Internal Investigations and Cooperation Credit in FCPA Investigations
Cooperation credit and conducting internal investigations were key themes in recent remarks by Assistant Attorney General Leslie Caldwell at New York University Law School’s Program on Corporate Compliance and Enforcement (April 17 2015)(here). These have long been critical issues for corporations facing a question of self-reporting, particularly in the FCPA area.
Companies considering whether to seek cooperation credit must do more than simply conduct an internal investigation and report to the Department, the Assistant AG noted. To earn credit “we expect that company to conduct a thorough internal investigation and to turn over evidence of wrongdoing to our prosecutors in a timely and complete way. Perhaps more critically, we expect cooperating companies to identify culpable individuals—including senior executives if they were involved – and provide the facts about their wrongdoing.”
While noting that the Department does not want to tell firms how to conduct an internal investigation, there is no such thing as an “off the rack” inquiry, Ms. Caldwell noted On the other hand there are what she called “hallmarks of all good internal investigations. Chief among them is the identification of wrongdoers. The mere voluntary disclosure of corporate misconduct—by itself—is not enough.”
It is critical that investigations be independent and designed to uncover the facts, not “spread company talking points or whitewash the truth.” The complete facts must be provided in a timely fashion. This does not mean that the investigation has to extend into unnecessary areas, expending millions of dollars. “This is particularly true in the FCPA context where the need for international evidence can add to the expense and burden of an investigation.”
While in many instances companies spend large sums on investigations it is not always necessary, according to the Assistant AG. The Department expects internal investigations to be thorough but “we do not expect companies to aimlessly boil the ocean.” For example, if an FCPA violation is discovered in one country and there is no basis to suspect violations are occurring elsewhere, “we would not necessarily expect it [the company] to extend its investigation beyond the conduct in that country. On the other hand, if the same people involved in the violation also operated in other countries, we likely would expect the investigation to be broader.”
Companies may chose not to cooperate. While this may delay the Department’s inquiry, it “rarely thwarts . . .” the investigation. A good example in the FCPA area is the Alstom inquiry. There the Criminal Division performed an extensive investigation without the cooperation of the company. The result: “Today, four individual Alstom executives have been charged with FCPA crimes, three of the executives have pleaded guilty; Alstom’s consortium partner, Marubeni, was charged and pleaded guilty after also opting not to cooperate, and Alstom pleaded guilty and paid a $772 million penalty – the largest criminal penalty in the history of the FCPA.”
Firms should carefully consider these facts when evaluating whether to self-report and cooperate. In the end, the Department will continue its investigation Ms. Caldwell noted regardless of the decision by the company. At the same time if the company intends to cooperate, it is critical that in internal investigation be designed to fit the situation, comprehensive, timely and that those responsible be identified.