Larry McMurtryToday we celebrate Texas Letters. I know that might sound counter-intuitive for a state that is bunkering down for the anticipated Jade Helm invasion but there is a literary tradition that is certainly well known. On this day 79 years ago in 1936 Larry McMurtry was born in Wichita Falls, Texas. He has many accomplishments over the years, starting at 25 when he published his first novel, Horseman, Pass By (1961), in 1966 he explored small-town society isolation in The Last Picture Show, . In 1983 Terms of Endearment became an award-winning movie and in 1986. He won the Pulitzer Prize for Lonesome Dove, his 1985 bestseller about a 19th century cattle drive.

Today I conclude a two-part series on how to formulate an effective best practices cross-border investigation based upon an interview I did with Mara Senn, a partner at Arnold & Porter LLP, who specializes in white collar defense and cases brought under the Foreign Corrupt Practices Act (FCPA). The interview was based on an article that Senn and a colleague, Michelle Albert, published in the FCPA Report, Volume 3, Number 1, entitled “Internal Investigations, How to Conduct an Anti-Corruption Investigation: Developing and Implementing the Investigation Plan”. Today I will review practices six through ten.

  1. Put Form in Native Translations

Senn noted that in the countries that have strict data privacy laws, there are times that the only way an investigation can collect an employee’s personal information is to obtain affirmative assent. Such information might include work documents, work emails, or similar information. However she cautioned that in this situation it is even more important to put the consent form in the native language. She said that you do not want the employee to later claim they did not understand the consent form or thought they were executing something different. It can be critical that you have informed consent, because if you do not have informed consent, that consent could well turn out to be void.

  1. Preserve the Attorney Client Privilege

I first asked Senn to briefly describe the attorney-client privilege. She responded that the attorney-client privilege is a communication between an attorney and a client for the purpose of seeking legal advice. The reason they have this privilege is to make sure that people are not afraid to go their lawyer. Further, the purpose of attorney-client privilege is set up so that you will be encouraged to have protected conversations with counsel, to make sure you understand the law so you can follow it. The US rule is relatively straightforward. It applies to both in-house and outside counsel.

However the rules outside the US can be quite different and perhaps a little bewildering. In many European countries there is no privilege from an in-house counsel, so if a General Counsel (GC) of a company speaks to the President or Chief Executive Officer (CEO) there is absolutely no privilege under basically any circumstances in Europe. Senn then noted that other jurisdictions have other kinds of laws, each with a slightly different parameter, leading to different attorney-client expectations. She gave one such example; where your client is headquartered in Germany and your in-house client is the GC, you cannot really use them as a point person to help you conduct the interview the way you would with the US in-house counsel, because they do not have the attorney-client privilege.

  1. Prepare for Local Enforcement Actions

Most American lawyers are aware that increasingly, as we have seen other jurisdictions, other countries are becoming more aggressive in their enforcement actions for bribery and corruption, sometimes based upon local and domestic anti-bribery laws. Senn pointed out that information which one government knows, whichever government that is, you should expect and assume that multiple governments are cooperating in some way. This then makes it more likely that there could well be some sort of local enforcement action against your client while you are investigating matters around a FCPA claim or potential FCPA claim.

Senn believes this is another area where your local counsel can be helpful in that they should be aware of the different enforcement agencies in different countries that have different ways of doing things. For instance some countries, such as China, like to perform dawn raids; where essentially they come, they get people when they are asleep or when they are just waking up, and they just arrest them or they come in and seize documents.

Yet there are other countries where that is extremely unlikely to happen and so again, local counsel can give you an idea of what the typical raid would look like. Sometimes they just very politely call you and say, “Can we make an appointment? We’d like you to come by.” While this might not occur if the local government officials are concerned that there is the potential for the destruction of evidence, also different countries have different traditions of what they do, so you must ensure that your client is prepared for whatever may come to pass.

