Conducting Corporate Investigations for FCPA Compliance

Conducting Targeted Corporate Investigations is a Key Component of an Effective FCPA Compliance Program

Timothy E. Allen
Corporate Investigations for
FCPA Compliance Team Lead
Former U.S. Secret Service Special Agent

Employees’ violations of the Foreign Corrupt Practices Act (FCPA) can lead to civil or criminal penalties for employers. To mitigate the risk of employees violating the FCPA, companies must adopt—and enforce—effective FCPA compliance programs.

A key aspect of FCPA compliance program enforcement (and of FCPA compliance generally) is conducting corporate investigations focused on uncovering issues before they lead to problems. By investigating potential deviations from their policies and procedures, companies can not only identify issues and implement remedies, but they can also document their good-faith compliance efforts for purposes of dealing with federal authorities if necessary.

When To Conduct a Corporate Investigation for FCPA Compliance

One issue with which many company executives struggle is determining when to initiate internal audits. This is particularly true in the area of FCPA compliance—in which identifying actual and potential compliance failures can pose a particular challenge.

Corporate FCPA Compliance Investigations Focused on Potential Violations

Broadly, the FCPA prohibits companies and their personnel from making, or attempting to make, “payments intended to induce or influence a foreign official to use his or her position ‘in order to assist . . . in obtaining or retaining business for or with, or directing business to, any person.'” As a result, any transaction (or proposed transaction) involving government business or foreign officials presents potential FCPA implications. This includes, but is by no means limited to, transactions involving:

Efforts to obtain non-public information during the bidding process for government contracts
Other efforts to win or retain government contracts
Regulatory affairs (including efforts to secure licenses, approvals, or favorable tax treatment)
Customs matters (including efforts to overcome customs duties or import/export restrictions)
Pending legislative and judicial proceedings

If a company’s leadership has concerns about any of the above, a corporate investigation is likely warranted. At a minimum, company leaders who have concerns about potential FCPA violations should consult with their compliance counsel regarding next steps. Experienced compliance counsel will be able to advise regarding any potential FCPA implications as well as the necessity of conducting an internal inquiry.

Corporate FCPA Compliance Investigations Triggered By Federal Scrutiny

While there may be some question regarding whether (and to what extent) a corporate investigation is necessary in response to a potential FCPA violation identified internally, there is virtually no question that an internal investigation is necessary when facing federal scrutiny. If the U.S. Department of Justice (DOJ) or another federal agency is investigating your company under the FCPA, conducting an internal corporate investigation is the first step toward executing a strategic and effective defense.

Federal FCPA investigations can have several triggers. They can also target several statutory violations. When facing scrutiny under the FCPA, it is imperative that companies have a clear understanding of both what triggered the government’s investigation and what allegations are on the table. Conducting a corporate investigation for FCPA compliance will allow companies to answer both of these questions in many cases. The information obtained during a corporate investigation will also determine what defenses the company has available, and it will allow the company’s leadership to make informed decisions about how to approach the government’s investigation (i.e., whether to pursue settlement negotiations or fully defend against the allegations at hand).

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

Conducting a Corporate Investigation for FCPA Compliance

Regardless of why it is necessary to conduct a corporate investigation for FCPA compliance, the investigation should follow a predefined set of steps. Only carefully selected internal personnel should be involved, and outside counsel should oversee the process to ensure that both (i) all necessary steps are taken, and (ii) the attorney-client privilege is preserved.

The major steps involved in conducting a corporate investigation for FCPA compliance include:

1. Identifying the Members of the Investigation Team

Prior to initiating a company’s investigative efforts, it is imperative to carefully select the internal personnel who will be members of the investigation team. The key concern here is making sure that no one on the investigation team has a personal interest in the investigation’s outcome. Any individuals who may be implicated in the investigation should be excluded; and, depending on the circumstances involved, their direct supervisors and department leaders may need to be excluded as well.

