In this session we will discuss the governance structures, both inside and outside a corporation, required to protect its various stakeholders. In the last decade, we have learned that many of the venerable institutions put in place to protect us from fraud do not function as promised. In particular, structural problems such as conflicts of interest and skewed incentives, lead to excessive risk taking, unethical behavior and even fraud.
The speaker will share his experiences following the financial crisis as a whistleblower in one of the world’s most important financial institutions. He will discuss his experiences with regulators and enforcement officials, whose conflicts of interests can damage the rule of law and the interests of investors and the broad society. He will also discuss steps that corporations should take to protect their shareholders and employees within this flawed environment. Among these steps, he will discuss the proper rules for independent audit committees, rewards for honest criticism, and a solid whistleblower protection policy.
Speakers corner / Preface to session
ZEC 2018: From the compliance experts point of view, that’s not so relevant, but from the ethics perspective of a human being, how did you feel after you say NO to 8,5 million USD? Was that a relief or what?
Eric: From an ethical and emotional perspective, the rejection was the culmination of years of growing anger at the behavior of the attorneys and the injustices they brought through their conflicts-of-interest. Like many others, I watched as these lawyers moved from regulator or prosecution to defending high-level white collar criminals. I became convinced that defending the public, the small investors, and justice, was not part of their plan. They were simply enriching themselves and protecting their powerful patrons. I came to see this as a systematic problem in the U.S.. It is the reason that most of the U.S. population faces a harsh legal system, whereas those who have the ability to pay elite lawyers who revolve in-and-out of the enforcement apparatus are almost above the law.
ZEC 2018: What was the importance of the established company’s compliance infrastructure during the process of reporting, investigating….?
Eric: Because of the conflicts-of-interest at the top of the compliance infrastructure in Deutsche Bank, rather than try to protect the firm, or at least clean house after the fact, there was only cover-up.
ZEC 2018: Will you do it again and why? Any lessons learned?
Eric: I’m not sure if I would do it again – sometimes I think the difference I made was worth it, other times I think the price I paid was too high. In the end, I think given my personality, I couldn’t do anything differently. The most important lesson I learned is the importance of separating money from justice. Once regulators, prosecutors, and even judges, have financial conflicts-of-interest (through campaign contributions, revolving doors, etc), the entire gate-keeping mechanism of our society collapses. In the end, the misdeeds on Wall Street are just a symptom of this disease.