This article was republished with permission from FCPAméricas Blog, for which Matteson Ellis is founder, editor and regular contributor.
These days, more and more companies are developing internal resources to manage potential FCPA violations. They bring to bear triage committees, internal audit teams, investigation units and in-house lawyers when running issues to ground.
This trend makes sense. Companies in high-risk industries and countries frequently need to vet indications of foreign bribery. Using outside lawyers, accountants, and investigators every time can be expensive.
Given these trends, when should companies rely on outside counsel for FCPA investigations? The answer is guided by various considerations.
Is the investigation record likely to be reviewed by others? One of the main reasons to hire outside counsel is credibility. Investigations by inside counsel are subject to suspicion as biased – or, worse, as a whitewash. Outside counsel bring (or should bring) both independence and expertise to the table. If your record of investigation could end up on the desk of a DOJ attorney, you will want it to be as credible as possible.
Thus, it is important to consider whether a potential whistleblower, disgruntled employee or aggressive journalist might bring the issue to light. This analysis can admittedly be difficult, as bribery issues tend to come to light in ways that companies might not expect.
What is the company’s reputation? Jeffrey Knox, the chief of the DOJ’s Criminal Fraud Section, recently stated, “I think credibility and reputation go a long way with us . . . A lot does have to do I think with the reputation of the company and the counsel and even to some extent the outside law firm.” Certain companies with leading compliance practices, like GE and Siemens, have built strong reputations (see posts about Siemens here, here and here). Their internal reviews will inevitably carry more weight. Others that are unknown might not have the same automatic credibility.
What are the company’s internal capabilities? Investigations are often complex because foreign bribery schemes tend to touch multiple jurisdictions, actors and cultures. Companies must consider whether they have the staffing to handle the matter – teams are often already stretched thin. Does personnel have local language skills, expertise in local laws and the manpower to handle complicated reviews? By relying on internal resources, will individuals get pulled away from their normal duties? If the answers are yes, companies are more likely to look externally for help.
How severe are the allegations? Many companies tend to start reviews internally and assess whether outside legal assistance is necessary as they go. For example, they will seek outside assistance as soon as information collected indicates violations of law rather than merely violations of internal policy. They will look outside when evidence implicates the involvement of high-level executives or systemic rather than isolated problems.
How credible are the allegations? When allegations are credible because tips are corroborated by evidence, a whistleblower is known and reliable or the person making the report has direct knowledge of the wrongdoing, this suggests that companies should use outside counsel. When tips appear baseless, internal reviews tend to be more appropriate.
These determinations are rarely easy and involve numerous factors. In my experience, companies that have already made significant investments in their compliance programs generally come out on the issue in one of two ways. They have built impressive internal capabilities for foreign bribery matters and can field many issues themselves. They also recognize that, at times, reliance on qualified counsel is essential. As one former compliance officer told me: “When a company makes significant investments to build a robust compliance program, it shortchanges itself by attempting to go the last mile on the cheap.”
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