Prison Professors

1. How Government Agencies Conduct Investigations

Business leaders and team members should understand how government agencies begin investigations. Typically, neither business leaders nor front-line staff even know that agencies may have taken an interest. Despite their lack of knowledge, investigators may be looking into operations at the company, or they may gather evidence against individuals that work in the company.

For more insight, we can turn to an article that Mark Eichorn published. In his article, If the FTC Comes to Call, Mr. Eichorn, an FTC administrator, wrote:

"All of our investigations are nonpublic. That means we can't disclose whether anyone is the subject of an investigation... FTC staff typically begins with an informal investigation, usually by reviewing publicly available information or even reaching out to the company directly... What we learn may lead us to conduct a full investigation….

https://www.ftc.gov/news-events/blogs/business-blog/2015/05/if-ftc-comes-call

Mr. Eichorn's statements, taken directly from the FTC website, confirm that government agencies begin their investigations in secret.

Other readily accessible information lets us know that all government agencies operate in the same, clandestine way. The agencies gather information until they choose to file a case. By the time an agency files a case, the investigators have an abundance of evidence that they believe will allow them to prevail in a lawsuit. They may sue the company, or they may bring charges against people that work in the company.

Leaders of the Securities and Exchange Commission reveal that they begin investigations in the same way as the FTC. Their investigations begin in any number of ways. Typically, they may notice unusual trading activity on public exchanges. Or, investigators may read something in the media that perks their interest. Another pathway to an investigation may start with a whistleblower-type complaint from a customer, or from an employee that wants to cash in on a reward that comes from a settlement.

Any of those scenarios could lead to a government investigation. The target of the investigation typically will not know about the investigation until the day of a subpoena, raid, or arrest. By that time, the agency will have gathered mountains of evidence.

Once an investigation begins, investigators within the agency, together with government attorneys, will make a decision on whether to proceed. If they choose to proceed, they may identify witnesses, subjects, or targets of the investigation. None of those people will typically be aware that government officials have begun making inquiries.

If an investigative agent or officer of a government agency gets a hint of potential illegal activity, either by a whistle-blower, via another active case, or through various data mining techniques, the agent will begin to investigate further. Business owners would be wise to remember that government investigators advance their careers by bringing people or businesses down. An investigator's motivation may influence the way he or she perceives business operations. Investigators tend to view evidence from a light that is unfavorable to the business or target.

Once government investigators identify a potential witness, subject, or target, they accumulate evidence that will sustain a finding of guilt. They do not look for evidence that will exonerate a person. Our team at Compliance Mitigation has come to expect that when investigators find evidence that would weaken an investigator's case, the agents will hide it.

Like sales leaders train their teams to overcome objections, investigative teams train their staff to look at all evidence with a suspicious eye. Unethical government investigators may even try to hide exculpatory evidence. Perhaps it will be helpful to think of it this way:

• A business owner strives to provide solutions for consumers. The business owner may strive to create jobs, with hopes of earning profits and paying taxes that sustain communities. Business leaders will incentivize people that perform well.
• A government investigator, on the other hand, advances his career in a different way. Rather than creating jobs or earning profits, the investigator prepares for promotions by identifying deception, or noncompliance with regulations. With the growth of our government, legislators and administrative agencies have many laws and regulations that lead to fines, injunctions, disgorgement, and potentially criminal prosecutions. Investigators advance their careers when they find wrongdoing.

For these reasons, every team member grows stronger with a better understanding of how to comply with regulations. That compliance training will help a business save the enormous expenditure of defending against a government investigation.

Further, the investment of time and energy into compliance training will help all team members become more profitable. When they communicate with coherent messaging, every person becomes "unconsciously conscious" about how to define excellence within every role in the company; they inherently know how to do the right thing, every time.

Good compliance brings numerous benefits to business owners. On the surface, comprehensive compliance leads to more effective internal fraud-prevention systems. Compliance systems can, however, also greatly improve document retention, thereby protecting the business in the event of a government investigation. Effective mitigation strategies should also help to shield business owners and team members from legal scrutiny.

The Investigative Phase:

To help business leaders appreciate the need for a compliance strategy and ongoing training, our team at Compliance Mitigation created this lesson to teach how investigations evolve. Generally speaking, many investigations begin with some type of complaint. As stated earlier, the complaint may come from disgruntled customers, competitors, suppliers, or the business community. Employees, too, may alert government officials to what they perceive as wrongdoing by acting as internal whistleblowers. They may even file civil whistleblower lawsuits, also known as qui tem cases, going after the massive rewards that result from successful whistleblower lawsuits.

In the macro sense, we know that high-pressure prosecutorial tactics lead to many government investigations. With our nation's commitment to mass incarceration, investigators feed the ecosystem that lead to more prosecutions and build population levels in prison.

Every year, our nation spends more than $100 billion to fill our nation's jails and prisons. To keep them full, investigators work to bring charges against more people and businesses for white-collar crimes. Although some people have a criminal mindset and begin businesses with an intent to deceive, or defraud victims, many people commit "crimes" without any intention or knowledge that they are violating laws. For example, the crime of cash structuring has led many people to prison, despite those people not having had any intent to break the law.

Cash structuring makes it a federal crime for any person to make a series of cash deposits in denominations in amounts of less than $10,000. If prosecutors can prove that a person made a series of deposits that were under $10,000 for the specific purpose of evading the requirement to file a currency transaction report, the prosecutors may bring criminal charges for cash structuring.

As an example, let's say a car dealer sells cars for $9,000. Let's say that the car dealer sold five cars each day. Each time he sold the car, he brought the money to the bank and made a deposit. If the person filled out a currency transaction report, the person would be in compliance with the law—even though he did not deposit $10,000. If the person did not complete the cash transaction report, that individual could be liable for a felony conviction, because authorities may accuse him of making a pattern of deposits that amount to less than $10,000 in order to avoid completing a cash-transaction report.

The person in the example above did not intend to violate the law. He completed an invoice system and he paid appropriate tax. The money lawfully belonged to him. Yet as a result of his not completing the necessary cash transaction report, prosecutors could bring charges; a judge could sentence him to prison. Members of our team have served time in prison alongside several people because they violated cash structuring laws. Those people did not intend on violating the law; they did not know laws restricted the way they could access or deposit their money.

In the law-and-order system of the United States, investigators have massive power. They may question individuals, and government attorneys may depose them under oath. The answers those witnesses give during government investigations can lead to further problems. Government investigators may incentivize people to talk by offering immunity in exchange for testimony, thereby putting more people under scrutiny and bringing more people into the system.

A hypothetical example may help to illustrate how a government investigation can begin. Let's say a policeman pulls a car over for erratic driving. The person driving the car may be a professional of some sort, a physician, for example. The physician may be driving under the influence.

Understanding that driving while intoxicated could threaten his license to practice medicine, the doctor may request to speak with a detective. The doctor may offer evidence of a fraudulent billing system to overcharge insurers. The detective may have authority to drop the driving offense in order to secure the physician's cooperation in a case that the physician would help to build. The threat of punishment, or loss of earnings, leads many people to become government informants that launch new investigations.

Investigators with various government agencies, including the FBI, the SEC, the FTC, the DHS, the ICE, or any other agency will make an initial determination on whether to advance the investigation. They may choose to proceed with a civil investigation, or they may work with law enforcement to launch a criminal investigation. Agencies have the authority to conduct civil investigations on their own. Criminal investigations, however, require prosecutors; those prosecutors may work with either with the US Attorney's Office, or with the state Attorney General's office.

Both civil and criminal investigations bring enormous pressure on a person. Every person on our team at Compliance Mitigation has personal experience with those investigations, and the consequences that follow. A case may begin with a civil investigation, but as evidence surfaces, the investigation may turn criminal at any time.

Once investigators choose to advance, they begin to subpoena documents related to the suspected activity. They may want to review bank and brokerage accounts, phone records, emails, social media etc. They can also request warrants to listen in on phone calls and review electronic activity in real time. Targets may or may not know that they're being investigated.

Investigators typically do not want a potential target to know anything about the investigation at the outset and will ask people they interview to be discreet and not mention anything. In some cases, investigators make their investigations obvious. They may want to push the target to act inappropriately, while the investigators gain or create additional evidence or charges.

At some point, a target becomes aware or suspicious that an investigation is underway. Whether investigators identify a person as a potential witness, subject, or target, the person would be well advised to understand options. People can take specific actions to minimize potential exposure.

The primary focus during the preliminary phase of a white-collar crime investigation is "what was done" and not "who did it." The earlier a person can persuade investigators or prosecutors that a crime did not take place, the more likely a person would be to get a better outcome.

As investigators and prosecutors spend more time on a case, they become more vested in getting the "win," which doesn't always equate with justice. They want a finding of guilt.

The Prosecution Phase:

If an investigative team feels it has sufficient evidence, then the government agency will bring public charges. In civil investigations, the agency may bring either an administrative proceeding, or it may file a lawsuit in federal court. With criminal charges, the prosecutor may file a criminal information. Prosecutors may also convene a grand jury. In a grand jury, the prosecutors present evidence to members of the grand jury, then request those members to indict the person or the company.

In either civil or criminal investigations, investigators may request a judge to issue a search warrant to raid a person's home or place of business. Citizens should expect that investigators will seize everything possible to help them build a case. They will take computers, cell phones, and all paper records that the warrant authorizes. The investigation will result in significant disruption to a person's life; it could also obliterate prospects to continue business operations.

Later, government lawyers will schedule interviews and depositions. They will subpoena bank records and question third parties. They do not spare any expense in gathering evidence that will help them build a case. In order to lessen exposure to risk, many people within the organization will offer evidence to assist the investigation—sometimes crawling deeper into an investigative trap.

Investigators typically coordinate a strategy to undermine the business and personal life at every level. Remember the nature of a government investigator. Perhaps an analogy is in order. I'll paraphrase an analogy from Aesop's Fables:

The scorpion wants to cross to the other side of the river, but it does not know how to make it across. When the scorpion sees an otter in the water, it requests to ride across the river on the otter's back.

The otter responds, "but if I let you get on my back, you'll sting me and I will die."

The scorpion responds, "why would I do that? I am asking you to help me."

The otter agrees and transports the scorpion across the river. Just before the scorpion climbs off the otter's back, the scorpion stings the otter.

The otter whimpers, "But why did you sting me? I helped you by bringing you to the other side of the river. Now I'm going to die."

The scorpion responds, "It's in my nature."

Remember that it's in the nature of everyone on the investigative team to convict people and businesses. People that build careers as government investigators want high profile convictions.

For this reason, business leaders and team members should adhere to best practices at all times.

Recommendation:

1. Create comprehensive policies that will keep the business and the team members free from the prying eyes of government investigators.
2. Keep accurate records and keep backup materials in cloud-based systems so they are always protected.
3. Create a well-documented process map to show the reasons behind every decision in the business.
4. Train the team members relentlessly.
5. Hire third-party auditors with appropriate levels of expertise to review corporate processes.

Some of the fallout from a government investigation includes reputational damage. Local and potentially national media will offer salacious details, fed by investigators. Internet searches may place a government's press release at the top of a search result. Such reputational damage can lead to enormous complications for a business, and for the individuals identified in the media report. Blogs and posting boards may follow, leading to further stress.

A government investigation will likely lead to the loss of clients, business associates, and abandonment from friends. To avoid being tainted by the investigation, people will scatter and sever ties.

Our team has numerous examples that show how government investigators will taint unrelated parties. We know of a medical office that terminated a woman's employment because authorities brought an indictment against her husband; investigators did not allege that she had anything to do with the crime. Investigators will use every tool in their arsenal to pressure people to cooperate with an investigation. As a result of their Grand Inquisitor tactics, collateral damage will follow.

Much like business owners crave favorable press for the services they provide, investigators welcome the shock and awe of a well-publicized investigation. For this reason, they frequently favor:

1. the pre-dawn raid at a target's home, with dozens of agents sporting massive firepower, and
2. the blitzkrieg arrest at a corporate headquarters, where scores of agents will come in with windbreakers emblazoned with branding of the government agency.

Investigators do not reserve such tactics for big-time drug dealers, Wall Street titans, or political stars. They use such aggressive tactics routinely, for strategic reasons. Investigators want targets to act irrationally. They want people to protest innocence, or to lie.

Although the target may be new to the proceeding, the investigator knows and understands that with a show of force, some people will lie to the investigators. When those people lie to a law-enforcement officer, they commit a federal criminal offense, under Title 18 of the United States Code, Section 1001. Investigators will use those lies as leverage, threatening imprisonment and other problems, to induce further cooperation.

The more people know, the better people can prepare. Our team at Compliance Mitigation will help you.

1. How Government Agencies Conduct Investigations

Business leaders and team members should understand how government agencies begin investigations. Typically, neither business leaders nor front-line staff even know that agencies may have taken an interest. Despite their lack of knowledge, investigators may be looking into operations at the company, or they may gather evidence against individuals that work in the company.

