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Corporate Government Scrutiny Intensifying – Five Tips to Handle New Mandates


12/3/15

The significant increase in regulatory enforcement activities was a key topic of discussion during the first Government Investigations and Civil Litigation Institute (GICLI) Conference. Held in New Orleans in October, the conference covered issues focused on legal, investigative, and risk management practices. It also looked at the growing need for experienced personnel who will be charged with handling investigations and litigation stemming from the new mandates. 
 
CohnReznick was a pillar sponsor of the GICLI Conference. We would like to share with you some of our top “lessons learned” from this event.
 
1.  The Yates Memo confirms that corporate fraud investigations are on the rise – and it’s the individual that may be on the hook.
Of all the topics discussed at the GICLI meeting, the Yates memo was a dominating subject. On September 9, 2015, the Deputy Attorney General of the U.S. Department of Justice, Sally Quillian Yates, issued a memo titled “Individual Accountability for Corporate Wrongdoing”. This memo, referred to as the Yates memo, sent a clear message – fighting corporate fraud and other misconduct is a top priority of the Department of Justice. In effect, the Yates memo directs all U.S. attorneys to increase their number of “white collar crime” investigations and to focus on individual accountability for misconduct rather than holding a corporation responsible through a monetary settlement.  
 
2.  Corporations remain overconfident in the protection of their data assets. 
In a recent report published by the Aspen Security Forum and Intel Security, just 27% of executives reported feeling very or extremely vulnerable today compared with 50% three years ago. This increasing level of confidence seems to be unjustified since the number of cyber-attacks continues to increase at an alarming rate. The world of business has exponentially transitioned to digital commerce with nearly all records, transactions, communication, accounting, and financial management now fully reliant on electronic processing. Nothing presented at GICLI was more prominently discussed as a threat to a corporation’s well-being than a cyber-attack. While the efficiencies gained from digital commerce have undoubtedly spurred economic growth, the potential for theft, loss of data, and disastrous business disruptions has also grown.  
 
3.  Investigation or civil litigation will tarnish your organization’s reputation regardless of outcome.  
Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.” This sentiment was echoed loudly at the conference. Attendees learned that there are few business events that adversely raise eyebrows and spur undesired public interest more than an announcement that an organization is under investigation or being sued in civil court.  
 
4.  Independent compliance assessments take the mystery out of meeting regulatory and legal requirements.  
The best way to prevent a government investigation or civil litigation action is to have an independent assessment of the existing compliance program and substantiated management procedures to assure legal and regulatory compliance. Too often, executives rely on unconfirmed self-reporting by subordinates who often feel pressured to only report good, unverified news, while avoiding reporting doubtful regulatory compliance issues.  
 
5.  GICLI’s education message extends beyond attorneys to include corporate executives as well.  
The GICLI agenda offered valuable insights and practical strategies for handling government investigations and related civil litigation. While the GICLI audience was primarily legal professionals, the educational sessions are also well-suited for corporate executives. GICLI educational panels included discussions on key factors or deficiencies that can spur an investigation as well as critical procedures and protocols that should be followed in the event of an investigation.      
 
What Does CohnReznick Think?
To prepare for an environment of more government investigations, companies must reduce their vulnerability to investigations. This means identifying management control and process weaknesses, as well as company vigilance around ethics compliance. Company management must deliver an ethical “tone at the top” and foster an “in-house” environment conducive to reporting compliance program breaches, ethics violations, or deviations from the code of conduct.
 
To maintain the fiscal and reputational health of an organization, organizations must take proactive measures to perform cybersecurity testing using the latest technology. Doing so will ensure the protective shield is in place, defending against hackers, thieves, malicious software (MALWARE), and other forms of cyber attacks. 
 
Contact
To learn more about CohnReznick’s services in support of corporate investigations, contact Vinni Toppi at vincenzo.toppi@cohnreznick.com or 732-635-3129, or William Monks at william.monks@cohnreznick.com or 732-590-3948.
 

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

 

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