TRACE International Remembers Roderick Hills Reply

By Severin Wirz

hillsrA memorial service was held today at the Washington National Cathedral to honor Roderick M. Hills, who passed away on October 29, 2014.  Mr. Hills served as counsel to President Gerald Ford, and then served as chairman of the Securities and Exchange Commission between 1975 and 1977.

As chairman of the SEC, Hills oversaw the Commission at a crucial time when its role changed from oversight over what companies were required to disclose in their public filings, to the regulating of corporate conduct itself.  One of Hills’ first major tests would be the SEC Enforcement Division’s findings that U.S. issuers were routinely involved in bribes to foreign government officials.  At the time, foreign bribery was not illegal under U.S. law, although under Mr. Hills’ tenure, over 400 companies would voluntarily come forward to the Commission admitting to having made improper payments abroad.  Those disclosures would eventually lead Congress to pass the Foreign Corrupt Practices Act in 1977.

The SEC’s incursion into corporate wrongdoing during that period was a role that Mr. Hills did not always relish, and among the five commissioners at the time, there was often disagreement between them as to whether improper payments abroad, especially minor ones, should have to be disclosed to shareholders.  The SEC also received criticism from the accounting industry, with many in the profession disapproving of the books and records provisions of the FCPA as an effort to turn accountants into corporate watchdogs for the SEC.

HillsMr. Hills was often himself critical of the criminal provisions of the FCPA, but advocated strongly in favor of providing more sanctions for companies failing to keep accurate corporate records.  Last February, in a speech he gave in Mexico City at a TRACE-sponsored workshop, Mr. Hills again remarked on the need for developing countries passing corruption laws to focus on accounting standards and disclosure rules rather than solely on criminal enforcement: “A better policy is to offer broad amnesty to those who voluntary disclose their bribes and tough action against those who do not… accompanied by the development of strong accounting and auditing practices that will uncover concealed bribery.”

Mr. Hills’ work in the field of corporate governance went beyond the mere issue of corruption, though, and as chairman he spearheaded the SEC’s efforts to bring new rigor to the independence of corporate directors.  Working alongside the New York Stock Exchange, he pushed for the adoption of rules that publicly-held companies create audit committees composed of independent directors to work with outside auditors.  Those committees are now standard today among both private and publicly-held companies.

Born on March 9, 1931, Mr. Hills grew up in Los Angeles where his father worked as a janitor.  He became the first in his family to go to college, receiving both his B.A. and LL.B. degrees from Stanford University and then going on to serve as law clerk to Justice Stanley F. Reed of the Supreme Court of the United States.  After becoming a named partner for the Los Angeles-based law firm of Munger, Tolles, Hills & Rickhauser, he served as Chairman of the Board of Republic Corporation (NYSE), until he was asked to take on the job of deputy counsel to President Ford in 1975.  A few months later he was nominated by Ford to be Chairman of the SEC, at a time when his wife, Carla Anderson Hills, already served as secretary of Housing and Urban Development.  In many ways, the two formed one of the most potent husband/wife pairings in Washington D.C. at the time.

One of Mr. Hills’ greatest achievements during his time in Washington was his ability to bring different viewpoints closer together, even opposing ones.  As chairman of the SEC, he hired the first chief economist to work at the Commission at a time when the focus by many in the SEC was on more lawyers and regulation.  In his last appearance as chairman before the Senate Committee on Banking, Housing and Urban Development, Senator William Proxmire of Wisconsin discussed with Mr. Hills the soon-to-be-passed Foreign Corrupt Practices Act and closed with this goodbye:

“Chairman Hills, before you leave, I want to say you have not only been, as I said earlier, an outstanding chairman of the Securities and Exchange Commission, but you have been a superlative witness before us on a number of occasions.  We are going to miss you very much.”

That Senator Proxmire had voted against Mr. Hills’ nomination as Chairman of the SEC in 1975 is testament to the fact that Hills earned the respect not only of those who shared his beliefs, but also of those who did not.

After leaving government, his focus turned to Asia, becoming chairman of the Peabody Coal Company and spending many years promoting good business practices in Southeast Asian countries.  In 2003, he and his wife created the Hills Program on Governance that established Centers for the Study of Governance in academic institutions around the globe, including at the Asian Institute of Management in the Philippines and the University of Indonesia.  In that role, he again returned to the issue of corruption, this time looking at its root causes by identifying serious integrity problems in both the public and private spheres.  In 2009, he was one of five anti-bribery professionals, (including Alexandra Wrage from TRACE), who traveled to Moscow during President Obama’s trip there for high-level discussions about commercial corruption in Russia.

Mr. Hills will be remembered as a guiding spirit for those dedicated to corporate governance and government transparency, which he made into a lifelong passion.  He was not only a source of wisdom, but he was a friend to TRACE, generously offering his time in order to advance the goals of anti-corruption.  Last year, while working on a book, I had the great fortune to sit down for lunch with Mr. Hills in Washington D.C. in order to discuss with him his time at the SEC.  Although I expected that he’d want to relive his glory days, he remained animated around present-day issues, continuing to argue the responsibility of the auditing profession to better detect corruption and the relative merits of a disclosure versus criminalization approach towards enforcement.  It was our first time meeting one another, but he was gracious enough to sit with me for over two hours, long after the bill had arrived.  Until the end of his life, the depths of his convictions were matched only by his kindness towards others.  He will be greatly missed by all who knew him.

