a scheme to defraud Illinois-based Ryan International Airlines, the Department of Justice announced.

This is a legacy case reassigned from the shuttered Atlanta Field Office suggesting a successful and a smooth transition of its assignment to the Washington 1 Criminal Office (formerly the National Criminal Enforcement Section).    For any tea leaf readers, AAG Bill Baer’s comments in this press release (reprinted below) suggest renewed focus by the Antitrust Division into procurement fraud and an increasing willingness to open, investigate and charge matters that involve non Title 15 U.S.C Section 1 offenses in all types of procurements.  The “tell” here is subtle, but it is very significant.

 Baer’s quote today:

 “Awarding government contracts in exchange for payoffs is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Today’s sentence reaffirms the division’s commitment to vigorously prosecute individuals who engage in this behavior.”

If you know the history of Title 18 procurement prosecutions, Baer’s commitment to bringing future procurement fraud cases is significant.  The Antitrust Division was a significant player during the Bush years’ National Procurement Fraud Task Force.  Besides domestic kickback and other Title 18 cases, the Division brought many overseas contingency operations (then “WarZone”) prosecutions for bidding corruption and grant fraud.  In fact, the Division had wide berth to investigate and prosecute cases that involved “corruption of the bidding or award process.”  This was a wider mandate than simply bringing cases of horizontal collusion among competitors.  The National Procurement Fraud Task Force was incorporated into the Financial Fraud Enforcement Task Force early in the Obama administration and resources were reallocated to new enforcement priorities in the wake of the financial crisis in 2008.  As everyone viewed their new enforcement mission through a financial crimes prism, the focus of the Antitrust Division returned to a more restrictive view of its mission, i.e., bringing Sherman Act cases under 15 U.S.C. Section 1.  At the height of this limitation, for an investigation to receive authority to be opened, it had to include evidence that on its face could be construed classic horizontal bid rigging conduct. 

It is beyond the scope of this blog entry, but there is much that goes into the press release process that provides insights into enforcement agency gestalt, resource allocation, drive to open cases, and willingness to keep cases open and to charge cases, particularly marginal ones.  A press release also can provide insight into the AAG’s mindset and, sometimes, even more importantly from an agency effectiveness perspective, what people reporting to the AAG think his mindset is.

Today’s quote from AAG Baer is instructive.  It is in an active, broad and forceful voice. In a sweeping statement it links “kickbacks” and “the Antitrust Division” in the same sentence and suggests direct Antitrust Division intervention.  Most importantly, it suggests an interest in crimes involving the payment of kickbacks to award contracts (a Title 18 offense where a Section 1 agreement between competitors is usually not present).  It then states that when offenses like these are committed they will be “tak[en] seriously…[and will be vigorously prosecut[ed]” by the Antitrust Division.

Contrast this with Baer’s statement in September 2013 regarding another case on the same investigation:

“Today’s sentence should serve as a stiff deterrent to executives who might be tempted to solicit a kickback from their supplies in exchange for their honest services,” said Bill Baer, Assistant Attorney General in charge of the Antitrust Division. “The Antitrust Division is committed to ensuring that contracts are won based on competition and not collusion.”

The 2013 AAG quote literally suggests that deterrence is provided by the length of this sentence rather than by any threat of immediate action by the Antitrust Division.  It then links to a general principle that references the blanket requirement imposed earlier in the Administration that a horizontal agreement between competitors had to be present to justify resources.  It also should be recognized that “collusion” is a primarily a term of art within the Antitrust Division directed at collusion among competitors rather than collusion with a contract officer. 

Baer’s current statement is forward-looking and reaffirms that procurement fraud as a Division priority.   For all intents and purposes, AAG Baer has indicated to line attorneys and the outside world (most importantly, investigative agencies) that the Antitrust Division is again open for cases of “corruption of the bidding or award process.”   This strongly suggests a move away from an exclusive focus on Invitation for Bids (IFB) contracting to the massively larger pie of “everything else” including cost plus contracts, prime vendor contracts, sole source contracts and even the issuance of grants.

To advise clients regarding risk analysis, GeyerGorey LLP has been tracking this progression because in many hidden, but key areas, the Antitrust Division provides disproportionate value to the government’s procurement fraud mission by supporting the agency mission, helping resource investigations and by providing continuity to long investigations and program management.  This message has been received loud and clear by Antitrust Division rank and file and it is in the process of being received by the FBI, IRS-CID and 38 Inspectors General who immediately recognize that they can bring cases to Antitrust that require extensive resourcing or which have been declined.   With history as a guide, we expect procurement fraud investigation openings to increase substantially and we expect current investigations to be prolonged or rekindled as resources are reallocated with Antitrust Division resources.  


