Compliance Week: Where Should The Compliance Officer Report?

Or, "How Asking The WRONG Question Yields A Mostly-Meaningless Answer."

This is quite an age-old debate, but given our discussion just yesterday of "corporate integrity" agreements [largely a misnomer, as usually corporations under criminal and civil investigation for deeds involving a lack of integrity end up signing them!] -- it is worthy of revisiting. Do go read it all, at ComplianceWeek -- but here is a bit of it:

. . . .[O]n April 29, the U.S. Sentencing Commission submitted to Congress proposed changes to the U.S. Sentencing Guidelines which, among other things, seek to bolster the authority and independence of the CCO to address such a situation. Under the amended guidelines, if the CCO has direct access to the board (and the corporate malfeasance was addressed in an appropriate manner) a company may still receive sentencing credit for having an effective program. Without direct access to the board, the company cannot obtain credit for its compliance program when a high-level corporate executive has committed an offense. . . .

The OIG has put these words into action, too. In a corporate integrity agreement it signed with Pfizer in 2009, for example, the inspector general mandated that the CCO “shall report directly to the chief executive officer.” And Pfizer’s CIA -- as well as those of healthcare giants such as Merck, Bristol-Myers-Squibb, Quest Diagnostics, Aventis, and Bayer -- all specify that the CCO cannot be, or be subordinate to, the general counsel or the CFO. . . .

So what this boils down to is how much leniency will be offered, if the chief compliance officer (CCO) reports directly to the board or CEO. Lovely. How about an independent, post-hoc assessment (in order to get sentencing credit) driven by actual outcomes -- actual results, and demonstrated independence? I mean, if we are discussing sentencing (i.e., clearly something is "very wrong", inside the affected company) -- why should that company have the benefit of any pre-ordained certainty about leniency? Just a thought. If the CCO has shown real independence, as determined by the US Attorneys on the case, then a credit is awarded (leniency granted). If not, then. . . not.