(This is only a summary. Click on the headline to view the entire article at Corporate Compliance Insights and participate in the discussion.)
Nearly a dozen men have been arrested in a cargo theft trafficking ring that used stolen tractor-trailers to move more than $1 million in goods meant for retailers across the country to a New Jersey warehouse, where they were held until they could be sold domestically or overseas, officials said Wednesday. The five-month investigation, dubbed “Operation Botany Strike,” began Oct. 14, when detectives from the New Jersey State Police Interstate Theft North Unit began looking into the theft of a tractor-trailer, which contained $104,000 worth of meat, from a trucking lot in South Amboy. Troopers found the abandoned tractor-trailer later that day at the Vince Lombardi Service Area on the New Jersey Turnpike and began following leads, which ultimately uncovered the organized theft ring.
Over the course of the investigation, detectives found the thieves would transport stolen tractor-trailers from various jurisdictions throughout New Jersey to specific locations within a warehouse in Passaic. That facility served as the predominant location where the suspects would load and offload stolen cargo, as well as store the stolen tractor-trailers, officials said. Detectives also identified secondary locations in Little Ferry and Secaucus that served similar functions. Ultimately, 16 loads of stolen cargo were recovered from 10 national retailers. The seized cargo ranged from clothing and granite to home goods, landscaping equipment and food products, officials said. The suspects range in age from 26 to 60 and all live in northern New Jersey. They all face charges of receiving stolen property and conspiracy; one also faces a charge of fencing, which means knowingly buying stolen goods in order to later resell them for profit. [Source: NBC4 New York]2 job applicants linked to $1M theft at marine store
Investigators say two men posing as job applicants are connected to a crew of thieves who stole $1 million worth of equipment from a Florida marine supply store. Broward Sheriff’s spokeswoman Joy Oglesby tells local news outlets that the burglary was carried out over a dozen visits during a weekend in January. The sheriff’s office released a video of men in hopes that someone will recognize them. She says the men applied for jobs Jan. 5. Later that night, thieves broke into a rear cargo door. Surveillance video shows the two applicants walking through the warehouse. Tips that lead to an arrest are eligible for a reward of up to $3,000. [Source: WFTV9 News]Off-Duty jail deputy assists in catching alleged shoplifter
An off-duty Chelan County Jail Deputy in Washington state helped catch an alleged shoplifter Monday in Wenatchee. Police Department spokesman, Captain Edgar Reinfeld says the deputy was at the Albertson’s grocery store at around 5:25 in the afternoon when he apparently witnessed the shoplifting and followed the 62-year-old suspect out of the store and into the parking lot. Reinfeld says the deputy appeared to be uninjured in the scuffle with the suspect, 62-year-old Marcus Jaramillo of Wenatchee. He says it is not uncommon for an off-duty cop to intervene when they observe a crime in progress.
“There is no requirement under law or policy even for Wenatchee Police to take action on something like this off-duty, though you would find that in general we may,” Reinfeld said. He says the Wenatchee Police Department sets guidelines for how officers should handle such situations. “Police officers, especially when you’re inside your own jurisdiction, obviously you have authority at all times to make contact and make an arrest,” Reinfeld said. “We certainly hope and by policy encourage but don’t require the carry of restraint and a firearm off-duty along with your badge and I.D. but it’s not required,” Reinfeld said. “We do have a policy that says you cannot be held liable for not taking action off-duty which is not really contradictory to the other policy but all tied together it does leave a lot of discretion to the individual about how to act.” [Source: NCW Life]Suspects in lingerie heist crash while fleeing the store
A California man and woman suspected of stealing about $7,500 worth of clothes from Victoria’s Secret were arrested after they flipped their car over while driving in the wrong direction in Menlo Park, Palo Alto police said yesterday. Dreamius Lamont Jones, 22 and Tammara Jalores Malika Roberts, 21, both of Oakland, allegedly scooped up dozens of sweatshirts and sweatpants from the lingerie store at Stanford Shopping Center in Palo Alto sometime on Friday (March 9). A Palo Alto police officer driving in the area while on routine patrol allegedly saw the two running from the mall along with another woman who is still at large. After the trio allegedly jumped into a car registered to Jones, the officer tried to pull them over, but they sped off. The officer got behind the car and watched as it allegedly merged into the bike lane. The cop turned on his lights and siren and followed as the car ran a red light, going almost 75 mph. Once the car crossed into Menlo Park, it allegedly crossed all lanes of traffic and drove over the center median into oncoming traffic. At that time, the officer stopped the pursuit out of concern for public safety and continued in his own lane.As he made a U-turn to head back to Victoria’s Secret to take a report from employees, a citizen flagged him down to alert him that Jones and Roberts had hit another car. The other car had been heading south when Jones and Roberts allegedly hit his car, flipping their own car on its passenger side. No injuries were reported. [Source: Daily Post]Maryland man accused of wielding knife, threatening employees in series of armed robberies
