Category Archives: Supervision

Catching up, part 3

Continuing from https://infogovnuggets.com/2019/01/04/catching-up-again/ and https://infogovnuggets.com/2019/01/04/catching-up-again-part-2/, and https://infogovnuggets.com/2019/01/04/catching-up-part-3/

  1. Conflicts with conflicts

    “Justice Department Chides McKinsey in Another Bankruptcy Case,” The Wall Street Journal, December 17, 2018.  McKinsey continues to fail to make what are viewed as adequate disclosures of conflicts when advising bankruptcy estates, and may not get paid for its work as a result.

  2. Voter data

    “Fight Over Voter Data Roils Democrats Ahead of Election,” The Wall Street Journal, December 17, 2018. Have Republicans been better than the Democrats at collecting and storing information?  What’s this worth?

  3. Your business partner wants you to call a shareholders’ meeting

    “Renault Urges Nissan to Call for Shareholder Meeting Following Nissan Indictment,” The Wall Street Journal, December 17, 2018.  Is this interfering with “your” governance?  Is this a compliance matter, or a partnership matter, where your partner is concerned that you are keeping your CEO as CEO while he sits in jail?

  4. Is a dance move “information”?

    “The ‘Fortnite’ Dance Move That Spawned a Lawsuit,” The Wall Street Journal, December 17, 2018.  While longer dance routine can be protected by copyright law (which was a bit surprising to me), not so (so far) for “snippets.”

  5. Hiding risk information may be a problem

    “Glencore-Controlled Miner to Be Fined by Canadian Authorities Over Congo Ops,” The Wall Street Journal, December 17, 2018.  Fine of $22 million for company and some of its former directors and executives for hiding the risks of doing business with someone connected to Congolese president.  Is a risk analysis information?  Can you hide that from the shareholders?

  6. Warning signs

    “Goldman Sachs Ignored 1MDB Warning Signs in Pursuit of Asian Business,.” The Wall Street Journal, December 18, 2018.  Can chasing business too hard lead one to ignore important information and sidestep important controls?  What controls can you put in place to avoid having this happen to you?  Is this an oversight issue?  Do criminal charges and huge fines lay ahead?

  7. VW vendor pleads

    “Volkswagen Supplier to Plead Guilty to Conspiracy, Pay $35 Million Fine in Emissions-Cheating Probe,” The Wall Street Journal, December 19, 2018. Company that designed the software used to fool or, as some say, cheat, the emission test pleads guilty to crime and pays a fine to US.  VW has paid more than $20 billion.  Is this just compliance-related, or is there also an information hook here?  Design a software to work around a government test.

  8. Looking for a whistleblower

    “Barclays Fined $15 Million by New York Over CEO’s Anti-Whistleblower Push,” The Wall Street Journal, December 19, 2018.  The CEO had tried to use the company’s security department to locate the writer of a letter critical of a recent hire.  He pressecd on, despite advice from the head lawyer and the chief compliance officer (costing him £642,000 in fines and £500,000 of his bonus).  So the shareholders pay more than the CEO did.  Go figure.

  9. Hiding the names of the guilty

    “Illinois Dioceses Withheld Names of Accused Priests, Report Says,” The Wall Street Journal, December 20, 2018.  Can you legally not disclose the name of an employee or a contractor who was accused of sexual abuse?  Is this a governance issue or a compliance issue or an information issue?  Or a reputation problem?

  10. Ethics and policies
    “Is It Really Five Stars? How to Spot Fake Amazon Reviews,” The Wall Street Journal, December 21, 2018. How Amazon goes about trying to separate the wheat from the chaff.  How does your company determine what’s a fake review and what’s the real deal?

  11. Information/price linkage

    “Room for Improvement? New Hotelier Tests an Algorithmic Pricing System,” The Wall Street Journal, December 22, 2018.  Using information about a customer and from a customer to establish the price for future sales to that customer.  Interesting linkages at a new hotel chain.