  1. Prepare for Security Risks 

In this situation Senn was referring to personal security, physical and health safety. She gave a couple of examples that sometimes you may be going into situations or countries where it may be war torn. Or consider the recent situation when Ebola was going around Western Africa or Central Africa. If you are conducting an investigation in such ravaged areas you should not send your employees to Liberia at that time to interview people. The same can be true in worn-turn areas like Syria or similar locales.

Senn articulated that the better plan would be to remove the people you are interviewing and bring them to you or to a local hub outside of the impacted areas. That avoids a whole host of issues, as you do not want to have to pay for extra security, for example you do not want your employees to have to walk around with loaded machine guns protecting them; you have to make a judgment call as to where and whether these potential threats need to be addressed in some way.

  1. Protect Whistleblowers

Here Senn had some very practical advice, which while it might seem counter-intuitive on the surface due to certain legal decisions, it might actually provide more protections for companies in the long run. Senn began by noting the 2nd Circuit Court of Appeals ruling in the Liu case, which essentially found that the Dodd-Frank retaliation provisions that protect whistleblowers in the US do not apply abroad, so in other words, a foreign whistleblower brought a case saying, “I was retaliated against and I bring a case under the retaliation provisions of Dodd-Frank,” and they said, “No way, you can’t bring it.”

Senn believes that companies that use the Liu decision as a basis to retaliate against whistleblowers outside the US are wrong for several reasons. First, is that the Securities and Exchange Commission (SEC) has announced they will still pay whistleblower outside the US, who come forward and meet the requirements, the Dodd-Frank bounty of up to 30% of the penalty. This means that even if courts determine that the Dodd-Frank provisions do not apply for retaliation for foreign nationals, the SEC can still honor the communication and compensate the foreign whistleblower.

The second reason Senn listed is that the US Sentencing Guidelines make clear that part of an effective compliance and ethics program includes having a publicized system for employees or agents to report potential or actual criminal conduct without fear of retaliation. These Sentencing Guidelines apply to all US companies, both domestic and internationally. Senn believes that if your company retaliates against foreign whistleblowers, the US government can take that into account, which could be viewed in a negative way, meaning that you don’t have an effective compliance and ethics program.

Senn’s best practices around the issue of cross-border investigations are excellent points for you to review if you have to consider such an investigation. Further, if you retain outside counsel to lead your investigation, you can use her best practices as guideposts to scope, plan and assist your outside counsel 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, 2015

Babe RuthToday we celebrate a closure for it was on this day in 1935 that probably the best-known baseball player in the history of the game, George Herman ‘Babe’ Ruth, retired. While many of his records were broken with the march of history, his career slugging percentage of .690 remains the highest in Major League history. He was an oversized character in every way, from the mammoth home runs that he hit, to his ingestion of hot dogs. While his lifestyle may not be considered best practices for today’s major leaguer to emulate, his name, nicknames and legend will live on as long as baseball is remembered.

I thought about Ruth as I begin a two-part series on how to formulate an effective best practices cross-border investigation based upon an interview I did with Mara Senn, a partner at Arnold & Porter LLP, who specializes in white collar defense and cases brought under the Foreign Corrupt Practices Act (FCPA). The interview was based on an article that Senn and a colleague, Michelle Albert, published in the FCPA Report, Volume 3, Number 1, entitled “Internal Investigations, How to Conduct an Anti-Corruption Investigation: Developing and Implementing the Investigation Plan”. Today I will review practices one through five.

  1. Offer Interview Translations

Senn believes that most people know English to a certain extent and that it is a very universal language nowadays. While many people outside the US have various levels of capabilities in a non-native language, when you get into the very detailed questions in an interview, they may have enough English skills that you assume they understand everything, but in fact, they do not. You may ask a key question, for example, about expense reports, maybe they understand conversational English, but there’s no reason for them to know expense reports. This makes it important to have someone present in the interview that speaks the witness’s native language, and just assume that there are going to be times where you’re going to need to call on that person. She cautioned that you should make it clear to the witness at the outset of the interview that you do not perceive a problem with their English and they understand the reason for the translator.

