Tricia Fratto, general counsel and co-founder of legal tech company Ethics Suite, went to undergrad and law school at night for 10 years while working days as a data administrator at IBM.
But it was a stint as a director of global investigations at a hotel chain that inspired the idea of her company. New York-based Ethics Suite is an employee misconduct reporting platform that provides an anonymous hotline channel between employers and workers.
Fratto talked with Corporate Counsel on Monday about her background, her company and trends in employee whistleblowing. The conversation below has been edited for clarity and brevity.
Corporate Counsel: Talk about your background, especially at International Business Machines Corp. and Starwood Hotels & Resorts Worldwide Inc.
Tricia Fratto: At IBM I was a database administrator; I didn’t do legal work while I went to night school. It took 10 years, and I gave the longest resignation notice ever. Afterward I started in law firm practice [five years as a litigation associate at Sidley Austin], and I transitioned into white-collar investigations and regulatory compliance [joining Fulbright & Jaworski for three and a half years.] Then I went in-house at Starwood, where I supervised anti-bribery investigations worldwide, as well as training and other compliance matters.
Certainly the IBM experience, immersed in the technology and the corporate structure there as well as at Starwood, was very helpful.
CC: What made you want to start your own company?
TF: The right platform just didn’t exist. We started the company to make our wish list a reality. Juliette Gust [president and the other co-founder of Ethics Suite] and I wanted to have a platform with every question we believe needs to be answered, but short enough not to be discouraging or too costly. And it had to assure anonymity for the employee.
I had worked with Juliette at Starwood [where she was project manager of its anti-corruption compliance program and former director of global fraud investigations]. She is also a forensic accountant. Together we have logged thousands of investigations and consulted on even more whistleblower complaints.
Just as important to us was making a platform that is acceptable to all companies. Such a hotline is required for public companies under the Sarbanes-Oxley Act. But we also are looking at companies that don’t have to have a hotline but should have it. We wanted to offer a tool that is not as costly as others out there.
CC: Describe how your platform works.
TF: Employees can go onto the online platform, which is co-branded with the client, and report completely anonymously. We don’t log IP addresses or anything. If someone wants to identify themselves, they have that option. They can upload any supporting documents. Each reporting employee gets a PIN number. The PIN number lets the company chat with and ask questions of the reporting employee without revealing who it is.
It’s all data encrypted, protected and tracked while housing all related documents. That’s important, so if the company gets a regulatory request, it can show exactly what it did and when.
CC: How many employees are in your company?
TF: Just the two of us, but we contract with consultants when we need to.
CC: Describe your duties as general counsel.
TF: My duties are administering to the company, overseeing our agreements, keeping current on privacy and other regulations, and interfacing with clients when they have legal questions. We also interface with clients on how to conduct an investigation, if they need support in that area. And we do training on how to use the system.
CC: How long have you been in business, and can you share any financial information?
TF: We have been in business three years in March, and we are growing well. We’re in the mid-40s or more in number of clients. And we have licensed our product to a company in the Middle East that covers 10 or so countries there.
CC: What trends are you seeing in whistleblowing in 2020 and beyond?
TF: Workplace movements [equal pay, #MeToo, diversity] are certainly trending everything toward the reporting platforms. I think we’ll continue to see employment groups being more active.
I hope the trend eventually will see employers less reactively putting these programs in place. Right now we see a lot of “I’m in litigation or I’m in the news media, and I know I need it.” Maybe they can be more proactive before a situation spirals into something embarrassing or more costly.
CC: Is there anything you’d like to add?
TF: I mentioned anonymous reporting. Companies sometimes get nervous about that. They worry about getting frivolous complaints or ones they can’t follow up on. There is new data showing that the substantiation rate for anonymous complaints is exactly the same as when someone identifies oneself. That’s important for people to know.
They also need to know that getting reports is a sign of a well-functioning organization. It doesn’t mean something is broken. In fact, just the opposite. If you get no reports, something is wrong and they [employees] don’t trust you. Organizations need to do more outreach in this area.