The Colorado House Finance Committee has unanimously approved legislation (HB 1240) that would codify a controversial rule change announced last year by the state’s Department of Revenue establishing a destination-based sales tax system.
Under the state’s current system online retailers assess, collect and remit sales tax based on the tax jurisdictions they share with their customers. But under the new system, the retailers pay sales taxes based on their customers’ addresses.
With more than 700 unique sales tax combinations in the state, due to its multitude of special taxing districts and home-rule cities, the new system could be a significant burden on small-businesses.
Another bill (SB 131) that would have exempted businesses with less than $100,000 in annual sales in the state from the new system died in committee in February. (DENVER POST)
This tax season, as part of an effort to attract blockchain-based companies to the state, Ohio gave businesses that operate there the option of paying their taxes with bitcoin.
Home furnishings company Overstock was one company that took the state up on its offer. The Utah-based company began allowing its customers to pay in bitcoin and other cryptocurrencies in 2014 and has taken in more than $13 million in such payments since.
“We have Bitcoin to spend,” said Jonathan Johnson, who’s on the company’s board of directors.
By late last month, however, fewer than 10 companies had made use of the bitcoin option, and the program’s future is uncertain, according to the Ohio treasurer’s office.
Other states, including Georgia and Illinois, considered bills last year to allow cryptocurrency tax payments, but those measures didn’t pass. (CINCINNATI PUBLIC RADIO)
U.S. Rep. Josh Gottheimer (D-NEW JERSEY) said he intends to introduce legislation potentially cutting federal funding for NEW YORK or its transportation authority if the congestion pricing plan just approved for Manhattan ends up subjecting New Jersey drivers to two tolls for one trip into New York City. Drivers already pay tolls to cross between the two states. (NEW YORK TIMES)
The INDIANA House passed comprehensive gambling legislation (SB 552) last week after amending it to limit legalized sports betting to casinos. That version of the bill will now have to reconciled with the one passed by the Senate in February allowing sports betting via mobile devices. (ASSOCIATED PRESS, LEGAL SPORTS REPORT)
CALIFORNIA Sen. Hannah-Beth Jackson (D) has introduced a bill (SB 468) that would require analysis of 10 large state tax breaks and the repeal of those that don’t show economic benefits. The labor-backed California Tax Reform Association estimates that the state’s 10 biggest tax breaks cost taxpayers $85 billion over the past decade. (CALMATTERS, LEXISNEXIS STATE NET)
The FLORIDA Supreme Court has agreed to consider a dispute over the extent of the Broward County School Board’s civil liability to the victims of last year’s mass shooting at Marjory Stoneman Douglas High School. The school board contends the state’s sovereign-immunity law limits its total liability for the entire incident to $300,000, but attorneys for the plaintiffs argue the cap should be $200,000 per claimant. (MIAMI HERALD)
-- Compiled by KOREY CLARK
The usual next step up the ladder for state legislators is statewide office or Congress. But some are now heading in the opposite direction and running for mayor.
One attraction is that the job generally pays better than most part-time legislatures. And being mayor allows you to execute policy rather than just craft it.
“After a period of time saying this is what they should do, you’re ready to carry things out,” said Jane Campbell, a former Ohio state lawmaker who served as mayor of Cleveland.
With its polarization and gridlock, Congress isn’t particularly alluring for state lawmakers who want to be productive policymakers. Cities, meanwhile, are economically healthier than they’ve been in a generation and have become fertile ground for policy innovation recently.
“There’s a pull toward cities right now because you can do things in a way that you couldn’t before,” said Michael Berkman, a political scientist at Penn State, “while there’s a push away from Congress, in that it’s not very interesting or fun.”
Major cities, most of which are under Democratic control, are also appealing to Democrats who have been stuck in minority status in red states, like Texas state Rep. Eric Johnson, who is running for mayor of Dallas.
“It’s unlikely that his party is going to get back in the majority in the Texas House anytime soon,” said Mark P. Jones, a political scientist at Rice University. “As mayor, he would have a very nice platform from which to propose initiatives and impact public policy.”
But the mayor’s office isn’t always an escape from minority status for state lawmakers who seek it. Before becoming Baltimore’s current mayor, Catherine Pugh served as majority leader of the Maryland Senate. And after 28 years serving in the majority in his state’s General Assembly, Sen. Jim Merritt (R) is running for mayor of Indianapolis, where he faces an uphill battle against well-funded incumbent Democrat Joe Hogsett.
With Indianapolis having repeatedly broken its homicide record in recent years, Merritt said he considers running for the office “something of a duty.”