A Maryland man has been charged with a series of armed robberies and burglaries over the past three months in Gaithersburg and Derwood, according to Montgomery County police. Anthony Paul Mackie, 27, was charged with 10 commercial burglaries and three armed robberies, during which he allegedly wielded a knife and threatened employees, according to police. The burglaries and robberies occurred between Dec. 2 and March 3. Mackie allegedly robbed the Redmill Beer and Wine store, B & B Beer & Wine store, and a 7-Eleven store according to a police press release. He allegedly stole from other Gaithersburg, Derwood and Montgomery Village businesses, including restaurants, auto repair stores and a nail salon. The crime spree came to an end when police officers saw him attempting to steal from Redmill Beer and Wine a third time on March 3 at 5:30 a.m., according to police. They arrested him at the scene. Mackie is facing three armed robbery charges and 20 other charges related to burglary, theft and destruction of property, according to court records. He is being held in the Montgomery County Detention Center. [Source: Bethesda Magazine]California lawmaker wants to crack down on organized retail theft by making it a felony
A state assemblyman wants to create a new felony offense to penalize organized retail theft, a crime some have called an unintended consequence of a 2014 ballot initiative that reduced drug possession and some theft crimes to misdemeanors. Under Proposition 47, a theft crime has to involve $950 worth of property in a single incident to rise to a felony. That threshold, some retailers have said, allows members of organized crime rings to steal from multiple stores, or from the same store numerous times a day, without facing tougher punishment. Assemblyman Jim Cooper (D-Elk Grove) first proposed a change last year by asking voters to amend Proposition 47 — which passed with 60% approval — making it a felony to steal $950 worth of property in a year. But after much debate, his legislation was shelved in February in the Assembly Public Safety Committee.
Now its chairman, Assemblyman Reggie Jones-Sawyer (D-Los Angeles), is pushing a bill of his own to tackle the problem. His legislation would make it a crime to work with others to steal goods or buy stolen goods with the intent to sell, exchange or return the merchandise. Under the proposal, organized retail theft would fall under a category of crimes known as “wobblers,” meaning prosecutors are able to charge them as misdemeanors or felonies depending on severity. Jones-Sawyer said his bill, unlike the previous proposal, would address concerns from store owners without stepping back from the overall goal of the voter initiative: to stop counties from incarcerating people for minor or petty crimes that are sometimes tied to mental health or drug abuse issues. Criminals “are going to get together and figure out loopholes…. It doesn’t escape me that is happening, and I am very sensitive to that,” Jones-Sawyer said. “But I also am very concerned [that] we don’t do a shotgun method, where we just lock up everybody.” [Source: Los Angeles Times]
I would like to join Chairman Clayton in thanking the staff for their work on this release—in particular, Zeena Abdul-Rahman, Thoreau Bartmann, and Sarah ten Siethoff.
While I sincerely appreciate the staff’s efforts, I am not persuaded that we should amend our liquidity rule and take useful disclosure away from investors.
So what is the staff proposing be taken away? Starting next year, certain investment funds, such as mutual funds, are supposed to give investors information about the liquidity of the funds’ investments.  The proposal before the Commission today [March 14, 2018] would take away that public disclosure requirement.
When you boil it down, liquidity is all about one question. How long does it take to do something? We ask that question in all sorts of situations. How long does it take to travel from point A to point B? How long does it take to sell a house or a car? Or, in this case, how long does it take for a fund to sell an underlying investment without affecting its price?
I would first like to thank the Director of the Division of Investment Management, Dalia Blass, for moving this proposal forward. Also, thank you to the staff who worked so hard devising and drafting its contents.