For more insight, we can turn to an article that Mark Eichorn published. In his article, If the FTC Comes to Call, Mr. Eichorn, an FTC administrator, wrote:

“All of our investigations are nonpublic. That means we can’t disclose whether anyone is the subject of an investigation... FTC staff typically begins with an informal investigation, usually by reviewing publicly available information or even reaching out to the company directly... What we learn may lead us to conduct a full investigation….

https://www.ftc.gov/news-events/blogs/business-blog/2015/05/if-ftc-comes-call

Mr. Eichorn’s statements, taken directly from the FTC website, confirm that government agencies begin their investigations in secret.  

Other readily accessible information lets us know that all government agencies operate in the same, clandestine way. The agencies gather information until they choose to file a case. By the time an agency files a case, the investigators have an abundance of evidence that they believe will allow them to prevail in a lawsuit. They may sue the company, or they may bring charges against people that work in the company.

Leaders of the Securities and Exchange Commission reveal that they begin investigations in the same way as the FTC. Their investigations begin in any number of ways. Typically, they may notice unusual trading activity on public exchanges. Or, investigators may read something in the media that perks their interest. Another pathway to an investigation may start with a whistleblower-type complaint from a customer, or from an employee that wants to cash in on a reward that comes from a settlement.

Any of those scenarios could lead to a government investigation. The target of the investigation typically will not know about the investigation until the day of a subpoena, raid, or arrest. By that time, the agency will have gathered mountains of evidence.

Once an investigation begins, investigators within the agency, together with government attorneys, will make a decision on whether to proceed. If they choose to proceed, they may identify witnesses, subjects, or targets of the investigation. None of those people will typically be aware that government officials have begun making inquiries.

If an investigative agent or officer of a government agency gets a hint of potential illegal activity, either by a whistle-blower, via another active case, or through various data mining techniques, the agent will begin to investigate further. Business owners would be wise to remember that government investigators advance their careers by bringing people or businesses down. An investigator’s motivation may influence the way he or she perceives business operations. Investigators tend to view evidence from a light that is unfavorable to the business or target.

Once government investigators identify a potential witness, subject, or target, they accumulate evidence that will sustain a finding of guilt. They do not look for evidence that will exonerate a person. Our team at Compliance Mitigation has come to expect that when investigators find evidence that would weaken an investigator’s case, the agents will hide it.

Like sales leaders train their teams to overcome objections, investigative teams train their staff to look at all evidence with a suspicious eye. Unethical government investigators may even try to hide exculpatory evidence. Perhaps it will be helpful to think of it this way:

• A business owner strives to provide solutions for consumers. The business owner may strive to create jobs, with hopes of earning profits and paying taxes that sustain communities. Business leaders will incentivize people that perform well.
• A government investigator, on the other hand, advances his career in a different way. Rather than creating jobs or earning profits, the investigator prepares for promotions by identifying deception, or noncompliance with regulations. With the growth of our government, legislators and administrative agencies have many laws and regulations that lead to fines, injunctions, disgorgement, and potentially criminal prosecutions. Investigators advance their careers when they find wrongdoing.

For these reasons, every team member grows stronger with a better understanding of how to comply with regulations. That compliance training will help a business save the enormous expenditure of defending against a government investigation.

Further, the investment of time and energy into compliance training will help all team members become more profitable. When they communicate with coherent messaging, every person becomes “unconsciously conscious” about how to define excellence within every role in the company; they inherently know how to do the right thing, every time.

Good compliance brings numerous benefits to business owners. On the surface, comprehensive compliance leads to more effective internal fraud-prevention systems. Compliance systems can, however, also greatly improve document retention, thereby protecting the business in the event of a government investigation. Effective mitigation strategies should also help to shield business owners and team members from legal scrutiny.

The Investigative Phase:

To help business leaders appreciate the need for a compliance strategy and ongoing training, our team at Compliance Mitigation created this lesson to teach how investigations evolve. Generally speaking, many investigations begin with some type of complaint. As stated earlier, the complaint may come from disgruntled customers, competitors, suppliers, or the business community. Employees, too, may alert government officials to what they perceive as wrongdoing by acting as internal whistleblowers. They may even file civil whistleblower lawsuits, also known as qui tem cases, going after the massive rewards that result from successful whistleblower lawsuits.

In the macro sense, we know that high-pressure prosecutorial tactics lead to many government investigations. With our nation’s commitment to mass incarceration, investigators feed the ecosystem that lead to more prosecutions and build population levels in prison.

Every year, our nation spends more than $100 billion to fill our nation’s jails and prisons. To keep them full, investigators work to bring charges against more people and businesses for white-collar crimes. Although some people have a criminal mindset and begin businesses with an intent to deceive, or defraud victims, many people commit “crimes” without any intention or knowledge that they are violating laws. For example, the crime of cash structuring has led many people to prison, despite those people not having had any intent to break the law.

Cash structuring makes it a federal crime for any person to make a series of cash deposits in denominations in amounts of less than $10,000.  If prosecutors can prove that a person made a series of deposits that were under $10,000 for the specific purpose of evading the requirement to file a currency transaction report, the prosecutors may bring criminal charges for cash structuring.

As an example, let’s say a car dealer sells cars for $9,000. Let’s say that the car dealer sold five cars each day. Each time he sold the car, he brought the money to the bank and made a deposit. If the person filled out a currency transaction report, the person would be in compliance with the law—even though he did not deposit $10,000. If the person did not complete the cash transaction report, that individual could be liable for a felony conviction, because authorities may accuse him of making a pattern of deposits that amount to less than $10,000 in order to avoid completing a cash-transaction report.

The person in the example above did not intend to violate the law. He completed an invoice system and he paid appropriate tax. The money lawfully belonged to him. Yet as a result of his not completing the necessary cash transaction report, prosecutors could bring charges; a judge could sentence him to prison. Members of our team have served time in prison alongside several people because they violated cash structuring laws. Those people did not intend on violating the law; they did not know laws restricted the way they could access or deposit their money.

In the law-and-order system of the United States, investigators have massive power. They may question individuals, and government attorneys may depose them under oath. The answers those witnesses give during government investigations can lead to further problems. Government investigators may incentivize people to talk by offering immunity in exchange for testimony, thereby putting more people under scrutiny and bringing more people into the system.

A hypothetical example may help to illustrate how a government investigation can begin. Let’s say a policeman pulls a car over for erratic driving. The person driving the car may be a professional of some sort, a physician, for example. The physician may be driving under the influence.

Understanding that driving while intoxicated could threaten his license to practice medicine, the doctor may request to speak with a detective. The doctor may offer evidence of a fraudulent billing system to overcharge insurers. The detective may have authority to drop the driving offense in order to secure the physician’s cooperation in a case that the physician would help to build. The threat of punishment, or loss of earnings, leads many people to become government informants that launch new investigations.

Investigators with various government agencies, including the FBI, the SEC, the FTC, the DHS, the ICE, or any other agency will make an initial determination on whether to advance the investigation. They may choose to proceed with a civil investigation, or they may work with law enforcement to launch a criminal investigation. Agencies have the authority to conduct civil investigations on their own. Criminal investigations, however, require prosecutors; those prosecutors may work with either with the US Attorney’s Office, or with the state Attorney General’s office.

Both civil and criminal investigations bring enormous pressure on a person. Every person on our team at Compliance Mitigation has personal experience with those investigations, and the consequences that follow. A case may begin with a civil investigation, but as evidence surfaces, the investigation may turn criminal at any time.

Once investigators choose to advance, they begin to subpoena documents related to the suspected activity. They may want to review bank and brokerage accounts, phone records, emails, social media etc.  They can also request warrants to listen in on phone calls and review electronic activity in real time. Targets may or may not know that they’re being investigated.

Investigators typically do not want a potential target to know anything about the investigation at the outset and will ask people they interview to be discreet and not mention anything. In some cases, investigators make their investigations obvious. They may want to push the target to act inappropriately, while the investigators gain or create additional evidence or charges.

At some point, a target becomes aware or suspicious that an investigation is underway. Whether investigators identify a person as a potential witness, subject, or target, the person would be well advised to understand options. People can take specific actions to minimize potential exposure.  

The primary focus during the preliminary phase of a white-collar crime investigation is “what was done” and not “who did it.”  The earlier a person can persuade investigators or prosecutors that a crime did not take place, the more likely a person would be to get a better outcome.

As investigators and prosecutors spend more time on a case, they become more vested in getting the “win,” which doesn’t always equate with justice. They want a finding of guilt.

The Prosecution Phase:

If an investigative team feels it has sufficient evidence, then the government agency will bring public charges. In civil investigations, the agency may bring either an administrative proceeding, or it may file a lawsuit in federal court. With criminal charges, the prosecutor may file a criminal information. Prosecutors may also convene a grand jury. In a grand jury, the prosecutors present evidence to members of the grand jury, then request those members to indict the person or the company.

In either civil or criminal investigations, investigators may request a judge to issue a search warrant to raid a person’s home or place of business. Citizens should expect that investigators will seize everything possible to help them build a case. They will take computers, cell phones, and all paper records that the warrant authorizes. The investigation will result in significant disruption to a person’s life; it could also obliterate prospects to continue business operations.  

Later, government lawyers will schedule interviews and depositions. They will subpoena bank records and question third parties. They do not spare any expense in gathering evidence that will help them build a case. In order to lessen exposure to risk, many people within the organization will offer evidence to assist the investigation—sometimes crawling deeper into an investigative trap.

Investigators typically coordinate a strategy to undermine the business and personal life at every level. Remember the nature of a government investigator. Perhaps an analogy is in order. I’ll paraphrase an analogy from Aesop’s Fables:

The scorpion wants to cross to the other side of the river, but it does not know how to make it across. When the scorpion sees an otter in the water, it requests to ride across the river on the otter’s back.

The otter responds, “but if I let you get on my back, you’ll sting me and I will die.”

The scorpion responds, “why would I do that? I am asking you to help me.”

The otter agrees and transports the scorpion across the river. Just before the scorpion climbs off the otter’s back, the scorpion stings the otter.

The otter whimpers, “But why did you sting me? I helped you by bringing you to the other side of the river. Now I’m going to die.”

The scorpion responds, “It’s in my nature.”

Remember that it’s in the nature of everyone on the investigative team to convict people and businesses. People that build careers as government investigators want high profile convictions.

For this reason, business leaders and team members should adhere to best practices at all times.

Recommendation:

1. Create comprehensive policies that will keep the business and the team members free from the prying eyes of government investigators.
2. Keep accurate records and keep backup materials in cloud-based systems so they are always protected.
3. Create a well-documented process map to show the reasons behind every decision in the business.
4. Train the team members relentlessly.
5. Hire third-party auditors with appropriate levels of expertise to review corporate processes.

Some of the fallout from a government investigation includes reputational damage. Local and potentially national media will offer salacious details, fed by investigators. Internet searches may place a government’s press release at the top of a search result. Such reputational damage can lead to enormous complications for a business, and for the individuals identified in the media report. Blogs and posting boards may follow, leading to further stress.

A government investigation will likely lead to the loss of clients, business associates, and abandonment from friends. To avoid being tainted by the investigation, people will scatter and sever ties.

Our team has numerous examples that show how government investigators will taint unrelated parties. We know of a medical office that terminated a woman’s employment because authorities brought an indictment against her husband; investigators did not allege that she had anything to do with the crime. Investigators will use every tool in their arsenal to pressure people to cooperate with an investigation. As a result of their Grand Inquisitor tactics, collateral damage will follow.

Much like business owners crave favorable press for the services they provide, investigators welcome the shock and awe of a well-publicized investigation. For this reason, they frequently favor:

1. the pre-dawn raid at a target’s home, with dozens of agents sporting massive firepower, and
2. the blitzkrieg arrest at a corporate headquarters, where scores of agents will come in with windbreakers emblazoned with branding of the government agency.

Investigators do not reserve such tactics for big-time drug dealers, Wall Street titans, or political stars. They use such aggressive tactics routinely, for strategic reasons. Investigators want targets to act irrationally. They want people to protest innocence, or to lie.

Although the target may be new to the proceeding, the investigator knows and understands that with a show of force, some people will lie to the investigators. When those people lie to a law-enforcement officer, they commit a federal criminal offense, under Title 18 of the United States Code, Section 1001. Investigators will use those lies as leverage, threatening imprisonment and other problems, to induce further cooperation.

The more people know, the better people can prepare. Our team at Compliance Mitigation will help you.

When it comes to limiting exposure from corporate fraud, we can learn from two philosophers, Socrates and Sun Tzu

• Socrates gave us the wise saying, "Know thyself"
• Sun Tzu followed with the equally wise saying, "Know thy enemy"

With Socrates, we're taught the importance of introspection. When we reflect on the connection between our past decisions and our where we are today, we see relationships. The decisions we made as children opened opportunities for us. Similarly, decisions we made in early adulthood influenced the careers that we built. As we look, we can see the road ahead. Theoretically, that exercise in introspection and contemplation should influence how we think and how we act. Just as the decisions we made yesterday influence where we are today, the decisions that we're making today will influence what we become in the months, years, and decades ahead.