“I grew up in Indianapolis,” he said. “That’s not the city I grew up in.” (GOVERNING)
A federal grand jury in NORTH CAROLINA is considering whether to recommend criminal charges in connection with the state’s 9th Congressional District race in November. Republican candidate Mark Harris held the lead in that contest before it was revealed that a political operative working for his campaign had collected ballots from voters. (ASSOCIATED PRESS)
A bill (HCB 10) under consideration in MISSOURI’s Republican-controlled House would impose a $350 fee for filing a ballot initiative petition, which would be refundable if the initiative received enough signatures to qualify for the ballot. The measure comes after an election cycle in which nearly 400 initiative petitions were filed and after the approval of initiatives in recent years raising the state’s minimum wage, legalizing medical marijuana and nullifying a GOP-backed anti-union law. (ST LOUIS POST-DISPATCH)
Seven of the eight public universities in MISSISSIPPI -- one of a handful of states that don’t limit gifts to public officials -- spent nearly $2 million over the last four years lobbying state lawmakers. But higher education hasn’t necessarily fared better than other spending categories at budget time, facing a 12-percent cut last year. (CLARION LEDGER)
A report from a special “strike force” to California Gov. Gavin Newsom (D) says the Golden State should ease its strict liability laws for utilities found to have caused devastating wildfires.
The report came in the wake of the bankruptcy filing by Pacific Gas & Electric, the state’s largest public utility, which is facing an estimated $30 billion in damages over its role in sparking dozens of massive wildfires over the last two years.
Under current state law, utilities are responsible for any wildfire damage traced to their equipment even if they were not negligent in maintaining it, a standard known as inverse condemnation. Newsom says that must change.
“I’m of the opinion that in order to maintain safe, reliable, affordable service — utilities and electricity — to meet our climate goals, to protect the victims of these fires, that we’re all in this together and we all have a role and responsibility to play,” Newsom told reporters at the headquarters of the California Governor’s Office of Emergency Services, where the report was released.
The strike force report presented three specific options:
Creating a state fund that utilities could tap into to pay wildfire damage claims.
Changing the inverse condemnation standard to a fault-based standard that would shift the bulk of the risk to insurance companies and uninsured property owners in cases where the utility was not at fault.
Pool money from investor-owned utilities like PG&E to pay out claims from big fires, and specifically those legally deemed to be catastrophic.
Newsom declined to endorse any specific proposal, saying it would be up to lawmakers over the next three months of the session to consider these options and to craft a solution that works for everyone.
To date, however, lawmakers haven’t been interested in any changes that are perceived as letting PG&E or other utilities off the hook for blazes like last year’s Camp Fire, which took 85 lives and for all intents and purposes wiped the Sierra town of Paradise off the map.
Newsom’s support of relieving some liability for such fires led to a surge in utility stock prices, with PG&E stock rising 21 percent to $23.08, its highest point since January. But Newsom also added a warning, raising the possibility that the state could take over PG&E should it continue to behave as “bad actors” in its dealings. (INSURANCE JOURNAL, SACRAMENTO BEE, CAL MATTERS, LEXISNEXIS STATE NET, CALIFORNIA GOVERNOR’S OFFICE)
Following through on one of his primary campaign promises, Illinois Gov. J.B. Pritzker (D) signed legislation (SB 1474) that bars local governments from implementing their own “right to work” statutes, which bar union shops from requiring workers to join the union as a condition of employment.
“From the start, right-to-work was an idea cooked up to lower wages, slash benefits and hurt our working families,” Pritzker said during a signing ceremony for the measure. “Right-to-work has always meant right to work for less money, and it’s wrong for Illinois.”
