Key Compliance Lesson From Credit Suisse: Actions Speak Louder Than Words
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Photo: Rick Kopstein/ALM[/caption] One of the most clear-cut lessons to take away from the federal government’s $77 million penalty Thursday against Zurich-based Credit Suisse Group AG is that general counsel must “operationalize” their companies’ compliance policies. “It is not enough to have a global statement on paper barring something,” said attorney Julie Myers Wood, CEO of Guidepost Solutions, an investigations and compliance consulting firm with offices in New York and Washington D.C. “General counsel have to think about how those policies will be carried out, and about training all the people who have control functions to execute on the policies.” The non-prosecution agreement between the U.S. Department of Justice and Credit Suisse’s Hong Kong unit contains a statement of facts in which the bank acknowledged its misconduct. The U.S. Securities and Exchange Commission also issued an order. The statement says that senior managers at both the parent company and the Hong Kong subsidiary knew about the illegal hiring of more than 100 friends and relatives of business associates and government officials in an effort to win and retain millions of dollars in business. Such hiring is considered a bribe, and violates the U.S. Foreign Corrupt Practices Act. “The facts here were egregious and blatant,” Wood said, citing a spreadsheet that bank employees used to track exactly which hires led to specific business deals. Other failures at the bank, she said, included a lack of:
Training for all employees to report such misconduct when they see it, or at least to flag suspicious activity, such as unqualified hires, to legal and compliance departments.
An internal review of hires on a spot basis by legal or compliance.
A quality assurance program in the human resources department on both hires and applications that are in the pipeline to make sure the employee is qualified for the job.
Consequences to an employee for misconduct.
The last comment refers to the bank’s decision not to fire the flagrant wrongdoers. That decision cost it “cooperation credit” with the DOJ. “The company did not receive full credit for remediation because it did not sufficiently discipline employees who engaged in the misconduct, and instead only recorded policy infractions internally and provided notices of infractions to three employees,” the Justice Department said in the agreement. The bank also lost some cooperation points because it did not voluntarily report the violations. “The company did not receive full cooperation credit because its cooperation was reactive” instead of proactive, the DOJ said. The bank must make compliance reforms and report back to DOJ yearly on its progress. Besides the government's lawyers, the NPA was signed by three in-house attorneys: Alex Charter, managing director of the general counsel division for Credit Suisse Hong Kong; and Alan Reifenberg, global head of litigation and investigations, and Jaclyn Barnao, head of cross-border litigation and investigations, both with the parent company. It was also signed by Herbert Washer, a partner and securities litigator at Cahill Gordon & Reindel in New York, which represented Credit Suisse.
