Airport Legal Governance Issues: Understanding & Meeting Ethics Compliance Obligations

Transcription

1 Airport Legal Governance Issues: Understanding & Meeting Ethics Compliance Obligations

2 presented by: Kevin Kraham Shareholder Washington, DC Office

3 Today s Agenda The Trends: A Growing Enforcement Priority A National Priority: Integrity and Stability Public Corruption Why We Care? The Business Reasons Compliance Foundation: FSGs Effective Response: Code of Conduct Pros / Cons of Training in this Economic Time Reporting Mechanisms / Retaliation Prevention Investigations Monitoring Systems Self Reporting

4 Why Do We Care About Ethics and Compliance? Why should you care about ethics and compliance in your organization?

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7 Global Ethical Crisis High-visibility events have shaken the trust of the public, employees, and government in the legal compliance of American organizations and those around the globe U.S. and other governments are cracking down and holding organizations accountable

8 June 18, 2009 Astronomical Sanctions

9 Record 800 Million A record $800 million in U.S. fines for bribery allegations levied against Siemens AG in December 2008 could have exceeded $3.2 billion if they hadn't taken steps to cooperate with prosecutors. The goal is self regulation. If you have a strong compliance program, you respond quickly and you hold people accountable, the DOJ is either not going to prosecute, or reduce your fine.

10 "I want to see people prosecuted. Senate Judiciary Committee Chairman Patrick Leahy, February 11, 2009 hearing on DOJ s handling of corporate corruption.

11 2010: The Year of Compliance We are coming down strong this year... [and] the pace of criminal prosecutions is peaking. The pace will continue this year, and it will be severe. More individuals will be prosecuted this year than ever before. The Department of Justice is planning. Department of Justice Representative, 2009 Ethisphere Conference

12 Hot Topics Airports impose new ethics policies Ethics and whistleblower policies going into effect Rank-and-file employees, airport executives, and board members required to adhere to ethics policies

13 Hot Topics Gift giving and receiving Nepotism Confidentiality and record keeping Use of authority Cooperating with government investigations Use of airport property, equipment, and personnel Retaliation

14 Hot Topics Airport boards tighten travel Criticism of Hawaii conference trip by 3 panel members prompts new rules

15 For How Long Does the Publicity Affect Your Reputation? The reputation of a thousand years is determined by the conduct of one hour. Japanese proverb

16 Compliance Strategies Requirements: FSGs Identity Theft and other State Federal Laws

17 Criminal Liability for Organizations Criminal liability can attach to an organization whenever an employee of the organization commits an act within the apparent scope of his or her employment, even if the employee acted directly contrary to company policy and instructions. Guidelines apply to ALL organizations, not just publiclytraded companies

18 And the Stakes are High... Manager Officer CEO An entire organization, despite its best efforts to prevent wrongdoing in its ranks, can still be held criminally liable for any of its employees' illegal actions. U.S. Sentencing Commission

19 New Amendments to the Federal Sentencing Guidelines Apply to ALL organizations Public Private Large and small Governmental units Requires an effective ethics and compliance program FSGs create minimum standard for compliance programs

20 FSGs Apply to All Organizations Small and large organizations are vulnerable civil and to criminal liability. The vulnerability is evident. Statistics show of all corporations criminally convicted of unethical business practices in federal courts, more than 90% are small businesses and more than 95% are privately held. William S. Laufer, Associate Professor of Legal Studies, the Wharton School

21 Executives are Agents! Organizations can act only through its agents and, under federal criminal law, generally are vicariously liable for offenses committed by their agents. Under both state and federal law, an organization can be held criminally liable for any crimes committed by its managerial and non-managerial employees in the course of performing their duties if ostensibly for the organization s benefit.

22 On the Other Hand, There is Good News Strong incentive now exists for organizations to take proactive action to prevent unethical, criminal, and other illegal conduct.

23 The Good News The potential fine range for a criminal conviction can be significantly reduced in some cases up to 95% if an organization can demonstrate that it had put in place an effective compliance and ethics program and otherwise cooperates with government.

24 Effective Compliance and Ethics Program under the FSGs To have an effective compliance program, organizations shall: Exercise due diligence to prevent and detect criminal conduct Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

25 Protect Your Airport Set the right tone at the top Call Out problem behavior of others: Associates Managers Stakeholders Board of Directors Vigorously enforce policies at all levels Code of Conduct

26 Code of Conduct FSG 1 Due diligence and the promotion of an organizational culture that encourages ethical conduct and a commitment to compliance minimally requires the following: 1. Standards and procedures to prevent and detect criminal conduct

27 Executives Can be Held Liable and Responsible FSG 2 The governing body must be knowledgeable about the content and the operation of the compliance and ethics program and exercise reasonable oversight with respect to the implementation and effectiveness of the program.

28 Effective Hiring FSG 3 The organization shall use reasonable efforts not to include within the substantial authority personnel of the organization any individual who the organization knew, or should have known through the exercise of due diligence, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.