The measure was a response to a right-to-work ordinance adopted in the village of Lincolnshire in 2015. A federal court blocked that measure in 2017, a decision upheld by the 7th U.S. Circuit of Appeals last year. That might now be the end of it, however, as other Circuit Courts have upheld such statutes in other locales. Most observers expect the issue to ultimately be decided by the U.S. Supreme Court. (SOUTHERN ILLINOISAN [CARBONDALE], BLOOMBERG LAW)
Assembly Speaker Robin Vos (R) decried Gov. Tony Evers’ (D) plans to renegotiate the state’s controversial deal to give Taiwan-based Foxconn Technology Group around $4 billion in tax breaks and other incentives, saying “the only thing that could happen is to make the deal worse for Wisconsin.” Evers said last week that Foxconn has no intention of creating the 13,000 jobs it promised former Gov. Scott Walker (R) it would provide at what was supposed to be a 20 million square foot campus. Industry experts have estimated the company will only be able to provide around 2,000 jobs. Vos, however, said he believes the company will reach the 13,000 number and said lawmakers will not support any attempt to renegotiate the deal. (MILWAUKEE JOURNAL-SENTINEL, REUTERS)
MICHIGAN Gov. Gretchen Whitmer (D) signed legislation (SB 203) that requires only those with 10 percent or more of an ownership stake in a medical marijuana business to undergo the state’s background check process. Previous law required anyone with an ownership stake to go through the vetting process. (DETROIT FREE PRESS, DETROIT NEWS)
Saying “Good teachers can change the trajectory of a student’s life forever,” MISSISSIPPI Gov. Phil Bryant (R) signed a measure (SB 2770) last week that will give Magnolia State teachers a $1,500 annual raise. The law takes effect on July 1. (ASSOCIATED PRESS)
The TENNESSEE House and Senate signed off last week on Gov. Bill Lee’s (R) proposal to give authority for reviewing the state’s charter school applications to a new nine-member body, removing that authority from the State Board of Education. The changes will take effect in the 2020-21 school year. (TENNESSEAN [NASHVILLE], U.S. NEWS & WORLD REPORT)
GEORGIA Gov. Matt Kemp (R) signed legislation last week to, for the first time, allow the sale of medical cannabis oil in the Peach State. Under the law, growers will now be allowed to cultivate cannabis on up to nine acres of indoor growing space for the specific purpose of producing cannabis oil to be sold directly to registered medical marijuana users. (ATLANTA JOURNAL-CONSTITUION)
CALIFORNIA Gov Gavin Newsom (D) announced a tentative deal with Los Angeles County last week that would allow both parties to sit at the same bargaining table when negotiating prescription drug prices with manufacturers. Newsom earlier this year pitched an as-yet amorphous proposal via executive order N-01-19 to have all state government entities negotiate drug purchased as a single entity. Newsom said he expects to eventually encounter significant resistance to the idea from pharmaceutical companies, which have so far remained neutral on the proposal. (LOS ANGELES TIMES, LEXISNEXIS STATE NET, CALIFORNIA GOVERNOR’S OFFICE)
-- Compiled by RICH EHISEN
The TEXAS Supreme Court rules that the state does not have to reveal the identity of the manufacturer of the drugs used to carry out executions. Doing so, the court ruled, “would create a substantial threat of physical harm to the source’s employees and others” (ROUTE FIFTY).
The IOWA Senate approves SF 329, which would legalize the growing of industrial hemp in the Hawkeye State. It moves to the House (DES MOINES REGISTER).
KANSAS Gov. Laura Kelly (D) signs HB 2167, which requires the state Department of Agriculture to submit a plan to the federal government for regulating commercial hemp production. The new law replaces a state program only for researching hemp and its potential uses with a program for commercial production (ASSOCIATED PRESS).
The NEBRASKA Legislature gives initial approval to LB 657, which would legalize hemp production in the Cornhusker State. It faces another vote before it could move to Gov. Pete Ricketts (R) for consideration (OMAHA WORLD HERALD).
The INDIANA House approves SB 522, which would legalize sports betting in the Hoosier State. The Senate, however, failed to concur with changes made in the House, and the measure will now go to a joint House-Senate conference committee (LEGAL SPORTS REPORT).
ARIZONA Gov. Doug Ducey (R) signs SB 1401, which removes licensing requirements for people whose activities are limited to washing, drying, curling, hot ironing and styling hair (ARIZONA CAPITOL-TIMES [PHOENIX]).
The NORTH CAROLINA House approves HB 389, a bill that would authorize public colleges and universities to allow alcohol sales at stadiums, athletic facilities and arenas located on school property. It moves to the Senate (WECT [WILMINGTON]).
The WASHINGTON Senate approves HB 1638, which would remove from Evergreen State law the ability for a parent to claim a religious or philosophical exemption for not vaccinating their children before starting public school. The measure returns to the House (SEATTLE TIMES).
The ALABAMA Senate approves SB 140, which would make the state’s decades-old sex education law more medically accurate and erase any discriminatory and stigmatizing language. It moves to the House (AL.COM)
The NEVADA Senate unanimously approves SB 358, which would raise the state’s Renewable Portfolio Standard to 50 percent by 2030. It moves to the Assembly (NEVADA INDEPENDENT).
The OREGON Senate approves SB 80, which would bar restaurants and other food outlets from dispensing plastic straws unless a customer asks for one. It moves to the House (OREGONIAN [PORTLAND]).
The MONTANA Senate endorses HB 658, which would extend the Treasure State’s Medicaid expansion, while also adding work requirements and a sunset date of 2025. The measure has returned to the Senate for consideration of changes made in the House (BILLINGS GAZETTE).
