Former DOJ Official on Evolution of Corporate Compliance

By Yin Wilczek, Bloomberg BNA

Hui Chen recently left the Justice Department after almost two years as the department’s first-ever compliance counsel. While at the Criminal Division’s Fraud Section, she helped prosecutors evaluate corporate compliance programs in areas such as securities and financial fraud, health-care fraud, and foreign bribery. Her cases at the DOJ included BP PLC’s Deepwater Horizon oil spill, Volkswagen AG’s emissions scandal, and Odebrecht SA’s Foreign Corrupt Practices Act violations. Those prosecutions garnered some of the largest corporate fines ever levied by the DOJ. Chen, now a private compliance consultant, speaks to Bloomberg BNA about her former role, and what lies ahead for the Fraud Section.

[caption id="attachment_54032" align="alignright” width="127"][Image “hui chen” (src=https://bol.bna.com/wp-content/uploads/2017/07/hui-chen.png)]Hui Chen.[/caption]

Bloomberg BNA: When you left, what was the state of corporate compliance programs?

Hui Chen: For me to render an assessment on that, essentially you’re asking a probation office who handles drunk driver cases how many people drive drunk. If you’re not a company that’s being investigated, I won’t see you in that role. I saw presumably some of the worst, so that’s not a representative view.

What I would say is that there is great variation in corporate compliance that goes from companies in large part doing a pretty good job but occasionally slipping, to companies that completely don’t get it. There are companies that should be seeing the risk but aren’t doing anything about it, which I think would be a little bit surprising to some, and I think that’s particularly true for companies that operate mainly outside the U.S.

I also think that many companies that are relatively small aren’t attuned to the risks they face when they expand. So let’s say they found a niche market in the U.S. They then jump into opportunities for their niche business in other markets without giving enough thought to what that might mean in terms of business and people risks.

I also see companies that are obsessively focused on their particular regulated risks but are not attentive to fundamental risks.

BBNA: What sorts of fundamental risk?

Chen: Take financial services. There are companies that say, “We’re going to dot all the `i’s and cross all the ‘t’s,” but they don’t think that lying to customers is a problem. I think that problem is more widespread than Wells Fargo. So the fundamentals are lying, cheating and stealing, things your mother would have taught you when you were five.

BBNA: In a sense, your role at the DOJ was a sop to business because you once worked in-house and can represent the corporate view. Do you think you were effective in that role?

Chen: I don’t see myself as representing the business view. I see myself as representing the business reality. So I think I was quite effective in working with the prosecutors to bring that reality to the discussion. Again, I cannot say better things about the prosecutors—they’re smart people with common sense. What most of them don’t have is that experience of working in-house. And I’m able to bring that reality to the table, and they very much get it and they appreciate it.

One of the results of that, for example, is that companies used to bring in binders full of their policies. Pretty early on at DOJ, I started asking the prosecutors to tell companies not to bring their policies to compliance presentations. I said to them, I really don’t care what the policy says because I challenge them to show me a single employee who sat there and read them. I can tell you right now that nobody in the company reads the policies except for the people who drafted them. I’m more interested in how the policies actually operate.

And the reaction from the prosecutors was, this was what we always thought but we just didn’t feel like we had the credibility to say it because we haven’t been in the companies. Now, I think they routinely tell companies not to bring their policies in.

BBNA: So you’ve left a legacy?

Chen: I think so. The Evaluation of Corporate Compliance Programs document I authored really reflected a lot of that view. The work that I’ve been doing with monitors, and really, the most important thing is, the monitors got it, the prosecutors got it. We want to see evidence, we want to see data, of effectiveness.

BBNA: Under the new administration, how do you think the DOJ will operate? Were you already seeing changes when you were there?

Chen: That’s not an easy question to answer, only because I think people don’t really appreciate how a large agency

works. Changes can come in very subtle ways; changes can happen very slowly. I know there are people out there who count the number of resolutions and say, oh my gosh, this is the first year under the Trump administration and the numbers either went up or went down, whatever it is.

White-collar cases take a long time. The cases that are being resolved now are cases that started years ago. You want to see the Trump administration’s impact, you should look four years from now, not now. What I would watch is how they’re allocating resources. When Trump came in, he put a freeze on hiring but various agencies and their components got exemptions. I was a former Justice Department prosecutor when the administration transitioned from Bush I to Clinton. My impression is that the Criminal Division traditionally got an exemption, and it’s usually not impacted by political transitions.

Now, the Fraud Section, to my knowledge, hasn’t got an exemption for hiring. And a number of people have departed. I’ve been going to one departure party after another, including my own. So how are they replacing these people, and what happens when you go from, let’s say, 40 prosecutors to 10?

BBNA: After your experience at the DOJ, what tips can you offer compliance officers who are interacting with the department?

Chen: Use common sense.

Make sure your program produces actual results that are measured thoughtfully.

Do assume the prosecutors are smart people with common sense who can see through charades. Prosecutors can detect the difference between a program that’s designed to satisfy them versus a program that’s designed to work.

BBNA: How do you think the Fraud Section will evaluate corporate compliance under the Trump administration?

Chen: I don’t not see the Fraud Section changing one bit. All the current leadership are people who have been there for the past several years and so long as they stay in place—and as far as I know, none of them is planning to go anywhere—the current acting chief and the acting deputy chief, and all the unit chiefs, they’re dedicated, committed, smart people, and I don’t see their approach changing one bit.

Now, going forward, would they have to engage in more battles with their upper management? That’s to be seen. Again, once you get above the Fraud Section, you’re dealing with political appointees, and who they are and what their priorities are will change things.

We all understand, anybody’s who’s worked in large organizations, if you have upper management that is generally supportive of what you do, then it makes your job so much easier. You know somebody’s got your back and you go do what you believe is the right thing to do. If you have an upper management that is constantly challenging you, then you’re going to have to pick your battles because you can’t battle with them 100 percent of the time.

That does impact how effective you are and how far you can go. Right now, they still don’t have a Criminal Division chief, and the acting chief is a career narcotics prosecutor, I believe. I do not know if he’s ever handled a white-collar case. That will impact things; it’s a different set of assumptions that you have to carry into your meetings.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com