I support this recommendation to improve the reporting and disclosure of liquidity information by investment companies. Nevertheless, I am disappointed that the Commission is missing a golden opportunity.
Seventeen months ago, the Commission adopted rules aiming to promote effective liquidity risk management throughout the fund industry and to provide investors with information to help them understand a mutual fund’s or exchange-traded fund’s (“ETF”) liquidity and redemption practices.  I supported the final rule, because it reflected the staff’s thoughtful consideration and incorporation of the public comments received on the proposal. 
Posted by James D. Cox Duke (Duke University) and Randall S. Thomas (Vanderbilt University), on Friday, March 9, 2018 Tags: Board independence, Boards of Directors, Delaware articles, Delaware cases, Delaware law, Disclosure, Fiduciary duties, Hedge funds, In re Revlon, In re Trulia, Management, Merger litigation, Mergers & acquisitions, Settlements, Shareholder activism, Shareholder suits, Shareholder voting, Unocal v. Mesa The Rise of Blockchains and Regulatory Scrutiny
Posted by Stuart Levi, Gregory Fernicola and Eytan Fisch, Skadden, Arps, Slate, Meagher & Flom LLP, on Friday, March 9, 2018 Tags: Bitcoin, Blockchain, Contracts, Cryptocurrency, Derivatives, Financial regulation, ICOs, Money laundering, SEC, SEC enforcement, Securities regulation Are Financial Constraints Priced? Evidence from Textual Analysis
Posted by Matthias Buehlmaier (University of Hong Kong) and Toni M. Whited (University of Michigan), on Saturday, March 10, 2018 Tags: Capital formation, Debt, Financial constraints, Financial reporting, Firm performance, Information asymmetries, Information environment, IPOs, Market efficiency, Small firms The Narrowing Scope of Whistleblower Anti-Retaliation Protections
Posted by Brad S. Karp, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Saturday, March 10, 2018 Tags: Compliance & ethics, Dodd-Frank Act, Misconduct, Sarbanes–Oxley Act, SEC, SEC enforcement, Securities enforcement, Securities regulation, Supreme Court, Whistleblowers Delaware Appraisal Litigation: Non-Arm’s-Length Transactions, Arm’s-Length Transactions and the Anna Karenina Principle
Posted by Arthur H. Rosenbloom (Consilium ADR) and Gilbert E. Matthews (Sutter Securities), on Sunday, March 11, 2018 Tags: Delaware articles, Delaware cases, Delaware law, Fair values, Fairness review, Firm valuation, Merger litigation, Mergers & acquisitions, Related party transactions, Shareholder suits Dunkin’ Brands and SEC Economic Relevance Exclusion of Shareholder Proposal
Posted by Keith F. Higgins and Craig E. Marcus, Ropes & Gray LLP, on Sunday, March 11, 2018 Tags: Boards of Directors, Corporate Social Responsibility, ESG, Institutional Investors, No-action letters, Rule 14a-8, SEC, SEC enforcement, Securities regulation, Shareholder proposals Taxation and Executive Compensation: Evidence from Stock Options
Posted by Andrew Bird (Carnegie Mellon University), on Monday, March 12, 2018 Tags: Board capture, Canada, Equity-based compensation, Executive Compensation, Executive performance, Incentives, Internal Revenue Code, International governance, IRS, Long-Term value, Management, Stock options, Tax Cuts and Jobs Act, Taxation An Identity Theory of the Short- and Long-Term Investor Debate
Posted by Claire A. Hill (University of Minnesota Law School), on Monday, March 12, 2018 Tags: Agency costs, Boards of Directors, Institutional Investors, Investor horizons, Long-Term value, Management, Shareholder activism, Short-termism SEC and CFTC Testimony on Virtual Currencies: Is More Regulation on the Horizon?
