Alstom, the French energy and transportation firm, got off on the wrong foot in responding to an FCPA investigation by U.S. authorities, according to reports. The Assistant U.S. Attorney handling the matter described the company’s preliminary compliance with a grand jury subpoena as characterized by “fits and starts.” The company’s new lawyer, Patton Boggs’ Robert Luskin, even conceded, “there were clearly problems between the company and DOJ initially before we were retained. What we hear back from the government is that they’re satisfied with the direction and the level of our efforts and frankly that has gotten better and better over time.”
Alstom’s experience is not unique. It is understandable that executives of non-U.S. companies can find it hard to accept when they are under investigation for potential violations of law in a third country. When companies learn that liability may be civil and criminal, may involve both corporate and individual liability and certainly implicates significant cost and reputational considerations, the effects can be overwhelming.
In situations like these, it is imperative that companies engaging with enforcement officials establish and maintain credibility with them to get the best possible outcomes. To do so, they should consider the following steps.
1. Have a plan. From the beginning, enforcement agencies will want to know who at the company is calling the shots and who will be doing the actual work. Is the general counsel, chief compliance officer or audit committee running the review? Is the investigation utilizing internal resources or external ones or both? How is the company ensuring the investigation’s independence? Companies will usually assign oversight to the Board’s audit committee. They should make sure they utilize only one point of contact with authorities.
2. Follow internal investigation best practices. As discussed previously, if a company has not already built credibility with enforcement officials, it will want to rely on outside counsel that has. Whatever the company does, it should be sure not to make novice errors. This means following investigative best practices like preserving evidence (described here and here), conducting internal interviews with proper protocol (described here) and defining scopes of review in ways that make sense, among other things.
When an internal investigation is properly calibrated, the company is better positioned to respond to the inevitable questions of FCPA officials about the types of evidence collected and the individuals, business units, countries and foreign officials implicated in the wrongdoing. If the company does not demonstrate seriousness, the government could quickly lose confidence in its ability to manage the issues. This complicates a company’s chances of obtaining a favorable resolution. More problematic, it can mean that the government might choose to take a more active role in guiding, or even conducting, the investigation itself.
3. Move quickly. There are inevitable obstacles and logistical hurdles when mounting a response to an FCPA issue — such as the need to get travel visas, understand the types of investigative efforts permitted under local laws and gather and assess initial facts. The longer a company waits to get started, the more likely it is that evidence could be lost or that individuals with information could be unavailable. The company also risks allowing a corrupt scheme to continue. For these reasons, companies should move quickly to get the facts and address the issues. Failing to do so would not look good in the eyes of the DOJ and SEC.
4. Be polite, honest and direct. A company should not lose sight of the human element of its interactions with enforcement officials. If it decides it is in its best interest to cooperate with the enforcement agency, it should do so in a way that allows it to obtain the fullest possible benefit of that cooperation. This means being prompt in responding to inquiries, producing translations of foreign language documents, highlighting the nature and substance of documents it produces and explaining the reasons for delays of supplemental productions. When officials ask to interview company employees, the company should assist in producing them in a timely and cooperative way. Cooperation should be proactive, not passive. This means reaching out to officials to make sure their requests are being met instead of merely waiting for their inquiries. It can also be helpful to take the time to point out important or significant documents or information, even when they might not be favorable to the company’s position. As one colleague stated, “DOJ and SEC officials are smart people. They will figure this stuff out. So you might as well make it easier for them.”
5. Strike the right balance between cooperation and advocacy. FCPA settlements, in particular, are specialized situations. Companies cannot be too pushy when they are trying to reach an agreement. For example, they should be careful not to overly assert the attorney-client or work product privileges and do so only in light of relevant standards. This means being conscious of the often non-attorney-client privileged communications of in-house counsel. It means not confusing government investigations with regular civil litigation, with its occasional document production gamesmanship. Production of documents is none other than a further important step in a company’s efforts to cooperate with an inquiry.
At the same time, companies should not roll over. FCPA enforcement officials can be aggressive, and companies need to know when and how to push back. When they push back, it should be educated and well reasoned. This is often difficult to do well without experienced FCPA counsel. Lawyers who regularly engage in settlements are familiar with the nuances of the statute’s application, knowing when it makes sense to concede to government requests and when it is appropriate to refuse. Approaching settlements in this way, companies are able to build credibility from a position of strength, even when taking positions contrary to the theories advocated by enforcement agencies.