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Speaker Firms and Organization:

Speaker Firms and Organization:. Presented By:. Joseph W. Koletar DPA, CFE FBI Senior Executive - Retired Anderson Terpening PLLC Peter C. Anderson Partner Lauer & Associates Steve Lauer Partner.

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Speaker Firms and Organization:

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  1. Speaker Firms and Organization: Presented By: Joseph W. Koletar DPA, CFE FBI Senior Executive - Retired Anderson Terpening PLLCPeter C. AndersonPartner Lauer & AssociatesSteve LauerPartner Thank you for logging into today’s event. Please note we are in standby mode. All Microphones will be muted until the event starts. We will be back with speaker instructions @ 11:55am. Any Questions? Please email: Info@knowledgecongress.org Group Registration Policy Please note ALL participants must be registered or they will not be able to access the event. If you have more than one person from your company attending, you must fill out the group registration form. We reserve the right to disconnect any unauthorized users from this event and to deny violators admission to future events. To obtain a group registration please send a note to info@knowledgecongress.org or call 646.202.9344. May 12, 2011

  2. If you experience any technical difficulties during today’s WebEx session, please contact our Technical Support @ 866-779-3239. • You may ask a question at anytime throughout the presentation today via the chat window on the lower right hand side of your • screen. Questions will be aggregated and addressed during the Q&A segment. • Please note, this call is being recorded for playback purposes. • If anyone was unable to log in to the online webcast and needs to download a copy of the PowerPoint presentation for today’s • event, please send an email to: info@knowledgecongress.org. If you’re already logged in to the online webcast, we will post a link • to download the files shortly. • “If you are listening on a laptop, you may need to use headphones as some laptops speakers are not sufficiently amplified enough to • hear the presentations. If you do not have headphones and cannot hear the webcast send an email to info@knowledgcongress.org • and we will send you the dial in phone number.“ May 12, 2011

  3. About an hour or so after the event, you'll be sent a survey via email asking you for your feedback on your experience with this event • today - it's designed to take less than two minutes to complete, and it helps us to understand how to wisely invest your time in future • events. Your feedback is greatly appreciated. If you are applying for continuing education credit, completions of the surveys are • mandatory as per your state boards and bars. 6 secret words (3 for each credit hour) will be give through out the presentation. We • will ask you to fill these words into the survey as proof of your attendance. Please stay tuned for the secret word. • Speakers, I will be giving out the secret words at randomly selected times. I may have to break into your presentation briefly to read • the secret word. Pardon the interruption. May 12, 2011

  4. Brief Speaker Bios: Joseph W. Koletar Over twelve years' experience as an Executive Director, Principal, and Director in the Fraud and Investigations practices of Ernst & Young LLP and Deloitte & Touché LLP. During this time Dr. Koletar conducted and managed investigations in retail, manufacturing, media, hospitality, health care, energy, banking, financial services, insurance, transportation, and not-for-profits. Matters addressed included: executive defalcations, conflict of interest, revenue recognition, court-ordered monitoring of a business convicted of criminal tax violations, channel stuffing, sales commission schemes, payroll and disbursement schemes, Foreign Corrupt Practices Act, vendor integrity, grey market and product counterfeiting, anti-money laundering controls, protection of intellectual property, due diligence, fraud vulnerability assessments, compliance testing, and crisis management preparedness. Peter C. Anderson  Pete has extensive experience in federal criminal law, having been a federal prosecutor in both Charlotte and Washington, D.C., as well as a defense attorney in various national law firms since 1996. Apart from his counseling and trial practice, he is an adjunct professor at the Charlotte School of Law, and teaches courses in both Trial Practice and White-Collar Crime. Pete also frequently writes and lectures on topics relating to federal business crimes, corporate compliance planning, trial advocacy, and sentencing issues. Pete was also selected by U.S. Senator Hagan (D-NC) as one of the three finalists whose names were sent to President Obama for consideration as the U.S. Attorney for the Western District of North Carolina.  May 12, 2011

  5. Brief Speaker Bios: Steve Lauer  As Principal of Lauer & Associates, Steven A. Lauer consults with law departments and law firms on the value of legal service. He assists them to better align and recalibrate the cost and value of legal service delivered to corporations and other business entities.Steve served as Corporate Counsel for Global Compliance Services in Charlotte, North Carolina, specializing in data protection and privacy for that hotline and compliance services company. Before that, he served for over two years as Director of Integrity Research for Integrity Interactive Corporation, in which capacity he conducted research, wrote white papers and otherwise worked with clients and potential clients of the company on issues related to corporate ethics and compliance programs. Those two positions culminated Steve’s approximately seven years in the compliance industry.  ► For more information about the speakers, you can visit: http://knowledgecongress.org/event_2010_risk_mitigation.html May 12, 2011