Sun Tzu, author of The Art of War taught that in addition to knowing ourself, we also must know our enemy. The more we know about how our enemy thinks, the better we can prepare. Rather than defining an "enemy" as a human being, we can use the concept of an "enemy" to serve as a framework; besides being a person, an enemy may include a way of thinking, or an action, or a state of affairs that we want to avoid. If we consider "obesity" as an "enemy" of our goal to fitness, we may want to avoid actions that lead to obesity.

As business leaders, we want to avoid litigation and government investigations. That's the enemy. Unless we're lawyers or professionals that earn a living defending against litigation or government investigations, we want to minimize our exposure to activities that could lead to our being deposed, or standing as an "accused" inside of a courtroom. Litigation can bring excessive risks that threaten to undermine our businesses, our careers, and potentially our liberty.

For these reasons, we need to give a great deal of thought to our businesses, our careers, and how our decisions can put those businesses and careers on the pathway to success—or expose us to risks. We also need to think about how people that earn a living from either litigation or government investigations think. The more we know, the better we prepare ourselves to make good decisions, and the stronger we become at making decisions that can decimate all that we've worked to create.

Two political philosophers, John Locke and Thomas Hobbes, offer us more insight that we can use as we consider risk and mitigation. Thomas Hobbes, author of Leviathan, advised on how leaders should govern. At our core, Hobbes believed that as human beings we are basically beasts that fight for survival. To build a society, we need laws to keep people in order. Without strict laws, Hobbes believed that people would act in their own self-interest and to the detriment of the broader society. Enforcement of strict laws keeps people in order.

John Locke, on the other hand, believed that people are rational. We all behave in accordance with what we have learned. At conception, according to Locke, we begin with a blank slate. But every experience makes an impression upon us. Those impressions shape how we think and how we act.

• If we're born into struggle and chaos, we may learn how to adapt in accordance with what we see.
• If we're born in privilege, we act and believe in accordance with what we see.

As rational beings, Locke believed that just as we learned, we could also unlearn.

Unlike Hobbes, who believed that it was the threat of punishment that kept us in line, Locke held that our experiences determine who we are, and what we become. As a society, then, according to Locke, we should invest to help people learn how to behave in ways that advance our communities. Some may consider John Locke as the father of liberalism.

These philosophical understandings are all highly informative in assessing a company's vulnerability to fraud and how to best protect against it.

Philosophy and Risk Management in the Corporate Sectors:

Whether we own a business, or we work to earn a paycheck, we all advance when we think as if we're the CEO of our life. And as a CEO, we can rely upon some basic tenets that include:

• Tenet 1: We've got to start by defining success. What are we trying to achieve?
• Tenet 2: We've got to document the strategy that will take us from where we are to where we want to go.
• Tenet 3: We've got to create tools, tactics, and resources that will help us succeed, to achieve that documented strategy.
• Tenet 4: We've got to execute our strategy every day, and we've got to measure our progress.

To use lessons from Sun Tzu, we advance prospects for success when we minimize risks, or exposure to the enemy. To use lessons from Socrates, we need to introspect constantly. When Socrates said, "the unexamined life is not worth living," he advised that we all should make connections between the decisions we're making today, with the potential risks and rewards that we'll experience tomorrow.

We can lessen our risk levels, or our exposure to litigation and government investigations, when we understand the thinking patterns and motivations of regulators—or our opposition. Like Thomas Hobbes, government regulators believe that if we've come under their purview, we're beasts by nature—out to deceive and defraud consumers, as we prioritize our self-interest. Regulators will define success with injunctions, fines, disgorgement, corporate shutdowns, and decimation of businesses.

To lessen risks of litigation and government investigations, we're going to help people understand the various types of corporate fraud; people should have a clear understanding of the exposure that accompanies fraud. Through this lesson, people will learn why a personal investment in compliance and risk-mitigation goes a long way toward advancing prospects for success.

Various Type of Corporate Fraud:

Fraud charges may begin with either civil or criminal investigations; those investigations may stem from any number of alleged activities. An inexhaustive list of those activities may include:

1. bribery,
2. forgery,
3. copyright and trademark infringement,
4. overbilling,
5. price fixing,
6. embezzlement,
7. insider trading,
8. data theft,
9. unscrupulous telemarketing,
10. money laundering,
11. wire fraud,
12. mail fraud,

With more than 4,000 criminal statutes, and millions of pages of government regulations, investigators have many more charges at their disposal. Any of those laws or regulations can prompt a government investigation. For such reasons, business owners do well when they invest time and energy to learn about what happens when investigators bring allegations of fraud. Since the acts of employees can launch an investigation, it makes a lot of sense to include such training for all new hires.

Any decision made during the course of business can threaten to undermine the enterprise.

When business leaders help all members of the company's team understand these concepts, they are better situated to avoid problems that can lead to government investigations or criminal prosecutions. Authorities can charge executives for decisions they made while on the job, and they can also bring charges if people under their control engage in any type of act that they deem nefarious. Those charges can destroy careers, decimate shareholder value, and lead to the loss of liberty.

Even if an individual did not carry out the act, authorities may bring conspiracy charges. With a conspiracy charge, authorities will look to "overt acts" that they believe would further a conspiracy. Conspiracy charges prove to be very useful for prosecutors because they require a lower threshold of proof; further, conspiracy may not require intent, yet they could bring penalties that are identical to those that would exist if the fraud had been consummated.

One of the numerous cases brought during this past decade against healthcare providers may be instructive. A director of physical therapy regularly performed services for patients and supervised the services of other therapists; the director signed off on to approve the work of others.

To further the enterprise, a marketing company orchestrated media campaigns to spread awareness of the business's services. Rather than charging a set fee for its services, the healthcare provider paid the marketing company on a per-patient basis. If the marketing company's efforts resulted in a new patient, the healthcare provider would compensate the marketer.

The government launched an investigation for "patient brokering." Although the marketing company thought its billing approach would reward it for success, legislators deemed the practice illegal.

Patient brokering represents a hot-button topic for regulators. Prosecutors filed charges against many people within the organization. According to prosecutors, the CEO "should have been" better supervising the marketing department. The director of physical therapy "should have known" that the company engaged in patient brokering and that patient brokering was against the law. The marketing company should not have participated. Each person in the conspiracy bore liability. The director of physical therapy chose to fight the charges at trial. After a jury returned a guilty verdict, the judge sentenced him to 12 years in prison.

For these reasons, stakeholders should understand the nature of corporate fraud and the allegations that may follow from a government investigation. By learning how regulators attach risk and learning more about the risk-exposure to corporate fraud, we help people make better decisions.

Knowledge can prove an effective first line of defense against any potential exposure.

Most Common Types of Corporate Fraud

Every company faces unique challenges with respect to fraud, depending on the specific type of business. For example, a chain of pharmacies may not have the same level of exposure to the Foreign Corrupt Protection Act as a steel manufacturer that sells its products around the world. Nevertheless, in our era of big government, professionals that value their liberty should learn about the various types of fraud, and the risk exposure that accompanies allegations of wrongdoing. Such knowledge, theoretically, will help people make better decisions:

1. Corporate Account Abuse – All companyies maintain corporate accounts to track transactions. Those corporate accounts may allow employees to order shipments on credit from a supplier; or the company may issue corporate credit cards so that employees don't need to come out of pocket for travel expenses. Managers are often too overwhelmed to extensively review details, so long as the dollar amounts and types of expenses listed seem reasonable.

Corporate executives may use their corporate accounts to order car services, stay at nice hotels, take first-class flights, and enjoy other perks while on a business trip. Many think nothing of keeping the frequent flyer miles and hotel points, even though they technically belong to the company. Some credit-card benefits may include cash-back programs for expenses paid by an employee and reimbursed by the company.

What policies exist to track these transactions? Investigators with the IRS may want to know.

Members of our team served time with an executive that got wrapped up in a government investigation that stemmed from an alleged abuse of expenses. After a prosecution, a judge sentenced him to 17 years in prison.

If business owners or professionals blur the line with regard to how they account for expenses, they expose the company and their lives to potential civil or criminal liability.

1. Overbilling – Overbilling practices can also lead to charges of fraud. For example, we knew the owner of a plumbing supply company that used some of the products in inventory to repair rental properties. He then wrote off the items as business expenses, declaring he lost toilets as being lost due to damage. When a disgruntled employee turned him in to authorities, a government investigation ensued. He went to prison for tax fraud.

1. Vendor Systems – Managers should be aware of one of the more common variations of fraud: setting up phantom vendors and creating fraudulent invoices for non-existent goods and services.

This type of fraud requires planning and plotting by the perpetrators, but all managers can get wrapped up in the problem. Investigations that reveal this type of fraud can bring both civil and criminal liability.

1. Bribery – Either giving or receiving something in exchange for a purchase order or project can lead to liability.

Regardless of where the bribe takes place, criminal charges can follow. In fact, Oderbrecht, a large Brazilian company paid a $3.5 billion fine in 2016 for bribery; the CEO went to prison.

Smaller independent contractors sometimes feel pressured to offer bribes just to get their foot in the door and keep it there. For example, we knew a former military contractor and West Point graduate that paid a bribe in the form of a "no-show" job to someone instrumental in helping him get a sizable military contract. The contractor, in turn, billed the Army $422,704 for the purported work. After a government investigation, a six-year sentence followed.

1. Payroll – A company owner or manager has hiring discretion. Abusing that discretion, however, can lead to charges of corporate fraud. For example, if a company provides employment to a person that does not perform any duties for the business, investigators may allege a fraudulent transaction. The allegation may be that the company took an unfair business expense by providing employment to somone that did not provide any service.

1. Sales – If companies try to push revenues into a specific time frame in order to manipulate accounting, investigators may allege fraud. Remember, although we can control what we do, we cannot control what other people do. Accounting scandals can result when people turn their employers in to authorities.

Consider the case of an executive we knew that worked with one of the world's largest software companies. In the years 1998 through 2000, the company began prematurely reporting $3.3 billion in revenues from 363 software contracts, creating what the SEC later facetiously referenced as 35-day months. Wanting to exceed Wall Street expectations to support the company's rising stock price, the company used accounting trickery. The investigation resulted in the company paying a $225 million settlement; eight people went to prison.

1. Forward and Backdating of Documents –Dozens of companies faced option-backdating scandals, which led to government investigations, fines, huge disruptions within their organizations, and imprisonment for some. Although companies have the right to issue option grants, their accounting practices must comply with regulations to order to withstand the scrutiny of investigations.

1. Evading Management Supervision –Telemarketing employees may increase their compensation levels by increasing sales. If not trained properly, however, they may go off-script. When anyone deceives consumers to strike a deal, that person may put the employer, and his or her liberty at risk.

Specific Concerns for Senior Management

Business owners and managers want to increase value with job performance. Similarly, investigators will want to distinguish themselves on the job by building cases that lead to findings of culpability or guilt. With that in mind, leaders should develop an understanding of the following charges that investigators or prosecutors may bring:

1. Conspiracy – the company and management can be held liable for conspiracy, regardless of whether the perpetrators carried out the fraud. To prove a conspiracy existed, prosecutors must identify the elements of the offense—like a conversation to deceive consumers. Then, they must show that the participants engaged in an overt act, like designing a marketing brochure. The deception does not have to take place—only the effort to deceive. Those actions can lead to a conviction for conspiracy on any fraud charge, as many people in prison have learned.
2. Aiding and Abetting – Sadly, a well-intentioned effort at damage control can lead to charges of a cover-up. We know one person who enjoyed fishing and regularly caught fish without checking or worrying about the limits. The Coast Guard stopped him for a random check. An officer spotted the captain throwing fish overboard in an attempt to cover up a catch of under-sized fish. The Coast Guard pressured the captain to provide evidence against the owner, or face charges for aiding and abetting.

Investigators may bring charges for aiding and abetting for any number of reasons, including shredding or destroying corporate documents. A good compliance program can shield a leader from such charges, especially if they train regularly on the importance of compliance.

1. Obstruction of Justice – When investigators or prosecutors believe that a witness has willfully tried to block the investigation, they may bring charges for obstruction of justice. For example, by providing false statements, tampering with or destroying evidence—even before an investigation begins—can lead to criminal charges.

We got a chance to know a media mogul who once controlled the world's third-largest English-language newspaper empire, which published more than 300 newspapers including The Daily Telegraph (UK), Chicago Sun-Times (U.S.), The Jerusalem Post (Israel), National Post (Canada). He was world renowned and even anointed a Lord by the Queen of England. That, however, didn't keep him from getting charged with 8 counts of fraud for a payment of $5.5 million that allegedly unjustly enriched him. While fighting those charges, he removed 13 boxes of documents from his office, which were merely copies of documents he'd already handed over to the SEC. That action led to additional charges for obstruction of justice. The media mogul appealed and beat the original charges; yet he still had to serve 37 months of the original 78-month sentence because of the obstruction of justice charges.

1. Responsible Corporate Officer Doctrine - in some instances management and the company can even be held liable for failure to prevent a wrongful action, such as in instances of "public welfare" and certain regulatory offenses.

