Compliance and Ethics in Review: July 12, 2018

The Latest and Greatest Industry News

Money-laundering, ethical transformations, FCPA enforcement, and more

Each week, Convercent will highlight some of the top stories and most newsworthy events in the ethics and compliance industry. The focus is global, but you might be surprised by how relevant these stories are, both across borders and businesses.

Former American Senior Communities COO gets 57-month prison sentence

Former American Senior Communities Chief Operating Officer Daniel Benson was sentenced to 57 months in federal prison for his role in a $19.4 million fraud, kickback and money-laundering scheme.

A tool like Convercent’s Disclosures Manager is one way to accomplish this, along with an emphasis on proactive ethics throughout the entire organization.

Barnes & Noble Fires C.E.O. Without Severance but Doesn’t Explain Why

Barnes & Noble fired its chief executive, Demos Parneros, for violating the company’s policies, but no specific policies were mentioned. According to a statement released by Barnes & Noble, Mr. Parneros was not terminated because of “any disagreement with the company regarding its financial reporting, policies or practices or any potential fraud relating thereto.”

It’s worth noting that Mr. Parneros is the company’s fourth chief executive to depart in five years, and he only held his role for little over a year. The previous chief executive, Ronald Boire, had a similarly short tenure at the company.

SAS officers get morality, ethics lessons

Australia’s Special Air Forces Regiment is undergoing an ethical transformation. Officers are being instructed on leadership, morals, and ethics ahead of a report detailing decisions made in Afghanistan, including whether any Australian troops have committed war crimes. The focus will be on building morale and strengthening culture, and while this news is recent, the reforms first began in 2015.

It’s unfortunate that potentially unethical behavior is the driving force behind an initiative like this, but it’s also great to see a country focusing on ethics within their armed forces. In fact, Australia has been working to improve its ethical landscape in a variety of ways. For example, a new whistleblower regime with increased protections for whistleblowers was announced for mid-2018.

Koppel accountant sentenced in Trombetta tax fraud case

A Pennsylvania accountant involved in a tax fraud case against former PA Cyber Charter School founder has been sentenced. The accountant, Neal Prence, was sentenced in federal court on Monday July 9th to serve one year and one day in prison for a count of tax conspiracy. Prence was indicted by a federal grand jury in 2013 and ultimately pleaded guilty to the charge in September 2016.

According to a news release, Prence, who was a certified public accountant, was “instrumental” in helping the school’s founder, Nick Trombetta, funnel approximately $8 million from PA Cyber through an entity known as NNDS and then to a company called Avanti Management Group where Trombetta had “free access” to the money.

Acting chief compliance officer named for new MSU office

Michigan State University has been inundated with scandal recently. Now, the university’s administration is putting a greater emphasis on ethics and compliance. On July 5, interim Michigan State University President John Engler appointed Nicholas Wittner to lead the university’s new Office of Enterprise Risk Management, Ethics and Compliance. Wittner is now the new office’s acting director, and also the university’s chief compliance officer (CCO). His position reports to the president and includes regular independent reporting to the Board of Trustees through its newly established Committee on Audit, Risk and Compliance.

U.S. Bribery Enforcement Gained Steam in Quarter

According to the Wall Street Journal, after a slow start to 2018, Foreign Corrupt Practices Act (FCPA) enforcement activity increased in the second quarter, raising the potential for a banner year in FCPA-related penalties collected. Collectively, the Securities and Exchange Commission and Department of Justice initiated enforcement actions against five different entity groups and five individuals. Total sanctions, including those payable to foreign regulators, were more than $1.2 billion. The SEC and DOJ continue to investigate dozens of companies for potential FCPA violations. 

This increase in activity underscores the importance of proactive ethics and compliance… preferably before the government comes knocking on your door. As we’ve discussed on the blog before, “checking boxes” might have worked for a while, but it’s no longer enough.

Tech to the rescue in compliance

Earlier this year, PwC released its annual State of Compliance Study, and industry leaders from around the globe continue to analyze the findings. The piece of news linked above comes from IT-Online, a news organization for the IT industry in South Africa. Shirley Machaba, governance, risk and internal audit leader for PwC Africa, shared a particularly interesting quote:

“Leading organisations are excelling in this environment by taking more-comprehensive approaches to compliance, as enabled by more information and better technology tools. As regulators become increasingly technology and data savvy, the compliance and ethics functions of organisations have to keep pace by using the best tools and information available to protect their organisations and to scan the horizon for new requirements, trends and risks.

The emphasis is ours, but the message is clear: Technology is changing the way we do business around the world, and the compliance and ethics space is part of that revolution. If you want to learn more about leveraging the power of tech to modernize your company’s program, here are some resources to review.