Category Archives: Duty of Care

Catching up

I was working on another project, and could not do my postings as timely as I would like.  But here’s a bunch of news items I wanted to write about:

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Filed under Compliance, Compliance, Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Lawyers, Oversight, Ownership, Privacy, Third parties, Uncategorized

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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Cyberattacks, revisited

It’s Groundhog Day.  Or becoming a dog-bites-man story.

“Cyberattack’s Fallout Fuels Scramble,” The Wall Street Journal, June 29, 2017 B3. A ransomware attack through Microsoft Windows hits Maersk, Merck, WPP, and Rosneft, among others.  Surgeries disrupted at a Pennsylvania hospital.  “Hospital Operator In Pennsylvania Works to Recover,” The Wall Street Journal, June 29, 2017 B3.

Does this become so routine we forget people are supposed to take steps to prevent it?  Do cyberattacks make the board agenda, without the tie to the greater information governance questions?  Is that progress?  Does industry not see the bigger risk?

 

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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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Snitches get stitches

Apparently, keeping the identities of confidential informants secret poses some challenges.  Are there information governance lessons to be learned?

“Inmates Targeting Informants,” The Wall Street Journal, June 21, 2017 A3. “[C]lose to 700 witnesses and informants believed to have cooperated with the government have been threatened, wounded or killed” over three years.  One source of information: online court records that provide clues as to who cooperated with the prosecutors.  Some inmates may be posting their sentencing files to establish their bona fides.

Hard to classify this in this blog.  Does this pertain to

  • the value of accurate and complete information
  • the risk in making information widely available
  • the government’s duty to protect informants
  • the government’s duty to have a transparent criminal justice system
  • a defendant’s right to confront his/her accusers
  • the need for security and the difficulty in providing it
  • the proactive value of disclosure
  • the fact that information can be misused
  • the difficulty in creating effective controls
  • other?

 

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Filed under Access, Accuracy, Communications, Compliance, Controls, Data quality, Duty, Duty of Care, Governance, Government, Information, Internal controls, Oversight, Privacy, Protect assets, Risk, Third parties, Value

Duty of Directors

One of my common themes is the duty of directors.  They get paid a lot of money to act as fiduciaries for the company’s shareholders.

“Warren Keeps Pressure on Wells,” The Wall Street Journal, June 20, 2017 B10.  Senator Elizabeth Warren (D. Mass.) is leaning on the Federal Reserve (arguably an independent body) to remove 12 directors who served on Wells Fargo’s Board when the account- cramming scandal was going on.  Other problems have emerged at Wells Fargo since then.

The shareholders didn’t/couldn’t vote them out in April, and so far (as I know) the directors haven’t been held personally liable for negligent oversight.  So it’s nice that someone is still pursuing the people in charge at the time that (some of the) bad things were happening.

Some executives got fired or their bonuses were docked.  The shareholders lost a bundle in fines and penalties paid by the company.  It would be nice if the directors were held responsible and accountable — not just to penalize them, but to put other directors on notice of what they are getting paid to do, and for whom.

Would be nice to have a poster child for the director’s duty.

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