Internal Investigations on the Rise in Latin America

This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.

FCPA internal investigations are a hot topic today in Latin America. The region is seeing a dramatic increase in focus on investigating potential wrongdoing within large organizations. Indeed, companies throughout the region are conducting internal reviews of significant FCPA compliance questions, including headline cases like Petrobras, Embraer, Eletrobras and SQM. The U.S. Department of Justice’s recent announcement of its FCPA pilot program also serves to elevate the emphasis on internal investigations. This is because a key component of credit under the program is cooperation, which often means conducting one’s own internal investigation and reporting the findings to the authorities.

FCPAméricas has written previously about important features of internal investigations, such as the rationale behind a company investigating itself, maintaining the attorney-client privilege, establishing credibility with FCPA enforcement officials, the reasons investigations are so expensive, best practices for conducting investigation interviews and voluntary disclosure considerations. Here are other key issues that companies conducting internal investigations in Latin America are facing today:

Determining whether an issue is serious enough to warrant an independent investigation.

FCPAméricas has written previously about when to use outside counsel for FCPA investigations. Companies working in Latin America continue to struggle with this question. When doing so, they consider factors like the financial significance of the potential misconduct, whether the allegations touch top management or include structural issues that would make an in-house investigation inappropriate or conflicted, whether the magnitude of an investigation would swamp in-house resources and whether there are technical or other issues that would challenge in-house ability.

Scoping the investigation appropriately.

One of the biggest challenges to investigations is designing the scope of the review so that it is sufficiently thorough while not overly broad. This effort can have serious implications on the credibility of the investigation, as well as the costs. When the U.S. government is involved, companies must make sure they reach an agreement with authorities on a reasonable strategy.

Preserving documents at the right time.

In Latin America, many companies face the reality that, as soon as they issue a document-hold request, employees are likely to start destroying documents. At the same time, without directives to employees to preserve documents, companies leave themselves vulnerable to inadvertent destruction of key materials. Companies must also put their employees on notice as to company policy so they can hold responsible any employees who do engage in destruction. Finding the right balance on timing can be tricky.

Cost-effective collection, hosting and search of electronic documents.

The most expensive aspect of an internal investigation is usually the review of documents and associated technology costs. Oftentimes this is an unavoidable reality of an investigation – to understand the full story of what occurred, a company must reconstruct the history of communications and activities. To make this process more manageable, companies in Latin America are learning that not all information that is preserved needs to be collected, and not all information collected must be reviewed.

Immediate remediation.

The highest priority when a company receives a credible allegation of an FCPA violation is to make sure the violations cease – to “stop the bleeding.” As the investigation unfolds and findings come to light, companies must also take steps to start remediating evident compliance failures in real time. No longer is it sufficient to wait until the investigation is complete to begin remediation.

Managing external audiences.

During internal investigations, companies must often manage the expectations and requirements of outside audiences. FCPA authorities might be involved who give input and require periodic updates. Publicly-traded companies must consider securities disclosure issues carefully. In doing so, they should consult with disclosure, not investigative, counsel. How disclosures are made to external auditors must also be considered carefully, especially at a time when auditors are increasingly aggressive in their FCPA investigation oversight.

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