  1. Avoid Cultural Pitfalls

Here Senn noted that cultural pitfalls are really truly pitfalls and, unfortunately, they can be big deep holes that you do not know anything about, but you can fall into pretty easily. She provided the issue of personal privacy as an example, where most countries have a different concept of privacy, particularly about whether your work area is your own versus what really belongs to the company. In most states in the US, employees fully understand that your employer can come in and take anything from your office at any time, even if it is personal, because you’ve brought it to work. Yet in many other countries, this is not the case. Things at your desk generally are never touched or looked at by anybody else and that’s considered your sanctum where no one else can come. If you go in and do a regular document sweep, the way that you would do in the US, that could be perceived as horribly offensive. She cautioned you should seek local counsel guidance to understand what needs to be done and also explain to you the best way to do it without offending people.

She explained that you do not want witnesses to begin the interview process with a negative view of you and you want them to be cooperative in the interview. This makes it in your best interest to follow local cultural norms. Otherwise, interviews can become embarrassing and awkward at times, if you do fall into one of these cultural pitfalls.

  1. Observe Data Privacy Restrictions

Most American lawyers are aware of different data privacy restrictions and requirements in countries governed by the European Union (EU) and the US. Senn mentioned that some of that is related to employee and employment law; whether or not they have ownership of certain information, and then other parts of the law that really do have to do with data privacy, which means personal information that no matter what form it is in, it cannot be disseminated. But here the point under this best practice is that your analysis and response must go much further to satisfy the US Department of Justice (DOJ) if you want to claim that you cannot get certain information out of a country because of data privacy restrictions.

For instance if you have personal data that you are routinely sending cross-border yet when an investigation begins you claim that you cannot take it out of that same country, for instance Germany; the DOJ will take a dim view of that claim. Further, even if there is a data privacy law on the books, yet the country does not enforce the law, that could work against any data privacy claim as well. So you will need to be prepared to fully present persuasive evidence on this issue if you try and make such a claim.

  1. Comply with Labor Requirements

Similar to the long-standing Weingarten right of unionized employees in the US to have a representative present for interviews, in many countries outside the US there are Works Council and similar analogs in other countries, where, basically, the Works Council is responsible for the interactions between the employers and the employees. Moreover, employees have certain statutory or labor code based rights as employees, regardless of whether they are members of a labor union or not. These rights can drill down into the types of questions that you can ask or even prevent you from meeting with or interviewing certain employees.

Senn noted that you may well have to work through Works Council to make sure that the way you ask the questions, and those present for the company, are acceptable to Works Council. If you do not have this pre-approval it may be that the Works Council prevents you from meeting with certain employees. For each area that you operate in, you must engage the local legal counsel to determine what is the best way to work with the Works Council, or similar types of organizations, to ensure that you can get done what needs to get done in your investigation.

  1. Be Aware of Other Local Requirements

Points three and four certainly lead into Senn best practice No. 5. She believes it is incumbent that you work with local counsel in the country you are performing the interviews to garner an understanding of the witnesses rights and your obligations during any investigation. She explained that many ways a US lawyer would think about doing an investigation could be problematic in other jurisdictions. She gave the examples of taking pictures or physically removing documents from a location, which could be issues that you might face. You certainly need advice and counsel on what is legal and what might not be going forward.

Ruth and Senn; Senn and Ruth? Even if you do not immediately associate them, Mara Senn has once again provided the compliance practitioner with concrete steps to take around international investigations and their protocol. Tomorrow, I will consider her practices six through ten.

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, 2015

FCPA InvestigationsOne of the things that I am questioned on is when to bring in outside counsel for a Foreign Corrupt Practices Act (FCPA) investigation or simply to take a look at an issue that may have raised a Red Flag but is not yet a FCPA violation. Clearly a reason is retain the attorney client privilege and I think most Chief Compliance Officers (CCOs) and compliance practitioners understand that reason, but one of the things I learned as a trial lawyer is that you need to understand who your ultimate audience will be in work you do as a lawyer. If you draft a contract, you need to think through how it will play out in front of a judge or jury. If you start an FCPA investigation, your ultimate audience may well be the Department of Justice (DOJ) and Securities and Exchange Commission (SEC). I recently had the opportunity to visit with white-collar practitioner Mara Senn, a partner at Arnold & Porter LLP, on this issue. She had several insights that I thought were insightful to assist a CCO or compliance practitioner to think through these issues. Today, I begin a three-part blog post on some of Senn’s thoughts on investigations for potential FCPA violations; tomorrow we will look at the decision (or not) to self-disclose and, finally, remediation if you discover a FCPA violation.