Posted by Michael H. Krimminger, Colin D. Lloyd & Zachary Baum, Cleary, Gottlieb, Steen & Hamilton LLP, on Monday, March 12, 2018 Tags: Bitcoin, CFTC, Commodities, Cryptocurrencies, Financial regulation, Financial technology, ICOs, Investor protection, SEC, SEC enforcement, Securities enforcement, Securities regulation What a Difference a (Birth) Month Makes: The Relative Age Effect and Fund Manager Performance
Posted by Kevin Mullally (University of Alabama), on Tuesday, March 13, 2018 Tags: Human capital, Institutional Investors, Management, Managerial style, Mutual funds, Risk-taking The Hidden Power of Compliance
Posted by Stavros Gadinis and Amelia Miazad (Berkeley Law School), on Tuesday, March 13, 2018 Tags: Accountability, Board communication, Boards of Directors, Compliance & ethics, Delaware articles, Delaware law, Misconduct, Securities enforcement, Securities litigation SEC Guidance on Public Company Cybersecurity Disclosures
Posted by Lillian Brown, Meredith Cross, and Benjamin Powell, Wilmer Cutler Pickering Hale and Dorr LLP, on Tuesday, March 13, 2018 Tags: Boards of Directors, Cybersecurity, Disclosure, Financial reporting, Insider trading, Materiality, Mergers & acquisitions, Oversight, Regulation FD, Risk, Risk disclosure, SEC, Securities regulation The Importance of Conviction in the Face of Litigation Risk
Posted by Edward D. Herlihy and David E. Shapiro, Wachtell, Lipton, Rosen & Katz, on Wednesday, March 14, 2018 Tags: Acquisition premiums, Appraisal rights, Arbitrage, Delaware cases, Delaware law, Fair values, Fairness review, Merger litigation, Mergers & acquisitions, Shareholder suits Investor Ideology
Posted by Enrichetta Ravina (Northwestern University), on Wednesday, March 14, 2018 Tags: BlackRock, Boards of Directors, Environmental disclosure, ESG, Executive Compensation, Glass Lewis, Institutional Investors, institutional Shareholder Services Inc., Mutual funds, Proxy advisors, Say on pay, Shareholder proposals, Shareholder voting, Vanguard Remarks to the SEC Investor Advisory Committee
Posted by Jay Clayton, U.S. Securities and Exchange Commission, on Wednesday, March 14, 2018 Tags: Arbitration, Dual-class stock, Institutional Investors, Investor protection, IPOs, SEC, SEC enforcement, Securities litigation, Securities regulation, Shareholder voting Overview of Proposed Revisions to the UK Corporate Governance Code
Posted by Jason Halper, Steven Baker and Janaki Tampi, Cadwalader, Wickersham & Taft LLP, on Thursday, March 15, 2018 Tags: Board composition, Board independence, Boards of Directors, Executive Compensation, Institutional Investors, International governance, Securities regulation, Shareholder voting, UK, Whistleblowers Spring Awakening: Notes from This Year’s CII Meeting
Posted by Nell Minow, ValueEdge Advisors, on Thursday, March 15, 2018 Tags: Boards of Directors, Corporate culture, Corporate Social Responsibility, Dual-class stock, Environmental disclosure, ESG, Index funds, Institutional Investors, Pension funds, Risk management, Securities regulation, Shareholder voting, Stewardship Statement on Proposed Amendments to Public Reporting of Fund Liquidity Information
Posted by Jay Clayton, U.S. Securities and Exchange Commission, on Thursday, March 15, 2018 Tags: Accounting, Disclosure, Exchange-traded funds, Financial reporting, Investor protection, Liquidity, Mutual funds, Risk management, Securities regulation, Transparency
(This is only a summary. Click on the headline to view the entire article at Corporate Compliance Insights and participate in the discussion.)
On 8 March, President Trump signed two proclamations – one on steel imports and one on aluminum imports (available here and here). As expected, the president is imposing, as from 23 March 2018, an additional 25% duty on steel, and an additional 10% duty on aluminum, imported from all countries except Canada and Mexico. The proclamations foresee the possibility of exclusions for particular steel and aluminum product imports, and contemplate further discussions with U.S. allies regarding possible country exemptions. Affected users of imported steel and aluminum products may want to consider the utility and viability of seeking product exclusions for their imports.
Meanwhile, a number of U.S. trading partners have raised concerns regarding the proposed tariffs, and have mooted the possibility of safeguard measures that could affect imports of steel and aluminum into their markets as well as potential retaliatory measures against the United States
- The 25% additional duty will apply to “steel articles” imported from all countries except Canada and Mexico.
- “Steel articles” are defined by reference to Harmonized Tariff Schedule (HTS) 6-digit subheadings, as follows: “7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications”.