COLORADO Gov. Jared Polis (D) signs HB 1177, which allows Centennial State judges to temporarily remove firearms from people believed to be at high risk of harming themselves or others (DENVER POST).
The WASHINGTON House approves SB 5497, a measure that would, among several things, require state agencies to provide services without considering a person’s citizenship or immigration status and to put in place secure information systems when people use state services and facilities. It has returned to the House (WASHINGTON STATE WIRE).
The TEXAS Senate approves SB 1264, so-called “balance billing” legislation that would create an arbitration process that takes the patient out of the billing dispute. It moves to the House (TEXAS TRIBUNE).
The U.S. Supreme Court declines to hear a challenge to a NEW JERSEY law that bans the use of so-called “conversion therapy,” which seeks to change a person’s sexual orientation, on minors (NJ.COM).
NEW JERSEY Gov. Phil Murphy (D) signs AB 1504, a so-called “aid in dying” bill that makes the Garden State the eighth to allow terminally ill patients to request prescriptions from their doctors for medication to end their lives (PHILADELPHIA INQUIRER).
The NORTH DAKOTA House gives final approval to HB 1259, which would make it a crime to pass off a pet as a service animal. Violators would face a fine of up to $1,000. The measure moves to Gov. Doug Burgum (R) for consideration (ASSOCIATED PRESS).
The NEVADA Senate approves SB 179, a bill that would repeal criminal penalties on abortions performed outside the scope of the state’s abortion statute, including self-induced abortions, and remove a requirement that doctors explain to women the emotional implications of undergoing the procedure. It moves to the Assembly (NEVADA INDEPENDENT).
The NEVADA Assembly approves SB 139, which would bar marriage for people under 18. It moves to the Senate (NEVADA INDEPENDENT).
ARKANSAS Gov. Asa Hutchinson (R) signs HB 1708, a bill that sets the legal marrying age at 17, without exceptions. Those under 18 would also still need parental consent (ASSOCIATED PRESS).
The FLORIDA House approves HB 1335, which would require minors to obtain parental permission to have an abortion. It moves to the Senate (MIAMI HERALD).
NORTH CAROLINA Gov. Ralph Northam (D) vetoes SB 359, a bill that would have imposed specific instructions to physicians and nurses to care for newborns who survive an abortion. Opponents say the Tar Heel State already has such laws in place (NEWS & OBSERVER [RALEIGH]).
The SACRAMENTO City Council passes an ordinance that makes it illegal to sell flavored e-cigarette cartridges, menthol cigarettes and other flavored tobacco products within city limits (SACRAMENTO BEE).
COLORADO Gov. Jared Polis (D) signs SB 181, a sweeping oil and natural gas drilling measure that gives local governments land use authority over extraction proposals, changes the mission of the Colorado Oil and Gas Conservation Commission to protecting public health and safety, and raises the burden on oil and gas companies before they could force pooling of mineral rights. The state Department of Public Health and Environment will now be tasked with writing new rules for implementing the law, which could take up to a year. Opponents, meanwhile, are already working on a ballot measure to overturn the law (DENVER POST).
The TEXAS Senate approves two measures that limit the ability of local governments to regulate businesses: SB 2486, which would limit governments from regulating a company’s scheduling practices, and SB 2488, which would prohibit regulations that limit the ability to request criminal history records. Both move to the House (AUSTIN AMERICAN-STATESMAN).
As Oklahoma Gov. Brad Stitt watched the “American Ninja Warrior” crew setting up the show’s rigorous obstacle course on the south side of the Capitol grounds in Oklahoma City last week, he couldn’t help thinking, “I could do that.” As luck would have it, the NBC folks were happy to give him a shot. So, as the Tulsa World reports, he did. The gov made it through three obstacles, though not unscathed: he came away with a nasty scrape on his left elbow from one challenge and a little hurt pride after he “face planted into the water” on another. All in all, however, he had a good time. We’ll have to take his word for it, because the show’s producers say his run will not be telecast.
California Assemblyman Kevin Kiley has big ambitions, beginning with beating out fellow Republican Brian Dahle for a currently-vacant Senate seat. That race is TBD, but Kiley has a little extra motivation to move on – he’s been relocated to the chamber’s infamous “dog house” office. Kiley’s troubles started during a recent Assembly Education Committee hearing when he aggressively questioned Assemblywoman Cristina Garcia, a Democrat, about legislation she had sponsored. Garcia thought he was disrespectful. Assembly Speaker Anthony Rendon agreed, and shortly thereafter Kiley was reassigned to Room 5127, which is barely larger than a closet. As the Sacramento Bee reports, Kiley’s loss was fellow Republican Tyler Diep’s gain. Diep had been stuck in the tiny digs since being sworn into the Assembly last December. The question now is will Kiley get out via election or because someone else gets on Rendon’s bad side?
