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Compliance expert: Scandals underscore weaknesses of compliance programs


Although scandals involving Volkswagen and Wells Fargo have exposed the failures of regulatory compliance and compliance infrastructures, it is still hard to convince some corporate executives to invest in compliance programs, according to Ted Banks.

Banks, an attorney concentrating on general corporate and antitrust matters, is also the president of Compliance & Competition Consultants, LLC, a firm devoted to assisting corporations in the development of effective compliance programs. He spoke with Wolters Kluwer about the changes and challenges in the field of corporate compliance. Banks is the author (along with Frederick Banks) of Corporate Legal Compliance Handbook and Distribution Law: Antitrust Principles and Practice.

What do you think were the most significant developments in the area of corporate compliance over the past year?

Prosecutions regarding compliance failures at companies like Volkswagen and Wells Fargo where the failures encompassed not only regulatory compliance but also their compliance infrastructure, particularly hotlines.

What do you expect will be the biggest pain point for compliance departments over the coming year?

Uncertainty over government policies, such as continued utility of the Department of Justice compliance guidance.

Tell us about some of your professional triumphs: a big court win, or an instance where your wise counsel averted a potential disaster.

In several encounters with government enforcers, I’ve found receptivity to listen to evidence about the existence of a compliance program. In one matter in particular, the SEC declined to bring an enforcement action against the company when presented with detailed evidence of the company’s compliance program, and illegal conduct by one employee that was clearly contrary to policy and training.

How has the day-to-day practice of compliance law changed since you started?

When I started, there was barely any mention of “compliance law” in the legal community. The closest concept was “preventive law,” and it was a subject for law review articles as a somewhat radical idea. Now, although “compliance” has a variety of definitions depending on the context, the concept is well-accepted throughout the business world.

How has the state of the law changed since you started?

There are more areas that are regulated now, which requires a compliance program to prevent violations. For example, the entire notion of privacy and protected personal information is a relatively recent development, and when this is combined with the technological developments in connected computers, there is an area of compliance concern that requires constant vigilance to keep up on both technical and legal changes.

What do you find most enjoyable about the practicing in the area of corporate compliance law?

I characterize litigation as cleaning up someone’s mess. In contrast, it is gratifying (and cost- effective) to help an individual or company do the right thing in the first place and minimize the risks of civil or criminal legal troubles.

What do you find most frustrating or tedious?

Some people are still not convinced that they need to invest in a compliance program for their company. If a compliance program is successful, nothing will happen, and it is very hard to prove a negative (that the absence of legal or reputational problems was due to a compliance program). Many companies that have not had serious legal problems because they have been lucky are still hard to convince otherwise.

What continues to surprise you about the employees?

Creative ideas to support doing business with integrity can come from all levels of a company. The suggestions of line workers can be as good or better than those coming from highly paid execs.

What compliance mistakes do you see often repeated (either violations of the law or procedural mishaps during litigation)?

Some companies tend to think that just putting out a policy, or distributing a computer-based training program is a sufficient compliance program. It is not. If an area has been identified as a significant legal risk for a company, there needs to be a complete program, embodying all of the elements identified in the Federal Sentencing Guide. Most importantly, the compliance program should be audited to make certain it is being executed, and evaluated to ensure that the message is taking hold with the employees.

Best advice for new associates or new partners?

Lawyers (both partners and associates) tend to treat a compliance assignment the same way they would write a brief: an emphasis on thorough legal coverage of a subject with formalistic language. It is easy to spot a compliance policy written by a lawyer: it is turgid and lengthy. Instead, any lawyer creating a compliance policy needs to put himself or herself in the shoes of the employee. What does the employee need to know to do his or her job? How does the employee communicate? Where can the employee go for more information? Hint: if you are writing something for employees that has footnotes, you are blowing it.

Ted Banks Theodore L. Banks (Ted) is a partner in the firm of Scharf Banks Marmor LLC in Chicago, where his practice concentrates on general corporate and antitrust matters. He is also President of Compliance & Competition Consultants, LLC, a firm devoted to assisting corporations in development of effective compliance programs. He is an Adjunct Professor of Law at Loyola University (Chicago) School of Law, where he teaches corporate compliance. He currently serves as a compliance monitor on behalf of the Federal Trade Commission and the Competition Bureau of Canada.