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Former airline fuel owner sentenced in fraud scheme

Executive Sentenced to Serve 50 Months in Prison

A former owner and operator of a Florida-based airline fuel supply service company was sentenced today to serve 50 months in prison for participating in a scheme to defraud Illinois-based Ryan International Airlines, the Department of Justice announced.

Sean E. Wagner, the former owner and operator of Aviation Fuel International Inc. (AFI), was sentenced in the U.S. District Court for the Southern District of Florida in West Palm Beach to serve 50 months in prison and to pay $202,856 in restitution.  On Aug. 13, 2013, a grand jury returned an indictment against Wagner and AFI, charging them for their roles in a conspiracy to defraud Ryan. On March 6, 2014, Wagner pleaded guilty to one count of conspiracy to commit honest services wire fraud.   According to court documents, from at least as early as December 2005 through at least August 2009, Wagner and others at AFI made kickback payments to Wayne Kepple, a former vice president of ground operations for Ryan, totaling more than $200,000 in the form of checks, wire transfers, cash and gift cards in exchange for awarding business to AFI.  The charges against AFI were dismissed on Feb. 21, 2014.

Ryan provided air passenger and cargo services for corporations, private individuals and the U.S. government – including the U.S. Department of Defense and the U.S. Department of Homeland Security.

“Awarding government contracts in exchange for payoffs is a crime the Antitrust Division takes seriously,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “Today’s sentence reaffirms the division’s commitment to vigorously prosecute individuals who engage in this behavior.”

“This sentencing highlights the continuing commitment of the DCIS to thoroughly investigate and bring to justice any companies or individuals who engage in fraudulent and corrupt practices that undermine the integrity of Department of Defense procurement programs,” said John F. Khin, Special Agent in Charge of the Defense Criminal Investigative Service Southeast Field Office.

As a result of the ongoing investigation, five individuals, including Wagner, have pleaded guilty and have been ordered to serve sentences ranging from 16 to 87 months in prison and to pay more than $780,000 in restitution.  An additional individual has pleaded guilty to obstructing the investigation and is currently awaiting sentencing.

The investigation is being conducted by the Antitrust Division’s Washington Criminal I office and the U.S. Department of Defense’s Office of Inspector General’s Defense Criminal Investigative Service, with assistance from the U.S. Attorney’s Office for the Southern District of Florida.

Maurice Stucke and Elizabeth Stucke will be presenting “In Search of an Effective Ethics and Compliance Program” at the 2014 SAI Global Customer Conference in Washington DC on April 30, 2014

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2014 SAI Global Customer Conference

See below for a description for each conference agenda track.

Track 1 | COMPLIANCE EFFECTIVENESS & BEST PRACTICES

This track is non-industry specific and will focus on best practices in various aspects of governance, risk and compliance management.

Track 2 | LEARNING & ADVISORY

This track will be centered around corporate compliance and is designed with Learning Solutions & Advisory Services clients in mind

Track 3 | COMPLIANCE 360

This track will have sessions designed for the typical Compliance 360 user.

Track 4 | HEALTHCARE REVENUE PROTECTION

This track designed with healthcare providers in mind, especially those using Compliance 360’s Claims Audit Manager.

Attendees are not required to stay within a single track.  In fact, we encourage attendees to become familiar with other solutions they are not yet taking advantage of.  

To download the complete agenda, please click HERE

 

Agenda

LEGEND | SESSION TYPES

Professional Development – sessions will offer best practices and will be presented by an industry expert.  Session will be educational in nature.  Many of these sessions will qualify for CEUs.

Solution Optimization – sessions will focus on the usage of one of our products & services, including Compliance 360 software and Learning Solutions.  Sessions could be led by professional services, product management or YOUR PEERS!

All Sessions Have Been Pre-Approved for Continuing Education Units (CEUs)

CCB is awarding 1.2 units per session (max 11.6 for entire conference)

Each session also qualifies for 1.2 CPE (max 6 for entire conference)

1 AAHAM CEU is awarded for each 60 minute session qualifies

New!  CLEs Awarded by Florida Bar Association (12 General CLEs and 9 Business Litigation Credits)

Antitrust and White-Collar Defense Luminary, Robert E. Connolly, Joins GeyerGorey LLP