2. Formulating an Investigation Strategy and Establishing Lines of Communication

To be effective, a corporate investigation for FCPA compliance must be both efficient and comprehensive. Spending too much time can frustrate the purpose of the investigation (i.e., allowing the company’s leaders to make strategic decisions before problems arise), while overlooking critical information sources can lead to uninformed and misguided decisions. Working with the company’s outside counsel, the company’s investigation team must identify all relevant information sources and then formulate a strategy for gathering all pertinent information as efficiently as possible.

At this stage, it is also important to establish lines of communication. To avoid oversights and missteps, it must be clear who will report to whom. Within the investigation team there should be a clear chain of command, and all investigation-related information should flow to the company’s outside counsel.

3. Identifying and Preserving All Relevant Documents

Internal FCPA compliance investigations are often heavily document-intensive. The investigation team must work with outside counsel to identify and preserve all relevant documents—not only for purposes of allowing the company’s leadership to make informed decisions, but also to avoid any allegations of spoliation or impeding federal agents’ investigative efforts. At this stage, it is imperative that all privileged documents be appropriately redacted or set aside as well.

4. Interviewing Appropriate Internal Personnel

Along with collecting relevant documents, conducting a comprehensive internal corporate FCPA compliance investigation will typically involve interviewing one or more employees. Conducting employee interviews is a process and skill unto itself, and all interview questions—as well as the interview itself—must be carefully structured in order to effectively achieve the company’s investigative goals. Here, too, it is imperative that the company’s leadership and investigation team members work closely with outside counsel to ensure an appropriate, strategic, and well-crafted approach.

5. Assessing the Information Gathered and Making Strategic Decisions

With all relevant information in hand, the company’s outside counsel can evaluate the company’s exposure under the FCPA. Counsel can then provide recommendations to the company’s leadership and work with leadership to execute appropriate next steps. What this entails will depend on the information uncovered and the circumstances involved, as well as the current status of any pending federal inquiry.

FAQs: Internal Corporate FCPA Compliance Investigations

What are the risks of failing to conduct a timely internal corporate FCPA compliance investigation?

The risks of failing to conduct a timely internal corporate FCPA compliance investigation can be substantial. These risks are twofold: First, failing to investigate can allow ongoing violations to continue, and this can increase the company’s penalty exposure. Second, failing to conduct a timely investigation can itself lead to scrutiny from federal authorities—as the federal government’s FCPA compliance guidance instructs companies to have mechanisms in place to uncover and remedy violations promptly.

Are there risks associated with conducting an internal corporate FCPA compliance investigation?

Conducting an internal corporate FCPA compliance investigation can also carry risks if the investigation is not handled appropriately. For example, if the investigation is not sufficiently comprehensive, it can provide the company’s executives with a false sense of security. Additionally, if appropriate procedures are not followed to preserve all relevant records and protect the attorney-client privilege, steps taken during the investigative process could actually increase the company’s exposure to federal enforcement action.

Do companies need to engage outside counsel for internal FCPA compliance investigations?

Due to the challenges and risks involved, companies should engage outside counsel to structure and oversee their internal FCPA compliance investigations. Company leaders and in-house counsel should ensure that they select a law firm with adequate experience in the areas of both corporate investigations and FCPA compliance.

Are internal corporate FCPA compliance investigations subject to the attorney-client privilege?

Yes, if conducted appropriately, internal corporate FCPA compliance investigations will be subject to the attorney-client privilege. However, various mistakes can lead to inadvertent waiver of the privilege; and, once the privilege has been waived, it cannot be easily restored (if at all).

What should a company’s leadership team do after conducting an internal FCPA compliance investigation?

The steps a company’s leadership team needs to take following an internal FCPA compliance investigation depend on two key factors: (i) what the investigation uncovers, and (ii) whether the company is presently facing federal scrutiny. At a minimum, the company’s leadership should generally take steps to impose discipline for past violations and remedy any ongoing FCPA violations; however, these processes can be rife with potential risks if not handled carefully.

Contact the Corporate Investigation and FCPA Compliance Attorneys at Oberheiden P.C.

The corporate investigation and FCPA compliance attorneys at Oberheiden P.C. represent companies nationwide in all FCPA matters. If you need to speak with an attorney about conducting an internal corporate investigation for FCPA compliance, we invite you to call 888-680-1745 or contact us online to get started with a complimentary consultation.