Building A Cost-Effective Physician Contracting Compliance Program Using Market Data
BUILDING AN EFFECTIVE COMPLIANCE PROGRAM April 22, 2010
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Transcript of BUILDING AN EFFECTIVE COMPLIANCE PROGRAM April 22, 2010
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BUILDING AN EFFECTIVE COMPLIANCE PROGRAM
April 22, 2010
Joseph L. Barloon Partner – Litigation & Government Enforcement, Skadden Arps Slate Meagher & Flom LLP
Julie A. BellDeputy General Counsel, VP, Law & Compliance –
Kratos Defense & Security Solutions Inc.
WMACCA ConferenceApril 22, 2010
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Overview
• What is Corporate Compliance?
• Benefits and Key Components of an Effective Compliance Program
• Tools for Addressing Compliance Concerns
• Board Oversight
• Compliance Pitfalls
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What is Corporate Compliance?
• Internal policies and procedures designed to: – Prevent and detect violations of applicable law,
regulations, rules and ethical standards by employees and agents; and
– Create a culture of compliance and ethical business.
• Legal risk management
• Internal controls
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Benefits of an Effective Compliance Program
• Deters criminal violations, thus avoiding costs and disruptions involved in government investigations and prosecutions.
• Aids in early detection, prompt internal investigation of violations, timely corrective action, and reporting to enforcement authorities.
• Considered a mitigating factor by U.S. enforcement authorities.
• Helps to avoid government-imposed compliance program and monitor.
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Why Have a Compliance Program?
• Federal Sentencing Guidelines – Mandate reduction of criminal fine if company had an
effective compliance program in place at time offense was committed.
– Set forth the components of an effective compliance program.
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Why Have a Compliance Program?
• United States Department of Justice, Principles of Federal Prosecution of Business Organizations
– In determining whether to charge a corporation for the criminal misconduct of its employees, prosecutors should consider “the existence and adequacy of the corporation’s compliance program.”
– Available at http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/title9.htm
• United States Securities and Exchange Commission, Seaboard Report, Exchange Act Release 44969
– In determining whether to bring charges and what charges to bring, SEC will consider what compliance procedures were in place to prevent the misconduct.
– Available at http://www.sec.gov/litigation/investreport/34-44969.htm
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THE U.S. FEDERAL SENTENCING GUIDELINES FOR SENTENCING ORGANIZATIONS
• These seven effectiveness factors have become the “prescription” for corporate compliance programs:– Establish standards and procedures to prevent and detect
criminal conduct.
– Governing authority knowledge and oversight; high-level individual responsible.
– Due diligence regarding “Substantial Authority” personnel.
– Communication and Training.
– Hotline, evaluation and monitoring.
– Consistency, incentives and discipline.
– Response and modification.
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Key Components of a Compliance Program
– Communication• Senior management must be committed to compliance. Should
convey the clear message that unethical behavior is not tolerated, even if business is lost.
– Structure• Compliance/ethics officer(s) reporting directly to the board of
directors.
– Resources• Sufficient resources to fund and staff program.• Training including well-conceived, real-life situations and
dialogue.• Monitoring, following-up and reassessing compliance.
– Incentives• Include compliance efforts in promotion, compensation and
evaluation process.
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Key Components of a Compliance Program
• Managers themselves must comply with the letter and the spirit of the rules. If employees see managers bending the rules, they will do it too.
• Character must be made a key part of the firm's hiring criteria.
• Integrity, ethics and compliance should be part of the promotion, compensation and evaluation processes.
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Key Components of a Compliance Program
• When an ethical violation occurs, the problem should be fixed and appropriate action taken against the employee – no matter how senior – as soon as possible.
• All managers must be held accountable for setting the right tone.
• Monitor, follow-up and re-assess. Make sure on a regular basis that policies and procedures are being followed.
• Don't fall victim to a checklist mentality.
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Contractor Code of Business Ethics and Conduct
• Government contractors must abide by Federal Acquisition Regulation (FAR) 52.203-13.– Available at https://www.acquisition.gov/far/
• Regulation prescribes a Contractor Code of Business Ethics and Conduct.
• Incorporates Department of Justice Guidelines.• Government contractor must have a written code of
business ethics and conduct.
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Customize Your Compliance Program for Your Industry
• Every industry has unique compliance considerations– Defense
– Health Care
– Financial services
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Compliance Tools
• Code of Ethics
• Whistleblower Procedures
• Business Ethics Hotlines
• Internal Investigations
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What is a Code of Ethics?
• Written policy that is reasonably designed to deter wrongdoing and to promote:– Honest and ethical conduct that requires compliance with
applicable governmental laws, rules and regulations.
– Complete, timely and understandable disclosure in public filings.
– The prompt internal reporting of violations to an appropriate person or persons identified in the code.
– Accountability for adherence to the code and sanctions for those who breach it.
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Addressing Whistleblower Allegations
• Do not take any adverse action against the whistleblower prior to learning all of the facts – unless action is necessary to prevent further harm to the company.– Document all actions.