- The 25% additional duty will apply to articles entered, or withdrawn from warehouse for consumption as from 23 March 2018.
- The 10% additional duty will apply to “aluminum articles” imported from all countries except Canada and Mexico.
- “Aluminum articles” are defined by reference to Harmonized Tariff Schedule (HTS) classifications, as follows: “(a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 76220.127.116.11 and 7618.104.22.168), including any subsequent revisions to these HTS classifications”.
- The 10% additional duty will apply to articles entered, or withdrawn from warehouse for consumption as from 23 March 2018.
Provisions Applicable to Both Steel and Aluminum Duties
- Canada/Mexico exemptions: Imports from Canada and Mexico are exempted from the additional duties for now; the proclamation describes the special relationship the United States has with these countries and concludes that steel and aluminum imports from these countries should be exempted, but includes the qualifier “at least at this time”; this exemption may be tied to progress in NAFTA renegotiations and could be withdrawn by the president with little notice; also, the president makes clear his intention to exempt articles produced in Canada or Mexico, not to exempt articles transshipped through Canada or Mexico (e.g., one cannot avoid the additional U.S. duty by shipping steel or aluminum produced in China through Canada).
- Possible country exemptions: Countries with which the United States has “a security relationship” (e.g., allies, like the EU, Australia, Japan and Korea) are encouraged to discuss with the Administration “alternative ways to address the threatened impairment of the national security” presented by imports from those countries; this could possibly lead to a series of “voluntary-restraint-type” arrangements being negotiated where exporting countries agree to limit exports to certain levels to avoid the additional duties.
- Product exclusions: The proclamations foresee a petition-based, product exclusion process run by the Department of Commerce (with input from other agencies); the standard for exclusion will be whether the article (i) is produced in the United States “in a sufficient and reasonably available amount or of a satisfactory quality or (ii) is subject to specific national security considerations; petitions need to be filed by “a directly affected party located in the United States” (i.e., foreign suppliers do not qualify); Commerce is to issue formal procedures for this process by 18 March.
- Duration: The duties, which begin on 23 March 2018, are to remain in effect until “expressly reduced, modified, or terminated”.
These additional duties will have a meaningful impact on the market that will go well beyond producers and importers.
All businesses that utilize steel or aluminum in their products are expected to be affected. As a result, there are a number of steps all companies should be taking to assess the potential impact. For example, supply contracts should be reviewed (even for downstream – e.g., finished products) to determine whether cost increases due to increased customs duties can be passed on. Businesses should also be considering whether to apply for product exclusions. Although the exclusion application procedures will not be released for several days, companies should be preparing now; this exclusion process is expected to be similar, procedurally, to that being used currently in the Section 201 cases. Also, it is not clear whether exclusions will be granted with retroactive effect, so it would be advisable to submit petitions as early in the process as possible.
Several countries have expressed their displeasure with the imposition of these additional duties and intention to take action of their own. Likely actions range from challenging the U.S. duties at the World Trade Organization (a process that would take years), to imposing duties of their own. The duties of their own could take the form of “safeguard” duties to combat a likely increase in imports of steel and aluminum, as product that had previously been going to the United States seeks new markets, or retaliatory duties imposed on politically-sensitive imports from the United States (e.g., agricultural products, coal, motorcycles, bourbon, blue jeans).
The post Trump on Trade: What New US Steel and Aluminum Duties Mean For Businesses appeared first on Global Compliance News.
The energy industry is being reshaped by major forces, including decentralization, digitization, shifting demand and prices, and greater sustainability as a public policy issue. As the risks shift, so too do the opportunities. Last week in Dubai, Christoph Frei, Secretary General of the World Energy Council, spoke at Marsh’s Energy Industry Conference. BRINK caught up with Professor Frei after the conference.
BRINK: First of all, what risks to innovation do you see in the energy sector?
Christoph Frei: There are several key risk areas regarding innovation in the energy industry.
One of the main ones is decarbonization. If you look back over the past 45 years, we’ve managed to decarbonize gross domestic product by, on average, 1 percent per annum. If we want to achieve a change of two degrees Celsius, we must accelerate this from 1 percent to 6 percent per annum. The challenge of decarbonization is massive. We have a factor of 2.8 times more CO2 in our resources—coal, oil, gas—than we are allowed to emit.