  6. While we cannot eliminate all risk, we can do a much better job of mitigating it. Internal fraud risk alone is estimated to cost the average organization six percent of revenue each year, regardless of its type or industry. The irony is that we have many of the tools at our disposal to mitigate risk, but do not use them effectively. In this 2-hour, live webcast organized by The Knowledge Group, a panel of experts will discuss the most critical issues, which include:  May 12, 2011

  7. - How we think about risk. - Who owns risk? - The risk mitigation controls we use and why they can fail. - A false sense of security. - Why good news may be worse than bad news. - We tend to protect against outside risk, while a greater threat may be inside. - How do we improve risk mitigation – strategies, tools, and techniques? - The consequences of failure.The presentation will also focus on one of these consequences, albeit a major one – compliance. Another highlight of this event is a discussion on the civil, administrative, and even criminal repercussions that can follow failure to mitigate risk, which includes financial, litigation, regulatory, and reputational damages. May 12, 2011

  8. Featured Speakers: SEGMENT 1: Joseph W. Koletar, DPA, CFE  FBI Senior Executive - Retired SEGMENT 2: SEGMENT 3: Steve Lauer PrincipalLauer & Associates Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  9. Introduction SEGMENT 1: Joseph W. Koletar, DPA, CFE FBI Senior Executive - Retired Over twelve years' experience as an Executive Director, Principal, and Director in the Fraud and Investigations practices of Ernst & Young LLP and Deloitte & Touché LLP. During this time Dr. Koletar conducted and managed investigations in retail, manufacturing, media, hospitality, health care, energy, banking, financial services, insurance, transportation, and not-for-profits. Matters addressed included: executive defalcations, conflict of interest, revenue recognition, court-ordered monitoring of a business convicted of criminal tax violations, channel stuffing, sales commission schemes, payroll and disbursement schemes, Foreign Corrupt Practices Act, vendor integrity, grey market and product counterfeiting, anti-money laundering controls, protection of intellectual property, due diligence, fraud vulnerability assessments, compliance testing, and crisis management preparedness. May 12, 2011

  10. Dr. Joseph W. Koletar – Author – “Rethinking Risk” SEGMENT 1: Joseph W. Koletar, DPA, CFE FBI Senior Executive - Retired • How We Think About Risk • Good Thing? • Bad Thing? • Risk In Our Daily Lives • Our Morning Routine • Risk Mitigation Becomes Invisible May 12, 2011

  11. Dr. Joseph W. Koletar – Author – “Rethinking Risk” SEGMENT 1: Joseph W. Koletar, DPA, CFE FBI Senior Executive - Retired • Who owns risk? • Board of Directors • Audit Committee • “C” suite executives • Middle management • Investors • Customers • Vendors May 12, 2011

  12. Dr. Joseph W. Koletar – Author – “Rethinking Risk” SEGMENT 1: Joseph W. Koletar, DPA, CFE FBI Senior Executive - Retired • Risk Mitigation Controls and Why They Fail • Performance Plans • Audit • Risk Department • General Counsel • A – B – C May 12, 2011

  13. Dr. Joseph W. Koletar – Author – “Rethinking Risk” SEGMENT 1: Joseph W. Koletar, DPA, CFE FBI Senior Executive - Retired • A False Sense of Security • Good News Versus Bad News • Outside Versus Inside Threats May 12, 2011

  14. Dr. Joseph W. Koletar – Author – “Rethinking Risk” SEGMENT 1: Joseph W. Koletar, DPA, CFE FBI Senior Executive - Retired • Getting Better • The Consequences of Failure • BALANCE! May 12, 2011