• If the whistleblower is known, attempt to interview him or her to gain a complete understanding of the allegations.
• Investigate the allegations in a privileged context, if possible.
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Business Ethics Hotlines Required In Today’s Business Environment
• Sarbanes-Oxley §301 Requires Audit Committees of issuers to establish procedures for: – The receipt, retention and treatment of complaints regarding
accounting, internal accounting controls and auditing matters; and
– The confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
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Business Ethics Hotline Best Practices
• Operate the hotline independently from management.– Often outsourced to credentialed third parties.
• Ensure that hotline is answered by a trained professional.
• Provide a live interviewer available 24 hours a day/365 days a year.
• Have a standardized in-take sheet to ensure that you gather sufficient information to evaluate the alleged conduct.
• Document all calls, follow-up actions and conclusions reached.
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Business Ethics Hotline Basic Parameters
• Communicate to employees how to report concerns.• Provide employees with periodic reminders about the
hotline’s existence. • Draft procedures regarding how to respond to time
sensitive issues. • Conduct an internal investigation where appropriate.• Where appropriate, advise employee(s) of actions
taken in response to Business Ethics Hotline calls.
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Business Ethics Hotline Complaint Follow-up
• Who should receive and follow-up on the complaints? – The audit committee or the chairman of the audit
committee.
– The company's general counsel.
– The company’s risk management department or human resources department.
– An outside consultant or advisor.
• Establish a standard distribution of complaint recipients.
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Internal Investigations
• Company Hotline Tips• Employee Complaints• Third Party Complaints• Informal Statements by
Government Regulator• Internal Audit Findings• Outside Auditor Findings• Informal Requests for
Information or Documents
by Government
• Grand Jury Subpoenas• Critical Pronouncements or
Inquiries by Legislative
Bodies• Civil Suits or Complaints by
Disgruntled Former
Employees• Press Inquiries or Reports
About Questionable Practices• Credible Information from
Any Source
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Purposes Served By An Internal Investigation
• Determine Facts and Identify Potential Wrongdoing by Officers or Employees to:– Respond to Government Investigation
– Take Action to Avoid Recurrence
– Position Company in Context of Litigation
– Take Proactive Measures to Recoup Damages
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Who Should Conduct the Investigation?
• Who Should Conduct the Investigation?– Corporate Audit, In-House Counsel and/or Outside Counsel
• Subject matter of the investigation
• What prompted the investigation
• Purpose of the investigation
• Probability of litigation
• Independence Issues
• Attorney Client Privilege Issues
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Board Oversight
• How can the board exercise compliance program oversight?– What should directors know?– How should they be kept informed?
• How can the Board support an ethical corporate culture?
• Amendments to Federal Sentencing Guidelines for Organizations incentivize companies to vest compliance operations personnel with direct reporting obligations to Board or appropriate subgroup.
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What Should Directors Know?
• Sources and scope of Board compliance oversight responsibilities – Sentencing Guidelines’ Criteria
– Legal/regulatory/prosecutorial guidance
– Best practices
• Elements of an effective ethics and compliance program
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What Should Directors Know? (cont’d)
• Major risks and compliance problems
• Board should be kept abreast of changes in risks– Changes in business
– Changes in business structure (e.g., acquisition/merger) laws
– Changes in laws or regulations
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What Should Directors Know? (cont’d)
• Board should know the key components of the company’s compliance program:– Tone at the top
– Policies
– Training
– Controls/oversight
– Auditing/monitoring/reporting mechanisms
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How Should Board Be Kept Informed?
• Monitor Compliance– Receive briefings from compliance officer, at least semi-
annually, on program initiatives and results.
– Obtain evidence that program meets the Sentencing Guidelines’ criteria.
– Conduct non-executive sessions with compliance officer.
– Understand procedures for filtering/handling whistleblower complaints and track reported problems and their handling.
– Review compliance systems evaluations.
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Directors Should Demonstrate a Strong Tone at the Top
• Devote adequate meeting time to compliance matters.• Make clear to management to report red
flags/warning signs of improper conduct or questionable risk.
• Oversee management’s involvement in and commitment to the Compliance Program.
• Scrupulously adhere to the Code of Conduct and other company policies applicable to directors.
• Know what questions to ask . . . and ask them.
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Compliance Pitfalls
• Boilerplate programs• Standards without established procedures• Poor communication• Lack of enforcement• Double standards regarding discipline• Lack of management commitment
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Conclusion
• Corporate compliance should be a top priority for your company.
• Monitor risks and act appropriately when risks are identified.
• Keep the Board apprised of compliance developments.
• Set a compliance “tone at the top.”
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For More Information, Contact:
Joseph L. BarloonPartner – Skadden Arps Slate Meagher & Flom, LLP(202) [email protected]
Julie A. BellDeputy General Counsel, VP - Law & Compliance – Kratos Defense & Security Solutions, Inc.(703) [email protected]
Building an Effective Compliance Program
April 22, 2010