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Robert E. ConnollyGeyerGorey LLP announced today that Robert E. Connolly has joined the firm’s Washington, D.C. office as a partner.  Connolly spent most of his career as a prosecutor with the Middle Atlantic Field Office of the Antitrust Division, Department of Justice.   Connolly joined that office in 1980 and was Chief from 1994 until early 2013.  More recently, Robert E. Connolly has been with DLA Piper in Philadelphia.  Connolly will lead GeyerGorey’s corporate internal investigations practice.  Founding partner Brad Geyer said “Bob is a natural fit for our culture, which requires constant disciplined teamwork and focus on client solutions that spring from the firm’s’ deep prosecutorial experience”
Connolly said: “I am excited to join my former DOJ colleagues.  Collectively we have worked on many of the Division’s most significant criminal and civil matters.  We have unique insights and experience to offer clients. The firm’s unique approach and rapid growth further strengthens our ability to serve clients faced with government investigations.”
“We expect Bob will be involved in much of the firm’s current portfolio of work, in addition to leading the corporate internal investigation practice,” said founding partner Hays Gorey.  “Bob has a notable reputation for his representation in high-stakes matters. He will strengthen our ability to represent multinational clients in complex litigation, as well as in high-profile regulatory and enforcement agency investigations.”  Connolly will be also be part of GeyerGorey’s compliance team, which blends its experience in enforcement, in-house counseling, criminal and civil defense, and qui tam litigation, to help companies efficiently identify, address, and mitigate litigation risks from the onset and develop an organizational culture that encourages ethical conduct and a commitment to comply with the law.
In his career with the Division, Connolly led major national and international white-collar crime investigations in the areas of antitrust, fraud and obstruction of justice.  He is known for innovative investigative and trial strategy and a command presence in the courtroom.  He left the government with one of the, if not the most successful, trial records in Antitrust Division history. Connolly was known for his building and leading effective teams that had an extraordinary commitment to successfully completing the mission.
Notably, Connolly led the international graphite electrodes cartel grand jury investigation, which resulted in seven corporate and three individual convictions and approximately $437 million in fines, including what was then the largest post-trial criminal fine in Antitrust Division history.  The investigation was capped by charging, trying and convicting a foreign corporation of aiding and abetting the cartel.   Connolly, as lead trial attorney, along with GeyerGorey’s Wendy Norman, received the DOJ’s highest litigation honor, the John Marshall Award for Outstanding Legal Achievement for Trial Litigation.  More recently, Connolly’s office led the historic effort to extradite Ian Norris to the United States from Britain to stand trial on obstruction of justice charges, of which Norris was later convicted.
In addition to his prosecutorial experience, Connolly was the Victor Kramer Fellow at Yale University in 1989-1990. He has served as an adjunct professor of antitrust law at Rutgers-Camden Law School and later Drexel School of Law.   He currently serves on the Advisory Board for the ABA Cartel and Criminal Practice committee and since leaving the Antitrust Division in 2013, has authored more than a dozen articles on U.S. and international competition law practice.

Compliance Week:What You Believe About Effective Compliance, And What Works

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Compliance Week focuses on Maurice E Stucke’s “In Search of Effective Ethics and Compliance Programs

“Stucke’s premise is that our current compliance ecosystem—regulators,
prosecutors, boards, CEOs, compliance officers—is extrinsic in nature,
imposing compliance demands upon Corporate America from the outside, with the
threat of punishment if your program is ineffective. The problem? The
assumptions behind an extrinsic system don’t hold up in the real world. So
companies end up seeking to invest the least amount necessary, to satisfy the
smallest number of compliance obligations possible, leaving employees still
tempted to commit misconduct. Lovely…”.

In Search of Effective Ethics & Compliance Programs; By Professor Maurice Stucke, GeyerGorey LLP

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Maurice E. Stucke

University of Tennessee College of Law
December 10, 2013


Abstract: 

The U.S. Sentencing Commission’s Organizational Guidelines for over twenty years have offered firms a significant financial incentive to develop an ethical organizational culture. Nonetheless, corporate crime persists. Too many ethics programs remain ineffective.As this Article explores, the Guidelines’ current approach is not working. The evidence, including sentencing data over the past twenty years, reveals that few firms have effective ethics and compliance programs. Nor is there much hope that the Guidelines’ incentive will induce companies, after the economic crisis, to become more ethical.The problem is not attributable to several assumptions underlying the Guidelines. The empirical research, while still developing, suggests that compliance efforts can be effective, and that effective compliance is attainable. Instead, this Article explores how the Guidelines’ extrinsic, incentive-based approach to compliance does not cure, and likely contributes to, the problem.

 

 

MainJustice.Com: “Former Civil Division Fraud Leader Joins White Collar Firm”

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MainJustice.Com: “Former Civil Division Fraud Leader Joins White Collar Firm”