One such instance involved the sale and distribution of tainted eggs and salmonella, leading to criminal liability for the father and son in charge of the company, even though they were not directly involved with day-to-day quality control procedures.

1. Avoiding Fiduciary Duties – Honest Services fraud has led many people into the crosshairs of an investigation, and to prison. Politicians and corporate executives perform duties that can be interpreted as favors on any given day. Voting for a particular bit of legislation, for example, or developing a corporate complex in a specific area. Certain people stand to benefit from these decisions and if any of them can be reverse engineered back to a vote or decision, that can spell potential trouble.
2. Control Person Liability – a person who legally controls another person or entity (and it need not be complete control) can be held jointly and severally liable (i.e. responsible for the actions of) for the wrongful acts of the controlled person/entity.

We know a former executive of a publicly traded corporation. His company made an acquisition and he delegated material aspects of the merger to several other high-level executives to deal with the details. When the CEO signed and attested to documents filed with the SEC, he exposed himself to criminal liability. Later, prosecutors charged the CEO and other executives for not recognizing possible warning flags and relying on assurances by subordinates. The government claimed the CEO signed off on financial statements in "reckless disregard" of the truth of their contents. The conviction resulted in a fine of $1 million and a 10-year sentence.

The examples above show the risk exposure for corporate fraud. To minimize exposure to such risks, we encourage regular training on best-practices for compliance at every level of the organization.

When it comes to limiting exposure from corporate fraud, we can learn from two philosophers, Socrates and Sun Tzu

• Socrates gave us the wise saying, “Know thyself”
• Sun Tzu followed with the equally wise saying, “Know thy enemy”

With Socrates, we’re taught the importance of introspection. When we reflect on the connection between our past decisions and our where we are today, we see relationships. The decisions we made as children opened opportunities for us. Similarly, decisions we made in early adulthood influenced the careers that we built. As we look, we can see the road ahead. Theoretically, that exercise in introspection and contemplation should influence how we think and how we act. Just as the decisions we made yesterday influence where we are today, the decisions that we’re making today will influence what we become in the months, years, and decades ahead.

Sun Tzu, author of The Art of War taught that in addition to knowing ourself, we also must know our enemy. The more we know about how our enemy thinks, the better we can prepare. Rather than defining an “enemy” as a human being, we can use the concept of an “enemy” to serve as a framework; besides being a person, an enemy may include a way of thinking, or an action, or a state of affairs that we want to avoid. If we consider “obesity” as an “enemy” of our goal to fitness, we may want to avoid actions that lead to obesity.

As business leaders, we want to avoid litigation and government investigations. That’s the enemy. Unless we’re lawyers or professionals that earn a living defending against litigation or government investigations, we want to minimize our exposure to activities that could lead to our being deposed, or standing as an “accused” inside of a courtroom. Litigation can bring excessive risks that threaten to undermine our businesses, our careers, and potentially our liberty.

For these reasons, we need to give a great deal of thought to our businesses, our careers, and how our decisions can put those businesses and careers on the pathway to success—or expose us to risks. We also need to think about how people that earn a living from either litigation or government investigations think. The more we know, the better we prepare ourselves to make good decisions, and the stronger we become at making decisions that can decimate all that we’ve worked to create.

Two political philosophers, John Locke and Thomas Hobbes, offer us more insight that we can use as we consider risk and mitigation. Thomas Hobbes, author of Leviathan, advised on how leaders should govern. At our core, Hobbes believed that as human beings we are basically beasts that fight for survival. To build a society, we need laws to keep people in order. Without strict laws, Hobbes believed that people would act in their own self-interest and to the detriment of the broader society. Enforcement of strict laws keeps people in order.

John Locke, on the other hand, believed that people are rational. We all behave in accordance with what we have learned. At conception, according to Locke, we begin with a blank slate. But every experience makes an impression upon us. Those impressions shape how we think and how we act.

• If we’re born into struggle and chaos, we may learn how to adapt in accordance with what we see.
• If we’re born in privilege, we act and believe in accordance with what we see.

As rational beings, Locke believed that just as we learned, we could also unlearn.

Unlike Hobbes, who believed that it was the threat of punishment that kept us in line, Locke held that our experiences determine who we are, and what we become. As a society, then, according to Locke, we should invest to help people learn how to behave in ways that advance our communities. Some may consider John Locke as the father of liberalism.

These philosophical understandings are all highly informative in assessing a company’s vulnerability to fraud and how to best protect against it.

Philosophy and Risk Management in the Corporate Sectors:

Whether we own a business, or we work to earn a paycheck, we all advance when we think as if we’re the CEO of our life. And as a CEO, we can rely upon some basic tenets that include:

• Tenet 1: We’ve got to start by defining success. What are we trying to achieve?
• Tenet 2: We’ve got to document the strategy that will take us from where we are to where we want to go.
• Tenet 3: We’ve got to create tools, tactics, and resources that will help us succeed, to achieve that documented strategy.
• Tenet 4: We’ve got to execute our strategy every day, and we’ve got to measure our progress.

To use lessons from Sun Tzu, we advance prospects for success when we minimize risks, or exposure to the enemy. To use lessons from Socrates, we need to introspect constantly. When Socrates said, “the unexamined life is not worth living,” he advised that we all should make connections between the decisions we’re making today, with the potential risks and rewards that we’ll experience tomorrow.

We can lessen our risk levels, or our exposure to litigation and government investigations, when we understand the thinking patterns and motivations of regulators—or our opposition. Like Thomas Hobbes, government regulators believe that if we’ve come under their purview, we’re beasts by nature—out to deceive and defraud consumers, as we prioritize our self-interest. Regulators will define success with injunctions, fines, disgorgement, corporate shutdowns, and decimation of businesses.

To lessen risks of litigation and government investigations, we’re going to help people understand the various types of corporate fraud; people should have a clear understanding of the exposure that accompanies fraud. Through this lesson, people will learn why a personal investment in compliance and risk-mitigation goes a long way toward advancing prospects for success.

Various Type of Corporate Fraud:

Fraud charges may begin with either civil or criminal investigations; those investigations may stem from any number of alleged activities. An inexhaustive list of those activities may include:

1. bribery,
2. forgery,
3. copyright and trademark infringement,
4. overbilling,
5. price fixing,
6. embezzlement,
7. insider trading,
8. data theft,
9. unscrupulous telemarketing,
10. money laundering,
11. wire fraud,
12. mail fraud,
13.  

With more than 4,000 criminal statutes, and millions of pages of government regulations, investigators have many more charges at their disposal. Any of those laws or regulations can prompt a government investigation. For such reasons, business owners do well when they invest time and energy to learn about what happens when investigators bring allegations of fraud. Since the acts of employees can launch an investigation, it makes a lot of sense to include such training for all new hires.

Any decision made during the course of business can threaten to undermine the enterprise.

When business leaders help all members of the company’s team understand these concepts, they are better situated to avoid problems that can lead to government investigations or criminal prosecutions. Authorities can charge executives for decisions they made while on the job, and they can also bring charges if people under their control engage in any type of act that they deem nefarious. Those charges can destroy careers, decimate shareholder value, and lead to the loss of liberty.

Even if an individual did not carry out the act, authorities may bring conspiracy charges. With a conspiracy charge, authorities will look to “overt acts” that they believe would further a conspiracy. Conspiracy charges prove to be very useful for prosecutors because they require a lower threshold of proof; further, conspiracy may not require intent, yet they could bring penalties that are identical to those that would exist if the fraud had been consummated.

One of the numerous cases brought during this past decade against healthcare providers may be instructive.  A director of physical therapy regularly performed services for patients and supervised the services of other therapists; the director signed off on to approve the work of others. 

To further the enterprise, a marketing company orchestrated media campaigns to spread awareness of the business’s services. Rather than charging a set fee for its services, the healthcare provider paid the marketing company on a per-patient basis. If the marketing company’s efforts resulted in a new patient, the healthcare provider would compensate the marketer.

The government launched an investigation for “patient brokering.” Although the marketing company thought its billing approach would reward it for success, legislators deemed the practice illegal.

Patient brokering represents a hot-button topic for regulators.  Prosecutors filed charges against many people within the organization. According to prosecutors, the CEO “should have been” better supervising the marketing department. The director of physical therapy “should have known” that the company engaged in patient brokering and that patient brokering was against the law.  The marketing company should not have participated. Each person in the conspiracy bore liability. The director of physical therapy chose to fight the charges at trial. After a jury returned a guilty verdict, the judge sentenced him to 12 years in prison. 

For these reasons, stakeholders should understand the nature of corporate fraud and the allegations that may follow from a government investigation. By learning how regulators attach risk and learning more about the risk-exposure to corporate fraud, we help people make better decisions.

Knowledge can prove an effective first line of defense against any potential exposure.

Most Common Types of Corporate Fraud

Every company faces unique challenges with respect to fraud, depending on the specific type of business. For example, a chain of pharmacies may not have the same level of exposure to the Foreign Corrupt Protection Act as a steel manufacturer that sells its products around the world. Nevertheless, in our era of big government, professionals that value their liberty should learn about the various types of fraud, and the risk exposure that accompanies allegations of wrongdoing. Such knowledge, theoretically, will help people make better decisions:

1. Corporate Account Abuse – All companyies maintain corporate accounts to track transactions. Those corporate accounts may allow employees to order shipments on credit from a supplier; or the company may issue corporate credit cards so that employees don’t need to come out of pocket for travel expenses. Managers are often too overwhelmed to extensively review details, so long as the dollar amounts and types of expenses listed seem reasonable.

Corporate executives may use their corporate accounts to order car services, stay at nice hotels, take first-class flights, and enjoy other perks while on a business trip.  Many think nothing of keeping the frequent flyer miles and hotel points, even though they technically belong to the company. Some credit-card benefits may include cash-back programs for expenses paid by an employee and reimbursed by the company.

What policies exist to track these transactions? Investigators with the IRS may want to know.

Members of our team served time with an executive that got wrapped up in a government investigation that stemmed from an alleged abuse of expenses. After a prosecution, a judge sentenced him to 17 years in prison.

If business owners or professionals blur the line with regard to how they account for expenses, they expose the company and their lives to potential civil or criminal liability.

1. Overbilling – Overbilling practices can also lead to charges of fraud. For example, we knew the owner of a plumbing supply company that used some of the products in inventory to repair rental properties. He then wrote off the items as business expenses, declaring he lost toilets as being lost due to damage. When a disgruntled employee turned him in to authorities, a government investigation ensued. He went to prison for tax fraud.

1. Vendor Systems – Managers should be aware of one of the more common variations of fraud: setting up phantom vendors and creating fraudulent invoices for non-existent goods and services.

This type of fraud requires planning and plotting by the perpetrators, but all managers can get wrapped up in the problem. Investigations that reveal this type of fraud can bring both civil and criminal liability.     

1. Bribery – Either giving or receiving something in exchange for a purchase order or project can lead to liability.

Regardless of where the bribe takes place, criminal charges can follow.  In fact, Oderbrecht, a large Brazilian company paid a $3.5 billion fine in 2016 for bribery; the CEO went to prison. 

Smaller independent contractors sometimes feel pressured to offer bribes just to get their foot in the door and keep it there.  For example, we knew a former military contractor and West Point graduate that paid a bribe in the form of a “no-show” job to someone instrumental in helping him get a sizable military contract.  The contractor, in turn, billed the Army $422,704 for the purported work. After a government investigation, a six-year sentence followed.

1. Payroll – A company owner or manager has hiring discretion. Abusing that discretion, however, can lead to charges of corporate fraud. For example, if a company provides employment to a person that does not perform any duties for the business, investigators may allege a fraudulent transaction. The allegation may be that the company took an unfair business expense by providing employment to somone that did not provide any service.

1. Sales – If companies try to push revenues into a specific time frame in order to manipulate accounting, investigators may allege fraud. Remember, although we can control what we do, we cannot control what other people do. Accounting scandals can result when people turn their employers in to authorities.

Consider the case of an executive we knew that worked with one of the world’s largest software companies. In the years 1998 through 2000, the company began prematurely reporting $3.3 billion in revenues from 363 software contracts, creating what the SEC later facetiously referenced as 35-day months. Wanting to exceed Wall Street expectations to support the company’s rising stock price, the company used accounting trickery. The investigation resulted in the company paying a $225 million settlement; eight people went to prison.

1. Forward and Backdating of Documents –Dozens of companies faced option-backdating scandals, which led to government investigations, fines, huge disruptions within their organizations, and imprisonment for some. Although companies have the right to issue option grants, their accounting practices must comply with regulations to order to withstand the scrutiny of investigations.

1. Evading Management Supervision –Telemarketing employees may increase their compensation levels by increasing sales. If not trained properly, however, they may go off-script. When anyone deceives consumers to strike a deal, that person may put the employer, and his or her liberty at risk.   