Unfortunately, many investigations being in a crisis situation, where a company may have discovered something that they know is bad but they do not know how bad that particular problem might be or they are not aware just how widespread the problem is. Senn indicated that the first thing she would note is that not every single incident requires outside counsel. There are all kinds of issues that can be handled very efficiently and effectively by in-house counsel. Moreover, there will be other issues and corporate disciplines involved such as the Human Resources (HR) Department. She explained that for a typical compliance blip that may happen, you do not need to call in an outside counsel right away, but if you do have these indicia of larger problems, particularly if you are a public company, it is a good idea to call outside counsel because you may be involved in reporting obligations. She cautioned that even at this early stage, outside counsel does not have to be boots on the ground and may not be required to be intimately involved if it is not a very complicated case.

Even with the above information, I asked Senn if there were any advantages she might see from bringing in outside counsel from the get-go rather than waiting. She articulated a number of things. First, there is more credibility if it is an independent review. If you are working for the company in whatever capacity, the government is not going to believe, as much, that it’s an independent investigation. From the government’s perspective, DOJ and/or SEC, they do not typically know the company involved in the investigation. Further, government regulators and enforcement officials are typically suspicious that a company is going to try to do what is right for the company. Of course there have been documented enforcement actions where companies have either destroyed documents or tried to hide things, such as witnesses or other evidence. In certain situations, an employee may look the other way, either purposefully or not really realizing what they’re seeing, and may take the investigation in the wrong direction. You want to just inoculate against that kind of problem.

Second, Senn said that there are very complicated issues that come up in cross-border situations. She provided four quick examples: privacy laws; labor laws; cultural issues and language issues. It can be very helpful, more cost effective and important from a legal compliance perspective to have somebody who is experienced in those kinds of issues.

Finally, and what I found most interesting, was Senn’s perspective on document preservation. She believes 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.” Some questions that she believes counsel needs to ask are: “Do you have hand held devices? Where are all of your servers? What is your back-up tape situation? Are you trained in forensically retaining information?” Basically you need to get into the technical nitty gritty and if you do not, you could end up having a situation where either information is lost or there’s a possibility or suspicion that information is lost. Unfortunately, that is the situation that leads to a prosecutor’s imagination going wild. Senn ended her thoughts on this key point with the following, “the thing you want to do is just lock down that information, so if it ever comes to a point where the government says, “Well, we want to kick the tires,” you can say, “Okay, don’t worry. We’ve got everything you would have gotten otherwise.”

All of these steps can lead your company, through its investigation counsel, to having credibility with the DOJ and SEC. She made clear that the government will not only put you through your paces but also test the vibrancy of your investigation protocol and steps you might take as an independent assessor. She said that “if they realize, or they think, that all you’re doing is parroting what they consider to be the company line, and you haven’t gone in and independently really taken a look for yourself, you’re just going to come off as less credible, as somebody that they can’t really trust. That is definitely something that a company wants to avoid at all costs.”

I really liked the way Senn phrased the next step, “You don’t want to go too crazy” around scoping out the investigation. After getting the documents and technology locked down you should try and figure out the bad actor(s). Depending on the situation of whether the investigation target is aware of their status, you may be forced into “somewhat of a stealth investigation, where instead of going full bore and sending out document holds and things like that, you first want to essentially get that person’s information and make sure that they’re not going to do anything to their information. If there are a number of people you know are at issue, you want to lock that down, as well.”

