How to Conduct Thorough, Budget Friendly Investigations
Costs can balloon quickly in FCPA investigations, however, these investigations don’t have to spin out of fiscal control. Corporate counsel can and should get to the root of alleged violations – certainly before the government does – without “boiling the ocean” to unearth the facts and decimating the organization’s bottom line. Based on Roscoe, Michael and Pat’s experience managing corporate investigations, both as defense counsel and as federal prosecutors, they recommend three fundamental best practices for conducting FCPA inquiries.
Co-authored by Michael Battle and Patrick Miles, Barnes & Thornburg LLP
Corporate investigations come with a hefty price tag in both dollars and risk. This reality makes it imperative that in-house counsel makes smart, informed decisions before and during internal investigations – especially those inquiries related to potential violations of the Foreign Corrupt Practices Act (FCPA).
Costs can balloon quickly in FCPA investigations, thanks in part to the need for international air travel, the complexity of global corporate operations and the U.S. Department of Justice’s continued scrutiny of those matters. As corporate legal department leaders monitor expenses, they must avoid the temptation to cut investigative corners for the sake of attempting to preserve their litigation or investigation budgets. Doing so could cost far more – prompting whistleblower activity, risking damaged reputations and lost revenue, and even threatening the personal freedom of corporate employees – than mounting legal bills.
Most executives understand the stakes involved in criminal corporate investigations, as evidenced by the spiraling costs of internal FCPA investigations disclosed by several public companies. Walmart has spent more than $865 million on a single ongoing investigation since 2013, while Siemens spent more than $1 billion investigating FCPA violations before resolving that matter in 2008.
Clearly, these are extreme instances involving two of the world’s largest organizations. However, these investigations don’t have to spin out of fiscal control. Corporate counsel can and should get to the root of alleged violations – certainly before the government does – without “boiling the ocean” to unearth the facts and decimating the organization’s bottom line. Based on our experience managing corporate investigations, both as defense counsel and as federal prosecutors, we recommend three fundamental best practices for conducting FCPA inquiries.
Start With a Budget
The initial, and most basic, step when putting controls on the costs of an internal investigation is to create a budget. Ask outside counsel to sit down with their investigative partners, such as forensic accountants, company auditors and investigators, and provide estimated costs of the investigation based on the anticipated violations, the places the violations occurred, the resources needed to conduct a thorough investigation and how long it will take to look into the allegation. These costs should include travel expenses, lodging and meals, as well as possible follow-up interviews.
When creating your budget, be aware that the final tally will inevitably be more than the outside counsel and company were anticipating. It is good to keep in mind that investigators have to follow the facts, not a preset allocation from a corporate litigation budget.
Still, starting with a budget will help avoid sticker shock. It is only a budget and so, by definition, will be solely an educated guess at the cost. Every investigation will have unforeseen twists and turns that may change that budget to make it more – or less — expensive. However, starting with a budget allows counsel to inform clients when it appears the budget may be exceeded, and the ability to identify why costs not previously anticipated are occurring.
Pick The Right Partners
Making sure you’ve got the right people, in the right places, conducting the right tasks is integral not only to ensure accurate findings but also to managing costs. If outside counsel lacks experience with internal investigations, the costs will quickly grow as their education gets underway. Hiring a firm without relevant experience but with an inexpensive hourly rate may not prove cost-effective if it turns out that the firm cannot get the investigation done. Having to replace an inexperienced firm with a more seasoned firm during the course of an investigation creates unnecessary and avoidable expenses.
The parties selected to conduct an investigation should have a history of conducting investigations or show the ability to partner with investigative entities that do. Seasoned investigators with a knowledge of DOJ practices, an understanding of interview techniques and access to the appropriate resources are essential for an efficient – and effective – investigation.
Experienced counsel and investigators need less time to structure and execute investigations.Corporate counsel will not want to pay for a learning curve, so making sure at the outset that they have selected the right investigative partner is imperative to controlling investigative costs.
Stop Violations Before They Start
The best way to avoid excessive costs for internal investigations is to address the source of the problems before they become problems. Corporations must work at creating a culture that has no tolerance for criminal behavior. That, more than anything else, will serve to contain costs for internal investigations. A corporate culture that lacks tolerance for such activity makes a lone bad actor or a single ethical misstep easier to isolate and investigate in a sprawling organization.
A strong set of compliance controls empowers you to effectively address problems that inevitably arise. Compliance training of all staff – including leadership – should start now, if it hasn’t already. Put processes in place to prevent violations, making sure to send a clear message that illegal activity is unacceptable and ethical business practices are valued over sales and growth. If this messaging comes from the top and is embodied in practice by leadership every day, a company will have a much better chance of avoiding the potentially spiraling costs of internal investigations.
This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
Roscoe C. Howard, Jr., is a partner in Barnes & Thornburg’s Litigation Department in the Washington, D.C., office, where he is a member of the White Collar and Investigations Practice Group. Roscoe is also a former U.S. attorney. His practice primarily focuses on white collar criminal matters, complex litigation, and corporate compliance and ethics issues. 