Specific Concerns for Senior Management

Business owners and managers want to increase value with job performance. Similarly, investigators will want to distinguish themselves on the job by building cases that lead to findings of culpability or guilt. With that in mind, leaders should develop an understanding of the following charges that investigators or prosecutors may bring:

1. Conspiracy – the company and management can be held liable for conspiracy, regardless of whether the perpetrators carried out the fraud. To prove a conspiracy existed, prosecutors must identify the elements of the offense—like a conversation to deceive consumers. Then, they must show that the participants engaged in an overt act, like designing a marketing brochure. The deception does not have to take place—only the effort to deceive. Those actions can lead to a conviction for conspiracy on any fraud charge, as many people in prison have learned.
2. Aiding and Abetting – Sadly, a well-intentioned effort at damage control can lead to charges of a cover-up. We know one person who enjoyed fishing and regularly caught fish without checking or worrying about the limits. The Coast Guard stopped him for a random check. An officer spotted the captain throwing fish overboard in an attempt to cover up a catch of under-sized fish. The Coast Guard pressured the captain to provide evidence against the owner, or face charges for aiding and abetting.

Investigators may bring charges for aiding and abetting for any number of reasons, including shredding or destroying corporate documents. A good compliance program can shield a leader from such charges, especially if they train regularly on the importance of compliance.      

1. Obstruction of Justice – When investigators or prosecutors believe that a witness has willfully tried to block the investigation, they may bring charges for obstruction of justice. For example, by providing false statements, tampering with or destroying evidence—even before an investigation begins—can lead to criminal charges.

We got a chance to know a media mogul who once controlled the world's third-largest English-language newspaper empire, which published more than 300 newspapers including The Daily Telegraph (UK), Chicago Sun-Times (U.S.), The Jerusalem Post (Israel), National Post (Canada).  He was world renowned and even anointed a Lord by the Queen of England.  That, however, didn’t keep him from getting charged with 8 counts of fraud for a payment of $5.5 million that allegedly unjustly enriched him. While fighting those charges, he removed 13 boxes of documents from his office, which were merely copies of documents he’d already handed over to the SEC. That action led to additional charges for obstruction of justice.  The media mogul appealed and beat the original charges; yet he still had to serve 37 months of the original 78-month sentence because of the obstruction of justice charges.     

1. Responsible Corporate Officer Doctrine - in some instances management and the company can even be held liable for failure to prevent a wrongful action, such as in instances of “public welfare” and certain regulatory offenses.

One such instance involved the sale and distribution of tainted eggs and salmonella, leading to criminal liability for the father and son in charge of the company, even though they were not directly involved with day-to-day quality control procedures.   

1. Avoiding Fiduciary Duties – Honest Services fraud has led many people into the crosshairs of an investigation, and to prison. Politicians and corporate executives perform duties that can be interpreted as favors on any given day. Voting for a particular bit of legislation, for example, or developing a corporate complex in a specific area. Certain people stand to benefit from these decisions and if any of them can be reverse engineered back to a vote or decision, that can spell potential trouble.     
2. Control Person Liability – a person who legally controls another person or entity (and it need not be complete control) can be held jointly and severally liable (i.e. responsible for the actions of) for the wrongful acts of the controlled person/entity.
3.  

We know a former executive of a publicly traded corporation.  His company made an acquisition and he delegated material aspects of the merger to several other high-level executives to deal with the details. When the CEO signed and attested to documents filed with the SEC, he exposed himself to criminal liability. Later, prosecutors charged the CEO and other executives for not recognizing possible warning flags and relying on assurances by subordinates.  The government claimed the CEO signed off on financial statements in "reckless disregard" of the truth of their contents.  The conviction resulted in a fine of $1 million and a 10-year sentence.    

The examples above show the risk exposure for corporate fraud. To minimize exposure to such risks, we encourage regular training on best-practices for compliance at every level of the organization.

Hello to you. My name is Michael Santos and on behalf of everyone on our team, I welcome you. Our websites include Prison Professors dot com and Compliance Mitigation dot com.

We offer services to help people and businesses with risk mitigation and avoiding government investigations.

For those who have been targeted for prosecution, we create mitigation strategies. We help with sentencing and preparations for the journey ahead.

Visit us at either PrisonProfessors.com or ComplianceMitigation.com. Call or text 949-205-6056.

To understand corporate fraud, we should begin with a basic review of how our nation's founders structured our government. Most all people that attended school in America remember that we have three separate branches of government:

• • Legislative Branch: Includes the Senate and the House of Representatives. In these two houses of Congress, legislators pass laws that people in our country must follow. The Congress also controls the country's budget.
• • Executive Branch: Our president leads the Executive Branch, signing legislative bills into law, and overseeing numerous administrative and law-enforcement agencies to ensure people comply with the laws.
• • Judicial Branch: The president appoints judges at the district court level to make factual findings, appellate court judges to assess due process in the lower courts, and the Supreme Court, which has the final say over all courts in the United States.

Since we declared our independence, our nation's government has grown. As a result, every individual and every business is subject to following more than 4,500 laws and millions of pages of regulations in the federal system. Besides the federal system, each of our 50 states has its own body of laws. Like the federal government, each state has many regulatory agencies and law enforcement divisions that enforce compliance.

Despite starting with an intent to create jobs and solve problems for customers, on any given day, business leaders could violate regulations or laws. Sometimes, decisions made in the course of business can lead to civil or criminal investigations. Sadly, investigators can also draw rank-and-file employees into those investigations.

The investigations may start in any number of ways. Ordinarily, they begin in secret. Investigators gather information with hopes of building a case. They may seek documents to review. They may identify people with whom they want to speak:

• • As witnesses to a government investigation,
• • As subjects to a government investigation, or
• • As the target of a government investigation.

Whether a person responds as a witness, a subject, or a target, when people respond to government investigators, they expose themselves to potential liability. Despite not having known whether they've done anything wrong, people may face civil or criminal charges for corporate fraud, obstruction of justice, or any number of white-collar crimes.

With so much at stake, it makes sense for people to learn as much as possible about government investigations and how they operate. More knowledge about government investigations will help people make better decisions. In some cases, it may make sense to get counsel by hiring a lawyer who has experience with government investigations.

How do Government Investigations Begin?

Agencies like the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) publish articles on their websites that offer information on how they begin investigations. Those agencies do not hide the fact that they begin in secret. Neither business owners, nor the people that work in the businesses, will know that they're being investigated until the agencies are ready to reveal what they're doing. An agency will not make its case public until the investigative team believes it has the evidence to prevail in the lawsuit or complaint.

Investigators may begin making inquiries for any number of reasons. They may receive a tip, or a complaint. That tip may come from a disgruntled consumer, from a whistleblower, or from a representative at a consumer-protection group, such as the Better Business Bureau. Once the complaint begins, the investigators start working to gather data. If the data suggests that the target has violated regulations, or engaged in corporate fraud, the agency may choose to handle the matter administratively, or it may file a lawsuit in court.

Business owners and employees protect themselves when they understand the power of government investigators. That means, if they're talking over the phone, if they're sending an email, if they're sending a text message, they may want to think about how government investigators would construe their words. The more knowledge a person has about what could happen, the more cautious a person would be when communicating within the organization, or with prospective consumers.

For example, in a case that the Federal Trade Commission was making against a real estate developer that operated a call center, investigators conducted an undercover call. The undercover agents went through the company's process:

• • Step 1: They filled out a lead form on the company's website.
• • Step 2: They agreed to participate in a telephone pitch at a scheduled time.
• • Step 3: They started a recording before the pitch, identifying themselves as agents of the FTC, stating the date, time, and stating that the purpose of the call was to investigate the real estate developer.
• • Step 4: The agent's spoke with the developer's representative and asked questions with an intent of gathering evidence to build their case.
• • Step 5: After the call, the agent's marked the recording into evidence, without the representative ever knowing that she was speaking to a government agency, and that her voice had been recorded and would be used to further a government investigation.
• • Step 6: Later, after the FTC filed its lawsuit, the telemarketing sales agent became subjected to a deposition under oath. If investigators believed that the telemarketer had lied, or misled consumers, they could threaten her with either civil or criminal charges.

What is the takeaway from the information above?

As business owners, it's crucial to recognize that government investigators have many resources at their disposal. When they begin investigations, they have an interest in penalizing the company and the individuals that work with the company. Since the agents have authority to conduct their investigation in secret, they do not have a duty to let the person know that they're being recorded.

Our team at Compliance Mitigation wants to help both business leaders and team members protect themselves. As citizens, we protect ourselves when we document every stage of our processes. We want to show that we're acting in good faith, because government investigators will always view our decisions from a cynical perspective—exposing people and businesses to sanctions.

In the example given, the business could have protected itself by publishing the scripts it creates for telemarketers. Each of those scripts should have been stored. Then, the business should invest in training, confirming that each of the telemarketers understood the corporate messaging—messaging that should have been vetted by an attorney who would be knowledgeable about the telemarketing sales rule.

Further, the telemarketers should confirm how often they've been trained to speak in accordance with corporate messaging—and the penalties associated with noncompliance.

Businesses should also train team members on the penalties that follow for those found to have violated agency regulations, rules, or laws.

Legal Exposure

Business leaders may not be trained in law, but ignorance of the law will not shield them from a government investigation. Government investigators will rely upon a doctrine known as respondeat superior. The translation from Latin means "Let the master answer." In other words, government agents may hold employers liable for the acts that employees perform during the course of the job.

As an example, we'll offer insight into a case that led to imprisonment for several officers and directors of a publicly traded company. These are people that served time in federal prison, along with members of our team. We have personal knowledge from listening to their stories.

Those people have since been released from prison, and they've gone on to build productive lives. Since the purpose of this exercise is to help our course participants understand the risks, and not to hurt other people, we'll change the names of the people involved.

• • Those who want to research the matter may search for the U.S. Securities and Exchange Commission case: CV-03-2834 R (RNZBx) (C.D. Cal.)

While confined at the federal prison camp in Lompoc, I met James. As a young entrepreneur, he launched an Internet advertising company. James later hired other people to join his company, including Mike, who served as the company's senior vice president of business development, and Lisa, who served as the company's vice president of finance, Cindy, who served as the company's controller and director of finance.

Eventually, investment bankers brought the company public and it performed well during the dawn of the Internet era. Rather than having a background in finance, James expertise came from selling advertising. He relied upon his team to keep track of records. The company's compensation plan incentivized people to build higher levels of sales, as all of the company's leaders had stock in the company. If the company performed well with growing sales, the stock price would rise. If sales faltered, the company understood that stock price would drop in the market.

When a recession threatened to slow sales, Mike, Lisa, and Cindy hatched a scheme. They conspired with leaders at another company. Basically, company A agreed to purchase goods and services from company B, and company B agreed to purchase goods and services for the exact same amount from Company A. Company A sent money to company B, masquerading the transaction as a sale; then, company B sent the exact same amount of money back to company A, masquerading the transaction as a sale.

The sham purchases boosted sales so that investors would think that each company continued bringing in robust sales, even though the conspirators created those sales artificially. In reality, the conspirators understood that those transactions did not represent authentic sales from actual consumers.

As CEO and president of the company, James had direct supervisory authority over Mike, Lisa, and Cindy. James was not on the sales team, nor did he have a finance background. He lacked the requisite skill to understand how Lisa and Cindy would account for the transactions on the financial statements. Nevertheless, James bore responsibility for the actions of the people that worked for him.

Several years later, a larger company made an offer to acquire James's company. During the due diligence phase, forensic accountants researched all of the corporate records of James's company. When the auditors discovered the sham sales transactions, the accountants notified investigators at the Securities and Exchange Commission. Investigators subpoenaed the records, launching a government investigation.

Before the investigators began to ask questions, they had a clear understanding of the deception. Yet neither James, Mike, Cindy, nor Lisa knew that they had been under investigation. When the questions came, they did not know how to respond. Each person lied to the investigators. The people did not know that lying to a federal law enforcement officer exposed each person to a criminal conviction, and the potential for up to five years in federal prison.

As the civil investigation advanced, the agents questioned people as witnesses, as subjects, and as targets. People had to hire lawyers. When prosecutors threatened to bring criminal charges that could expose them decades in prison, the people began to cooperate in exchange for leniency.

I met both James and Mike in federal prison. Both of them told me that had they known the severity of the crime, and the punishments that could follow, they would not have participated.

James and Mike told me their perspectives at the time of the crime. When company A purchased a product from company B, and then company A sold a product to company B for the exact same amount, James and Mike believed that it was a wash. They did not see any harm coming from the transaction.

They did not consider the viewpoint of government regulators or prosecutors. In the eyes of law enforcement, James and Mike participated in a conspiracy to deceive investors. As such, they violated securities laws. By violating laws, they faced a criminal prosecution. With the government investigation and criminal prosecution, they had to spend millions of dollars in attorney fees. Further, they damaged their professional reputations, they lost their liberty, and they have to live as convicted felons.

Questions to consider:

• • As the company's CEO, what level of culpability did James have for the decisions that Mike, Lisa, and Cindy made?
• • In what ways would knowledge about criminal penalties influence corporate leaders like James, Mike, Lisa, and Cindy?
• • Who would law enforcement officials identify as victims in the case above?
• • What type of training could protect a company against decisions like those that James, Mike, Lisa, and Cindy made in the case example above?

