1. 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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May 12, 2011

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May 12, 2011

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May 12, 2011

4. 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 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. 
May 12, 2011

5. 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:
May 12, 2011

6. 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: 
May 12, 2011

7. - How we think about risk. - Who owns risk
- 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.
May 12, 2011

8. Featured Speakers: SEGMENT 1: Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
SEGMENT 3:
Steve Lauer  Principal Lauer & Associates
May 12, 2011

9. 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.
May 12, 2011

10. Dr. Joseph W. Koletar – Author – “Rethinking Risk”
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
May 12, 2011

11. Dr. Joseph W. Koletar – Author – “Rethinking Risk”
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
May 12, 2011

12. Dr. Joseph W. Koletar – Author – “Rethinking Risk”
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
May 12, 2011

13. Dr. Joseph W. Koletar – Author – “Rethinking Risk”
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
May 12, 2011

14. Dr. Joseph W. Koletar – Author – “Rethinking Risk”
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!
May 12, 2011

15. 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 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. 
May 12, 2011

16. One Former Prosecutor’s Viewpoint The Knowledge Group 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
May 12, 2011

17. Unique Perspective “Recovering” Prosecutor Goals in Private Practice:
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
May 12, 2011

18. Main Goals of Presentation
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
May 12, 2011

19. Telling Statistics @ Enforcement
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
Telling 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
May 12, 2011

20. Typical Assumption . . . SEGMENT 2: Peter C. Anderson
Partner Anderson Terpening PLLC
Typical Assumption . . .
May 12, 2011

21. What Is Basis for that Assumption?
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 !!
May 12, 2011

22. The Three Certainties in Life . . .
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
The Three Certainties in Life . . .
Death
Taxes
Corporate Crises
May 12, 2011

23. Timing of Crisis Management Efforts
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
Timing of Crisis Management Efforts
Before
During
After
May 12, 2011

24. Focus of Effective Compliance
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
Focus of Effective Compliance
PREVENTION
DETECTION
RESPONSE
May 12, 2011

25. When a Crisis Erupts . . . Accusers Always Have 20/20 Hindsight
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?
May 12, 2011

26. Convergence to Two Major Risks – Enforcement Leverage
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
May 12, 2011

27. Low Legal Threshold for Culpability
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
May 12, 2011

28. Broad Prosecutorial Discretion
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?
May 12, 2011

29. Tremendous Prosecutorial Discretion:
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
Tremendous Prosecutorial Discretion:
Potential Targets:
Individuals & Corporations
Potential Charges:
Wide Variety of
Substantive &
Process Crimes
May 12, 2011

30. 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
May 12, 2011

31. How Do You Establish a Compliance Program?
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
May 12, 2011

32. 7 Criteria for “Effective” Corporate Compliance Plans
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
7 Criteria for “Effective” Corporate Compliance Plans
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);
Assigning overall oversight responsibility to specific individuals within high-level positions (i.e. centralized compliance activities and a compliance officer with authority to monitor);
May 12, 2011

33. 7 Criteria for “Effective” Corporate Compliance Plans
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 well-documented screening process for key employees);
Effectively communicating the program's standards and procedures to all employees (i.e. adequate employee training);
Taking reasonable steps to achieve compliance with the standards (i.e. monitoring, auditing, establishing best practices benchmarks, etc.);
May 12, 2011

34. 7 Criteria for “Effective” Corporate Compliance Plans
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
7 Criteria for “Effective” Corporate Compliance Plans
Consistently enforcing the standards through appropriate disciplinary mechanisms (i.e. disincentives policy, range of disciplinary measures including termination, etc.);
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)
May 12, 2011

35. Federal Sentencing Guidelines - Criteria for Effective Programs
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
Federal Sentencing Guidelines - Criteria for Effective Programs
Size of the organization
Formal program for larger companies
Nature of the business
Highly regulated activities require greater effort
Prior compliance history
Previous problem areas should be addressed
Industry standards
Must meet or exceed industry standards
May 12, 2011

