Don't get caught

Picture a mid-sized Wisconsin manufacturer doing what many other U.S. companies have done in recent years -- establish an office in China.

But even such a common move could land a company in trouble if it's unaware of applicable laws, said Eric J. Wilson, an attorney with Godfrey & Kahn.

Under the Foreign Corrupt Practices Act, which outlaws bribes of foreign officials by U.S. companies or their agents, a company handing over money to an agent to set up an office could be prosecuted if that agent uses those funds for bribes, said Wilson.

This scenario is just one example of a criminal violation that could easily arise, said Wilson, especially in a company unaware of the latest laws. "The enforcement authorities have made it clear that they are stepping up investigation, so companies have to be increasingly vigilant," said Wilson.

In June, Godfrey & Kahn, a Milwaukee-based firm with a Madison office, launched a group practice aimed at white collar crimes counseling and defense. According to Wilson, it's the first Wisconsin law firm to have an entire team of attorneys focused on this area of law.

The eight-member practice can help a company assess weak spots in its compliance programs, said Wilson, or help it understand relatively new laws such as the federal Economic Espionage Act that covers theft of trade secrets. "White collar crime isn't just (an employee) skimming from the cash register anymore," said Wilson. "It's increasingly more complex."

Nonviolent crimes

Many nonviolent crimes can be classified as white collar, said Wilson, but most such crime involves fraud. Subcategories range from embezzlement, to newer threats such as data and intellectual property theft.

According to the U.S. Attorneys' annual statistical report, 6,126 cases of white collar crime were filed in the fiscal year ended last September. That's up 7 percent from the previous year. At the close of the same fiscal year, the Federal Bureau of Investigation was pursuing 529 cases of corporate fraud, up from 486 cases the year before.

Growing attention on white collar crime has fed a strong market for consultants, law, and accounting firms that advise companies on compliance, according to Randall Hoth, president and CEO of the Wisconsin Better Business Bureau, which gives out its annual "Torch" ethics awards. Hoth said top management should lead the way on ethics. "Setting the right tone at the top of the company has a big, positive impact on avoiding internal fraud and white collar crime," he said. "It's (about) how do you create a culture within your business that promotes honesty and integrity."

Online ethics course

Rick Packard, compliance director with American Family Insurance, Sun Prairie, says the company has had a compliance department for about 10 years. American Family mandates that all employees, agents and agent staff take an online ethics course, he said.

The department also distributes compliance bulletins that managers can use in staff meetings and runs departmental risk assessments.

Specific training, however, should be reinforced by the attitude at the top, according to experts.

"It all starts with a mission vision," said Praveen Parboteeah, an associate professor in the business management department at UW-Whitewater. "If the basic direction a company wants to go is geared toward being ethical, I think that sets a foundation."

American Family's mission statement places emphasis on trust, said Packard, and top management stresses ethics. "Right from the very top of our company, our CEO and president have made ethics and compliance something that is important here," he said.

Wilson also believes the right "tone at the top" is important to minimizing white collar crime risks, but that companies must be able to demonstrate effective compliance programs. If a violation does occur, he said, prosecutors will look at factors such as whether written policies were taught to employees, as well as the presence of programs like well-publicized ethics hot lines.

Finding a balance

Parboteeah -- who teaches business ethics and is involved with UW-Whitewater's business ethics student association — said companies need to find a balance between "compliance-driven" versus "values-driven" approaches.

Even a company that stresses ethics from the top, he said, should follow up with training and mechanisms such as hot lines.

"Once you decide what a company is all about, then you want to enforce policies," he said.

Michele Thoren, human resources manager for Cintas Corp.'s Madison site, said the provider of uniforms and facility supplies has long focused on ethics, going back to the philosophy of its founder.

But the company also maintains specific programs, such as a toll-free ethics hotline that employees can call anonymously, as well as an ethics concerns form that can be sent to senior executives if an ethics issue can't be resolved locally.

Thoren says the written form hasn't been used in Madison since she has been there, but that employees know it's an option.

"If an employee is concerned about something they feel isn't ethical, we want them to have someone to talk to, even if they aren't comfortable talking about it directly with their supervisor," she said.

Having effective programs is something prosecutors evaluate in white collar crime cases, said Hank Shea, a special assistant U.S. attorney for the district of Minnesota, and a teaching fellow at the University of St. Thomas School of Law.

One of the worst things a company can do, he added, is have written ethics policies that aren't taught to employees. "It's my experience that poorly communicated policies or programs can land a company in trouble," he said. "It shows the organization was aware of the laws, but failed to communicate or follow through on them."

Packard agrees that specific education is crucial, but believes teaching core values is equally important.

"If your first priority is to worry about wrongdoing, you probably have a cynical view on people," he said. "I think the better approach is to create a culture that values ethics and compliance and makes them a priority. And then have a process -- where if you do have problem situations -- there is a way to take care of them."

Roberto Michel is a Madison freelance writer.