During corporate training sessions, it may help for leaders to work through these types of role-playing situations. By helping people understand how government investigations begin, we can go a long way toward helping team members make better decisions. Hopefully, we can also reduce vulnerabilities to government investigations, and also reduce the number of people that face charges for white-collar crime.

Hello to you. My name is Michael Santos and on behalf of everyone on our team, I welcome you. Our websites include Prison Professors dot com and Compliance Mitigation dot com.

We offer services to help people and businesses with risk mitigation and avoiding government investigations.

For those who have been targeted for prosecution, we create mitigation strategies. We help with sentencing and preparations for the journey ahead.

Visit us at either PrisonProfessors.com or ComplianceMitigation.com. Call or text 949-205-6056.

To understand corporate fraud, we should begin with a basic review of how our nation’s founders structured our government. Most all people that attended school in America remember that we have three separate branches of government:

• • Legislative Branch: Includes the Senate and the House of Representatives. In these two houses of Congress, legislators pass laws that people in our country must follow. The Congress also controls the country’s budget.
• • Executive Branch: Our president leads the Executive Branch, signing legislative bills into law, and overseeing numerous administrative and law-enforcement agencies to ensure people comply with the laws.
• • Judicial Branch: The president appoints judges at the district court level to make factual findings, appellate court judges to assess due process in the lower courts, and the Supreme Court, which has the final say over all courts in the United States.

Since we declared our independence, our nation’s government has grown. As a result, every individual and every business is subject to following more than 4,500 laws and millions of pages of regulations in the federal system. Besides the federal system, each of our 50 states has its own body of laws. Like the federal government, each state has many regulatory agencies and law enforcement divisions that enforce compliance.

Despite starting with an intent to create jobs and solve problems for customers, on any given day, business leaders could violate regulations or laws. Sometimes, decisions made in the course of business can lead to civil or criminal investigations. Sadly, investigators can also draw rank-and-file employees into those investigations.

The investigations may start in any number of ways. Ordinarily, they begin in secret. Investigators gather information with hopes of building a case. They may seek documents to review. They may identify people with whom they want to speak:

• • As witnesses to a government investigation,
• • As subjects to a government investigation, or
• • As the target of a government investigation.

Whether a person responds as a witness, a subject, or a target, when people respond to government investigators, they expose themselves to potential liability. Despite not having known whether they’ve done anything wrong, people may face civil or criminal charges for corporate fraud, obstruction of justice, or any number of white-collar crimes.

With so much at stake, it makes sense for people to learn as much as possible about government investigations and how they operate. More knowledge about government investigations will help people make better decisions. In some cases, it may make sense to get counsel by hiring a lawyer who has experience with government investigations.

How do Government Investigations Begin?

Agencies like the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) publish articles on their websites that offer information on how they begin investigations. Those agencies do not hide the fact that they begin in secret. Neither business owners, nor the people that work in the businesses, will know that they’re being investigated until the agencies are ready to reveal what they’re doing. An agency will not make its case public until the investigative team believes it has the evidence to prevail in the lawsuit or complaint.

Investigators may begin making inquiries for any number of reasons. They may receive a tip, or a complaint. That tip may come from a disgruntled consumer, from a whistleblower, or from a representative at a consumer-protection group, such as the Better Business Bureau. Once the complaint begins, the investigators start working to gather data. If the data suggests that the target has violated regulations, or engaged in corporate fraud, the agency may choose to handle the matter administratively, or it may file a lawsuit in court.

Business owners and employees protect themselves when they understand the power of government investigators. That means, if they’re talking over the phone, if they’re sending an email, if they’re sending a text message, they may want to think about how government investigators would construe their words. The more knowledge a person has about what could happen, the more cautious a person would be when communicating within the organization, or with prospective consumers.

For example, in a case that the Federal Trade Commission was making against a real estate developer that operated a call center, investigators conducted an undercover call. The undercover agents went through the company’s process:

• • Step 1: They filled out a lead form on the company’s website.
• • Step 2: They agreed to participate in a telephone pitch at a scheduled time.
• • Step 3: They started a recording before the pitch, identifying themselves as agents of the FTC, stating the date, time, and stating that the purpose of the call was to investigate the real estate developer.
• • Step 4: The agent’s spoke with the developer’s representative and asked questions with an intent of gathering evidence to build their case.
• • Step 5: After the call, the agent’s marked the recording into evidence, without the representative ever knowing that she was speaking to a government agency, and that her voice had been recorded and would be used to further a government investigation.
• • Step 6: Later, after the FTC filed its lawsuit, the telemarketing sales agent became subjected to a deposition under oath. If investigators believed that the telemarketer had lied, or misled consumers, they could threaten her with either civil or criminal charges.

What is the takeaway from the information above?

As business owners, it’s crucial to recognize that government investigators have many resources at their disposal. When they begin investigations, they have an interest in penalizing the company and the individuals that work with the company. Since the agents have authority to conduct their investigation in secret, they do not have a duty to let the person know that they’re being recorded.

Our team at Compliance Mitigation wants to help both business leaders and team members protect themselves. As citizens, we protect ourselves when we document every stage of our processes. We want to show that we’re acting in good faith, because government investigators will always view our decisions from a cynical perspective—exposing people and businesses to sanctions.

In the example given, the business could have protected itself by publishing the scripts it creates for telemarketers. Each of those scripts should have been stored. Then, the business should invest in training, confirming that each of the telemarketers understood the corporate messaging—messaging that should have been vetted by an attorney who would be knowledgeable about the telemarketing sales rule.

Further, the telemarketers should confirm how often they’ve been trained to speak in accordance with corporate messaging—and the penalties associated with noncompliance.

Businesses should also train team members on the penalties that follow for those found to have violated agency regulations, rules, or laws.

Legal Exposure

Business leaders may not be trained in law, but ignorance of the law will not shield them from a government investigation. Government investigators will rely upon a doctrine known as respondeat superior. The translation from Latin means “Let the master answer.” In other words, government agents may hold employers liable for the acts that employees perform during the course of the job.

As an example, we’ll offer insight into a case that led to imprisonment for several officers and directors of a publicly traded company. These are people that served time in federal prison, along with members of our team. We have personal knowledge from listening to their stories.

Those people have since been released from prison, and they’ve gone on to build productive lives. Since the purpose of this exercise is to help our course participants understand the risks, and not to hurt other people, we’ll change the names of the people involved.

• • Those who want to research the matter may search for the U.S. Securities and Exchange Commission case: CV-03-2834 R (RNZBx) (C.D. Cal.)

While confined at the federal prison camp in Lompoc, I met James. As a young entrepreneur, he launched an Internet advertising company. James later hired other people to join his company, including Mike, who served as the company’s senior vice president of business development, and Lisa, who served as the company’s vice president of finance, Cindy, who served as the company’s controller and director of finance.

Eventually, investment bankers brought the company public and it performed well during the dawn of the Internet era. Rather than having a background in finance, James expertise came from selling advertising. He relied upon his team to keep track of records. The company’s compensation plan incentivized people to build higher levels of sales, as all of the company’s leaders had stock in the company. If the company performed well with growing sales, the stock price would rise. If sales faltered, the company understood that stock price would drop in the market.

When a recession threatened to slow sales, Mike, Lisa, and Cindy hatched a scheme. They conspired with leaders at another company. Basically, company A agreed to purchase goods and services from company B, and company B agreed to purchase goods and services for the exact same amount from Company A. Company A sent money to company B, masquerading the transaction as a sale; then, company B sent the exact same amount of money back to company A, masquerading the transaction as a sale.

The sham purchases boosted sales so that investors would think that each company continued bringing in robust sales, even though the conspirators created those sales artificially. In reality, the conspirators understood that those transactions did not represent authentic sales from actual consumers.

As CEO and president of the company, James had direct supervisory authority over Mike, Lisa, and Cindy. James was not on the sales team, nor did he have a finance background. He lacked the requisite skill to understand how Lisa and Cindy would account for the transactions on the financial statements. Nevertheless, James bore responsibility for the actions of the people that worked for him.

Several years later, a larger company made an offer to acquire James’s company. During the due diligence phase, forensic accountants researched all of the corporate records of James’s company. When the auditors discovered the sham sales transactions, the accountants notified investigators at the Securities and Exchange Commission. Investigators subpoenaed the records, launching a government investigation.

Before the investigators began to ask questions, they had a clear understanding of the deception. Yet neither James, Mike, Cindy, nor Lisa knew that they had been under investigation. When the questions came, they did not know how to respond. Each person lied to the investigators. The people did not know that lying to a federal law enforcement officer exposed each person to a criminal conviction, and the potential for up to five years in federal prison.

As the civil investigation advanced, the agents questioned people as witnesses, as subjects, and as targets. People had to hire lawyers. When prosecutors threatened to bring criminal charges that could expose them decades in prison, the people began to cooperate in exchange for leniency.

I met both James and Mike in federal prison. Both of them told me that had they known the severity of the crime, and the punishments that could follow, they would not have participated.

James and Mike told me their perspectives at the time of the crime. When company A purchased a product from company B, and then company A sold a product to company B for the exact same amount, James and Mike believed that it was a wash. They did not see any harm coming from the transaction.

They did not consider the viewpoint of government regulators or prosecutors. In the eyes of law enforcement, James and Mike participated in a conspiracy to deceive investors. As such, they violated securities laws. By violating laws, they faced a criminal prosecution. With the government investigation and criminal prosecution, they had to spend millions of dollars in attorney fees. Further, they damaged their professional reputations, they lost their liberty, and they have to live as convicted felons.

Questions to consider:

• • As the company’s CEO, what level of culpability did James have for the decisions that Mike, Lisa, and Cindy made?
• • In what ways would knowledge about criminal penalties influence corporate leaders like James, Mike, Lisa, and Cindy?
• • Who would law enforcement officials identify as victims in the case above?
• • What type of training could protect a company against decisions like those that James, Mike, Lisa, and Cindy made in the case example above?

During corporate training sessions, it may help for leaders to work through these types of role-playing situations. By helping people understand how government investigations begin, we can go a long way toward helping team members make better decisions. Hopefully, we can also reduce vulnerabilities to government investigations, and also reduce the number of people that face charges for white-collar crime.

Hello to you. My name is Michael Santos and on behalf of everyone on our team, I welcome you. Our websites include PrisonProfessors.com and ComplianceMitigation.com.

We offer services to help people and businesses with risk mitigation and avoiding government investigations.

For those who have been targeted for prosecution, we create mitigation strategies. We help with sentencing and preparations for the journey ahead.

Visit us at either Prison Professors dot com or compliance mitigation dot com. Call or text 949-205-6056.

Episode: 153: Why Every Business Should Invest in Compliance Training

If we ask any group to give us their impression of successful technology companies, we're likely to hear the following names:

• • Apple,
• • Google,
• • Facebook,
• • Amazon, and
• • Microsoft.

Many of us would consider the above-mentioned companies as models of excellence. They're famous for creating trillions of dollars in value, creating millions of jobs, generating billions of dollars in tax revenues, and providing enormous value to consumers.

Besides being success stories, the companies share something else in common.

Each of the above-mentioned companies has been the subject of a government investigation.

Our team at Compliance Mitigation does not make a judgment call with regard to the reasons behind the investigation, or the usefulness that the investigation would serve. Rather, we want more entrepreneurs, business leaders, and team members to understand how government investigations can threaten businesses and careers. The more a person knows, the more equipped a person becomes to make better decisions—hopefully to avoid being brought in as a witness, a subject, or a target of a government investigation.

From our perspective:

• • Business leaders define success by solving problems for customers, bringing value to shareholders, and creating jobs that contribute to vibrant communities.
• • When investigators begin their task, they define success by obstructing business operations, or complicating the lives of business leaders and the entire teams that they target.

Big-government leaders do not limit their attacks to the most successful companies. Elected officials create many government agencies that investigate business operations, business leaders, and people who have decision-making power in businesses. That means even small companies—and leaders of those companies that have decision-making power—are also vulnerable to government investigations and to charges for white collar crimes.

For that reason, it makes sense for business leaders to learn about government investigations. That insight can help people involved in businesses both save and make money.

You might ask, "How can investing in compliance help a company or people make more money?"

• • Compliance is all about transparency. It's about documenting processes and following best-practice approaches to business. The more we train people how to follow such procedures, the more effective we become at messaging. If we communicate well, we're more successful at showing the value proposition we offer.

How does investing in compliance help a company or an individual save more money?

• • Investing time and energy to develop effective compliance systems is like an insurance policy. It can lead to lower business insurance costs, and it can lower the enormous risks that business owners and decision makers have to reserve for litigation expenses. Good compliance systems can also lower the risk levels to corporate fraud.

Besides saving or making money, investing in ongoing compliance training represents an excellent insurance policy for the company. No company wants to become the subject of a government investigation. They are costly. In many cases, those costs exceed millions of dollars, both for the business and in many cases, for individuals. Investigations, potentially, can obliterate a business and lead to loss of liberty for some people.