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Catching up again, part 2

Continuing from https://infogovnuggets.com/2019/01/04/catching-up-again/

  1. Pot calling the kettle black

    “Comey Tells House Panel He Suspected Giuliani Was Leaking FBI Information to Media,” The Wall Street Journal, December 10, 2018.  Former FBI Director Comey, who admitted to leaking information to a reporter through a law school professor, complains that someone else did it, too.

  2. Yes, we have no privacy

    “Thieves Can Now Nab Your Data in a Few Minutes for a Few Bucks,” The Wall Street Journal, December 10, 2018.  Following the series of major hacks of privacy data (e.g., Marriott, LinkedIn, Equifax, and Yahoo), “Every American person should assume all of their data is out there,” said one FBI agent.  Comforting.

  3. Duty to report

    “New Report Shows Olympics Executives Concealed Knowledge of Nassar Allegations,” The Wall Street Journal, December 11, 2018.  Executives knew information about sexual abuse allegations, and failed to report.  To whom did they breach a duty?

  4. Interesting intersection of the right to petition the government and your right to privacy

    “U.S. Investigating Fake Comments on ‘Net Neutrality,’” The Wall Street Journal, December 11, 2018. “Earlier this year, the FCC said it would upgrade its website to try to prevent fakery. … Several federal agencies warn that it is a felony to send falsified comments to the federal government when posting on websites soliciting opinions on federal rulemaking.”  What if the comments were anonymous?

  5. Lying or overspending on your expense account can get you canned

    “Under Armour Ousts Two Executives After Review of Expenses,” The Wall Street Journal, December 11, 2018. Complying with company policy and procedures is sort of kind of like a job requirement.  Even if you signed Jordan Spieth.  But how were they to know how much was too much?

  6. Weakest link?

    “Amazon, Amid Crackdown on Seller Scams, Fires Employees Over Data Leak,” The Wall Street Journal, December 11, 2018.  Employees bribed for access to inside information.  What’s your information worth to you?  To the briber?  To the (former) employee?  Do you have a policy against taking bribes?

  7. Collateral impact

    “Nissan-Renault Scandal Shows It’s Hard to Keep Car Alliances On Track,” The Wall Street Journal, December 12, 2018.  A scandal at your business partner can affect your company’s relationships.  Is that Governance?

  8. How do you deal with rumors?  Are they “information,” too?

    “Super Micro Finds No Malicious Hardware in Motherboards,” The Wall Street Journal, December 12, 2018.  This contradicts a prior report from Bloomberg.  How do you govern other sources of information?  Is using a trusted third party to investigate just standard crisis management planning?

  9. Should Compliance be more congenial?

    “Banks Get Kinder, Gentler Treatment Under Trump,” The Wall Street Journal, December 13, 2018.  Regulators are urged to be more collegial with the banks they regulate.  Is that better “Governance,” in the short term or in the long term?

  10. What does it say?

    “Renault Sticks With Carlos Ghosn as Internal Probe Finds No Illegality,” The Wall Street Journal, December 13, 2018.  What does it say to the rank-and-file when the Chairman gets arrested?  And when he’s thereafter kept in place?  The Board may have some explaining to do.

  11. What can your employer do with your information?

    “U.S. Companies Asked to Disclose More About Their Workers,” The Wall Street Journal, December 14, 2018.  Pension funds ask employers to disclose more information than the SEC currently requires.  Whose decision is that?  When and how can you object?

  12. Watch your contractors

    “Chinese Hackers Breach U.S. Navy Contractors,” The Wall Street Journal, December 15, 2018.  What’s this information worth, both to the US and to China?  How much do you look at the security at your vendors who process or create information for you? Are  they a weaker link than your employees? (See item 6, above.)

