The call, email or tip comes into your office; an employee reports suspicious activity somewhere across the globe. That activity might well turn into a FCPA issue for your company. As the CCO, it will be up to you to begin the process which will determine, in many instances, how the company will respond going forward.
This scenario was driven home by the SEC in a 2015 FCPA enforcement action involving Mead Johnson Nutrition Company. In this enforcement action, the company performed two internal investigations into allegations that its Chinese business unit was engaged in conduct which violated the FCPA. Unfortunately, the first investigation, performed in 2011, did not turn up any evidence of FCPA violations. It was not until 2013, when the SEC made an inquiry to the company that it performed an adequate internal investigation which uncovered FCPA violations.
Internal reporting. The 2020 FCPA Resource Guide has as clear and concise a statement about hotlines as any other requirement found in Hallmarks of an Effective Compliance Program. It states: “An effective compliance program should include a mechanism for an organization’s employees and others to report suspected or actual misconduct or violations of the company’s policies on a confidential basis and without fear of retaliation.”
Triaging claims. Given the number of ways that information about violations or potential violations can be communicated to the government regulators, having a robust triage system is an important way that a company can determine what resources to bring to bear on a compliance problem.
Jonathan Marks has articulated a five-stage triage process which allows for not only an early assessment of any allegations but also a manner to think through your investigative approach. Marks cautions you must have an experienced investigator or other seasoned professional making these determinations, if not a more well-rounded group or committee. Next, consider what will be the types of evidence to review going forward. Finally, before selecting a triage solution, understand what tools are available, including both forensic and human, to complete the investigation.
Finally, after you ascertain you have an effective reporting mechanism through your hotline and demonstrate you have a robust and properly scoped investigation protocol, you must use the information you receive to remediate any issues which may arise. It is not enough merely to show that a hotline exists, you must present the data it produces.
Three key takeaways:
- The DOJ and SEC put special emphasis on internal reporting lines.
- Test your hotline on a regular basis to make sure it is working.
- Have an investigation protocol in place before the call comes in so you will be ready to go and not required to scramble to create a protocol.