Evaluation:

In June 2020, the Department of Justice's Criminal Division updated its Evaluation of Corporate Compliance Programs. Essentially, the government white paper offered guidelines for prosecutors to consider when they deliberated over offering leniency, non-prosecution agreements, or deferred-prosecution agreements to businesses. According to the guidance, prosecutors must question the business as follows:

1. 1. Is the corporation's compliance well designed?
2. 2. Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively?
3. 3. Does the corporation's compliance program work in practice?

If we know that prosecutors will ask those questions when assessing a business's compliance program, then business leaders and team members should ask similar questions. By investing time, energy, and resources to understand the importance of compliance, leaders can design a best-practice approach in the design of their compliance training.

Large companies may deploy resources to hire white-glove law firms that specialize in risk management. Those law firms may earn millions of dollars in fees by doing a deep dive to understand a company's operations. They will perform risk assessments to identify potential problems, assessing the regulatory landscape, the potential clients and the business partners, as well as transactions with foreign governments, payments to foreign officials, use of third parties, political contributions, and so forth.

Small to mid-size companies may not have the resources to hire such law firms. Yet if they're doing business, their lack of resources will not make them any less vulnerable to investigations and potential prosecution. In fact, those small- to medium-sized businesses may be easier targets for government investigators.

For this reason, all businesses benefit by helping team members learn more about the real-life consequences that followed for people that lost their liberty as a result of government investigations. Such training spreads awareness on the collateral consequences that follow bad decisions made during the course of business.

In making people more aware, our team at Compliance Mitigation can lessen risks for individuals, and for businesses that want to show a commitment to minimizing problems with regulators.

Companies that want to minimize risk levels would do well to train their team members. As we say at ComplianceMitigation.com, we did the time so you won't have to.

Corporate Fraud:

Internal corporate fraud is an ever-growing problem. Government prosecutors bring charges against thousands of people every month for white collar crimes. Those charges leave businesses vulnerable to ongoing problems, including massive legal fees, large fines, and potentially, criminal liabilities.

Management leaders may not have a clear process on how to prevent fraud, or how to respond if they uncover a fraud. We offer this introductory compliance course to assist companies with the following objectives:

1. (i) Help all team members understand the implications of a government investigation,
2. (ii) Identify best practices within corporate operations, and encourage employee compliance,
3. (iii) Improve messaging and corporate storytelling,
4. (iv) Minimize risk to litigation,
5. (v) Teach businesses how to develop a best-practice approach to respond to a government investigation,
6. (vi) Develop a mitigation strategy in the event of a government investigation.

We encourage company leaders to use the modules our team at Compliance Mitigation creates to help more people understand the costs and collateral consequences of a government investigation. Strength comes through proper preparation.

Members of our team have worked with numerous entrepreneurs that didn't know their business practices violated regulations, or how their policies could expose them to the enormous costs of litigation or a government investigation.

For example, a small business that advertised debt-relief services accepted advance payments from consumers. The business owner hired scores of telemarketers that sold the service. By accepting advance payments from consumers, the business leaders and decisions makers made themselves vulnerable to government investigations. They didn't understand the Federal Trade Commission's prohibitions against collecting advance fees.

Nor did they understand how a government investigation could lead to:

• • litigation,
• • an asset freeze, and
• • forfeitures that would cripple their business.

Good compliance training helps leaders make better decisions. By investing time to both learn and teach, leaders can create a culture that minimizes exposure to risks in an era of big government.

Larger companies have different complications. People become complacent, expecting that they're operating without risk to regulation or interference from government. Sadly, many rank-and-file employees get dragged into investigations. Their responses to the investigations can bring them into further problems. Our nation's prison system confines thousands of people that once worked in large companies. Prosecutors convicted those people of white-collar crimes, even though the people professed to be doing their jobs without any knowledge that they were breaking laws.

Other people began working in a company with the best of intentions. Yet something happened during the course of the person's career. Thinking that they could get away with something, they engaged in behavior without fully understanding the consequences. For example, consider the case of David Smith, who faced charges for crimes he committed while on the job as a manager at Quest Diagnostics.

David concocted a reimbursement scheme, creating systems that would lead his employer to reimburse him for fraudulent expenses that ran through a complex web of transactions. Smith created fake companies, invoices, and expense reports for payments he'd supposedly made on Quest's behalf. An internal investigation revealed that Smith had forged his boss's signature. The internal investigation uncovered losses totaling more than $1.2 million. Quest referred the case to the FBI. A judge sentenced Smith to five years in prison. Beside the financial loss and Smith's criminal liability, the distraction undermined confidence in Quest Diagnostic's management team.

Better compliance training serves companies and individuals by:

• • Broadening an awareness of the consequences that follow white collar crime,
• • Helping people think before they compromise their values,
• • Providing transparency into businesses processes, potentially lessening occurrences of internal corporate fraud.

Fraud Triangle:

People like David, in the example above, may not set out to engage in fraudulent behavior. Educators identified a "Fraud Triangle" that, theoretically, created a perfect storm for fraud. The three corners of the triangle include:

• • Opportunity: A person like David Smith had to be in the position that would allow him to create the scheme. If he were not in a managerial position, he would not have been able to initiate the scam.
• • Pressure: David Smith's supervisors may have considered him a competent, trustworthy employee. They may not have known pressures he felt in his personal life.
• • Rationalization: A person like David Smith may think that the company is so big and profitable that no one would even notice the missing funds.

Although hindsight is 20/20, we can always learn from real case studies:

• • What if Quest Diagnostics invested more resources in its compliance systems?
• • What if the training systems included lessons on the high costs of corporate fraud, both for the business and for the people that knowingly engage in white-collar crime?
• • David Smith may have been in a position to commit the fraud, he may have felt pressure, and he may have been able to rationalize his crime. The question remains: would better training have convinced him to act with more integrity?

Consider the example of Walt Pavlo, a person who writes a popular column for Forbes online. In January 2001, a federal judge sentenced Walt Pavlo to 41 months in federal prison. The sentence followed Pavlo's conviction for white-collar crimes that included money laundering, wire fraud, and obstruction of justice.

Walt had worked hard to earn an engineering degree and an MBA. Those credentials led to a leadership position at MCI WorldCom, one of the world's most valuable companies at the turn of the century. In his role as a finance manager, Walt described pressure he felt to report higher revenues than the company earned. The supervisors that oversaw his department wanted to boost WorldCom's financial performance, likely with pressure from the top. When Walt saw that other leaders entered fraudulent transactions, he felt justified to create his own fraud to enrich himself.

Ordinary people may not expect a multi-billion-dollar, global corporation like WorldCom to engage in fraud. Neither would they expect a family man with a professional education to exploit the fraud he discovered—then create his own scam.

Members of our team have met and interacted with thousands of people that served time for white-collar crimes. Despite leading or working with companies that had compliance-training manuals, they did not get the message.

Human Stories of Noncompliance and Fraud:

To make compliance a part of any corporate culture, leaders should include regular training that includes real-life stories. Those stories will help all team members appreciate the magnitude of problems that come with a government investigation. When leaders and team members grasp the severity of consequences, fewer people will participate in the type of behavior that can increase risk levels for businesses and organizations.

As an added bonus, by investing in compliance training that works, businesses and individuals may qualify for leniency or mitigation in the event that investigators begin asking questions.

It's impossible to predict who might commit fraud within an organization. The vast majority of people that engage in white-collar crime do not have criminal histories. Yet as the theory of the fraud triangle suggests:

• • those people may be in a position to commit fraud;
• • they may feel pressure that induces them to participate in fraud;
• • they may rationalize their behavior for any number of reasons.

Good training may lower risk levels for businesses and for individuals. Consider statements that our team at Compliance Mitigation found online:

•  According to Carnegie Mellon University's report on Insider Fraud in Financial Services, employees working in accounting, operations, sales, upper management, customer service, purchasing, and finance commit 75% of all corporate fraud.
•  Employers frequently assume that people always act with integrity, even after being hired. Since businesses incentivize managers to focus on meeting targets and goals rather than detecting fraud, commitment to ongoing compliance training frequently suffers.
•  In a report that Intel published, Grand Theft Data, inside sources cause 42% of all company security breaches. Those security breaches can lead to government investigations and litigation, exposing businesses and individuals to enormous levels of stress.
•  Corporate fraud represents one of the government's highest criminal priorities. The FBI estimates that white-collar crime costs Americans more than $300 billion annually. Those crimes run the gamut, from accounting schemes designed to deceive management, investors, auditors, and analysts about the true financial condition of a company, to cases involving fraud on the government and insurers, vendors, and clients. Government agencies scrutinize telemarketers, brokers, crypto currency businesses, cannabis, financial services, and the healthcare field.
•  The FBI partners with numerous agencies to capitalize on their experience in specific areas such as securities, taxes, pensions, energy, and commodities. The Bureau has placed greater emphasis on investigating allegations of these frauds, and FBI agents frequently broaden their reach by partnering with other agencies, such as the:
• •  Securities and Exchange Commission
  •  Commodity Futures Trading Commission
  •  Federal Trade Commission
  •  Internal Revenue Service
  •  Department of Labor
  •  Federal Energy Regulatory Commission,
  •  US Postal Service
  •  Secret Service.
  •  The Department of Homeland Security has its own independent mandate to criminally pursue fraud, financial crimes involving blackmail, contract fraud, grant fraud, money laundering, bribery, immigration fraud and program theft.
  •  Government investigations are likely to increase as a result of COVID-19. The CARES Act, subjects companies to additional scrutiny by establishing three new oversight bodies:
  •  (i) the Office of the Special Inspector General for Pandemic Recovery within the Treasury Department;
  •  (ii) the Pandemic Response Accountability Committee, consisting of the IGs for Departments of Defense, Education, Health and Human Services, Homeland Security, Justice, Labor and the Treasury, among others; and
  •  (iii) the Congressional Oversight Commission. In fact, dozens of cases have already been brought in connection with abuse of the Payroll Protection Program (PPP).

The Value Proposition

Building a compliance program will protect businesses, shareholders, communities, and individuals. On the surface, the investment may feel like a wasteful expense and hassle. Yet effective compliance programs represent an opportunity to both increase revenues and decrease risk for debilitating costs. They provide an excellent return with peace-of-mind. As an aside, they may pay for themselves in a variety of ways, including:

• • Eliminating fraud, waste, and theft of company assets
• • Creating a more inspiring corporate culture with transparency
• • Opening opportunities for increased efficiencies

An effective program will improve internal communications and messaging with prospective customers.

Good compliance metrics may also put a company in a good position for a deferred prosecution agreement (DPA), which may avoid total disruption. In these cases, the government brings an action but realizes it needs the assistance of the company itself in order to prove wrongdoing by the individuals involved. For example, federal prosecutors entered into Deferred Prosecution Agreement with Samsung Heavy Industries in 2019. The company agreed to settle matters by paying a fine and cooperating in with the government's investigation of bribery. The DPA likely saved millions of dollars for shareholders and may have spared some people from going to prison.

Maintaining compliance equips employees to do their jobs well, reach career goals, and keep customers happy. To paraphrase Warren Buffet:

• • It takes five years to grow a reputation, and five minutes to ruin it.

An integrated compliance program becomes a valuable corporate asset. Leverage the compliance training so that people can empower themselves to reach their highest potential. By showing everyone to act in accordance with corporate values, leaders protect the enterprise, the team members, and shareholder value.

Hello to you. My name is Michael Santos and on behalf of everyone on our team, I welcome you. Our websites include PrisonProfessors.com and ComplianceMitigation.com.

We offer services to help people and businesses with risk mitigation and avoiding government investigations.

For those who have been targeted for prosecution, we create mitigation strategies. We help with sentencing and preparations for the journey ahead.

Visit us at either Prison Professors dot com or compliance mitigation dot com. Call or text 949-205-6056.

Episode: 153: Why Every Business Should Invest in Compliance Training

If we ask any group to give us their impression of successful technology companies, we’re likely to hear the following names:

• • Apple,
• • Google,
• • Facebook,
• • Amazon, and
• • Microsoft.

Many of us would consider the above-mentioned companies as models of excellence. They’re famous for creating trillions of dollars in value, creating millions of jobs, generating billions of dollars in tax revenues, and providing enormous value to consumers.

Besides being success stories, the companies share something else in common.

Each of the above-mentioned companies has been the subject of a government investigation.

Our team at Compliance Mitigation does not make a judgment call with regard to the reasons behind the investigation, or the usefulness that the investigation would serve. Rather, we want more entrepreneurs, business leaders, and team members to understand how government investigations can threaten businesses and careers. The more a person knows, the more equipped a person becomes to make better decisions—hopefully to avoid being brought in as a witness, a subject, or a target of a government investigation.

From our perspective:

• • Business leaders define success by solving problems for customers, bringing value to shareholders, and creating jobs that contribute to vibrant communities.
• • When investigators begin their task, they define success by obstructing business operations, or complicating the lives of business leaders and the entire teams that they target.

