One potential bright spot for corporate compliance officers seeking answers in about the incoming Trump Administration: one of your own is leading the transition team for the Justice Department, according to Bloomberg.
That person is Kevin O’Connor, who served as global head of ethics & compliance at United Technologies Corp. from 2012 to 2015. O’Connor also served as U.S. attorney for Connecticut during the Bush Administration, wrapping up as associate attorney general 2008-09. He is now general counsel at Point72 Asset Management, the investment fund managed by Stephen A. Cohen.
O’Connor is not on any list (that we know of, any way) to be attorney general himself. Right now the leading Big Names seem to be Sens. Ted Cruz and Jeff Sessions. Rudy Giuliani had been mentioned as a possible attorney general earlier; now he seems to be a candidate for secretary of state—although some senators seem to be balking at that idea since Giuliani has no real qualifications for that job. Giuliani may yet drift back into the AG running, or (my bet) we will get a nominee nobody has considered yet.
O’Connor could, however, have much influence on posts such as deputy attorney general, and it’s much more plausible that a man like him get a job like that. Or he could help to set the agenda for where the Justice Department will focus its attention come Jan. 20.
Compliance professionals can make a few different arguments about the merits of O’Connor leading the Justice Department transition. First, he has done this job, and therefore knows its challenges—especially the challenges of a modern regulatory environment as built since the Sarbanes-Oxley Act, the Dodd-Frank Act, and the Foreign Corrupt Practices Act. United Technologies was a sprawling, diverse company, heavily involved in government contracting, and with a multitude of compliance challenges. O’Connor will understand the value of a compliance program and just how complicated a compliance officer’s job can be.
Let’s also consider his current employer—yes, that Stephen A. Cohen, who pleaded guilty to insider trading charges with his prior firm, SAC Capital Advisers. SAC paid a $1.8 billion fine in 2013, and Cohen himself was banned from professional money management until 2018. (Point72 is the successor to SAC, managing money for Cohen, his family members, and certain eligible employees.)
You can read O’Connor’s working with Cohen in two ways. You could say that Cohen hiring an ethics & compliance executive to be Point72’s general counsel shows that Cohen now takes corporate compliance seriously, and wants good conduct embedded across the whole firm. Indeed, Point72’s website displays its mission and commitment to ethics prominently.
Then again, you’d expect all that from someone trying to rebuild his reputation after an insider trading scandal. Cynics would say Cohen wanted someone who knew federal regulatory enforcement cold, with deep connections to the Justice Department. O’Connor fits those criteria too. Plus he doesn’t mind working in Connecticut.
So is O’Connor someone who embraces the value of corporate ethics & compliance, and will try to steer the Trump Administration to Justice Department appointees who follow that philosophy? Or will he push people and policies to shield wealthy investors like his current employer from the unpleasant chores of running an ethical business?
Let’s be honest: probably a mixture of both, but my gut leans toward O’Connor not wanting to undo all the progress in corporate compliance that we’ve seen. In the 2000s he worked with Justice Department officials such as Paul McNulty and Mark Filip, who were instrumental in the early surge of FCPA investigations and prosecutions that we saw 10 years ago.
McNulty and Filip also updated Justice Department charging policies, giving corporations credit for disclosure of facts or having pre-existing compliance programs. (Earlier policies only granted credit if companies waived attorney-client privilege.) O’Connor was a fellow traveler in those theories of corporate compliance and regulatory enforcement.
The Yates Memo of 2015 can trace its origins back to those ideas—with a big dose of political theater, to be sure, since liberal Democrats like Sen. Elizabeth Warren were pressuring the Obama Administration to scalp some Wall Street tycoons. But fundamentally, the Yates Memo gives prosecutors a lot of discretion. It’s plausible that O’Connor will want to keep that discretion in the next Justice Department’s hands, even if those prosecutors are Big Business, “light touch” advocates who will never really exercise it.
One question I do have about O’Connor: If he does end up in some senior Justice Department role, how will he navigate the potential conflicts between his old employer, United Technologies Corp., and the battle it might have with Donald Trump over shipping jobs to Mexico?
Remember that during his campaign, Trump slammed Carrier Corp. for its decision to ship 1,400 jobs from Indiana to Mexico. If Carrier went through with that plan, Trump vowed, he would impose 35 percent tariffs on the products Carrier makes there.
Well, United Technologies owns Carrier. As of this week, those Carrier workers still expect Trump to save their jobs, and UTC has no plans to change Carrier’s course.
How Trump might force this issue with Carrier? Given his penchant for cutting deals, I can imagine Trump thinking he will threaten to cancel some government contracts with UTC if the outsourcing proceeds, or reward UTC with more contracts if the jobs remain. That’s precisely the sort of unethical business practice a good compliance officer would recommend against. How O’Connor might navigate the inevitable questions about his prior UTC experience, I don’t know. Some days, I would not wish working with Donald Trump on my worst enemy.
Still, all things considered, the compliance community could do far worse than someone like O’Connor handling the Justice Department at this crucial time. Given how unqualified and unprepared Trump is, we’ll need all the help we can get.