  13. Information and Governance and Compliance

    “PG&E Falsified Gas Safety Records, California Claims,” The Wall Street Journal, December 15, 2018.  From the explosion in San Bruno in 2010 (after which PG&E couldn’t find a bunch of inspection records relating to hundreds of miles of its pipelines) to more recent claims about fudging the records on pipeline locations, PG&E has had this problem for awhile.  For now, these are just allegations.  But what impact on every claim made against the company, and every claim made by it?  If they falsify safety records, do they falsify bills, too? “The [state regulator] last month expanded a continuing probe of PG&E’s safety practices and said it would explore the way the company is structured and managed.”  There seems to be a link between record-keeping and management and compliance and culture.

  14. Facebook, again

    “Facebook Bug Potentially Exposed Unshared Photos of Up 6.8 Million Users,” The Wall Street Journal, December 15, 2018.  One almost gets the idea that protecting your privacy is not a high priority for them.

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Those pesky Romulans!

You may not be old enough or nerdy enough to remember the Romulan cloaking device from the original Star Trek.  But I do/am.

“Fake Signals and Illegal Flags: How North Korea Uses Clandestine Shipping to Fund Regime,” The Wall Street Journal, November 29, 2018 (online). How do shipments still arrive in and leave from North Korea, notwithstanding the various sanctions on the regime there?  Apparently, it’s blue smoke and mirrors.

I raise this here for two reasons.  First, in the North Korean story this is a bunch of information being generated that is deliberately false, and the compliance types struggle to deal with it in order to enforce the applicable rules.  The enforcers use satellites and data analytics; the shippers use deception and semi-legal and illegal stratagems.

Second, what extremes might your employees go to to avoid being detected when they are doing something they know is wrong, and how well prepared are you to deal with it?  Do you have the proper controls and investigative procedures?  What should you look at to confirm that what you’re being told is true?

 

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Fraud at the top

“Former Goldman Bankers Charged,” The Wall Street Journal, November 2, 2018 A1. “Two senior … bankers allegedly paid bribes and stole and laundered money … [in] one of the biggest financial frauds in history.”

What does it say when two of your 435 partners and one of your managing directors commits a fraud?  Failures in systems/controls?  Bad culture?  Do you have a “cowboy atmosphere” in Asia?  Poor training?  Are these rogue employees?  What’s the impact on your reputation?  What was the tone at the top?

This is primarily a Governance point.  How will the new CEO handle?

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Another one bites the dust

“Barnes & Noble Details CEO Firing,” The Wall Street Journal, October 31, 2018 B1.  CEO allegedly fired for sexual harassment and bullying, and interfering with the sale of B&N.

So, the CEO gets canned.  No severance package.  What message does this send to the rest of the organization (and, indeed, to other CEOs and other companies)?  How does the Board look on this one?  From a Compliance standpoint, and a Governance one, looks pretty good.

Might this be a pretext?  Could he have been fired for some other reason?

 

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Consequences

One of the consequences of non-compliance is a higher level of scrutiny from the regulators.

“Wells Fargo Places Two Executives On Leave,” The Wall Street Journal, October 25, 2018 B10.  The Comptroller of the Currency sent letters to two WF executives about their failures of oversight at the bank in connection with WF’s sales practices.  Execs (chief administrative officer and chief auditor) placed on leave and removed from operating committee.

Boy, does that ever not look good on your resume.

Why did the regulator have to do this?  One reason is that WF didn’t do it itself.  Would your compliance system do better?  Do the directors still have their jobs?

 

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Information delayed

“Advertisers Allege Facebook Put Off Disclosing Error,” The Wall Street Journal, October 17, 2018 B1.  Facebook sued two years ago for knowing the statistics on how long users were looking at videos were flawed, overstating the average time videos were viewed but failed to let the advertisers know.  So advertisers paid for posting videos based on inaccurate information from the seller (Facebook).

I guess one could comment on the culture at Facebook that would permit this behavior, or upon the Compliance implications of the apparent failure to punish anybody (employees, directors) for this apparent breach of customer trust. But instead one could focus on how much value Facebook derived from not disclosing information about known defects in its processes.  So, either (a) the definition of Information includes information you don’t disclose or (b) the value of information can include the value of not disclosing it.

The documents turned over in discovery are not favorable to FB.

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