36. “Good Faith” Oversight
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)
May 12, 2011

37. Overview of Top Priorities for Board Oversight of Crisis Management
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
May 12, 2011

38. A Peak Inside the Government’s Playbook
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”
May 12, 2011

39. Sources of Insight/Guidance
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)
May 12, 2011

40. SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
“Principles of Federal Prosecution of Business Organizations” (Sec )
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
May 12, 2011

41. Focus on Compliance Programs
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.
May 12, 2011

42. Goal: Understand & Influence Prosecutorial Discretion
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)
May 12, 2011

43. Goal: Understand &Influence Prosecutorial Discretion
May 12, 2011

44. DOJ’s “Filip Memo” (8/28/08)
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?
May 12, 2011

45. Earning Your “Good Corporate Citizenship” Merit Badge
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?
May 12, 2011

46. Earning Your “Good Corporate Citizenship” Merit Badge
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?
May 12, 2011

47. Pyramid of Possibilities re: Compliance Programs
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”
May 12, 2011

48. Reasons for Setting Up A Compliance Program?
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
May 12, 2011

49. Why Does Compliance Really Matter?
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
May 12, 2011

50. Key Decision Points – Equal Relevance
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
Key Decision Points – Equal Relevance
Investigate ?
Indict?
(Prosecutor)
Degree of Punishment?
(Judge)
Liability? Convict ?
(Jury)
What is Organizational Culture?
“Effective” Compliance?
May 12, 2011

51. Measuring “Organizational Culture?”
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
May 12, 2011

52. A Former Prosecutor’s Twist on Anonymous Hotlines
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
A Former Prosecutor’s Twist on Anonymous Hotlines
Resistance & Perspectives
Justifications/Rationale:
You want to “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
May 12, 2011

53. A Former Prosecutor’s Twist on Anonymous Hotlines
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
Retaliation/Anonymity
No Real “Buy-In” By Mgmt.
Don’t Assume Waste of Time & Money !!
Value of Such Tools is in What It Commitment
NOT merely the Information Conveyed / Received
May 12, 2011

54. A Former Prosecutor’s Twist on Background Checks
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.
May 12, 2011

55. Establishing a Proactive Attitude About Compliance
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
May 12, 2011

56. On-Going Debate – ROI for Effective Programs
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
May 12, 2011

57. On-Going Debate – ROI for Effective Programs
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”
May 12, 2011

58. “Near Irreparable” Harms From Criminal Investigation/Conviction
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
May 12, 2011

59. On-Going Debate – ROI for Effective Programs
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
May 12, 2011

60. Anderson Terpening PLLC
SEGMENT 2:
Peter C. Anderson 
Partner Anderson Terpening PLLC
Any Questions?
Peter Anderson
Anderson Terpening PLLC
Office:
Cell:
May 12, 2011

61. 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. 
May 12, 2011

62. The Business Judgment Rule vs. The Sentencing Guidelines
SEGMENT 3:
Steve Lauer  Principal Lauer & Associates
The Business Judgment Rule vs. The Sentencing Guidelines
Uneasy Bedfellows or
Intractable Foes?
May 12, 2011

63. The Business Judgment Rule
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.
May 12, 2011

64. Recent Judicial Decisions
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
May 12, 2011

65. The Sentencing Guidelines
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.
May 12, 2011

66. 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.
May 12, 2011

67. 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
May 12, 2011

68. 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.”
May 12, 2011

69. Steve A. Lauer Expert in role of lawyers in compliance
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.
May 12, 2011

70. SEGMENT 3:
Steve Lauer  Principal Lauer & Associates
Contact Information
Steve A. Lauer Lauer & Associates
May 12, 2011

71. Q&A: SEGMENT 1: Joseph W. Koletar, DPA, CFE
FBI Senior Executive - Retired
SEGMENT 2:
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.
May 12, 2011

72. Notes:
May 12, 2011

73. ABOUT THE KNOWLEDGE CONGRESS:
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May 12, 2011