29 An Effective Training Program FSG 4 The organization shall take reasonable care to communicate periodically and in a practical manner its standards and procedures and other aspects of the compliance and ethics program by conducting effective training and by disseminating information appropriate to their respective roles and responsibilities.

30 Yet, in Today s Challenging Times

31 Misconduct Goes Up Statistically... Workplace misconduct tends to increase by at least 11 percent during periods of turmoil, including times of layoffs and budget cuts, Ethics Resource Center, Arlington, Va., 2008 Report

32 How to Justify the Expense? Ethics training is the cheapest insurance you will ever buy. Paul McNulty, Former U.S. Attorney

33 Monitoring, Auditing and Complaint Process FSG 5 The organization shall take reasonable steps to ensure the organization compliance and ethics program is followed, including monitoring and auditing to detect criminal conduct. Evaluate periodically the effectiveness of the program. To have and to publicize a system which may include a mechanism that allows for anonymity or confidentiality whereby employees may report or seek guidance regarding potential or actual criminal conduct without fear of reprisal.

34 Accountability FSG 6 The program needs to be promoted and enforced consistently throughout the organization through appropriate incentives to perform in accordance with the program and the organization must apply appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.

35 Work in Progress FSG 7 Periodic assessment of the risk and shall take appropriate steps to design, implement and modify the above requirements.

36 Compliance Mandate Four Basic Elements 1. The Tone Must Start at the Top sincerity matters 2. Internal Controls integrity versus rules 3. Training and Communication 4. Monitor and Assess Transparency

37 Effective Compliance Program STEPS: Standards ~ codes and core values T E each P rocess & assess nforcement Teaching ~ training and communications Enforcement ~ discipline and accountability, oversight, rewards S tandards Process and Assessment ~ CCO, helpline, investigations

38 Compliance Strategies Investigation Issues Prevention of Retaliation

39 Managing the Risk What s the plan to manage the risks? Crisis Teams who will be involved? Compliance? Audit? CFO? Investigators? Communications? What about the law department? Role? Response to the whistleblower? Do you know enough?

40 When Conducting an Investigation, is There Really any Choice? It s a small market, located far, far away Nobody will ever find out. It s so awful, why should we dig? We don t want any PR on this. Revised U.S. Sentencing Guidelines Once criminal conduct has been detected, the organization shall take certain reasonable steps to respond appropriately to such criminal conduct

41 When Conducting an Investigation, Is There Really any Choice? Dep t of HHS, Office of the Inspector General Model Guidance Upon receipt of indications of suspected noncompliance, organization must immediately investigate the issues to determine whether a material violation of law has occurred Other practical consequences from failing to conduct an internal investigation Bad actors remain with organization No ability to control public relations issues Organization remains in legally defensive position Raise government concerns regarding commitment to compliance

42 Who Should Conduct Investigation? In-house counsel or outside? Ascertain privilege protection What are internal resources within and outside law department?

43 Who Should Conduct Investigation? What is likely end game? If ultimate disclosure to government anticipated, cuts in favor of retaining outside counsel

44 Who Should Conduct Investigation? The more the organization is at risk, the more important the independence of OC If trying to convince prosecutors not to indict, preferable to not use more frequently used OC or counsel who has previously been an advocate for organization

45 Retaliation All Statutes 32.30% 34.30% 29.8% 29.5% 28.6% 27.9% 27.0% 27.5% 27.1% 25.4% 24.0% 22.6% 15.3% 15.7% 17.4% 19.5% 20.6% 14% 19% 24% 29% 34% 39% FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

46 Summary Reducing your Exposure

47 What Organizations Are Doing Today Corporate Ethics Program Elements Organizations Formalized Statement of Ethics in Code and Policy 92% Annual Certification of Ethics Code 71% Ethics Training for Supervisory Personnel and Above 81% Ethics Training for All Personnel 60% Ethics Orientation Program for New Personnel 54% Anonymous Helpline or Hotline 72% Using of Intranet for Ethics Awareness 56% Appointment of Ethics Officer 61% Ongoing Downstream Communications Program 56% Board Level Reporting on Ethics Program 49%

48 Safeguards Checklist Policies Code of conduct update it, and make sure it s specific to airports Proper procedures on owns investigation who does investigation and scope Adopt policies on how to deal with law enforcement and other federal authorities

49 Safeguards Checklist Monitor Monitor, audit and create an effective reporting system Ensure systems are in place so that organization is in compliance with ethics programs and state and federal laws Audit and monitor compliance systems Act appropriately on unethical and criminal behavior After the investigation, do an assessment. Are there flaws in your program? Are there policy failures?

50 Safeguards Checklist Training Ethics training and code of conduct for every employee live training for executives and managers Specialized training for executives and management Constant communication of the policies

51 Questions?

52 Thank You Kevin Kraham Shareholder Washington, DC Office