Jun 10

DOJ’s New Guidance Could be Trouble for Many Companies


On June 1, 2020, DOJ issued its guidance memorandum “Evaluation of Corporate Compliance Programs” (“Guidance”) that is meant to assist prosecutors in determining whether the corporation’s compliance program was effective at the time of an offense, and effective up to the time of the resolution of the matter, for purposes of calculating the appropriate criminal fine. The Guidance is an update from the last memorandum issued in April 2019. Like its predecessor, this Guidance emphasizes “Tone at the Top” and the responsibility of all members of the organization to contribute an ethical corporate culture. Even if you are familiar with the April 2019 version, this Guidance memorandum is a must-read for compliance and ethics personnel.

This paragraph struck me for the succinctness in describing the role and importance of ethical leadership:

“Beyond compliance structures, policies, and procedures, it is important for a company to create and foster a culture of ethics and compliance with the law at all levels of the company. The effectiveness of a compliance program requires a high-level commitment by company leadership to implement a culture of compliance from the middle and the top. The company’s top leaders – the board of directors and executives – set the tone for the rest of the company. Prosecutors should examine the extent to which senior management have clearly articulated the company’s ethical standards, conveyed and disseminated them in clear and unambiguous terms, and demonstrated rigorous adherence by example. Prosecutors should also examine how middle management, in turn, have reinforced those standards and encouraged employees to abide by them.”

According to a study by the Institute of Leadership & Management:

               • 63% of managers have been asked to do something contrary to their own ethical code. 

               • 43% have been told to behave in direct violation of their organization’s own values statements.

               • 9% have been asked to break the law. 

I’m not sure if these numbers are right, but if they are, the Guidance should be a wake-up call to all senior management and board directors. It is worth quoting directly from the Guidance critical factors relating to compliance and ethical leadership that the DOJ will be considering, and changes that company management can make:

·        “… whether the (compliance) program is adequately designed for maximum effectiveness in preventing and detecting wrongdoing by employees and whether corporate management is enforcing the program or is tacitly encouraging or pressuring employees to engage in misconduct.”

·        Whether “… there is not only a clear message that misconduct is not tolerated, but also policies and procedures – from appropriate assignments of responsibility, to training programs, to systems of incentives and discipline – that ensure the compliance program is well-integrated into the company’s operations and workforce.”

·        “… whether the company has established policies and procedures that incorporate the culture of compliance into its day-to-day operations.

·        Whether … “ the steps taken by the company to ensure that policies and procedures have been integrated into the organization, including through periodic training and certification for all directors, officers, relevant employees, and, where appropriate, agents and business partners.”

·        Whether… “the company provided tailored training for high-risk and control employees, including training that addresses risks in the area where the misconduct occurred? Have supervisory employees received different or supplementary training?”

·        Whether… “managers encouraged employees to act unethically to achieve a business objective, or impeded compliance personnel from effectively implementing their duties?”

·        Whether … “the company’s communications convey to its employees that unethical conduct will not be tolerated and will bring swift consequences, regardless of the position or title of the employee who engages in the conduct.”

The Guidance is a valuable resource companies can use to implement changes in compliance and ethical training, and policies and procedures to reduce risk in the event of a criminal investigation.

I sincerely hope that your company can check off all of these ethical compliance factors. It surely takes a commitment at all levels of an organization and effective ethical leadership.

Apr 27

Ethical Leadership Returning to Work


Today’s Blog entry is from Everyday Ethics, a weekly video series where we address timely ethics topics. 

There’s no way around it………if you are a leader considering how to marshall your employees for a return to work, there are special challenges ahead.  Today, we will discuss the considerations of an ethical leader in starting up business again in the post-Covid world. What is your number one duty as an ethical leader?  It is taking care of your people.  So, how should we approach it?  With kindness ….. empathy …… respect, and integrity!  Right??

Your employees have been facing different difficult personal situations while they were furloughed or working from home, and we should respect that by not forcing employees back too soon for a variety of logistical and health reasons.  Many people are either in a high-risk category or have someone at home who is.  Others have children at home who must be cared for.  The respectful thing to do may be to let the employees decide when they are ready to return, and not force them back.  AND, we still don’t know the extent of employee screening that will be required by public health officials.  So, there are logistical issues that need to be addressed that might be served by slowly reintegrating employees.

We have a moral responsibility to give employees a safe place to return to.  Have you considered how employees will maintain social distancing, and the workplace is sanitized?  The office layout may need to be changed and staggered shifts employed to promote social distancing.  Special cleaning and sanitation procedures may need to be implemented.  Regardless,  OSHA and CDC guidelines should be followed for both legal and health reasons. 

Be honest with employees about how you are providing a safe working environment and explain their responsibility to provide themselves and fellow workers with the best chance of avoiding the virus.  We are all in this together, so let’s give ourselves the best chance of defeating this killer.

