You may find yourself in the position that you will have to have some very frank discussions about what to expect in terms of costs and time outlays. While much of these discussions will focus on the investigative process and costs, these discussions will allow you to begin to talk about remediation going forward and begin to explain why money must be budgeted for the process.

One of the things rarely considered is how the investigation triggers the remediation process and the relationship between the two. When issues arise warranting an investigation that would rise to the Board of Directors level and potentially require disclosure to the government, there is usually a flurry of attention and activity. Everyone wants to know what is going on. Russ Berland has noted, “for that short moment in time, you have everyone’s full attention.” Yet it can still be “a tricky place, because you get your fifteen minutes to really get everyone’s full attention, and then from then on, you’re fighting with everybody else for their attention, just like the normal things in business life. It’s, they’re coming in and saying, “Okay, here’s the situation as we know it now, there is an investigation path, and corresponding to that, here’s what we think is the remediation path and some outlines of what it’s going to take,” often with some dollar signs attached to it.”

You need to explain the costs to the Board and senior management. As Berland said, you need to be upfront and candid in firmly stating, “For us to get to this place, this is what it’s going to cost.” Moreover, you need to be able to show how some companies paid very large amounts, not just in the eventual fine and penalty but also in other costs. Berland went on to say, “We want to show you how people have lost money by having to write big checks, because they didn’t take this seriously, and saved money, because they didn’t have to write as big a check, because they took this very seriously, and your return on investment here is going to be very high if you do this well.” This is easier with the information that was provided in the 2017 FCPA Corporate Enforcement Policy as such an approach how much discount a company can receive below the minimum range of the US Sentencing Guidelines for remediation.

One of the most difficult parts is that the investigation is often done in a way in which the investigators want to maintain as tight a control over the information and privilege as they possibly can. The remediation process really requires output from the investigation to understand where the risk points are and where the gaps are, both in the compliance program and the internal controls. There’s a tension there, and it needs to be structured in a way that information can be shared with those who are designing the remediation without fear of compromising the investigation.

Costs must be adequately discussed to set proper expectations. These include both direct costs and, even more importantly, a discussion of indirect costs to a company. Dan Chapman has noted, “the biggest cost to a company during an investigation is the diversion of management resources” and, as he further explained, “kind of everything stops to focus on the investigation.” This indirect cost comes through largely the time commitment of senior management. He further explained, “if senior management has to commit 20% of their time, that’s 20% that’s not going towards revenue generating, shareholder value protecting activities.”

Yet, how can you communicate that to somebody who has not gone through a full-blown internal investigation then coupled with a federal investigation with the Department of Justice (DOJ) and FBI involved? As understanding that the all-encompassing nature of such an event is difficult to articulate, Chapman uses his past experiences as touch points. He talks about his past experiences in leading two major Foreign Corrupt Practices Act (FCPA) investigations leading to two successfully concluded major FCPA enforcement actions and one brought in the United Kingdom by the Serious Fraud Office (SFO) under the UK Bribery Act.

Another approach is to explain the upside of compliance and in a manner that juxtaposes the cost. Chapman said you could mention things such as, “If you have clear policies and people know what to do, think how much easier your life would be. Instead of having to make calls and figure it out on your own every single time, you had clear policy.” The same types of arguments come into play in areas generally considered the purview of Human Resources (HR), i.e., recruiting and retention.

Recruiting can also be an indirect cost as what will new or potential hires see if they google your company? If one of the first things they see is you have been in trouble, been assessed a fine and penalty for engaging in bribery and corruption, it may well make them less likely to want to work for you. Moreover, the word will get around college recruiting on campus. The same sentiment can be said for retention of current employees. Will employees be embarrassed by what happened? Would that help retention?

Yet even more than these types of points about employees in the organization, it is important to make it personal to the highest level of the organization and try to make it as real and personal to your audience as possible. Chapman asks the Board and senior management “What about you? How do you feel about being involved in it? Rather than being something that’s out there, the company, what about you? How do you feel about being here?”

What about the always dreaded ‘Where Else’ question in an investigation? Berland believes the key is “anticipating the question is going to come up, and having an answer ready, which is, “We are going to do a comprehensive risk assessment of the remainder of the company. We are not going to go out and look under every leaf and check every tree, but we are going to do a very extensive risk assessment, and we’ll be able to come back and tell you that we don’t think there is a likelihood of other issues in other places.””

However, the answer could be equally something along the lines of, ““we have found a high likelihood and we’re going to continue to take deeper and deeper considers that section until we know if something happened or not.” That was an acceptable answer. It was “here’s the slice of the pie where we know something is happening, and here’s the process to look at the rest, given it really is kind of a risk assessment plus going forward.””

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2020

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