Big-government leaders do not limit their attacks to the most successful companies. Elected officials create many government agencies that investigate business operations, business leaders, and people who have decision-making power in businesses. That means even small companies—and leaders of those companies that have decision-making power—are also vulnerable to government investigations and to charges for white collar crimes.

For that reason, it makes sense for business leaders to learn about government investigations. That insight can help people involved in businesses both save and make money.

You might ask, “How can investing in compliance help a company or people make more money?” 

• • Compliance is all about transparency. It’s about documenting processes and following best-practice approaches to business. The more we train people how to follow such procedures, the more effective we become at messaging. If we communicate well, we’re more successful at showing the value proposition we offer.

How does investing in compliance help a company or an individual save more money?

• • Investing time and energy to develop effective compliance systems is like an insurance policy. It can lead to lower business insurance costs, and it can lower the enormous risks that business owners and decision makers have to reserve for litigation expenses. Good compliance systems can also lower the risk levels to corporate fraud.

Besides saving or making money, investing in ongoing compliance training represents an excellent insurance policy for the company. No company wants to become the subject of a government investigation. They are costly. In many cases, those costs exceed millions of dollars, both for the business and in many cases, for individuals. Investigations, potentially, can obliterate a business and lead to loss of liberty for some people.

Evaluation:

In June 2020, the Department of Justice’s Criminal Division updated its Evaluation of Corporate Compliance Programs. Essentially, the government white paper offered guidelines for prosecutors to consider when they deliberated over offering leniency, non-prosecution agreements, or deferred-prosecution agreements to businesses. According to the guidance, prosecutors must question the business as follows:

1. 1. Is the corporation’s compliance well designed?
2. 2. Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively?
3. 3. Does the corporation’s compliance program work in practice?

If we know that prosecutors will ask those questions when assessing a business’s compliance program, then business leaders and team members should ask similar questions. By investing time, energy, and resources to understand the importance of compliance, leaders can design a best-practice approach in the design of their compliance training.

Large companies may deploy resources to hire white-glove law firms that specialize in risk management. Those law firms may earn millions of dollars in fees by doing a deep dive to understand a company’s operations. They will perform risk assessments to identify potential problems, assessing the regulatory landscape, the potential clients and the business partners, as well as transactions with foreign governments, payments to foreign officials, use of third parties, political contributions, and so forth.

Small to mid-size companies may not have the resources to hire such law firms. Yet if they’re doing business, their lack of resources will not make them any less vulnerable to investigations and potential prosecution. In fact, those small- to medium-sized businesses may be easier targets for government investigators.

For this reason, all businesses benefit by helping team members learn more about the real-life consequences that followed for people that lost their liberty as a result of government investigations. Such training spreads awareness on the collateral consequences that follow bad decisions made during the course of business.

In making people more aware, our team at Compliance Mitigation can lessen risks for individuals, and for businesses that want to show a commitment to minimizing problems with regulators.

Companies that want to minimize risk levels would do well to train their team members. As we say at ComplianceMitigation.com, we did the time so you won’t have to.

Corporate Fraud:

Internal corporate fraud is an ever-growing problem. Government prosecutors bring charges against thousands of people every month for white collar crimes. Those charges leave businesses vulnerable to ongoing problems, including massive legal fees, large fines, and potentially, criminal liabilities.

Management leaders may not have a clear process on how to prevent fraud, or how to respond if they uncover a fraud. We offer this introductory compliance course to assist companies with the following objectives:

1. (i) Help all team members understand the implications of a government investigation,
2. (ii) Identify best practices within corporate operations, and encourage employee compliance,
3. (iii) Improve messaging and corporate storytelling,
4. (iv) Minimize risk to litigation,
5. (v) Teach businesses how to develop a best-practice approach to respond to a government investigation,
6. (vi) Develop a mitigation strategy in the event of a government investigation.

We encourage company leaders to use the modules our team at Compliance Mitigation creates to help more people understand the costs and collateral consequences of a government investigation. Strength comes through proper preparation.

Members of our team have worked with numerous entrepreneurs that didn’t know their business practices violated regulations, or how their policies could expose them to the enormous costs of litigation or a government investigation.

For example, a small business that advertised debt-relief services accepted advance payments from consumers. The business owner hired scores of telemarketers that sold the service. By accepting advance payments from consumers, the business leaders and decisions makers made themselves vulnerable to government investigations. They didn’t understand the Federal Trade Commission’s prohibitions against collecting advance fees.

Nor did they understand how a government investigation could lead to:

• • litigation,
• • an asset freeze, and
• • forfeitures that would cripple their business.

Good compliance training helps leaders make better decisions. By investing time to both learn and teach, leaders can create a culture that minimizes exposure to risks in an era of big government.

Larger companies have different complications. People become complacent, expecting that they’re operating without risk to regulation or interference from government. Sadly, many rank-and-file employees get dragged into investigations. Their responses to the investigations can bring them into further problems. Our nation’s prison system confines thousands of people that once worked in large companies. Prosecutors convicted those people of white-collar crimes, even though the people professed to be doing their jobs without any knowledge that they were breaking laws.

Other people began working in a company with the best of intentions. Yet something happened during the course of the person’s career. Thinking that they could get away with something, they engaged in behavior without fully understanding the consequences. For example, consider the case of David Smith, who faced charges for crimes he committed while on the job as a manager at Quest Diagnostics.

David concocted a reimbursement scheme, creating systems that would lead his employer to reimburse him for fraudulent expenses that ran through a complex web of transactions. Smith created fake companies, invoices, and expense reports for payments he’d supposedly made on Quest’s behalf. An internal investigation revealed that Smith had forged his boss’s signature. The internal investigation uncovered losses totaling more than $1.2 million. Quest referred the case to the FBI. A judge sentenced Smith to five years in prison. Beside the financial loss and Smith’s criminal liability, the distraction undermined confidence in Quest Diagnostic’s management team.

Better compliance training serves companies and individuals by:

• • Broadening an awareness of the consequences that follow white collar crime,
• • Helping people think before they compromise their values,
• • Providing transparency into businesses processes, potentially lessening occurrences of internal corporate fraud.

Fraud Triangle:

People like David, in the example above, may not set out to engage in fraudulent behavior. Educators identified a “Fraud Triangle” that, theoretically, created a perfect storm for fraud. The three corners of the triangle include:

• • Opportunity: A person like David Smith had to be in the position that would allow him to create the scheme. If he were not in a managerial position, he would not have been able to initiate the scam.
• • Pressure: David Smith’s supervisors may have considered him a competent, trustworthy employee. They may not have known pressures he felt in his personal life.
• • Rationalization: A person like David Smith may think that the company is so big and profitable that no one would even notice the missing funds.

Although hindsight is 20/20, we can always learn from real case studies:

• • What if Quest Diagnostics invested more resources in its compliance systems?
• • What if the training systems included lessons on the high costs of corporate fraud, both for the business and for the people that knowingly engage in white-collar crime?
• • David Smith may have been in a position to commit the fraud, he may have felt pressure, and he may have been able to rationalize his crime. The question remains: would better training have convinced him to act with more integrity?

Consider the example of Walt Pavlo, a person who writes a popular column for Forbes online. In January 2001, a federal judge sentenced Walt Pavlo to 41 months in federal prison. The sentence followed Pavlo’s conviction for white-collar crimes that included money laundering, wire fraud, and obstruction of justice.

Walt had worked hard to earn an engineering degree and an MBA. Those credentials led to a leadership position at MCI WorldCom, one of the world’s most valuable companies at the turn of the century. In his role as a finance manager, Walt described pressure he felt to report higher revenues than the company earned. The supervisors that oversaw his department wanted to boost WorldCom’s financial performance, likely with pressure from the top. When Walt saw that other leaders entered fraudulent transactions, he felt justified to create his own fraud to enrich himself.

Ordinary people may not expect a multi-billion-dollar, global corporation like WorldCom to engage in fraud. Neither would they expect a family man with a professional education to exploit the fraud he discovered—then create his own scam.

Members of our team have met and interacted with thousands of people that served time for white-collar crimes. Despite leading or working with companies that had compliance-training manuals, they did not get the message.

Human Stories of Noncompliance and Fraud:

To make compliance a part of any corporate culture, leaders should include regular training that includes real-life stories. Those stories will help all team members appreciate the magnitude of problems that come with a government investigation. When leaders and team members grasp the severity of consequences, fewer people will participate in the type of behavior that can increase risk levels for businesses and organizations.

As an added bonus, by investing in compliance training that works, businesses and individuals may qualify for leniency or mitigation in the event that investigators begin asking questions.

It’s impossible to predict who might commit fraud within an organization. The vast majority of people that engage in white-collar crime do not have criminal histories. Yet as the theory of the fraud triangle suggests:

• • those people may be in a position to commit fraud;
• • they may feel pressure that induces them to participate in fraud;
• • they may rationalize their behavior for any number of reasons.

Good training may lower risk levels for businesses and for individuals. Consider statements that our team at Compliance Mitigation found online:

•  According to Carnegie Mellon University’s report on Insider Fraud in Financial Services, employees working in accounting, operations, sales, upper management, customer service, purchasing, and finance commit 75% of all corporate fraud.
•  Employers frequently assume that people always act with integrity, even after being hired. Since businesses incentivize managers to focus on meeting targets and goals rather than detecting fraud, commitment to ongoing compliance training frequently suffers.
•  In a report that Intel published, Grand Theft Data, inside sources cause 42% of all company security breaches. Those security breaches can lead to government investigations and litigation, exposing businesses and individuals to enormous levels of stress.
•  Corporate fraud represents one of the government’s highest criminal priorities. The FBI estimates that white-collar crime costs Americans more than $300 billion annually. Those crimes run the gamut, from accounting schemes designed to deceive management, investors, auditors, and analysts about the true financial condition of a company, to cases involving fraud on the government and insurers, vendors, and clients.  Government agencies scrutinize telemarketers, brokers, crypto currency businesses, cannabis, financial services, and the healthcare field.
•  The FBI partners with numerous agencies to capitalize on their experience in specific areas such as securities, taxes, pensions, energy, and commodities. The Bureau has placed greater emphasis on investigating allegations of these frauds, and FBI agents frequently broaden their reach by partnering with other agencies, such as the:
• •  Securities and Exchange Commission
  •  Commodity Futures Trading Commission
  •  Federal Trade Commission
  •  Internal Revenue Service
  •  Department of Labor
  •  Federal Energy Regulatory Commission,
  •  US Postal Service
  •  Secret Service.
  •  The Department of Homeland Security has its own independent mandate to criminally pursue fraud, financial crimes involving blackmail, contract fraud, grant fraud, money laundering, bribery, immigration fraud and program theft. 
  •  Government investigations are likely to increase as a result of COVID-19. The CARES Act, subjects companies to additional scrutiny by establishing three new oversight bodies:
  •  (i) the Office of the Special Inspector General for Pandemic Recovery within the Treasury Department;
  •  (ii) the Pandemic Response Accountability Committee, consisting of the IGs for Departments of Defense, Education, Health and Human Services, Homeland Security, Justice, Labor and the Treasury, among others; and
  •  (iii) the Congressional Oversight Commission.  In fact, dozens of cases have already been brought in connection with abuse of the Payroll Protection Program (PPP).

The Value Proposition

Building a compliance program will protect businesses, shareholders, communities, and individuals. On the surface, the investment may feel like a wasteful expense and hassle. Yet effective compliance programs represent an opportunity to both increase revenues and decrease risk for debilitating costs. They provide an excellent return with peace-of-mind. As an aside, they may pay for themselves in a variety of ways, including:

• • Eliminating fraud, waste, and theft of company assets
• • Creating a more inspiring corporate culture with transparency
• • Opening opportunities for increased efficiencies

An effective program will improve internal communications and messaging with prospective customers.

Good compliance metrics may also put a company in a good position for a deferred prosecution agreement (DPA), which may avoid total disruption. In these cases, the government brings an action but realizes it needs the assistance of the company itself in order to prove wrongdoing by the individuals involved. For example, federal prosecutors entered into Deferred Prosecution Agreement with Samsung Heavy Industries in 2019. The company agreed to settle matters by paying a fine and cooperating in with the government’s investigation of bribery. The DPA likely saved millions of dollars for shareholders and may have spared some people from going to prison.

Maintaining compliance equips employees to do their jobs well, reach career goals, and keep customers happy. To paraphrase Warren Buffet:

• • It takes five years to grow a reputation, and five minutes to ruin it.

An integrated compliance program becomes a valuable corporate asset. Leverage the compliance training so that people can empower themselves to reach their highest potential. By showing everyone to act in accordance with corporate values, leaders protect the enterprise, the team members, and shareholder value.

James Catlidge talks with us and reveals the preparations he made prior to reporting to a minimum security camp. You can learn from his positive mindset.

James Catlidge went to prison for offenses related to fraud. A federal judge sentenced him to serve a 60-month sentence. This podcast reveals his journey, including how he got out in less than 14 months.

This is the first conversation we recorded since his release. James reveals the mindset of knowing that he was going to prison.