The next step is to collect the documents forensically and use the information gleaned from this step in the process to do what Senn called “lay of the land interviews” where you try and obtain enough information to have a basic understanding of the situation, who the key players and who may be involved in the incident. Senn also believes you can garner quite a bit of information from working with your client before the actual interviews begin. You can look at organizational charts; see the number of employees who could have touched the transaction(s) at issue and also the countries involved. Also a review of the company’s financial accounting systems is critical so that you can assess how much will have to be done manually and in-country. (Think Avon)

One of the questions that I have struggled with is at what point in the investigation process is it appropriate to discipline employees, up to and including termination? I was gratified when Senn said this not only was a difficult question but also required a case-by-case analysis. You should begin by taking any persons out of the responsible situation. Paid leave pending an investigation is one option. If you terminate them, they will be gone and you will have zero control over them for initial interviews, follow-up interviews or assistance. She explained, “the government might want to interview that person. If you fired them, and that person has moved away or is now inaccessible to the government, it’s actually worse. My tendency is to keep them around, but just prevent them from continuing to do any of the harm that they may have previously done.”

In my next post, I will review Senn’s thoughts on the subject of self-disclosure.

To listen to the full interview with Mara Senn, go to the FCPA Compliance and Ethics Report, by clicking here, or download it from iTunes.

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, 2015

CornerstoneRecently one of the most unlikely sources for praise of the Foreign Corrupt Practices Act (FCPA) came out to inform us all that corporations are the cornerstone of FCPA compliance and enforcement. You may be surprised to find out that it came from the US Chamber of Commerce. It did not come in the form of Congressional testimony in praise of the FCPA but in the Chamber’s Amicus Curie filing in a case currently being considered by the Texas Supreme Court. Regardless of the forum, the praise was just as strong and hopefully just as lasting.

The Texas Supreme Court recently held oral arguments in the appeal of Shell v. Writt. Unusually for a state supreme court case, it touches on the FCPA. The issue before the Court is whether Shell’s internal FCPA investigation is absolutely privileged from a defamation claim by persons named in the report as having violated the FCPA. Being as this is Texas, with a state supreme court just to the right of Attila the Hun, it is easy to determine what the outcome of the case will be, the company will win.

Procedurally, Writt, the plaintiff claiming defamation from Shell’s report of its internal investigation that it provided to the Department of Justice (DOJ), lost at the trial court on summary judgment. The trial court found that Shell had an absolute privilege because the report was turned over to a government agency investigating the matter. The court of appeals reversed this decision holding that because the internal investigation was voluntary, not mandatory, that only a conditional privilege existed and sent the matter back to the trial court for further proceedings. Shell appealed this court of appeals decision to the Texas Supreme Court.

Interestingly, the US Chamber of Commerce filed an amicus brief in the appeal to the Texas Supreme Court, supporting Shell. In its brief, the Chamber came out with full guns blazing in support of the FCPA and for full internal investigations and self-disclosure by companies. At the start of its brief, the Chamber comes out four square in support of the FCPA stating, “Since 1977, and especially over the last decade, the Foreign Corrupt Practices Act (“FCPA”) has played a very significant role in the federal regulation of multinational corporations. By punishing bribery and other illicit influence of foreign officials by U.S. companies, the statute seeks to improve the integrity of American businesses, promote market efficiency, and maintain the reputation of American democracy abroad.”

The Chamber noted the importance of the FCPA to both the US government and to US businesses. It stated, “Over the past decade, the FCPA has taken on renewed importance for both the U.S. government and American businesses.” As to the importance that the US government places on FCPA enforcement, the Chamber cited to the following, “DOJ officials have publicly stated that “enforcement of the FCPA is second only to fighting terrorism in terms of priority.”” Lastly, because of this focus, “FCPA compliance is now a main focus of concern for U.S. businesses.” Moreover, US companies are now ““light years ahead of where [they were] circa the mid-to-late 1990s,” with companies “implementing more rigorous and sophisticated compliance protocols,” including thorough internal investigations and candid self reporting.”