Apr 18

Ethics Amid the Pandemic

Compliance , Ethics , My Life Before Prison

I know there are huge pressures on every business to survive during this challenging crisis. But now is not the time to let your guard down and expose your company to financial or ethics scandals.

In solving the ethics enigma, I talk about being hijacked by outside pressures as one of those circumstances leading to unethical behavior.   Over the last six weeks, we’ve seen massive layoffs and pay cuts.  People are hurting, so the number one outside pressure for many people is financial.  Is it so hard to see where your employees may cross the proverbial line to make their quotas?  Bribery to get business is always a risk. What about padding product testing results to meet demand? 

As a kid, I remember the public service announcement, “Do you know where your children are?”, with the implication being, do you know what they are doing. 

So I ask you, do you know what your people are doing?  What is the ONE thing you can do RIGHT NOW to reduce risk and prevent a sudden revelation of a financial or ethics scandal in your organization?  This is the time to be talking to your direct reports and making sure their direct reports are talking to them to spot red flags.  This is not the time to sweep suspicious behavior under the rug.  Help your team make the right choices and stay out of prison.

Aug 28

Knowledgelink Podcast: A Warning to White-Collar Professionals

Criminal Justice , Ethics , Family Impact , Life after Prison

When it comes to ethics, what you don’t know can hurt you.

J. Kevin Foster

I was honored to sit down with Jon Tota, CEO of Knowledgelink, to talk about the common ethical traps that can bring people and companies down the wrong path, and how to prevent failures of integrity through training, seminars, and consulting.

In this episode of Learning Life with Jon Tota, hear about my journey of a real estate executive turned-convict turned-ethics expert, who formed a plan to end the slippery slope of bad ethical decisions in the business world during his 28 days in solitary confinement.

This is a great interview for those in the business world that are concerned about the pitfalls that everyday people can find themselves inadvertently in.

Aug 08

Why Facebook’s $5B Fine is No Surprise


As reported in Vanity Fair (May 2019), Mark Zuckerberg told a friend in an IM, “You can be unethical and still be legal that’s the way I live my life.”

With that being said, no one should be surprised that Facebook agreed to pay a $5B fine for violating multiple previous agreements with the FTC and users. Next to generating a return for shareholders, the most important role of the C-Suite is to create an ethical culture, the true essence of leadership.

A strong ethical culture is good for business, the customers, and employees. Is it no wonder that Facebook has reputational problems? How should the nearly 36,000 Facebook employees be expected to remain ethical in their jobs when their CEO thinks it is ok to be unethical?

Under the new agreement, Zuckerberg and other executives will be required to certify personally, subject to civil and CRIMINAL penalties, Facebook’s compliance program. The line between unethical and illegal is very thin. The penalties for being unethical or illegal can be devastating to the individual and the organization. (photo courtesy of Bon Appetite)

Jun 07

CEO Integrity Failure Stats


It may only seem that many C-Suite executives fail to set the ethical bar high enough or not at all, but we now have some confirming statistics. According to a May PwC Strategy& CEO Success study of the world's 2,500 largest companies, more CEOs lost their jobs in 2018 to ethical malfeasance (39%) than poor financial performance (35%) or struggles with their board (13%). The most cited reasons for ethical lapse dismissals are more transparency, zero tolerance by boards, #metoo movement, social media and the news media chasing sensational stories. CEO turnover in 2018 was the highest in the 19-year history of the study at 17.5%.

Cultivation of an ethical corporate culture is one of the most important roles of an executive.  Ethical leadership means leading by example.  The days of the boards giving its C-suite executives slack is over with.  Let's hope that executives learn from the mistakes of their predecessors and exercise ethical leadership.

May 02

Top Three Takeaways from the Pharmaceutical Compliance Congress 2019, Part III

Compliance , Ethics

This is Part III of a three-part series of the key takeaways from CBI’s 16th annual Pharmaceutical Compliance Congress was April 16th – April 18th

Takeaway #3 – Given all the legal action in the industry, large pharma companies fear the cost of non-compliance far more than the cost of their compliance and training.  Can the smaller companies keep up? 

The large pharma companies have a lot of money and resources for compliance and ethics training, but how effective are their compliance and training programs when they are playing whack-a-mole with government regulators worldwide.  The compliance programs are getting more sophisticated with the use of artificial intelligence, but the data can be overwhelming and requires detailed analysis.  These larger companies are willing and able to spend what it takes to limit their legal liability and reputational harm.

The smaller and medium size pharma companies seemed shell shocked at the conference about the risks they are facing.  Their companies appear unlikely to have the money for data mining and compliance software, but it seems doubtful that any government agency will give them a break when an allegation arises.  Given the costs to bring new drugs to market and the scarcity of capital, management has hard decisions to make about where to invest scarce cash.

