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S P E A K U P
A N I M A H K O S A I
19 APRIL 2017
MALAYSIAN CORPORATE COUNSEL ASSOCIATION
KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION
W H AT D O Y O U N E E D T O S P E A K U P O N ?
Have your say!
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I wondered whether corporate scandals were due
to rogue employees (like Nick Leeson) or was
something deeper at work?
How many people really knew something was
wrong but stayed silent?
I discovered fear was common in corporations.
People look to leaders to make things right.
But if leaders are complicit?
It is us Lawyers, the Reluctant Heroes.
We have incredible Power to make things Right.
M Y I N Q U I RY
A C O U N S E L’ S N I G H T M A R E
W H E N C O U N S E L D I S C O V E R S
W R O N G D O I N G …
• I N H O U S E L A W Y E R & L A W F I R M B R I B E D M E X I C A N P U B L I C
O F F I C I A L S
S A C K E D I N H O U S E L A W Y E R W H I S T L E - B L O W S T O L E G A L H Q
H Q L E G A L I N F O R M S B O A R D
H A L F B A K E D I N V E S T I G AT I O N C L E A R I N G M E X I C O B U S I N E S S
H E A D
T H E L A W Y E R D I D I T !
WOAH! OK, HOW DO WE CLEAN
“The group has always had as a core element of
its global policy, a focus on both letter and spirit
of laws and regulations. Not just what is
permissible but what is prudent and responsible.
In hindsight as I reflect…. we all sometimes
allowed a focus on what was lawful and
compliant to obscure what should be best
practices for a global bank. Transparency is a
priority that HSBC and every bank should
always make a top priority even when it is
legally not required.”
HSBC Head of Compliance
W E J U S T D I D N ’ T D O E N O U G H
https://www.youtube.com/watch?v=36_kcLs8xTU start at 2 mins
"HSBC is being held accountable for
stunning failures of oversight – and
worse," said Breuer, "that led the bank
to permit narcotics traffickers and others
to launder hundreds of millions of
dollars through HSBC subsidiaries and
to facilitate hundreds of millions more in
transactions with sanctioned countries.”
Lanny Breuer, Asst AG
The US Senate said the bank had
operated a "pervasively polluted"
culture that lasted for years, allowing
HSBC to move billions around the
financial system for Mexican drug lords,
terrorists and governments on sanctions
lists. HSBC's Mexican operations
moved $7bn into the US operations, for
instance, which the Senate was told
was tied to drug money.
FILING FOR YE 2016
W E J U S T
D I D N ’ T D O
E N O U G H
W E L L S FA R G O : W H E R E W E R E T H E
L A W Y E R S ?
• And, yet again, we must ask the question, "where were the lawyers," the damning question first
formulated by Stanley Sporkin about corporate misdeeds decades ago when he was head of
the U.S. Securities and Exchange Commission Enforcement Division in the 1970s and then as
federal district judge from the mid-80s onward — and repeated in virtually every major
corporate scandal since.
• But can they not have been responsible, in some part, for fundamental failings in prevention
and in the failures to respond swiftly and comprehensively when wrongdoing was detected
• The [independent] investigation should undertake a complete assessment of causes and the
accountability of top management, including the lawyers, in failing to create the proper culture,
systems and processes for addressing blatantly improper actions by thousands of Wells Fargo
employees under a compensation system which rewarded "new" accounts and which lacked
checks and balances to prevent self-aggrandizing fraud.
LORD LEVESON, SFO V ROLLS ROYCE
“There were many and varied attempts to conceal
misconducts and obstruct detection through the
use of emails and memos with conversations not
recorded or kept off email; auditors who were best
placed to detect misconduct were not provided
with a complete picture, and the Board was
increasingly kept out of correspondence.”
One of the 12 charges:
“failure to prevent the provision by Rolls-Royce
employees of inducements which constitutes
bribery in its civil business in China and Malaysia
between the commencement of the Bribery Act
2010 and December 2013”
R E D F L A G S
• Whistleblowing, reports
• Competent people fired without due process, contracts not renewed
• Use of intermediaries, agents
• Unable to respond to Authorities queries
• Same contractors winning bids/same clients, favouritism to contractors
• Lack of valid certification
• Lavish gifts/entertainment of officials and clients
• Culture: Bullying, closed
• Legal/Compliance is kept out of strategic/business discussions
• Lack of Diversiy - Group Think, Wilful Blindness, Normalised Deviance
• Connected to Government - conflict of interest, influence by people in power
S T E P S T O TA K E
C U LT U R E
S T R U C T U R E
S Y S T E M S
P O L I C Y
S T E P S
• Top Level Commitment
• Structure: reporting line, Ethics/Audit Committee to Board, bypass management Policies and
Procedures, regular review
• Hotlines, investigation process, independent
• Risk Assessment Framework, e.g. use of agents
• Due diligence of intermediaries, terminate offenders, review commissions
• Training: compulsory, include third parties
• Dedicated and independent Audit, Compliance team with resources
• Audit on anti-corruption
• Procedures on entertaining govt officials, clients, receiving gifts (FCPA, MACCA)
• Disciplinary action - fair
• HR: vigilant over hiring, firing, follow process, job rotation
In their role as technical experts, general counsel and inside lawyers should
call out and reject certain courses of action underlying numerous corporate
• It is wholly inappropriate to ignore the law and hope the corporation can
get away with it, sometimes through bribes.
• It is wholly inappropriate to be Holmes’ “bad man” and decide whether to
follow the law based on a cost-benefit calculation: Do the benefits of
disobedience outweigh the costs of being caught?
• It is wholly inappropriate to look solely at the “face of the documents” and
render a hypertechnical judgment on legality that not only is outside the
range of reasonable discretion but also fails to ask hard questions about
what is the real purpose of the legal arrangements and what are likely, or
even possible, consequences.
– B E N H E I N E M A N J R . E X G E N E R A L C O U N S E L O F G E
C O U N S E L A N D T H E L E T T E R O F T H E L AW
–BEN HEINEMAN JR. EX GENERAL COUNSEL OF GE
“At the end of the day, in-house counsel are
guardians first and business partners second.
The fundamental tension [for in-house lawyers] is
between being partner to the business leaders and
the guardian of the business," he said. "The core
role is to be guardians and that can never be
compromised to be a good partner, although
there is plenty of pressure to do that.".”
ANIMAH KOSAI ON LINKEDIN
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