  15. Introduction Pete has extensive experience in federal criminal law, having been a federal prosecutor in both Charlotte and Washington, D.C., as well as a defense attorney in various national law firms since 1996. Apart from his counseling and trial practice, he is an adjunct professor at the Charlotte School of Law, and teaches courses in both Trial Practice and White-Collar Crime. Pete also frequently writes and lectures on topics relating to federal business crimes, corporate compliance planning, trial advocacy, and sentencing issues. Pete was also selected by U.S. Senator Hagan (D-NC) as one of the three finalists whose names were sent to President Obama for consideration as the U.S. Attorney for the Western District of North Carolina.  SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  16. One Former Prosecutor’s Viewpoint The Knowledge Group May 12, 2011 Peter Crane Anderson Anderson Terpening PLLC SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  17. Unique Perspective • “Recovering” Prosecutor • Goals in Private Practice: • Help Clients Sail Through the Prosecutorial Storms • “Teach Lessons Without Slamming Jail Cell Doors” • Redefine Business Crimes Defense & Litigation = Risk Mgmt. • Proactive  Compliance  Reduce Risks • Reactive  Defense  Minimize Harm SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  18. Main Goals of Presentation • Recent Enforcement Trends in Business Crimes • Share Prosecutor’s Mindset & Perspective • A Peak Inside Opponents “Playbook” • Review Relevant Policies/Guidance • Practical Suggestions for “Effective” Compliance • Reducing Risks • Adding Value SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  19. Telling Statistics @ Enforcement • New & Expanding Enforcement Priorities • Regardless of Administration/Party Politics • President Bush - Corporate Fraud Task Force (2002) • 250 corporate fraud convictions within first year • President Obama - Financial Fraud Enforcement Task Force (Exec. Order – 2009) • Multi-Agency Involvement • Massive Resources SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  20. Typical Assumption . . . SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  21. What Is Basis for that Assumption? • We Have Never Been Indicted Before • We are “Good People” – Not “Criminals.” • Pure Hope (?) – We Have Enough “Real” Problems • Auditing/Monitoring • Maintain a Healthy Skepticism • Remain Open to Possibility of Criminal Conduct !! SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  22. The Three Certainties in Life . . . • Death • Taxes • Corporate Crises SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  23. Timing of Crisis Management Efforts SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  24. Focus of Effective Compliance SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  25. When a Crisis Erupts . . . • Accusers Always Have 20/20 Hindsight • Corporate Leaders Must Be Prepared to Answer (& Document) the Following Questions: • What did you do to prevent/detect? • How could you NOT have known? SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  26. Convergence to Two Major Risks – Enforcement Leverage • Low Legal Threshold for Organizational Liability • Broad Prosecutorial Discretion SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  27. Low Legal Threshold for Culpability • Broad Criminal Liability for Organizations • Anytime an employee commits a crime within the apparent scope of employment • Even if the employee acted directly contrary to company policy or instructions SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  28. Broad Prosecutorial Discretion • What conduct should be prosecuted? • ----- Higher Standard • Zone of Discretion • ----- Low Threshold • What conduct can be prosecuted? SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  29. Tremendous Prosecutorial Discretion: Potential Targets: Individuals & Corporations SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC Potential Charges: Wide Variety of Substantive & Process Crimes May 12, 2011