What should pharmaceutical and life science companies do to reduce risk?

Government prosecutors and regulators will not be letting up their scrutiny in this industry, and these companies will require aggressive compliance oversight and training at all levels of the organization.  To limit risk, pharma companies must be looking at and analyzing the massive reams of data they are collecting, and assume that their data will be used against them.  AI might be a tool gaining more use in the industry, but nothing beats human action based on reasoned analysis.

We don’t know how many of the actions giving rise to the settlements mentioned above could have been avoided with more aggressive ethics and code of conduct training.  We do know that the SEC and DOJ consider ethics in the corporate culture when negotiating settlements.  Companies are well-served if they can prove that bad actors in their organization are outliers and ignored company training and guidelines.  Massive settlements are often the result of massive integrity failures.  Effective ethics training has a high ROI if just one ethics breach is avoided.  How will you prepare for a sudden revelation of a scandal in your organization?

May 01

Top Three Takeaways from the Pharmaceutical Compliance Congress 2019, Part II

Compliance , Ethics

This is Part II of a three-part series of the key takeaways from CBI’s 16th annual Pharmaceutical Compliance Congress was April 16th – April 18th

Takeaway #2 – Expect a lot of uncertainty in how the government investigates and pursues criminal and civil allegations of wrongdoing. 

The U.S Healthcare Fraud and Enforcement Panel featured two current Assistant U.S. Attorneys (AUSAs) and three former AUSAs currently representing pharma clients.  Notably, the current AUSAs were very straight about how they source leads for investigations including whistleblowers, self-reporting, data mining, investigative reporting and public statements from pharma companies. 

The former AUSAs were not shy about pushing back against, what they consider, the lack of consistent definition and enforcement of federal laws pertaining to the pharma industry.  They pointed out that there is very little consistency between the different U.S. Attorney offices about what conduct constitutes a violation of pharma-related statutes.   The current AUSAs said that if their offices believed it was a violation, they would pursue the case regardless of what other offices would do.  This lack of consistent application of the law is a significant risk for the pharma industry, and it is easy to understand the frustration that pharma executives and counsel experience.

The DOJ encourages companies to self-report violations, and the DOJ will seek actions against individuals for personal liability.  However, pharma companies question how much cooperation credit they will receive.  There seems to be no consistent pattern of relief.

Part III will follow tomorrow.

Apr 24

Top Three Takeaways from the Pharmaceutical Compliance Congress 2019, Part I

Compliance , Ethics

CBI’s 16th annual Pharmaceutical Compliance Congress was April 16th – April 18th.  I was honored to be the keynote speaker on the last day of the conference but attended many of the sessions.  As an ethics expert, I live and breathe ethics in Corporate America, so I am always looking at the current trends.  I’ve known that the pharma industry has unique challenges, but never realized the depth of compliance and ethics risk until this month.  The pharma industry continues to get hit on all sides from the alphabet soup of government agencies including the DOJ, SEC, FDA, HHS, FTC and all 50 state AG’s, not to mention regulators in other countries where they operate.

Take-Away #1 – Recent Pharma settlements are probably an indication of risks that are not going away anytime soon.

 According to Potomac River Partners “Year-in-Review” presentation that kicked off the conference, recent US federal civil and criminal settlements include False Claim Act (FCA) violations for DJO Global ($7.6M), Alere ($33.2M), Rotech ($10M), Pfizer ($23.9M), Jazz ($57M pending resolution), Lundbeck ($52.6M pending resolution), Angiodynamics ($12.5M), Actelion ($360M) and AmerisourceBergen ($625M).  Insys settled kickback allegations for $150M.  Clovis Oncology paid $20M to settle SEC allegations.   Olympus Medical paid $85M to settle Federal Drug and Cosmetic Act (FDCA) violations.  An FCPA settlement cost Sanofi $25M.  EV3 and Covidien paid a combined $30.9 million for FDCA and FCA violations.

Some states have already passed, or are considering, bills for drug price transparency, allowance of off-label promotion, and banning manufacturer co-pay assistance for opioids.

California passed a data privacy law, so look for other states to follow suit.  Other nations are already following the EU’s GDPR guidelines on data privacy.  This area will be ripe for future enforcement.

Product liability suits have hit AbbVie’s AndroGel and J&J’s talc powder.  Anti-opioid actions enjoy bipartisan support at the federal and state level.  Expect more litigation and legislative action to crank up this year and next for these issues.

All these actions indicate the pharma industry has on-going problems with off-label selling, kickbacks related to medical provider dinners, speaking fees and grants, market access and technical violations of various federal laws.  The personnel posing the greatest risks are domestic and foreign salespeople and third-parties hired outside the U.S.

Part II will follow tomorrow.

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