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Why Corporate Compliance is a Joke

Patrick Burns says what others know and refuse to acknowledge. Compliance is a joke. Burns is the communications director at Taxpayers Against Fraud.

“What do companies do to people who threaten their profit center – even and maybe especially if the profit center is one based on fraud? They move to isolate, to humiliate and to terminate,” Burns said last week. “And they do it every single time.”

“When I speak to compliance officers, I always ask one question right at the beginning. I raise my hand and say – any companies here ever made a whistleblower employee of the year?”

“Invariably, the room bursts out laughing. It’s treated as the opening of a comedy act when I ask that question.”

“And these are the compliance officers. Then I turn it around on them.”

“I ask them, at the end of this session, to go into their car and turn off the radio and not start the engine. And think for thirty seconds about this question – why was I hired at this company?”

“Was I hired because I am a fierce, tough, brave compliance officer?”

“Or was I hired because they sensed a weakness in me and they thought that I would be a compliant officer? An officer who would be useful to them to ferret out and finger anybody in the company who was actually going to blow the whistle, internally or externally, on massive fraud within the company.”

Does anybody object when you say that?

“They can’t.”

Because what you’re saying is that compliance is a joke?

“I have to say that it really is most of the time.”

Have you come across exceptions?

“No,” Burns said. “The compliance officers are great for the little stealing.”

“The compliance officer at Wal-Mart is there to stop employee theft. It’s to stop someone from bundling up a bunch of frozen meat in the trash bag and throwing it into the trash and then pulling it out thirty minutes later.”

“But some massive bribery scheme in Mexico, importing goods from China that have a made in America label sewed on to them – they won’t pay attention to that.”

“Not paying taxes on what they’re selling, none of that stuff, none of that is going to happen.”

“That is not what a compliance officer is supposed to do. The compliance officer is about twenty levels down within a company. He’s above the rent-a-cop in the lobby, but he’s not much higher than that most of the time.”

“And they are not able to challenge the people in the top executive suites. The never even meet those people most of the time.”

“This idea that a compliance officer is somehow a combination of the Fantastic Four meets the X-men – it’s just not true. It’s a lot closer to Barney Fife with his one bullet.”

And Burns has no illusions about the Justice Department’s war on fraud.

“If you go out to a farm field and you see 2000 pounds bulls standing behind a single strand of hot electric wire,” Burns said. “Those bulls have touched the wire once or twice. And after they touched that wire once or twice and got an immediate serious shock, they never touched it again.”

“That is not the way the Department of Justice works. The Department of Justice will take two, three, five, ten years to work a case.”

“Let me be explicit in what I’m saying here. The GlaxoSmithKline case was settled yesterday for three billion dollars. It’s the largest healthcare fraud case in US history.”

“Whistleblowers went to the company internally. The company did an internal investigation. The compliance officers in the company said – “yes we are indeed doing this fraud.”

“GlaxoSmithKline ran the numbers and decided that doing the fraud and delaying with its interaction with the Department of Justice was a better business plan than fessing up and paying up.”

“So they lawyered up and delayed.”

At the end of eleven years, they paid the three billion dollar fine. But during that time, they’ve collected billions and billions of dollars in profits.”

“Now here’s the perverse part of all of this. During that ten year period, people at GlaxoSmithKline were promoted, they were paid, they got bonuses and they got stock options based on this extravagant fraud scheme that involved nine different drugs, and was a virtual clown car of fraud.”

“All of the profits from this fraud were privatized. Private beach houses were bought. Private careers were made. Private bonuses were cashed. People sent their kids to private schools based on these frauds – this poisoning for profit.”

Burns doesn’t think jailing top corporate executives is likely. He says we need to exclude them from the industries in which they work.

“Putting people in jail we don’t think is very likely,” Burns said.

“The truth of the matter is a criminal prosecution requires a standard of evidence that is beyond a reasonable doubt. Companies will fund a full push back against the Department and there’s a very good chance that they will prevail.”

“The good thing about exclusion is that it can be done administratively.”

“Let me make it as simple as possible here. When you go to a dry cleaner and you put in a shirt or a tie and it comes back stained or ripped, you may get a little miffed. But you’ll talk to them about it, and maybe they’ll promise to never do it again.”

“But the next time you bring in a shirt or a tie and it comes back stained or ripped, you don’t say anything.”

”You just walk away and you never do business with them again.”

“We can do that. The US government is just like you. It is a consumer of goods and services. It can say – we’re done with you. If you continue to hire this person to run this dry cleaner, we will never go to this dry cleaner again.”

“We are not calling for more fines. We want America’s stolen money to be recovered, sure. But we need to disenthrall ourselves from the notion that money alone will change corporate behavior.”

“We also need to disenthrall ourselves that there is a single silver bullet solution. We need to recover America’s stolen billions, but at the same time, we need to make the pain personal within the fraudster companies.”

“That means that people who design frauds, who wink at these frauds, who operationalize these frauds, need to be made unemployed and unemployable.”

“Right now that penalty is only vested upon the whistleblower, the truth teller, the person who stands up to power for the good of all.”

“Being unemployed and unemployable is not something we do to the big fraudsters. We do not send them to jail.”

“We are not going to exclude big companies like Pfizer and Schering Plough and GlaxoSmithKline and McDonnell Douglas.”

“They employ too many people and they’re too central to healthcare and defense in this nation.”

“But if a company is too big to fail, and that may be true, there is no executive that is too big to jail. And certainly there is not an executive too big not to make unemployed and unemployable.”

[For the complete transcript of the Interview with Patrick Burns, see 26 Corporate Crime Reporter 28(10), July 10, 2012 print edition only.]

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Russell Mokhiber is the editor of the Corporate Crime Reporter..

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