Affiliated Monitors, Inc.

Transcription

1 Affiliated Monitors, Inc. INTEGRITY THROUGH COMPLIANCE CORPORATE PROBATION: THE USE OF INDEPENDENT MONITORS TO IMPROVE COMPLIANCE AND PREVENT FRAUD Presenters: Eric R. Feldman Principal/Director of Corporate Compliance Services All rights reserved.. No copies may be made without the express written consent of Affiliated Monitors, Inc. 1

2 Government Contracting Government Investigation or Auditing Corporate Compliance or Legal Independent Accounting, Fraud Examination, or Consulting Other

3 Prosecutors choices: Used to be binary Bring charges Decline prosecution No middle ground for supervision, remediation, or corporate probation 1960s: Juvenile rehabilitation and first offenders IG Act of 1978: Prevention and detection of fraud, waste, and abuse Independent Private Sector Inspector General (IPSIG): 1989 New York report

4 1991 Federal Sentencing Guidelines: Shift of responsibilities from government to contractor Post 9-11: World Trade Center monitoring Increased corporate scrutiny resulting from the 2001 Enron scandal/2008 economic meltdown Way to leverage corporate culture, compliance, and controls through deferred prosecution

5 A person or entity who has in-depth knowledge and experience with regulatory schemes and oversees businesses or professionals that have been sanctioned for violating one or more laws or regulations.

6 Yes, under a formal settlement agreement. Yes, as part of a deferred prosecution agreement. Yes, part of an administrative settlement with a government agency. Yes, proactive use to demonstrate due diligence to a government agency or regulator. No.

7 Oversight to protect the public Reduction in government resources Insufficient insight into corporate activities Guidance to reduce risk of recurrence Repetitive investigations without remediation Penalties built into cost of doing business Improve deficient controls, procedures, and culture Goal is to create responsible contractors

8 Deferred prosecution or non-prosecution agreements Plea agreement in criminal matters Debarment proceedings Administrative and regulatory actions Settlement agreements Probation or corrective actions Proactive and preventive situations

9 Increased Government Scrutiny False claims Procurement Integrity Act violations FAR violations Mandatory disclosures Regulatory violations Quality control FCPA

10 U.S. Agencies Want 1,000-plus Contractors Barred By Kathleen Miller, Bloomberg News, December 28, 2011 WASHINGTON The Obama administration, under pressure from Congress to weed out government suppliers for ethics violations or poor performance, has proposed to ban almost as many contractors this year as President George W. Bush did in his entire second term. Federal agencies have proposed blocking 1,006 companies and individuals from contracting so far this year, as well as asking a judge to ban a unit of food-processing giant Cargill Inc. of Minneapolis, in a process known as debarment. That is 16 percent more than the 868 contractors that government agencies proposed to block in all of 2010, and only 70 fewer than the 1,076 contractors that US agencies sought to debar under Bush from 2005 to 2008, according to data provided by the General Services Administration. Federal agencies have proposed blocking 1,006 companies and individuals from contracting so far this Federal agencies are under pressure after a series of congressional hearings and reports from inspectors general and the Government Accountability Office faulted procurement officials for failing to keep unqualified or ineligible vendors out of the $500 billion-a-year federal market. We year. are starting..that to see the is pendulum 16 percent swing to more contractor than. accountability,..in all of but government needs to do a lot more to ensure it only works with responsible contractors and thereby protects the public, said Scott Amey, general counsel for the Project on Government Oversight, a nonprofit watchdog group. The proposed debarments appear to be the most since at least 1997, the earliest year comparable data were available, and may be a record, said Meredith Whitehead, a project manager with the General Services Administration, which oversees the online database used to track contractors barred from winning government work. Federal spending on contracts for goods and services has more than doubled since 2000, to $534 billion in the fiscal year ended Sept. 30, 2010, from $213 billion in the fiscal year ended Sept. 30, Federal agencies are under pressure...for failing to Some contractor advocates say the government may be too aggressive in pursuing debarment in some cases, since even proposing a company keep unqualified for debarment means or it ineligible will not be able to vendors win new contracts out of until the situation $500 is resolved. The use of suspensions and debarments is getting increasingly hostile, said Stan Soloway, president of the Professional Services Council, a trade association billion-a-year of government federal contractors market. based in Arlington, Va. Moira Mack, a White House Office of Management and Budget spokeswoman, said the agency provides due process to all contractors facing suspension or debarment. For too long, the government failed to use suspension and debarment, even in the face of egregious conduct by contractors, Mack said in an ed statement. That s why this administration has been pushing for tougher oversight of contractors, and we ve seen results. Contractors can be proposed for debarment for poor performance as well as a variety of ethical issues, including overbilling or falsely claiming a company is owned by a disabled veteran in order to win special awards. In some cases, debarment is automatic