Another challenge is innovation around electrification, decentralization and digitization. The one thing above everything else that is keeping energy leaders awake at night is the impact of digitization on the future of the energy system. New business models and digitization will define momentum on a path of innovation, which will change the way we produce and use energy in industrialized and developing worlds.
BRINK: What is the industry saying about its key risk concerns?
Prof. Frei: We have an issues map where we look at about 40 risk issues in the energy sector through interviews with 300 energy leaders in more than 90 countries. Over the past five years, this has shown us a very dynamic market. The risks that have heightened in importance most dramatically are decentralized systems, digitization, electric storage, market design, and renewable energies.
Issues such as carbon capture and storage have been cooling down—people just do not believe they will deliver on its promise. Unconventional, or renewable, energy is seen as less of a risk for the industry. Consider that 18 months ago, solar was being sold in Chile for 2.9 cents per megawatt. I recently spoke to several sources who said that this year they were probably looking at 2 cents per megawatt. That tells a story of continued crashing of prices.
In the automobile area, we have seen some very bold statements from governments, such as India and Norway, with France and the UK announcing the end of diesel and even gasoline by 2040. The real question is, when does China, which has less legacy supply chain and wants to reduce pollution, become a leader in electric mobility? They certainly have expressed this ambition and that will truly be a tipping point.
BRINK: What advances in technology do you see stepping up to play a bigger role in the energy industry?
Prof. Frei: A key challenge and opportunity is how to bring the Internet of Things to bear in the industry. For example, how do you leverage connected devices so that they can smart-trade with each other with very low transaction costs? Another application will be to automate billing.
Electricity is the new oil—demand is likely to double by 2060. Coal will probably peak in demand around 2020—and oil by 2040.
BRINK: What role might blockchain and the Internet of Things play in the energy sector?
Prof. Frei: Ultimately, it means replacing physical assets through digitization. Is that possible in energy? We have seen it in other places such as the taxi industry, for example. We talk a lot about energy storage. This has great potential to accelerate decarbonization by leveraging existing assets. Your refrigerator, for example, which on its own is currently about 100 watts, but if you can capture a million households’ refrigerators and turn them all off at the same time, you then have a 100-megawatt power asset.
That is a very decent storage asset—and you haven’t paid for it, you have simply digitized an existing one. If blockchain enables things like that and removes intermediaries from some processes, you can see it making a real difference in the energy sector.
There is also a huge opportunity for the industry in reaching rural households and delivering access to solutions that simply are not possible without cheap solar, affordable storage, and digitization—solutions that can be provided via cell phones, for example. Mobile technology with cloud support already enables new financing models, such as micro-leasing schemes in the developing world and greater customer choice and control for all. These are transformative examples brought about by decentralization and digitization.
BRINK: What about the wider risk landscape—how does it relate to the energy sector?
Prof. Frei: As we all felt again last year, extreme weather events are, naturally, a huge issue for this industry. Over the past 40 years there has been roughly a quadrupling in the number of extreme weather events. This obviously has a dramatic impact on our thinking about how the industry can become more resilient. Locally empowered solutions could be the key here.
BRINK: What trends are you seeing in energy demand?
Prof. Frei: For one thing, the per capita energy demand will peak before 2030—it is basically peaking now. That doesn’t mean that global demand will not go up, but the per capita average demand is peaking.
At the same time, electricity is the new oil. Electrification is firing demand, which will double by 2060.
As for renewables, the phenomenal rise of solar and wind will continue at an unprecedented rate and create both new opportunities and challenges for energy systems. Coal will probably peak in demand around 2020—and oil by 2040.
A key question is how quickly will storage for electricity be cheaper than the relevant counterpart? Natural gas will peak later, because in areas like China, India, sub-Saharan Africa, and particularly in Asia, demand is expected to grow rapidly. Roughly a quarter of the world’s natural gas consumption is in Asia. At first glance, nuclear looks like a success story because demand is still rising—but it is very concentrated. Two-thirds of the newly installed nuclear between now and 2060 will be in China.
The best energy policies that will master the transition to the new energy era will have a balance between security, affordability, and sustainability: We call it the Trilemma.