The Chamber did not stop there with its high praise of the FCPA and the importance of the FCPA and its enforcement for US businesses. The Chamber next turned to US businesses role in FCPA enforcement and compliance when it said, “the government has always relied upon businesses to cooperate with investigations and self-report any potential violations by corporate employees. “Federal enforcement authorities have consistently encouraged, if not as a practical matter demanded, that as to the FCPA companies voluntarily conduct internal investigations, disclose potential violations and cooperate with government investigations.” With their vast resources, individualized focus, and access to documents and witnesses, “companies are actually much better positioned to gather more information more quickly overseas than the Justice Department or the SEC.”” Perhaps channeling some of the criticisms of the recent General Motors (GM) and FIFA investigations, the Chamber recognizes that more than simply results must be shared with the DOJ when it stated, “The government requires that corporations provide not just information on violations that they are certain of, but rather any “relevant information and evidence,” as well as identification of “relevant actors inside and outside the company.””

The money line from the Chamber’s brief is the following, “Corporate cooperation, internal investigation, and self-reporting thus form the cornerstone of FCPA compliance and enforcement.” It could not be clearer from this statement the importance that a robust internal investigation protocol, coupled with self-disclosure bring to FCPA compliance. The FCPA Guidance states, “once an allegation is made, companies should have in place an efficient, reliable, and properly funded process for investigating the allegation and documenting the company’s response, including any disciplinary or remediation measures taken. Companies will want to consider taking “lessons learned” from any reported violations and the outcome of any resulting investigation to update their internal controls and compliance program and focus future training on such issues, as appropriate.”

Thus internal investigations coupled with self-reporting provide both companies and the US government towards the same goal; greater compliance with the FCPA because the Chamber recognizes that the FPCA plays a vital role in international business and corruption prevention and prosecution. The Chamber even cites, favorably, the Congressional logic for the enactment of the FCPA by stating, “Congress determined that such practices tarnish the image of American democracy abroad, impair confidence in American businesses, hamper the efficiency of the market, anger the citizens of otherwise friendly foreign nations, and, put simply, are “morally repugnant” and “bad business.”” Finally, the Chamber acknowledges the importance of the FCPA for both US and international investors; both in the US and for companies abroad by concluding, “The FCPA is a valuable statute that helps to reduce corruption and to reinforce public and investor confidence in the markets here and abroad.”

This brief lays out one of the strongest articulations of the power of the FCPA. I did not expect the Chamber to come out so forcefully in favor of what that many business types continually bemoan. The Chamber’s recognition that FCPA compliance and enforcement are cornerstones of the protection of US businesses; US business interests and investor confidence across the globe is a welcome addition to the FCPA dialogue.

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, 2014

CautionYou know things are getting bad when the Wall Street Journal (WSJ) questions a business’ moral authority. Things certainly cannot be much better when the regulators begin nosing around your own self-indulgence. What happens when you realize all of a sudden that all those actions you have taken may actually fall under the jurisdiction of both the United Kingdom and the United States and their respective anti-corruption laws, the UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA)? It turns out all of this may have come through for our friends at Fédération Internationale de Football Association (FIFA).

Last week FIFA announced that it had considered the investigation into allegations of corruption into the awarding of the 2018 World Cup tournament to Russia and the 2022 World Cup tournament to Qatar and found, as reported in the Financial Times (FT) by Roger Blitz in an article entitled “Fifa thrown into fresh turmoil over Qatar World Cup corruption claims”, that “any improper behaviour in the bidding process for the tournament was “of very limited scope.”” This conclusion was made by a FIFA appointed former judge, “Hans-Joachim Eckert, who is chairman of the adjudicatory chamber of Fifa’s ethics committee.” Eckert had reviewed a 350-page report by investigator Michael J. Garcia, who is a former US prosecutor now practicing law in New York. Eckert released a 42 page “summary study” of the Garcia report, which he claimed supported his decision.

