Today, I continue my exploration of the implications from the Department of Justice (DOJ) announcement last week of a new program around Foreign Corrupt Practices Act (FPCA) enforcement (herein “Pilot Program”). Contemporaneously, the Fraud Section of the Criminal Division of the DOJ released a written document, entitled “The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance” (herein “The Guidance”), more fully laying out the specifics of this Pilot Program and providing more background and information for the compliance practitioner. Today I want to consider what full cooperation means going forward.
I, among others, have often asked the question as to what ‘full cooperation’ means? I have received lots of good information from some very well respected members of FCPA Inc. However there has never been a place where the DOJ lays it as well as it has done so as in the Guidance. The Guidance arranges it out in the following manner (Guidance in italics, commentary in regular type face).
- As set forth in the DAG Memo on Individual Accountability, disclosure on a timely basis of all facts relevant to the wrongdoing at issue, including all facts related to involvement in the criminal activity by the corporation’s officers, employees, or agents. Once again we see the emphasis on individuals. This will put significant pressure on your internal investigation to not only get it right but also get it right early.
- Proactive cooperation, rather than reactive; that is, the company must disclose facts that are relevant to the investigation, even when not specifically asked to do so, and must identify opportunities for the government to obtain relevant evidence not in the company’s possession and not otherwise known to the government. While it might be difficult for civilians to know what DOJ prosecutors might want, I think this prong behooves companies to hire experienced, competent FCPA investigatory counsel. A former prosecutor is far more likely to know what a current prosecutor’s line of thinking might be than someone who has not gone through the process previously.
- Preservation, collection, and disclosure of relevant documents and information relating to their provenance. Document preservation and collection has always been one of the most important first steps in any investigation. You always want to be able to demonstrate to prosecutors you have not only a handle on the evidence but that you have tied it down to prevent destruction or spoliation.
- Provision of timely updates on a company’s internal investigation, including but not limited to rolling disclosures of information. Here the key would seem to be more, rather than less, information and updates. This does not mean providing opinions before you have evaluated and tested hypothesis but it does mean presentation of facts timely and, when warranted, on an almost real-time basis.
- Where requested, de-confliction of an internal investigation with the government investigation. The DOJ may have many or other investigations going on while you are in the middle of your investigation. If they want you to stand down or move to a focus you do not quite understand, you are obligated to do so.
- Provision of all facts relevant to potential criminal conduct by all third-party companies (including their officers or employees) and third-party individuals. Since most third parties will be overseas, this one may be more difficult because of privacy laws such as under the EU, China or in other jurisdictions. However, as noted below, you have better be prepared to move forward on these facts, sharing them in a timely manner with the DOJ.
- Upon request, making available for Department interviews those company officers and employees who possess relevant information; this includes, where appropriate and possible, officers and employees located overseas as well as former officers and employees (subject to the individuals’ Fifth Amendment rights). While this would seem to be a self-evident requirement in cooperation, given the new focus towards individuals, companies may not always be in a position to demand and receive such cooperation. Once again if you have terminated such individuals it may be very difficult to garner such cooperation and if any such overseas individual believes they would be subject to prosecution in the US, it may well be nigh impossible to get them to come to the US to provide testimony.
- Disclosure of all relevant facts gathered during a company’s independent investigation, including attribution of facts to specific sources where such attribution does not violate the attorney-client privilege, rather than a general narrative of the facts. This year saw FCPA enforcement actions where the company either neglected or did not see fit to disclose prior internal investigations that led to remediation but were not self-disclosed. Such machinations must now end to secure cooperation. Further, the hiding or lack of mentioning anything about senior officials must also end.
- Disclosure of overseas documents, the location in which such documents were found, and who found the documents (except where such disclosure is impossible due to foreign law, including but not limited to foreign data privacy laws);
- Note: Where a company claims that disclosure is prohibited, the burden is on the company to establish the prohibition. Moreover, a company should work diligently to identify all available legal bases to provide such documents.
This prong puts burden on the company to fully disclose all documents and if they cannot do so, explain not only why but always substantiate why an alternative path is not available for document production. Although not a FCPA case, Volkswagen (VW) is currently claiming it cannot produce certain documents allegedly relevant in its emissions-testing scandal due to German privacy laws. But this prong also ties with the third prong above on provenance; that is, how did the document come into your possession and what is the chain of custody?
- Unless legally prohibited, facilitation of the third-party production of documents and witnesses from foreign jurisdictions. Once again this will be challenging in EU and other countries with more robust privacy concerns than in the US. It also makes clear the importance of keeping employees on board because if you terminate them during the pendency of an investigation, the likelihood they will fly to America to give testimony drops considerably.
- Where requested and appropriate, provision of translations of relevant documents in foreign languages. No doubt warming the heart of Mr. Translations himself, Jay Rosen, companies must provide translated documents, which should be certified as true and correct.
Every Chief Compliance Officer (CCO) and compliance practitioner should study this list thoroughly and carefully to see if your internal investigation protocol incorporates these requirements. If you do not have a document hold process, that would be a good starting point but you have to triage and then begin an investigation on a very quick and timely manner, particularly in a corporate time frame. The Guidance states that all efforts of cooperation will be evaluated on a case-by-case basis. The DOJ does not expect a $500MM valued corporation to have the resources or in-house compliance investigatory expertise to perform the same level of internal investigation as does a $40bn sized corporation. The Guidance states, “An appropriately tailored investigation is what typically should be required to receive full cooperation credit; the company may, of course, for its own business reasons seek to conduct a broader investigation.” This does mean you will have to defend the thoroughness, robustness and effectiveness of your investigation.
Provisions for escalation and notice to the Board must also be made so the Board, or other appropriate body, can make an informed decision on whether or not to self-disclose. The benefits for self-disclosure can be significant, which I will explore in more detail in my final post in this series. Tomorrow, I consider “timely and appropriate remediation in FCPA matters”.
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© Thomas R. Fox, 2016