Arguments over health care are a daily occurrence in statehouses around this country. While it’s hard to find common ground on what reforms would be best, everyone can agree that the cost of health care can be downright absurd. Which is why, as the Vancouver Sun reports, a Canadian family on vacation opted to return to their Quebec home with a dead relative in the car rather than taking him to a hospital in the United States. Unfortunately for them, guards at the border opted to search their car. When they did, they found what was likely a lot more than they were looking for. The man appeared to have died of natural causes, most likely from a heart attack. Which is how most Americans feel when they get their bill from a U.S. hospital.
These days, any sentence that includes the words “Florida man” is usually ends in a tale of someone doing something ignorant, criminal or both. So kudos to Florida state Sen. Joe Gruters for flipping that narrative around. As the Tampa Bay Times reports, Gruters has authored legislation that would make it a crime to leave a dog tied up outside when its humans bug out to avoid an impending disaster. Those wretched souls who do will face a year in the pokey or a hefty fine, neither of which is harsh enough in my book but better than nothing at all. Several Sunshine State cities already have local laws barring such heinous behavior, but Gruters’ bill (SB 1738) would make it statewide. “We want to give dogs a fighting chance,” he says, and so far his colleagues have agreed. The measure has cleared the Senate Agriculture Committee and is now with the Criminal Justice Committee.
-- By RICH EHISEN
There’s no room for clowning about when it comes to risk management and maintaining the integrity of international business.
According to records of ancient Chinese history, the armies of the Chu and Song states were facing each other in readiness for battle in 630 BC when a Chu warrior, Xiong Yiliao, stepped into the space between them and started juggling nine balls at once. Presumably he didn’t drop any, because the Song troops were so astonished and intimidated, they turned and fled, giving complete victory to the Chu army.
Since its International Jugglers’ Day, we thought it was the ideal metaphor for risk management professionals who are required to keep a lot of ‘balls in the air’ in addressing the compliance requirements and reputational risks relating to bribery and corruption, money laundering and terrorism financing, and forced labor in supply chains.
The right tools and sources can help you juggle all these balls by enabling in-depth due diligence and comprehensive audit trails of investigations to meet regulators’ expectations.
Grabbing risk management with both hands
Stretching the metaphor further, we note that Xiong Yiliao was surely juggling with both hands. We’ve covered the due diligence hand and suggest that the other hand represents ongoing monitoring. Because in the complex times we are faced with, a comprehensive approach to risk mitigation requires both these hands, working in unison with seamless continuity.
Expert jugglers practice until they reach what could be called a state of ‘mental automation’. It’s simply not possible to think individually about each of the balls being juggled; the brain’s autopilot must kick in.
Similarly, monitoring is best achieved with sophisticated automation and embedded analytics and visualizations around PESTLE factors, negative news, sanctions, company financial data and more. When monitoring surfaces a potential threat, it gets tossed back to the other hand for an enhanced due diligence check.
An evolving regulatory battlefield
We don’t know what the battlefield looked like when the Chu and Song armies faced off in 630 BC, but we’re well familiar with the regulatory landscape that today’s compliance and due diligence warriors must contend with.
And it’s anything but stable, open ground.
It’s highly complex, increasingly international and changing very quickly, with new laws being introduced, additions and amendments coming into play, and decisions being made in courts of law that set precedents, clarify interpretation and indicate how evidence of prior corporate behavior can affect leniency or severity in the setting of penalties.
The expectations enforcement agencies have regarding corporations’ due diligence and monitoring obligations are on similarly shifting ground.
“For several years, observers could be forgiven for concluding that anti-corruption enforcement was primarily an American activity, and that the FCPA enforcement was the primary—if not only—anti-corruption risk faced by companies. The world is different today,” says the New York-based international law firm Hughes Hubbard & Reed in its Fall 2018 FCPA Anti-bribery Alert before going on to outline recent anti-corruption enforcement developments in Brazil, China, France and Norway.
In this context, even the UK’s Bribery Act 2010, introduced to consolidate, clarify and strengthen UK anti-bribery law, seems like long-established legislation although it’s less than a decade old.
The evolving nature of the due diligence/compliance landscape—including the intensifying vigilance of increasingly empowered enforcement agencies—is further exemplified in the Hughes Hubbard & Reed report highlighting “investigations and enforcement actions of note” brought by the UK’s Serious Fraud Office in the past two years. They involve a range of issues and entities, including Liberty Media (the ultimate owner of Formula 1), British American Tobacco, mining giant Rio Tinto, Rolls-Royce and Airbus Group.