Severin Wirz is Manager of Advisory Services at TRACE International.  He may be reached at

TRACE Introduces Global Business Bribery Risk Index Reply

The TRACE Matrix, developed with RAND Corporation, is the first global business bribery risk index for the compliance industry.

TRACE Matrix - Map (Complete)

View the TRACE Matrix here.

November 11, 2014, Annapolis, M.D.TRACE International today announced the launch of the TRACE Matrix, the first business bribery risk index specifically tailored to the needs of the compliance community. Developed in collaboration with RAND Corporation, the TRACE Matrix provides the business community with a powerful new tool for anti-bribery risk assessment.

The lack of reliable information on the risk of business bribery in foreign countries exposes a company to the possibility of violating anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA) and other international anti-bribery regulations which prohibit bribery of foreign government officials.

The TRACE Matrix was designed to help companies assess the propensity for public-sector bribery and its associated business risk while providing actionable intelligence to inform a company’s compliance processes.

“We have heard from the business community for years that a tailored tool to gauge levels of commercial bribery was needed.  There are some excellent indices currently available, but these are either very broad, measuring perceived corruption across all spheres of society, or very narrow, measuring just one factor,” said Alexandra Wrage, President of TRACE. “The TRACE Matrix provides the compliance community with a clear guide to business bribery, focusing specifically on the data that is relevant to business activity.”

View the complete press release announcement here.

What was October’s biggest compliance story? Reply

  1. Ebola health epidemic highlights corruption problems in West African countries – As health officials struggle to contain the spread of the recent outbreak in West Africa’s Sierra Leone, Guinea and Liberia, some are pointing to corruption as a major exacerbating factor in the outbreak, including reports of shipments of medical supplies delayed in port for weeks.
  2. SEC defendant challenges agency’s powers to bring charges before administrative law judges – The head of a Delaware investment fund is challenging the SEC’s powers under Section 929P of the Dodd-Frank Act to impose civil penalties in an administrative proceeding.  The case, which is before the federal district court for the southern district of New York, comes amidst criticism that the SEC is improperly bypassing federal courts by trying complex cases before its administrative law judges.
  3. UK takes major step to require large companies to disclose efforts taken to avoid supply chain slavery – A proposed new measure going through parliament in the UK would require disclosure of the steps companies have taken to ensure their supply chains are “slavery free.”  If passed, the law would be notably broader than President Obama’s 2012 executive order, which imposes transparency measures for trafficking and forced labor on federal U.S. contractors.
  4. Second Circuit Court further narrows jurisdictional requirements under Alien Tort Statute – This month, the Second Circuit ruled in Mastafa v. Chevron Corp that the same set of allegations used to satisfy the Supreme Court’s Kiobel ruling (that the case touches and concerns the United States with sufficient force to displace the presumption against extraterritoriality), must also satisfy the jurisdictional test for whether the alleged conduct violated the law of nations where that conduct occurred.  As Sarah Altschuller of Foley Hoag LLP comments on the firm’s blog, the recent Mastafa decision shows just how limiting the Kiobel decision has been for plaintiffs in ATS cases for claims based on conduct occurring abroad.
  5. Layne Christensen pays $5.1 million to resolve FCPA charges with the SEC – Layne Christensen, the U.S.-based global water management, construction and drilling company, agreed to pay a $5.1 million fine this month to the SEC to resolve allegations that the company’s subsidiaries in Africa and Australia violated the anti-bribery and books and records provisions of the FCPA.  The complete Compendium summary for this case may be accessed here.

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What was September’s biggest compliance story? Reply

  1. SEC announces record-breaking $30 million whistleblower award. The award, which is the largest in the Commission’s history, was for key information related to an ongoing fraud investigation.  It also marks the fourth time that a whistleblowing award has been made to someone living in a foreign country.
  1. GSK agrees to pay $491 million penalty to Chinese authorities because of bribery charges. The announcement of the largest corporate fine ever imposed in China came in the wake of a one-day trial in Changsha, Hunan, finding the company’s subsidiary guilty of bribing Chinese doctors and hospitals.  Investigations in the United States and the United Kingdom appear to be ongoing.
  1. California court dismisses human rights abuse case against Cisco Systems. The California court ruled that the plaintiffs, who had brought their case partially under the Alien Tort Statute, did not sufficiently show facts that human rights abuses touched and concerned the United States with sufficient force to overcome the presumption against extraterritorial application of the statute.  The decision closely followed the Supreme Court’s 2012 ruling in Kiobel v. Royal Dutch Petroleum.
  1. U.S. Commerce Department publishes list of all known conflict mineral processing facilities. The list, which was made public pursuant to section 1502(d)(3)(C) of the Dodd-Frank Act, tells companies all known facilities that process the minerals tin, tantalum, tungsten, or gold, but does not indicate whether a specific facility processes minerals that are used to finance conflict in the Democratic Republic of the Congo or an adjoining country.
  1. Brazilian authorities charge Embraer SA employees of bribing officials of the Dominican Republic. Brazilian authorities are reportedly working alongside their U.S. counterparts to collect evidence of a $3.5 million bribe to a retired Dominican Air Force colonel.  The case marks one of the first major actions by Brazilian authorities to curb instances of bribery abroad.