11 Government Agency Customers Agency Inspectors General Defense Contract Audit Agency (DCAA) Federal Regulatory Agencies Department of Justice

12 Part of comprehensive remedial program Improve practices/internal controls Demonstrate corrective actions and due diligence Strengthen ethics and compliance programs

13 Objective Neutral Qualified Professional Custom-Tailored for Each Matter

14 DOJ Morford Memo: 2008 Frequent appointment of former government officials Questioned independence, integrity of the process No Conflicts of Interest No personal or business relationship Not an Investigator/Not an Advocate Reports to the Government Agreement Directs the Monitor Clear, Written Program for Monitoring

15 Yes, I ve read it. Yes, but I haven t read it. No, I ve never heard of it.

16 1. Qualifications based on merit and on the unique facts and circumstances of the case. 2. A monitor is an independent third-party, not an employee or agent of the corporation or the government. 3. Assess and monitor compliance with those terms of the agreement specifically designed to address and reduce the risk of recurrence of the corporation s misconduct, including, in most cases, internal controls and corporate ethics and compliance programs.

17 4. Monitor s scope and authority should be no broader than necessary to address and reduce the risk of recurrence of the corporation s misconduct. 5. Communication among the Government, the corporation and the monitor is in the interest of all parties; periodic, written reports both to the government and the corporation may be appropriate. 6. If the corporation chooses not to adopt the monitor s recommendations within a reasonable timeframe, that fact should be reported.

18 7. The agreement should clearly identify whether previously undisclosed or new misconduct will be reported by the monitor directly to the government, the corporation, or both. 8. The duration of the agreement should be tailored to the problems that have been found to exist and the types of remedial measures needed for the monitor to satisfy their mandate.

19 No Conflicts of Interest - No personal or business relationship Not an Investigator/Not an Advocate Reports to the Government Agreement Directs the Monitor Clear, Written Program for Monitoring

20 Assessment of Ethical Culture Ethics and Compliance Program Reviews Audits and Record Reviews Interviews Inspections Employee Surveys Internal Control Assessments Improvement Recommendations

21 Some orders call for purely objective assessments. Some agencies and businesses want the benefits of monitor s insight. Our approach: On-site, with independent eyes and no gotcha mentality. Can make substantive recommendations relative to: - Ethics and compliance - Training - Quality controls - Internal controls - Due diligence - Risk assessments

22 Frequency and duration of monitoring? Monitor s scope of authority? Announced or unannounced visits? Who gets the reports? Implementation of recommendations?

23 Opening business to outsiders Monitor as arm of agency Something to hide Change Losing control Cost

24 Ethics program and application Books and records Business processes - Procurement - Financial management - Safety - Internal controls Third-party due diligence Quality control Billing submissions/contract modifications

25 Good faith efforts to comply, or lack thereof Extent of cooperation with the monitor ID d areas of government concern Improvements made by company Contract obligations fulfilled Areas where more efforts are needed Implementation and adherence to ethics and compliance programs Additional recommendations

26 The program is comprehensive and more than a trophy. There is an Ethics/Compliance Officer. The ethical culture meshes with the company s Code of Ethics. The program addresses risks. Effective training occurs regularly. The company s ethical fiber runs top-tobottom.

