Who to suspend during any Foreign Corrupt Practices Act (FCPA) investigation is always a delicate question to answer. Unfortunately there is never an easy answer. As the Volkswagen (VW) emission-testing scandal continues to reverberate, it continues to bring up some very knotty questions, which have bedeviled the Chief Compliance Officer (CCO) or compliance practitioner in many areas. De-confliction has also recently arisen as a bedeviling issue.

In an article in the Wall Street Journal (WSJ) entitled “Scope of VW Suspensions Grows”, William Boston reported on the ongoing internal investigation by the company’s outside counsel Jones Day. Boston noted that VW had “suspended a larger number of engineers than previously acknowledged, following a recommendation from the law firm conducting” the investigation. The article went on to state, “Jones Day urged suspension of anyone who could have been involved in the scam – from high level decision makers to ordinary engineers – to prevent possible perpetrators from tampering with the evidence”.

This final statement emphasizes a key consideration in a FCPA investigation, which is to tie down the evidence. Former Arnold & White partner Mara Senn has said that “probably from the government’s perspective, the most important aspect of setting up an investigation in a way that makes them feel comfortable, is ensuring that all data is locked down.” However, if you are worried about evidence tampering you may have a bigger problem on your hands.

Pointing up the difficulties in making such a blanket sweep an un-named source, who provided this information to Boston, was quoted in the WSJ piece as saying “We had to suspend everyone in this area to get them out of the way of this process. This is necessary for the investigation, but it’s really hard for us because we are now missing their professional knowledge and experience.”

This issue brings up another point that Senn has discussed, around when to suspend or discipline an employee during an internal investigation. Senn related, “That is a very case-by-case difficult question to answer, but in general, I think it’s better to keep them around for as long as you may need them. Once they’ve been fired or otherwise disciplined, really, even if you keep them around, they’re going to be less cooperative with you and possibly, if you fire them, not cooperative at all. You can require them to be cooperative in the termination agreement, but obviously in practice, cooperation can mean a lot of different things.”

In view of the Schrems decision by the European Court of Justice (ECJ), I also wonder how the investigation will fair with the German based employees? Obviously there will be data that in the US would be deemed company-owned but in Europe it may well be private to the employee being investigated. This problem became even greater with the recent decision by Privacy Regulators from 28 EU nations that backed the ECJ’s Schrems decision that invalidated the Safe Harbor regime. As reported by Jo Sherman in the FCPA Blog, “that closed the legal pipeline by which data has flowed freely from the EU to the U.S. for the last 15 years. The rationale for the court decision and the subsequent backing of the EU Data Protection Authorities is that the surveillance powers of the U.S. government are considered to be too excessive and disproportionate, and can override the data protections for EU citizens under the Safe Harbor framework.”

Lanny Breuer, the former number two at the Department of Justice (DOJ) and now a partner at Covington and Burling LLP, raised an interesting concern in the context of the Justice Department’s FCPA Pilot Program. It is around what Breuer terms “de-confliction”. This involves the government asking a company to halt its own investigation for the government to be the first to interview witnesses. At the FCPA Blog Conference, Breuer said that if “de-confliction” is required as cooperation to gain the benefits of the pilot program, such a request from the DOJ would be “an extraordinary request, in my view” because it “could lead companies to be unable to disclose to other agencies or to shareholders, and it could keep a board in the dark about the alleged wrongdoing.” Breuer added, “In general, publicly traded companies can’t just stand down from doing an investigation when such an allegation comes in.” He also commented that “he’d been asked to do so a couple of times.”

Breuer raised four questions during his presentation which every investigator must consider in the area of de-confliction. (1) Would complying with the request be consistent with directors’ and corporate officers’ fiduciary duty of oversight?; (2) How can a company make decisions without speaking with its employees?; (3) How will a delay affect the company’s other regulatory obligations?; and (4) How can external counsel advise a company without knowing the facts? Companies hire external counsel to conduct thorough investigations, evaluate their clients’ conduct, and provide informed legal advice. These tasks can be difficult if not impossible to accomplish where external counsel have their hands tied behind their backs.

Clearly the DOJ could have a broader remit or be involved with other ongoing investigations where they might make such requests. However, such ‘de-confliction’ could stop a company from engaging in a root cause analysis or even robust investigation. At the same conference, an earlier panelist, Gerald Kral, the Chief Ethics and & Compliance Officer (CECO) of Brown-Forman, said on his panel that his company did an extensive root cause analysis of every claim or incident so it can not only understand what happened but put sufficient risk management protections in place to try and make sure it does not happen again.

Three Key Takeaways

  1. The decision on whom to discipline and when are critical decisions during any investigation.
  2. You should take a case-by-case approach.
  3. The de-confliction question can be quite troubling during an internal investigation.

 

 

 

 

 

 

 

 

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