The balls are in the air. But in this case, the opposing enemy won’t be turning and fleeing any time soon.
Take Action Now:
Is sustainability part of your corporate social responsibility commitment? This year’s Earth Day festivities mark the 49th year of the global awareness event and brings into focus a pressing concern for all Earthlings—from CEOs to regular Joes. To the point where a joke is perhaps the best way to sum up what Earth Day is about.
Q: What did Earth say to the other planets?
A: Get a life.
It may come as a surprise to learn how big an event the first Earth Day was. On April 22, 1970, an estimated 20 million people across the United States took part in peaceful demonstrations calling for environmental reform. In what has been widely cited as the launch of the modern environmental movement, the first Earth Day spawned groundbreaking U.S. laws:
Europe also moved forward with a range of environmental laws within a few years of the first Earth Day, and the official EU website notes, “Green growth is at the heart of EU policy to ensure that Europe’s economic growth is environmentally sustainable.”
The Earth Day Network, which grew out of the inaugural event, went global in 1990. EDN now works with more than 50,000 partners in 193 countries, and more than one billion people participate in Earth Day activities each year.
The theme this year is Protect Our Species (from extinction), which touches on all manner of environmental concerns, from localized pesticide use to global climate change. People across the world will march, sign petitions, meet with elected officials, plant trees, and clean up their towns and roads. Corporations and governments will make pledges and announce sustainability measures.
Spotlighting CSR and ESG
While Earth Day is the largest civic observance in the world, it also gives the business world plenty to think about.
For one thing, companies might deem it timely to reassess their corporate social responsibility (CSR) policies and ethics strategies, or lack thereof. Due to many developments over the past decade or so, these may extend to international laws and the authority of various organizations that take voluntary CSR self-regulation beyond individual companies to industry-wide initiatives and mandatory schemes at regional, national and even transnational levels.
There’s also the matter of growing investment in sustainable and ethical companies, and the three central factors in measuring it: environmental, social and governance (ESG).When considering CSR and ESG, companies might like to note that Earth Day has always been of great appeal to young people. In the U.S. in 1970, about 2,000 colleges and universities, and 10,000 primary and secondary schools, took part in the inaugural event. Very recently, of course, it is young people, including very young people, who have passionately seized the initiative in driving the call for genuine, committed action on climate change.
Millennials prioritize sustainability—and the brands that support it
By young people, we mean: consumers and investors of the not too distant future. To a significant degree, the millennials, or Gen Y—the children of the baby boomers, born between the early 1980s and early 2000s—have arrived already.
“Millennials are already coming into their own as an up-and-coming economic powerhouse, which means companies that embody their compassionate views have an opportunity to build a strong relationship on the ground floor,” says the global measurement and data analytics company Nielsen in its recent report Unpacking the Sustainability Landscape.
“When it comes to purchase behavior, it has become abundantly clear that consumers care. In fact, 73 percent of global consumers [adults of any age] say they would definitely or probably change their consumption habits to reduce their impact on the environment. As consumers become increasingly aware of what they put in and on their bodies, they are also interested in buying—and sometimes paying more for—products that simultaneously help the environment. In fact, 41 percent of consumers from around the world say they are highly willing to pay more for products that contain all-natural or organic ingredients.”
In surveys Nielsen conducted in the U.S. in 2017, 83 percent of millennials (aged 21-34) said it was extremely or very important to them that companies implemented programs to improve the environment. This compared to 66 percent of Gen X (35-49) and 62 percent of baby boomer (50-64) respondents. Similarly, 75 percent of the millennials said they would definitely or probably change any purchase/consumption habits to reduce their impact on the environment, compared to 46 percent of Gen Xers and 34 percent of baby boomers.
While the breakdown of responses to such questions varies in different parts of the world, there is clearly an ever-increasing need for companies to address CSR and ESG, to monitor for risk on environmental issues, and to thoroughly assess the threat of reputational and financial risk if they fall short.
It could be said that when it comes to Earth Day 2019 and its relevance to the world of business, Protect Our Species refers to more than the survival of threatened animals of the furred and feathered kind.
There were only three FCPA enforcement actions in the first quarter of 2019, but the small number obscures a bigger threat to corporate bottom lines—fines totalling $1.1 billion. This figure eclipses the total settlements in Q1 2018—also for three corporate enforcement actions—of a mere $3.45 million. What does this mean to risk management professionals? It’s more important than ever to ensure that your processes for managing third-party risk meet regulators’ standards.
