Personal liability for CCOs in Compliance settlement agreements?


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Empowering CCOs via personal liability—An advance in Compliance outcomes or just a new problem?

Compliance officers across industries face similar problems: They often need to take positions and advise actions that management and sales colleagues find too conservative or profit-limiting. A strategy gaining favor with enforcement authorities around the world favors holding both chief executives and chief compliance officers personally liable for Compliance failures.

While the intent may be to lift the status and voice CCOs in their firms, the personal liability element and the potential conflicts with top management may be making the CCO role more and more difficult. A Wall Street Journal report on June 16 described these conflicts and the potential of unintended consequences.

Personal Compliance certification in Glencore settlement

Using as an example the recent Glencore settlement related to foreign bribery and other charges, the WSJ report describes a new Justice Department policy that aims to give CCOs more power to hold the line on Compliance initiatives in the face of pressure from colleagues driven by profit targets. The policy also makes clearer the requirements that CCOs have access to the internal information they need to assess and adapt Compliance programs in their firms as they retool to avoid future failures.

Currently, the policy applies specifically to companies working through settlement agreements where they agree to correct Compliance failures and ensure that Compliance initiatives are sufficiently improved to prevent future violations. Glencore, for example, pleaded guilty to bribing officials in foreign countries and manipulating oil prices. The Justice Department policy requires that both the CEO and CCO sign a personal certification that their Compliance program can “prevent and detect” future violations.

While intended to give CCOs leverage to improve their Compliance programs, withholding one’s signature on a personal certification could be predicted to lead to major internal conflict with the CEO. And signing such a certification later proved untrue or inaccurate could result in personal criminal liability for perjury charges.

The Justice Department has asserted that it is trying to help CCOs gain greater voice and leverage, but industry lawyers and analysts continue to wonder whether the outcomes will match the intent.


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