Yet another Department of Justice official is emphasizing the importance of effective compliance programs, this time in the context of avoiding a bribery and corruption probe. In remarks at the Advanced Compliance and Ethics Workshop held by the Practising Law Institute in New York Oct. 7, Marshall Miller, Principal Deputy Assistant Attorney General for the Criminal Division, highlighted a few primary strengths and weaknesses that the Justice Departmant has observed in corporate compliance programs of late. 

“As an overarching theme, the failure to expand compliance programs to meet the needs of growing corporations, particularly global corporations, drives many of the compliance problems we have seen,” Miller said. “On the flip side, compliance programs that have widespread prophylactic and training mechanisms—as well as procedures designed to uncover wrongdoing and expose individuals responsible for criminal behavior—are the most effective.”

“A corporation’s ability to use compliance to uncover misconduct and, just as importantly, identify wrongdoers is central to the Justice Department’s evaluation of a compliance program,” Miller added. Although, each company must tailor its compliance program to manage their unique risks, certain characteristics should be present in every program, he said.  

Some of those essential characteristics include:

High-level commitment.  If compliance executives sit in positions of authority, reporting directly to independent monitoring bodies, such as an internal audit committee or board of directors, “you likely are looking at a strong compliance program,” Miller said. “Compliance programs also need to be resourced; they need to have teeth and respect.” 

Flexibility to grow with the company.  “Any good compliance program needs to be periodically evaluated, using risk assessment models aimed at the individual circumstances of the company,” Miller said. “As companies change over time, so must compliance policies.” 

Enforcement and discipline. Responses to incentivizing compliance, and disciplining violations, must be even-handed.  “Too often we see low-level employees who implemented bad conduct fired, but bosses who did nothing to stop the conduct—and may even have directed it—left in place without sanction,” Miller said.

Compliance Gone Wrong

Some global companies today still don’t have any real compliance programs in place, and they’re suffering serious consequences as a result. During his remarks, Miller cited the example of oilfield services giant Weatherford International, which pleaded guilty last year to violations of the Foreign Corrupt Practices Act and export control violations. As a result, both Weatherford International and three of its subsidiaries paid $252.6 million in penalties and fines.

Over a period of many years, Weatherford subsidiaries in Africa, the Middle East, and Iraq paid bribes to foreign officials in exchange for lucrative contracts and inside information about competitors. Some of Weatherford’s international subsidiaries also illegally exported oil and gas drilling equipment to countries under United States sanctions, including Cuba, Iran, Sudan, and Syria. 

Weatherford’s compliance program was practically non-existent. “Had Weatherford employed even a basic compliance program, it may not have found itself paying over $252 million in penalties and fines,” Miller said. Weatherford admitted that prior to 2008, the company did not have a dedicated compliance officer or compliance personnel, did not conduct anti-corruption training, and did not have an effective system for investigating employee reporting of ethics and compliance violations. 

The most glaring failures occurred in its overseas offices and subsidiaries: Despite its presence in more than 100 countries around the globe, and despite operating in a high-risk industry, Weatherford never bothered to translate its compliance policy into languages other than English. 

“Although translation of the compliance policy into other languages would probably not, by itself, have solved Weatherford’s problems, the failure to do so certainly demonstrated that compliance was not a company priority,” Miller said. Policies are meaningless if not thoughtfully enforced and backed by commitment and resources, he said.

Furthermore, although the company began circulating an ethics questionnaire in 2004 asking if employees were aware of payments to foreign officials, Weatherford had no process to investigate affirmative responses. “Indeed, Weatherford did not conduct any follow-up investigation in response to allegations of corruption,” Miller said. Its compliance policy “wasn’t worth the paper it was written on,” he added.  

“The Weatherford case is also a stark example of a problem that we’re seeing more and more frequently: the failure of a compliance program to bridge the geographic divides and cultural gaps exposed by global corporate expansion,” Miller said. In short, compliance officers are the first line of defense in preventing fraud and corruption, and the existence of an effective compliance program can make all the difference when a company is in the Justice Department’s sights.

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