FCPA compliance failure leads to $850 million penalty
At the top of the pack—and not in a good way—is Russia’s biggest mobile phone company, Mobile TeleSystems Public Joint Stock Company (MTS). The FCPA Enforcement Report noted that the company paid $100 million to the SEC for violating the anti-bribery, books and records, and internal accounting controls requirements of the FCPA. MTS also faced criminal penalties levied by the DOJ of $850 million, with credit for the $100 million paid to the SEC. Both MTS and its Uzbek subsidiary are now required to engage a compliance monitor for three years as part of the deferred prosecution agreement.
Compared to the hefty fines levied on MTS, the other two companies received relatively modest penalties.
But these weren’t the only actions taken in Q1 for FCPA compliance failures.
Individuals face significant penalties for ignoring bribery risk
The Report also highlighted several investigations, guilty pleas and sentencings against individual actors in FCPA violations
In addition, individuals related to two of the corporate enforcement actions face charges. The former president and the former chief legal officer of Cognizant were each charged in a 12-count indictment ranging from conspiracy to violate the FCPA to falsifying books and records to cover up the crimes. Likewise, the former CEO of an MTS subsidiary, along with the daughter of the former president of Uzbekistan, were charged with a variety of bribery and money laundering offenses.
The message is clear: If leadership doesn’t set—and adhere—to high standards of FCPA compliance, they’ll be held accountable. Make sure you implement a rigorous bribery and corruption risk mitigation process or face the consequences. Are you confident enough to put corporate finances and personal freedom on the line?
Take Action Now
Lawmakers in at least 10 states are considering bills that would impose the first state bans on the sale of flavored tobacco and “vaping” products.
The measures are part of a wave of legislation dealing with e-cigarettes and other vaping devices currently being considered in statehouses across the country, despite the fact that those devices are regulated by the federal government. Many of the state measures, like the proposed bans on flavored tobacco products, are aimed at curbing skyrocketing e-cigarette use among teenagers, which has also been a recent focus of federal regulators.
E-cigarettes have been subject to federal regulation since 2016. In August of that year the Food and Drug Administration finalized a rule extending its regulatory authority over cigarettes and smokeless tobacco to encompass all tobacco products, including e-cigarettes and other electronic nicotine delivery systems like e-hookahs, vape pens and vaporizers. The rule also prohibited the sale of the newly regulated tobacco products to those under the age of 18.
Last year the FDA initiated a crackdown on sales of e-cigarette products to minors, which included the largest coordinated enforcement action in the agency’s history, resulting in the issuance of over 1,300 warning letters and fines for online and brick-and mortar retailers nationwide. The agency also stated that it intended to continue its stepped up enforcement effort “indefinitely” and that it had directed manufacturers of the top-selling e-cigarette brands to submit plans for addressing youth access to their products or risk having them removed from the market.
FDA Commissioner Scott Gottlieb, M.D. said the agency was “committed to advancing policies that promote the potential of e-cigarettes to help adult smokers move away from combustible cigarettes,” but it also saw “clear signs that youth use of electronic cigarettes has reached an epidemic proportion,” necessitating an adjustment of the agency’s strategy.
Manufacturers of e-cigarettes have promoted them both as a safer alternative to conventional cigarettes and a way to help smokers quit. And the FDA actually allowed the sale of the devices without manufacturers having to first prove they provided a net public health benefit. The jury is still out on whether they are either safer than regular cigarettes or an effective smoking-cessation aid, and no e-cigarette maker has yet sought FDA approval for its product.
Meanwhile, between 2011 and 2018, e-cigarette use among middle school students increased 716.7 percent (from 0.6 percent of their total number, or about 60,000 students, to 4.9 percent, or about 570,000 students), according to a report from the Centers for Disease Control and Prevention. Among high school students, e-cigarette use rose 1286.7 percent (from 1.5 percent of their total number, or 220,000 students, to 20.8 percent, 3.05 million students) over the same period, the CDC report said.
In response to those surging teen usage rates and the FDA’s threatened ban, JUUL Labs, maker of the sleek, USB flash drive-like JUUL device, which commanded 75 percent of total e-cigarette sales as of October 2018, announced in November that it was suspending sales of its Mango-, Fruit-, Creme-, and Cucumber-flavored “pods” at the 90,000-plus retailers that carry its products, making them available only on its website, which restricts sales to those 21 and older.
“Our intent was never to have youth use JUUL products,” said Kevin Burns, CEO of the San Francisco-based company. “But intent is not enough, the numbers are what matter, and the numbers tell us underage use of e-cigarette products is a problem. We must solve it.”