27 Strictly compliance-oriented; its all about the rules. Values-based; we focus on ethical decision making as a way to maintain compliance with the rules. Our program is minimal; mostly to meet government requirements. None

28 Our rules alone won t be enough. Our rules never have been enough, are not enough today, and never will be enough. What s really needed is a change of mindset one that fosters not only a culture of compliance, but also a company-wide environment that fosters ethical behavior and decision-making. William Donaldson Former Chair, SEC

29 Ethics/Compliance Officer Has good communication and training skills Respected by staff Is knowledgeable Has adequate tools for the job Understands and respects obligations Key to position: independence, authority, and placement within the company

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31 Leadership Commitment/Tone at the Top Visible Constant Participatory Code of Conduct Useable, not shelf ware States company and employee responsibilities Employees acknowledge duty to report Focused on unique vulnerabilities

32 Training Both values-based and compliance-focused Encompasses new hires Live and CBT, scenario-based Cascading Includes tests of comprehension Anonymous Reporting Hotline: Phone and Trend analysis/feedback

33 ETHICS AND COMPLIANCE PROGRAMS IN ACTION Subcontractor Flow Down Due diligence Terms of reference Validation Extension of resources Mandatory Disclosure Policies Practices Communication

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35 Yes, Ethics and Compliance is part of our due diligence process. No, not part of our regular process. Not applicable to me or my organization.

36 ETHICS AND COMPLIANCE PROGRAMS IN ACTION Carrot or Stick? Is there a progressive discipline program? Are there incentives? Have employees been disciplined or terminated? Is the company trying to implement changes? Recommendations for improvement?

37 An emphasis on high ethical and moral standards is made not simply with words on a poster in the corporate office, but with the attitudes and actions of people at all levels.

38 Too often, ethics is separate from the reality of the organization. Professional ethicists may huddle and talk, but most of their practice is reactive in response to people not walking their talk, feeling that the only wrong is in getting caught

39 COMPANY: Federal construction contractor GOVERNMENT AGENCY: DOD ISSUE: Proposed debarment for violating the Buy American Act RESOLUTION: Ethics evaluation and monitoring APPROACH: In-depth study of company s ethics program; review of risk areas; improve programs; monitoring

40 COMPANY: Federal Consulting and Services Contractor GOVERNMENT AGENCY: DOD ISSUE: Debarment of field office and several employees for violating the Procurement Integrity Act RESOLUTION: Ethics Program evaluation and monitoring APPROACH: Nationwide study of company s ethics program and implementation at field locations; assessment of ethical culture; improve programs; monitoring

41 COMPANY: Pharmaceutical manufacturer GOVERNMENT AGENCY: State Licensing Board ISSUES: Fraud guilty plea by owner, licensing issues RESOLUTION: Compliance program, monitoring, hotline, random drug analysis, debarment of owner APPROACH: Set up compliance program; trained internal Compliance Officer; excellent test results; demonstrated owner s compliance/removal from operations

42 COMPANY: Multi-state construction company GOVERNMENT AGENCY: Federal Highway, IG ISSUES: Requisition/time and materials fraud, false claims RESOLUTION: Compliance program and independent monitor in lieu of debarment APPROACH/RESULTS: Improved internal controls; conducted risk assessments; mentored Compliance Officer; company continued work on government contracts

43 COMPANY: Pain management specialist clinic GOVERNMENT AGENCY: U.S. Department of Health and Human Services ISSUE: Medicare fraud RESOLUTION: Fine, compliance program, periodic audits, reporting hotline APPROACH/RESULTS: Implementation of Compliance Program; improved coding and billing practices; prompt response to hotline complaints

44 COMPANY: International precious metals refiner GOVERNMENT AGENCY: U.S. Bureau of Immigration and Customs Enforcement ISSUE: Money laundering RESOLUTION: Fine, Anti-Money Laundering Program, independent monitoring APPROACH/RESULTS: Implementation of AML Program; independent monitoring of due diligence with third parties and banking transactions; internal controls

45 Diligence is the mother of good luck. Benjamin Franklin

46 Eric R. Feldman, CFE, CIG President, Core Integrity Group and Director of Corporate Compliance Services Affiliated Monitors, Inc. (540)

47 Eric R. Feldman, CFE, CIG President, Core Integrity Group and Director of Corporate Compliance Services Affiliated Monitors, Inc.