Category Archives: Compliance

VW Compliance Executive Pleads Guilty

“Ex-VW Official Admits Role in Emissions Cheating,” The Wall Street Journal, August 5, 2017 B3. A former VW “compliance executive” charged with conspiracy to defraud the US, wire fraud, and Clean Air Act violations pleads guilty.  He admits he knew about the software used to mislead US environmental regulators.  Faces sentencing in criminal case in December.

Hiding information from the government is not a good thing.  What was the culture that allowed this to happen?  Did people feel a need to do this to compete?  Too many car companies have been caught up in such scandals to have it be random.

The shareholders have paid (and are continuing to pay) for the mistakes of the employees of the company.  Who else from the company is going to go to jail,  or lose his/her job?  VW is facing costs in just the US of more than $25 billion and investigations elsewhere.  Does the “compliance executive” know of others who also knew?  Might he offer up some names before December?  People who bought VWs are going to want to recover damages from someone.

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Filed under Accuracy, Analytics, Board, Compliance, Compliance, Controls, Corporation, Culture, Culture, Data quality, Directors, Duty, Employees, Governance, Information, Internal controls, Oversight, Oversight, Value

Too many controls?

A key element of governance is determining who’s in charge.  And who’s responsible when something goes wrong.

“Fed Looks To Ease Curbs on Directors,” The Wall Street Journal, August 4, 2017 B10. “The Federal Reserve proposed scaling back the requirements it places on banks’ boards of directors….”  The Fed is concerned “it has been overloading boards with too many specific requirements….”

Have the Fed attempts at micromanagement resulted in directors taking their eyes off the ball?  Does the Fed take responsibility for over-management?  Is the Fed a fiduciary, with liability to the banks or their shareholders?

 

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Filed under Board, Compliance, Controls, Corporation, Directors, Duty, Governance, Government, Third parties

A study in corporate liability

You hire independent contractors to drive under your corporate banner, and pay you a portion of the fees they collect.  You buy cars  and lease them to the contractors to drive.  What could go wrong?  The cars catch on fire.

“Uber Knowingly Leased Unsafe Cars to Drivers,’ The Wall Street Journal, August 4, 2017 A1.  Apparently, the cars that were leased had been recalled, and not fixed.  Who knew what when?  Did Corporate in the US know before the fire?  Or is this the result of a business model or culture where working around rules is prized above complying with them?

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Filed under Board, Compliance, Compliance, Corporation, Culture, Culture, Duty, Employees, Governance, Oversight

VW may face fraud charges

VW is being investigated by the EU’s antifraud office since November 2015, in connection with loans based, in part, on VW’s green environmental reputation.  The emissions cheating scandal has cost $25 billion.  And counting.  May recommend that Germany charges two employees with fraud.  German authorities are in on the hunt, too.

“Volkswagen Faced With New Legal Woes,” The Wall Street Journal, August 1, 2017 B3.

Who knew what when, and who failed to disclose what they knew?  When it rains, it pours.

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Filed under Board, Compliance, Compliance, Corporation, Duty, Employees, Governance, Inform market, Inform shareholders, Managers, To report

Keeping it in the family

“Two Plead Guilty in Insys Cases,” The Wall Street Journal, July 12, 2017 B3.  Insys Therapeutics had an unusual fentanyl problem: bribing doctors to prescribe it.  Two saleswomen took the plea.

Notable:  one of the women is married to the firm’s former CEO, who  was arrested on related charges in December, together with 5 other senior managers.

Does corruption normally run this deep?  Where is (or was) the board?

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Filed under Board, Compliance, Compliance, Compliance, Compliance Verification, Controls, Corporation, Culture, Culture, Directors, Duty, Duty of Care, Employees, Governance, Internal controls, Management, Oversight, Oversight

Altered metrics

If someone asks you to “alter” or “fudge” a financial metric reported to the market, take pause.  Or hit the big red button.

“Witness: Magnate Knew of Altered Metric,” The Wall Street Journal, June 28, 2017 B9. The chairman of a large company allegedly knew that one of the financial metrics the company reported to the market for the previous quarter was improperly inflated.  Or fudged, as they say in the trade.  By $12 million.

The former chief accounting officer took a plea to fraud (and admitted to lying on other matters) and is cooperating with the government; the former CFO is charged with criminal fraud and is at trial.  The company is “cooperating.”  The chairman hasn’t been charged.  Yet.

Why isn’t the company charged?  At least one of its agents appears to have committed a fraud.  Why isn’t the chairman charged, if he knew?  Is this consistent with the Yates memo?  Is there a civil (derivative) suit against the chairman?

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Filed under Accuracy, Board, Collect, Communicate, Compliance, Compliance, Compliance, Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Inform market, Internal controls, Management, Oversight, Oversight

Criminal charges for a CEO

Corporations get charged with criminal conduct from time to time.  But seldom does the CEO at the time also get charged.

“Barclays Hit With Fraud Charges,” The Wall Street Journal, June 21, 2017 B1.  Charges of fraud and illegal payments filed against the bank and its former CEO (and a few other executives) in the UK.

As usual, the shareholders get the bill for any fines (and any diminution in share value).  Curiously absent were any charges against the directors of the Bank’s Board at the time.  But maybe the failure of the Board to detect this level of criminal activity will result in civil suits against the directors for negligent supervision.

Maybe Shearman & Stirling can write another report. (See Wells Fargo posts, supra).  Willie Sutton wasn’t the only crook who knew where the money is/was.

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Filed under Board, Compliance, Compliance, Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Internal controls, Oversight, Oversight, Protect assets, Risk assessment, Supervision