And in March came the surprise announcement that Gottlieb was resigning from the FDA, creating uncertainty about the agency’s position on teen vaping and other issues going forward.
“We believe his resignation calls into question whether or not the FDA will in fact enforce harsher regulations around youth e-cig usage/access, cig nicotine limits and a cig menthol ban given he was the champion behind these initiatives,” Bonnie Herzog, managing director and senior beverage, personal care and tobacco equity research analyst at Wells Fargo Securities, stated in an email to clients, according to a report by the New York Times.
The Times also reported that Gottlieb had increasingly come under pressure from some Republican members of Congress and other conservatives “for his tough stance against youth vaping and traditional cigarettes.”
This month, however, the FDA announced it has seen “a recent uptick” in reports of seizures associated with youth e-cigarette use, signaling “a potential emerging safety issue.” Although the agency stressed in another statement that it didn’t “yet know if there’s a direct relationship between the use of e-cigarettes and a risk of seizure,” the substantiation of such a connection would presumably constitute a compelling reason for it to take further action on e-cigarettes.
But regardless of what happens at the federal level, new e-cigarette laws are on the way in the states. As of April 9, at least 175 measures dealing specifically with e-cigarettes and other vaping devices had been introduced in 40 states, according to LexisNexis State Net’s legislative tracking system. The measures include proposed taxes on those products, as well as restrictions on their promotion and sale, particularly to minors, and the use of the products in public places, such as schools.
A dozen of the bills had already been enacted, including Illinois HB 345, Utah HB 324, Virginia HB 2748 and Washington HB 1074, all of which prohibit the sale of e-cigarettes to those under the age of 21. As of last December, six other states - California, Hawaii, Maine, Massachusetts, New Jersey and Oregon - had already raised their minimum legal sales age for e-cigarettes to 21, according to the Public Health Law Center.
As of last week, at least 10 states had also introduced bans on the sale of flavored tobacco products (see Bird’s Eye View). Most of those proposals would exempt establishments that prohibit minors. Some would apply only to e-liquids used to refill vaping products. But legislation introduced in California - where more than two dozen cities and counties, including San Francisco, have already approved restrictions on the sale of flavored tobacco products - had no such exclusions.
One of those bills, SB 38, was approved by the state’s Senate Health Committee last month. And one of the measure’s strongest supporters on that panel was Sen. Jeff Stone, a Republican from Riverside County. Bucking the general inclination of his party, which receives substantial financial backing from tobacco giant Altria, Stone took aim at that company’s acquisition of a 35 percent ownership stake in JUUL for $12.8 billion last year.
“It is very transparent that these tobacco companies investing in these vaping companies have one goal, and their one goal is not to try to get people to stop using traditional tobacco,” he said, according to a report by CALmatters. “Their goal is to get youngsters addicted to nicotine, one of the most addictive products in the world, even as addicting as heroin.”
The issue is personal for Stone, who told CALmatters’ Dan Morain that his mother, who died at the age of 52, had been addicted to cigarettes.
JUUL spokesman Ted Kwong told the San Francisco Chronicle the company supported “reasonable regulation to restrict inappropriate flavors such as cotton candy and gummy bear that are clearly directed at children.”
“We look forward to working with the California Legislature in the coming months,” he said.
California’s Legislature isn’t the only one the company will need to work with this session. At least one other state, Hawaii, is considering measures similar to California SB 38, one of which, SB 1009, has already been passed by its originating chamber.
The House version of that bill, HB 276, was amended to exempt menthol-flavored tobacco products, because menthol cigarettes provide $30 million in revenue for ambulance services and a hospital trauma center, according to the chairman of the House Health Committee, Rep. John Mizuno (D), as the New York Post reported.
Still, Scott Rasak, vice president of sales for VOLCANO Fine Electronic Cigarettes, which has stores on three of the state’s islands, suggested the ban would push “75 percent of the adult vaping community back to smoking cigarettes” and “annihilate” independent retailers.
The future growth of the whole tobacco industry could take a hit from bans like those proposed in California and Hawaii, as well as the other e-cigarette legislation enacted or pending in the states.
Global cigarette sales, valued at $604.35 billion in 2015 by one estimate, dwarf those of e-cigarettes, valued at $13.9 billion in 2017. But a cumulative annual growth rate of 2.8 percent has been forecast for the former from 2016 to 2021, while a CAGR of 19.6 percent has been forecast for the latter from 2018 to 2023.
As Altria Chairman and CEO Howard Willard explained to investors last year, by acquiring 35 percent of JUUL, the company was “taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes.”