Lexpert Magazine

4 www.lexpert.ca PANDEMIC FUELS WHITE-COLLAR CRIME COMPLIANCE — AND ENFORCEMENT — ARE MORE IMPORTANT THAN EVER, AS REGULATORS CAN RECEIVE MORE COMPLAINTS DURING ECONOMIC DOWNTURNS, DISGRUNTLED FORMER EMPLOYEES CAN TURN 'WHISTLEBLOWERS,' AND RISKS TO CYBERSECURITY INCREASE Feature AS PANDEMIC-DRIVEN ECONOMIC instability has heightened the risk factors for white-collar crime, so too has the impor- tance of compliance been reinforced. Good compliance means a diminished chance of receiving criminal charges or even an investigation if there is fraud, corruption or threats from "whistleblowers." Toronto litigator, Kenneth Jull, tells a story to illustrate this. A corporate client had come to him, describing a disgruntled former employee who had threatened to go to authorities unless the client paid money for his silence. "What I told him was, 'First off, you cannot pay any money to this person because that's hush money,'" and the Criminal Code prohibits paying someone off to hide crim- inal conduct. In this particular case, Jull had helped the client devise a solid compliance program, and they were then able to turn the tables on the former employee effectively. "We went to the FBI and the RCMP first, and we said, 'Look, you may get a complaint from X. We don't think we've done anything wrong, [but] will you come and look at our books and at what we've been doing ?' We struck first, and the result was: not only was there not a complaint, but this guy was then investigated," and may have even been charged with obstructing justice or extor- tion, says Jull. is result would not have been possible without a strong compliance program already in place, he notes. So, is now the time to buckle down on compliance measures? Jull, counsel at Gardiner Roberts LLP and co-author of Profiting From Risk Management and Compliance, cites a paper by academic Amitai Aviram published in the Yale Law Journal. In it, Aviram analyzed enforce- ment levels of the U.S. Securities Exchange Commission over 10 years and compared it to the Standard & Poor index during that same timeframe. e results showed "an inverse relationship between the economy and enforcement," Jull says: when the S&P was at its lowest, regulatory enforcement was at its highest, and vice versa. e reasons for high enforcement in a poor economy are threefold, says Jull. e first is the temptation: when times are bad, and margins are narrower, people don't want to give up what they have, such as the second car, big house or private schools. Individuals and companies alike will start cutting corners and cheating under increased pressure. e second reason is that troubled times and markets result in more complaints to regulators by disgruntled investors. "Regulatory authorities start to get many more complaints and act on those," he says. ird — and also in bad times — people get fired and take revenge by going to regula- tors. Jull saw this recently, he says, in a threat made to an employer: "If you don't give me what I think I deserved, I'm going to go to the FCA [Financial Conduct Authority] and RCMP and tell them what happened." Although an economic downturn due to the pandemic may deter companies from spending on compliance, "now is the time when a company is more at risk than ever," he says.

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