  30. In View of Two Dangers Goal: Understand & Influence Prosecutorial Discretion • Demonstrate “Good Corporate Citizenship” • Avoid Being Perceived by Government As a “Bad Actor” • Government “Perception” is Reality SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  31. How Do You Establish a Compliance Program? • Review legal requirements • Identify areas of focus • Ensure program meets Guidelines requirements • Upgrade program where necessary • Tailor-Fit Program to Unique Operations SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  32. 7 Criteria for “Effective”Corporate Compliance Plans Establishing compliance standards and procedures that are reasonably capable of reducing the prospect of criminal conduct (i.e. written company policy statements and policies approved by senior management or board); Assigning overall oversight responsibility to specific individuals within high-level positions (i.e. centralized compliance activities and a compliance officer with authority to monitor); SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  33. 7 Criteria for “Effective”Corporate Compliance Plans 3. Exercising due care not to delegate responsibility to individuals who are predisposed to illegal activities (accomplished with a careful and well-documented screening process for key employees); Effectively communicating the program's standards and procedures to all employees (i.e. adequate employee training); Taking reasonable steps to achieve compliance with the standards (i.e. monitoring, auditing, establishing best practices benchmarks, etc.); SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  34. 7 Criteria for “Effective”Corporate Compliance Plans Consistently enforcing the standards through appropriate disciplinary mechanisms (i.e. disincentives policy, range of disciplinary measures including termination, etc.); Responding appropriately to an offense and taking all reasonable steps to prevent similar offenses, including any necessary program modifications (i.e. authorizing or conducting internal investigations) SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  35. Federal Sentencing Guidelines - Criteria for Effective Programs • Size of the organization • Formal program for larger companies • Nature of the business • Highly regulated activities require greater effort • Prior compliance history • Previous problem areas should be addressed • Industry standards • Must meet or exceed industry standards SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  36. “Good Faith” Oversight • Confirm Procedures Are In Place & Used: • Reporting Misconduct or Violations; • Documenting Complaints; • Investigating Complaints / Responding to “Red Flags” • Upper Management Reporting & Response • Enforcing Program • Complying with Stated Policies • Improving Training (i.e. Self-Correcting) SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  37. Overview of Top Priorities for Board Oversight of Crisis Management • Maintain Open Lines of Communication • Internally - Within Corporation • Employees / Vendors / Customers = “Helplines” • Between Chief Compliance Officer & Board • Affirmative Reporting & Documentation SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  38. A Peak Inside the Government’s Playbook Viewing a Case From the Other Side’s Perspective – “Thinking Like a Prosecutor” SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  39. Sources of Insight/Guidance • “Principles of Federal Prosecution” (General) • “Factors to Be Considered in Charging Corporations” • Statutory Sentencing Factors (18 U.S.C. 3553) SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  40. “Principles of Federal Prosecution of Business Organizations” (Sec. 9-28.300) General Factors To Consider in Charging: • Nature & Seriousness of Offense • Pervasiveness of Wrongdoing w/in Corporation • Corporation’s History of Wrongdoing (Crim/Civ/Reg) • Corporation’s Timely & Voluntary Disclosure • Existence & Adequacy of Corp’s Compliance Program • Corporation’s Remedial Actions • Collateral Consequences • Adequacy of Prosecution of Individuals or Civil Actions SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  41. Focus on Compliance Programs • Factors in Evaluating a Compliance Program (among others): • Corporate governance mechanisms to detect and prevent misconduct, such as director’s oversight of compliance. • Staff sufficient to audit, document, analyze and use the corporation’s compliance efforts. • Employee’s knowledge of – and “buy-in” regarding the compliance program. SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  42. Goal: Understand & Influence Prosecutorial Discretion What is Root Cause of Problem ? • A “Bad Apple” (Employee) • A “Bad Orchard” (Organization / Culture) SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  43. Goal: Understand &Influence Prosecutorial Discretion May 12, 2011

  44. DOJ’s “Filip Memo” (8/28/08) • Two Criteria Unique to Board Oversight: • Do the corporate directors exercise independent review over proposed corporate actions, rather than unquestionably ratifying recommendations? • Have the directors established an information and reporting system in the organization that is reasonably designed to provide management and directors with timely and accurate information sufficient to allow them to reach an informed decision regarding the organizations compliance with the law? SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  45. Earning Your “Good Corporate Citizenship” Merit Badge • Does your corporation have compliance plans / ethics policies? • Demonstrated commitment from management? • Who is in charge of compliance? Centralized? CCO? • Do you do sufficient background checks? • Training? • Anonymous Hotline? SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  46. Earning Your “Good Corporate Citizenship” Merit Badge • Implementation? Benchmarking? • (objective monitoring /audit/enforce) • Documentation? • Plans to Respond to Incidents? • Continual Improvements? SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  47. “No Hope” 10% Shades of Gray 80% Need a Tie-Breaker “No Need” 10% Pyramid of Possibilities re: Compliance Programs SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  48. Reasons for Setting Up A Compliance Program? • Fiduciary Duties (as noted) • Influence Prosecutor’s Discretion • Argument for not bringing criminal charges (both company & individuals) • Proof of “Good Corporate Citizenship” Merit Badge • “If the Prosecutor Won’t Listen . . . Perhaps a Jury Will” • Improve corporate image with public, employees, and community • Increase value of company • Provide for efficient management of compliance costs • Reduce penalties or fines SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  49. Why Does Compliance Really Matter? • Penalty Reductions? • (Only Part of the Story) • Much More Significant • Broader Applications – • “Ethical Barometer” or “Surrogate” • Better Management SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC May 12, 2011

  50. Key Decision Points – Equal Relevance Degree of Punishment? (Judge) Investigate ? Indict? (Prosecutor) Liability? Convict ? (Jury) SEGMENT 2: Peter C. Anderson  PartnerAnderson Terpening PLLC What is Organizational Culture? “Effective” Compliance? May 12, 2011

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