If you watched the end of the Loyola-Chicago-Miami game, you are well aware that March Madness is officially here. I was barely functioning during the second half of the Gonzaga-UNCG game, having picked the Zags into my Final Four this year but at least they held on. About the best I can say is that [...]
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Attorney General Sessions Condemns Companies That Sell Defective Equipment to First Responders
The U.S. Department of Justice issued a press release late today announcing a settlement in a 13-year long False Claims Act case. Toyobo Co. Ltd. of Japan and its American subsidiary, Toyobo U.S.A. Inc., f/k/a Toyobo America Inc. (collectively, Toyobo), have agreed to pay $66 million to resolve claims under the False Claims Act that they sold defective Zylon fiber used in bullet proof vests that the United States purchased for federal, state, local, and tribal law enforcement agencies.
The settlement was reached as part of a False Claims Act initiated by a whistleblower, Aaron Westrick, Ph.D.
The attorneys for Dr. Westrick issued the following release following the DOJ’s announcement:
Bullet Proof Vest False Claims Act Case Ends in Victory for Whistleblower
Attorney General Sessions Condemns Companies That Sell Defective Equipment to First Responders
Washington, D.C. March 15, 2018. The U.S. Department of Justice announced today that Japanese manufacturing company, Toyobo Co., Ltd., agreed to pay $66 million to settle allegations that it conspired to sell defective body armor to American police departments, federal law enforcement agencies and the U.S. military. The settlement was reached as part of a False Claims Act initiated by a whistleblower, Aaron Westrick, Ph.D.
As required under the False Claims Act, Dr. Westrick will obtain a qui tam whistleblower reward of $5.77 million. This award is designed to compensate Dr. Westrick for the damages he suffered and to incentivize other whistleblowers with evidence of fraud to report these crimes.
A detailed discussion on the national importance of this case is posted on The Whistleblower Blog.
Dr. Westrick, now employed as a tenured professor at Lake Superior State University in Sault Ste. Marie, Michigan and an active Michigan Deputy Sheriff, issued the following statement:
“I only wanted to stop the sale of unsafe Zylon vests to police officers, federal agents, and members of our Armed Services. I tried to convince my company to stop selling these vests. They refused. I lost my job and career. I have no regrets. I would blow the whistle again. The defective Zylon product was taken off the market and Toyobo (along with other companies) were held accountable.
“I am proud that the United States joined in my False Claims Act case, and aggressively sought justice in this matter.”
In a statement released today by the DOJ, Attorney General Jeff Sessions said:
“Bulletproof vests are sometimes what stands between a police officer and death. Selling material for these vests that one knows to be defective is dishonest, and risks the lives of the men and women who serve to protect us. The Department of Justice is committed to the protection of our law enforcement officers, and today’s resolution sends another clear message that we will not tolerate those who put our first responders in harm’s way.”
“Dr. Westrick is a true American hero. He lost his job and career in the body armor industry by exposing Zylon safety risks. He provided the crucial documents and testimony justifying the removal of Zylon from the market, and compensation to states and the federal government due to the immoral sale of Zylon vests.
“The False Claims Act is America’s most important tool to fight fraud in government contracting. It was enacted to protect and reward whistleblowers like Dr. Westrick, who sacrifice for the public interest, save taxpayers millions of dollars, and ensure that products sold to front-line responders are safe.”
Mr. Kohn also serves as the pro bono Executive Director of the National Whistleblower Center.
- United States Department of Justice press release
- Settlement Agreement with Toyobo
- Highly Contested Defective Bullet Proof Vest Case Ends in Victory for Whistleblower
*Permission granted to reprint photo of Dr. Westrick.
Companies are getting on the bandwagon – corporate culture matters. Business ethics is important. My worry is whether this new acknowledgement is viewed as a short-cut for compliance investment.
CEOs and the board are troubled by (and even resisting) the resources needed to implement an effective compliance program. Unfortunately, this attitude reflects a fundamental misunderstanding of the importance of an ethical culture and robust compliance controls working, in tandem, to promote an effective ethics and compliance program.
With that initial understanding, let’s turn to the fundamental question – how do you define a culture that aligns with, and inspires, your employees? Let’s go back to the fundamental question every company has to answer – what is our purpose?
Frankly, Sinek’s message applies to much of life and helps to focus attention on purpose and inspiration.
