SCOTUS: Skilling and Honest Services
June 24, 2010 | Filed Under Criminal Liability
Apparently a white collar conviction requires a crime to have been committed.
The US Supreme Court ruled today (PDF) in the case of former Enron executive Jeffrey Skilling. It found that the government’s use of a deprivation of “honest services” statute given Skilling’s conduct did not constitute a crime under federal law. This has been an area where the government has sought to expand the area of corporate conduct that could be prosecuted criminally.
The court held that under Title 18 of the US Code:
Section 1346, which proscribes fraudulent deprivations of “the intangible right of honest services,” is properly confined to cover only bribery and kickback schemes. Because Skilling’s alleged misconduct entailed no bribe or kickback, it does not fall within the Court’s confinement of §1346’s proscription.
The court ruled on this point unanimously, but left it up to the lower court to determine whether the conviction should be overturned based upon other elements of the case. The Washington Post has a good summary here.
I recall years ago getting an annual form letter from Mr. Skilling’s former boss, Kenneth Lay. Mr. Lay informed all counterparties that Enron was committed to ethical business conduct, and that any concerns should be reported to their compliance department. At the time I believe there were a few hundred staff members working on compliance.
Enron had very good compliance training videos, too.
When Civil Charges Expand
May 5, 2010 | Filed Under Criminal Liability, Investigations
Governmental scrutiny that starts with civil liability and threatens to become more serious makes coordinating the corporate response very difficult.
Professor Peter Henning writes in the New York Times that the expansion of civil charges dramatically complicates things for executives, directors, and their counsel.
This can make the standard “we are cooperation with the governmental investigation” almost impossible. Two points from Professor Henning.
First, for a target:
There are significant potential risks for someone asserting the privilege against self-incrimination during a corporate criminal investigation. An employee who takes the Fifth Amendment and refuses to cooperate risks losing his job because the employer may try to curry favor with the government by showing that it is unwilling to tolerate those who will not provide assistance.
Then, the issue of D&O coverage for an employee refusing to testify:
[a] … company’s directors and officers liability insurance policy may preclude an employee from being reimbursed for the costs of retaining a lawyer during an investigation, making it prohibitively expensive to defend oneself.
The business press sometimes equates criminal inquiries with a likelihood that charges may be forthcoming. Lawyers know that this is not the case, that investigations take time, and criminal charges are rare and difficult to prove.
In-house counsel also know that that the time lag between inquiry and resolution, and the public and financial concerns that it raises, is perhaps the most significant risk of all.
When the Criminal Becomes a Compliance Leader
May 8, 2008 | Filed Under Criminal Liability, Compliance
The Financial Times management blog notes a different twist on the “do as I say, not as I do” bromide:
Students at Canada’s Richard Ivey School of Business will have an unusual guest speaker on Thursday: Nick Leeson, the rogue trader who served four years in prison after bringing down Barings Bank. Mr. Leeson will aid the students in a case study analysing the bank’s collapse, while giving tips on the safeguards needed to prevent similar debacles. Afterwards, the students will take part in the “Ivey Ring Tradition Ceremony”, in which they pledge “to act ethically and honestly in all their activities”.
The school’s press release touts the benefits of business-barons-to-be of listening to Mr. Leeson:
For future business leaders, it’s important not to just focus on success, but to also hear how people get themselves into trouble. Mr. Leeson will also highlight the importance for all businesses of integrating financial oversight into an enterprise-wide system that supports and promotes ethical behaviour.
Having a criminal lead a compliance case study is one way to teach a lesson; part of the message here could be that crime does pay eventually, as Mr. Leeson gets $15,000 or so for talks such as this.
It’s not clear whether Mr. Leeson will hand out the Ivey Rings; we have obtained closed-circuit camera footage of the ring Mr. Leeson wore around the time of the Barings collapse:
Sacre Bleu!
January 25, 2008 | Filed Under Criminal Liability, Compliance
$7 billion buys a lot of compliance training and even more monitoring technology, n’est pas?
Here’s a slide to put in the deck:
And who says life doesn’t imitate art?
Jerome Kerviel, Societe Generale, 2008
Bud Fox, Wall Street, 1987
One Way to Deal With Corruption
May 29, 2007 | Filed Under Criminal Liability, In the News
The New York Times reports that China’s former top food and drug regulator has been found guilty of accepting bribes.
The sentence: death.
While possibly intended to signal how seriously the Chinese government takes the problem of adulterated food or counterfeit drugs, it may send a mixed message to the global marketplace.
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