1. Role and Responsibility of the Chief Compliance Officer Session 610: Compliance and Ethics PRESENTERS Barbara BarrettStephen Daoust Chief Compliance OfficerV.P., Legal & Compliance Reliant Care Management Company, LLCIridium Satellite, LLC (314) 543-3821(703) 287-7447 bbarrett@reliantcaremgmt.comstephen.daoust@iridium.com Suzanne Rich Folsom Christopher Hall General Counsel, CCO, Chair, White Collar & Government Investigations SVP- Government AffairsSaul Ewing, LLP United States Steel Corporation215-972-7180 SRFolsom @uss.comchall@saul.com

2. Traits of a “Great” Chief Compliance Officer 1)Ethical 2)Courageous 3)Respectable 4)Analytical 2

3. Traits Of A “Great” Chief Compliance Officer 5)Detail Oriented/Global Visionary 6)Approachable 8)Savvy 9)Cooperative 10)Proactive 3

4. DIFFERENCES BETWEEN IN-HOUSE COUNSEL & CHIEF COMPLIANCE OFFICER

5. What’s the Difference? “The General Counsel defines the lanes in a road; and the Chief Compliance Officer is responsible for processes and systems designed to ensure that the corporation stays within those lanes.” -- Michael Volkov, CEO and owner of The Volkov Law Group, LLC 5

6. Educational and Licensing Requirements IN-HOUSE COUNSEL Law Degree Required Must Be Professionally Licensed Must Act in Accordance with Rule of Professional Responsibility CHIEF COMPLIANCE OFFICER Law Degree Preferred, But Not Required No licensing requirement No rules of professional responsibility* *Healthcare Compliance Association has adopted a Code of Conduct for compliance professionals in healthcare industry. No enforcement mechanism in place for failure to comply (i.e., disbarment or suspension of license). 6

7. Compliance Responsibilities In-House Counsel Identify statutes and regulations applicable to client Assist in internal investigation “Zealously defend” company in the event of legal noncompliance – Retain outside counsel Advise Senior Management/BoD of Legal Obligations/Defenses and/or Litigation Strategies Compliance Officer Develop compliance risk assessments Develop Code of Conduct Develop compliance awareness and training program Monitor/Audit compliance Investigate Disclosures of Noncompliance Determine Compliance/Noncompliance Advise on Penalties for Misconduct Disclose Noncompliance to Senior Management/BoD/Government 7

8. CHIEF COMPLIANCE OFFICER REPORTING STRUCTURES 8

9. Most Common Reporting Structures Chief Compliance Officer (CCO) to Chief Executive Officer (CEO)/President (38%) CCO to General Counsel (GC)/Chief Legal Officer Including General Counsel and CCO in the Same role (21%) CCO to Board of Directors or Sub-Committee of Board of Directors (19%) 9

10. CCO Reports to CEO/President PROS Signals Importance of “Compliance” Raises Stature and Perceived Authority of Compliance Officer Add an extra voice to the conversation Compliance expert spending all of his or her time on compliance matters CONS CEO/President may not fully understand nature of job – No legal/compliance background expertise Role not seen as “independent” – May reduce “whistleblowing” Communications not subject to attorney/client privilege 10

11. CCO Reports to General Counsel PROS Centralizes legal/compliance regime Better understanding of legal/investigatory nature of position and its requirements Increases direct access to legal experts within and outside company Communications may be subject to attorney/client privilege CONS Role my not be seen as “senior” or “independent” Non-compliances may be filtered/suppressed May create false impression that Compliance Officer is an attorney or acting in a “legal” role Often lacks understanding of non-legal aspects of Compliance Officer’s role May cause GC/CLO to become a “fact witness” in litigation 11

12. CCO is the General Counsel PROS Compliance and legal issues often overlap Consistency of advice Gives CCO a “seat at the table” Signals to employees that compliance is a top priority Efficiency Communications protected by attorney/client privilege CONS Resources: the general counsel’s work load is inherently heavy Role of CCO and GC are different and in particular situations advice may differ Having two different perspectives can be useful Not all GCs have sufficient compliance background to serve as CCO 12

13. CCO Reports to Board of Directors (BOD)/Board Committee PROS Signals Importance of “Compliance” Raises Stature and Perceived Authority of Compliance Officer Role seen as “independent” Receive “extra credit” under the U.S. Federal Sentencing Guidelines CONS CCO may not be fully integrated into Senior Management BoD has no ability to manage/supervise “day to day” activities BoD may not fully understand nature of job – No legal/compliance background expertise Communications not subject to attorney/client privilege 13

14. Best Practices? Regardless of title or position within org chart, CCO must be a member of Senior Executive Management Team CCO must have direct and unfettered access to both the CEO and BoD or appropriate committee CCO should be required to report to BoD annually on the adequacy of compliance program and major activities Termination of CCO must be approved by the BoD 14

15. CCO Liability Insurance Do I Need It? In-house attorneys are in the “crosshairs” of both the SEC and other regulators – Tenet – GSK – Moneygram – Buckingham Capital Mgmt 15

16. CCO Liability Insurance Do I Have It? Check your corporate bylaws for indemnification and state indemnification laws – Are you included? What is included? Mandatory or permissive? – Limits in state law Check Your Corporate D&O Policy – Are you considered a corporate officer? – What is the scope of the policy? – Are their any exclusions? – What is the deductible? What are the limits?

17. CCO Liability Insurance Do I Have It? Will employed lawyer insurance protect me? Need to check with insurance carrier to determine whether it includes “non-legal” duties of a compliance officer? Will not apply to CCOs who are not active lawyers able to practice law in the jurisdiction where they are working.

18. CCOs and the A/C Privilege Are Compliance Activities Subject to A/C Privilege? – Compliance audits – Investigations Does it matter if the CCO is an attorney? Does it matter if the CCO reports to the GC? Do you want the information Privileged? 18

19. Lessons Learned from Barko v. KBR Case involved a discovery request filed by a qui tam relator to obtain witness statements, witness interview summaries and compliance investigation reports arising from an internal investigation of fraud. D.C. District Court originally held that documents should be produced as they were created for “business purposes”.

20. Lessons Learned from Barko v. KBR D.C. Circuit vacated the order and held that proper rule for privilege is “whether obtaining or providing legal advice was one of the significant purposes of the attorney-client communication.” held these documents generally are privileged (given involved activity of KBR’s Legal Dept.) D.C. District Court agreed with holding but... 20

21. Ruled that the documents nevertheles should be turned over on the theory of “implied waiver” because: – KBR’s had used the documents to argue their position that no fraud had occurred in an SJM. – KBR had used the documents to refresh the recollection of a 30(b)(6) witness prior to a deposition in the case. 21

22. Best Practices to Preserve A/C Privilege Define separate legal and compliance roles Investigations should be performed by Legal Department or directed by Legal Department When needed, actively communicate the confidentiality regarding documents and discussions DO NOT mark all compliance related documents as “privileged” 22

23. How to Be an Effective CCO Add value to your company by being a strategic thinker/leader Be creative as you lead and implement compliance initiatives Be able to take a stand and communicate why one course of action is better than the other Be persistent when you address difficult situations 23