While reading the Embraer settlement documents, I read over the facts implicating a senior legal executive and his/her involvement in the Embraer bribery scheme. Truthfully, I had a slight gasp as I read about a fellow lawyer crossing the line – from lawful to unlawful.
Not only did the Embraer legal executive know about the bribery scheme, the executive was the one who came up with the brilliant idea to use third parties to funnel the bribes to foreign government officials. What a genius.
Again, I am always perplexed by lawyers who cross the line, or as I like to say with reference to my favorite television show – lawyers who break bad. (Of course, you have to enjoy Saul’s new show, Better Call Saul).
We have too many examples of lawyers breaking bad. It reminds me again of the importance of an independent chief compliance officer. For some reason, lawyers get caught up in these schemes and confuse problem-solving solutions with law-abiding solutions.
Let’s consider a few recent examples. In VimpelCom we had an in-house attorney who approved the two proposed acquisitions through a shell company owned by the daughter of the Uzbekistan President. The in-house attorney never asked for, never reviewed, nor did he/she learn the beneficial owner of the shell company. Without this critical piece of information, there is no way an attorney can ever approve a due diligence review.
Instead, the in-house attorney gave into internal business pressure and signed off on the acquisitions. The rest is history and now VimpelCom and its parent company, are looking at enforcement actions totaling $2 billion.
Even outside of the FCPA context, we have the GM case where not only was one attorney crossing the line but an entire group of attorneys were dedicated to avoiding disclosure of problems with the GM ignition switch. For years, the attorneys knew about the problem, took minimal steps to correct the problem, but spent hours and hours in fighting litigation and disclosure of the problem internally.
The GM case is infuriating not because lawyers crossed the line but because their transgressions directly caused the deaths of many innocent consumers. A lawyer who breaks bad rarely causes such harm to innocent victims – the GM case stands as a testament to illegal and unethical conduct that caused death.
These case examples underscore two important points. Lawyers are bound to their professional ethics – that is far different that a chief compliance officer’s commitment to ethical conduct. Business ethics is a lot different than legal ethics. A lawyer’s ethical code is a set of requirements to zealously represent their client’s interests and maintain attorney-client privilege. It is not a prescription for doing the right thing (as we well know).
In contrast, a chief compliance officer has a duty to promote and embed a culture of ethics. Business ethics is a goal, and is fast becoming a requirement for an effective ethics and compliance program. Lawyers have a different set goals surrounding legal compliance. CCOs are dedicated to ethical compliance – meaning “to do the right thing.”
It is easy to imagine how a CCO would have reacted to the GM situation, the VimpelCom proposed transaction, and the Embraer issue resulting in the use of third parties to funnel bribes. A CCO inside the C-Suite and at the business table is an important counterweight to decision-making that led to lawyers and business people breaking the law.
