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.
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© Thomas R. Fox, 2015