Unfortunately for FIFA and Eckert, Blitz reported in another FT article, entitled “Garcia and Eckert set for showdown over Fifa report”, that “Mr Eckert’s summary was disowned within hours of its publication by Mr Garcia, who claimed it misrepresented his findings. He has protested to Fifa’s appeals committee.” Garcia’s statement “has blown apart Fifa’s attempt to bring to a close nearly three years of allegations of unethical behaviour and has left Mr Eckert under increasing pressure to publish the Garcia investigation.” This action by FIFA led Reinhard Rauball, president of the German football league (DFL), to say, “Europe would have to consider breaking away from Fifa unless the Garcia investigation was published in full.”

All of this came after the summary itself noted that documents and evidence surrounding the Russian bid were lost because the computers on which they were stored had been destroyed. Garcia was not even able to speak with all the relevant witness in the Qatar bid as well. Even with this lack of full investigation, Garcia issues a statement which said that Eckert’s summary contained “numerous and materially incomplete and erroneous representations of the facts and conclusions detailed in the investigatory chamber’s report.”

What does all of this mean for FIFA? Certainly if the head of the German football league says that the European soccer federations may have to pull out of the organization because it is so corrupt that portends poorly. In another article in the FT, entitled “Brussels launches sliding tackle against Fifa”, Alex Barker reported “The EU’s top sports official is urging Fifa to come clean with findings from its corruption investigation, in a warning that signals a Brussels rethink over the commercial freedoms enjoyed by football’s scandal-tarnished governing body. In a direct swipe at Fifa’s attempt to clear Russia and Qatar to run the next two World Cups, Tibor Navracsics, the EU commissioner for sports, has called for full publication of a graft report into the 2010 bidding process to “remove doubts” about its findings. While Sepp Blatter’s Fifa is an unregulated Swiss body independent from government, its lucrative business activities in the European market are subject to rules overseen by EU regulators, including sales of television rights.”

What about any criminal issues? A quick Google search reveals that FIFA has offices in both the US and the UK. Given the very broad jurisdiction of the FCPA and perhaps the UK Bribery Act, it does not seem too far a stretch for either the Department of Justice (DOJ), the FBI, the UK Serious Fraud Office (SFO) or even the Overseas anti-corruption unit of the London police might want to open an investigation. Indeed CNN reported that the FBI is investigating FIFA at this time, saying “Investigators are moving ahead with their probe, which could result in charges against senior FIFA officials, the U.S. law enforcement officials said.”

For the compliance practitioner there are a couple of important lesson in all of this. First and foremost, in your internal investigations, you need to provide access of both documents and witnesses to your counsel. If you do not that alone may certainly compromise your investigation. This point was recently re-emphasized in the ongoing General Motors (GM) scandal over its ignition switch problems. It turns out that over two months prior to the public announcement the company had ordered over 500,000 new switches from its supplier. According to Hilary Stout and Bill Vlasic, writing in the New York Times (NYT) in an article entitled “G.M. Ordered a Half-Million Replacement Switches 2 Months Before Recall”, the order was placed after an internal company committee met. But no records of the meeting were provided to company’s outside counsel investigating this matter, Anton R. Valukas. Interestingly Valukas released a statement which the article quoted, ““To my knowledge, G.M. provided me access to all information in its possession related to G.M. inquiries regarding various repair options and part availability as G.M. considered potential fixes for the ignition switch in the event that a recall would occur,” the statement said.” That is lawyer-speak for I looked at what they showed me.

Hiding or not providing access to internal or outside counsel can be a recipe for disaster with the DOJ. The reason is the same as it is a disaster for FIFA in Europe. There is no trust left for the organization. Ask any ex-DOJer and they will tell you that it is all about credibility when you self-disclose to the DOJ or when you are in negotiations with the DOJ over a potential FCPA penalty. I regularly hear Stephen Martin and Mike Volkov say precisely that when they talk about their experiences from working for the US government. If you do not allow your investigators access to all relevant documents and those witnesses under your control, the DOJ will most probably not consider the results of your investigation valid. The DOJ may not even consider your exertions worthy of a good-faith effort.

One thing is also very relevant for the compliance practitioner. If your outside counsel disavows him or herself from the company’s interpretation of it going forward, you are in big trouble. Even the WSJ, in its Op-Ed piece said, “FIFA’s moral failure stands out.”

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, 2014