A company has to define its mission beyond just making good products or providing efficient services. Instead, companies have to inspire managers, employees and other stakeholders with defining a purpose beyond simple commercial activities. Such inspiration is essential for the marketplace and for defining a culture.
A company’s culture reflects its values, its moral fabric and the reason its exists. I know this sounds like mumbo jumbo, but corporate culture reflects the company’s ability to bring individuals together for a common purpose.
Harvard Business School Professor James Heskett has written about the importance of business culture in his seminal book, The Culture Shock: How to Shape Unseen Force That Transforms Performance, (here) in which he estimates that a positive corporate culture can account for a 20 to 30 percent difference in corporate performance.
As Heskett explains, the culture cycle begins with the communication of shared values and behaviors and includes the development of realistic expectations in employees and meeting them in ways that establish trust, engagement and ownership; policies and practices that lead to an innovative organization; and measurement of the results in terms of employee retention and referrals, returns to labor, and relationships with customers as well as financial results.
A company’s culture can be defined in six categories:
- Vision: a culture starts with a vision or mission statement which captures the company’s purpose.
- Values: a company’s values should be concise and simple.
- Conduct: the company leadership has to demonstrate its commitment to its culture with conduct not with words.
- People: the company has to infuse its recruitment process to hire personnel who are consistent with culture.
- Narrative (Story-Telling): the company has to develop a unique and powerful narrative to reinforce and promote its culture. A unique narrative can be a short-story that is frequently retold and referenced by corporate leaders, incorporated into publications and communications, and added to the company’s sustainability objectives.
- Environment: The company’s offices, architecture, working environment and space should be consistent with its culture and used as a means to reinforce its culture.
Bringing employees together through a consistent and motivational message is critical in today’s marketplace to improve corporate performance. No longer can companies rely on quarterly financial reporting goals to define and incentivize its workforce. Long-term sustainable growth while minimizing risk is the preferred strategy for corporate growth and economic success. Such an approach is the best way to harness employee innovation and productivity.
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(This is only a summary. Click on the headline to view the entire article at Corporate Compliance Insights and participate in the discussion.)
Joe Murphy – Compliance & Ethics Professional – April 2018
In a recent article on 2017 developments, Rebecca Walker discussed the increased focus by the U.S. Department of Justice (DOJ) on the role of the chief ethics and compliance officer (CECO), including independence, authority, and direct contact with the board. Similarly, DOJ looked at empowerment of the eld compliance people.
This focus reminds us of a weakness in the anti-harassment effort—failure to address power imbalances. There has been occasional recognition that much harassment involves the abuse of power. If the harasser has power over the victim, this weakens the victim’s ability to react. If the victim can get support from a different power source, like a strong CECO, then the odds are improved.
Yet in the typical approach to harassment, the emphasis is primarily formalistic: Have a policy, training, and reporting system, and react to calls. But what about the issue of power? Where is the authority and independence of the person you call when you report harassment? Where is the support at the executive level?
Like it or not, it takes power to control power. If employees call a department that lacks real power, what protection can they expect? What if they talk to a local manager who reports to the same local boss engaged in the harassment? Why would a vulnerable employee call someone who cannot protect them and lacks the power to get results? Why would they call someone whose lack of independence means they will likely take the side of the powerful manager? This is another reason why anti-harassment compliance needs to be part of an empowered, overall compliance program and be subject to rigorous standards like those found in the Federal Sentencing Guidelines.
To address any form of misconduct, including harassment, the CECO needs to be empowered and independent. The CECO must have the clout to confront the strongest, most powerful managers. To do this, the fate of the CECO needs to be in the hands of the board, not the managers; a strong employment contract requiring cause for termination would also be a plus. And throughout the eld organization, the compliance and ethics people need a strong support line to the CECO so they have this same protection.
The treatment of harassment needs to be tied directly into this powerful compliance system. The CECO’s job and professional responsibility include using their best efforts to prevent misconduct. It also includes taking effective steps to prevent retaliation. Compliance people know such things as the importance of reporting on results so victims have confidence in using the reporting system.
If we are going to prevent harassment, we cannot ignore the importance of power. Abuse of power is a source of harassment. Having a CECO and compliance organization with power and independence is essential for all areas of compliance, and especially so in harassment.
A PDF version of this article is available here.