Thinking Through the Suspension & Debarment Implications of FCPA Violations

1. Thinking Through the Suspension & Debarment Implications of FCPA Violations

2. Table of Contents • Conducting Investigations • Considerations for Ethics and Compliance Programs • Disclosure Practices • Lead Agency Determination • Engaging the Suspension & Debarment Official (SDO) • Considerations When Appearing Before an SDO • Purpose of the Meeting with the SDO • Preparing for a Meeting with the SDO • Written Submissions • Preparing Your Client • Who to Bring

3. Table of Contents, Cont’d • The Meeting with the SDO • Following the Meeting with the SDO • SDO Decision Making Process • Present Responsibility • Overview of Present Responsibility Factors • Potential Outcomes • Administrative Agreements • Corporate Monitors • Important Links • Contact Information

4. Conducting Internal Investigations • Initiate internal investigation of the alleged violation(s) • Through the investigation, seek to understand: • Whether a violation occurred • If determined that a violation did occur: • Where/how the violation occurred • Who committed it ?- position, responsibilities, authority • Was the alleged violation done by a rogue employee or is it a systemic problem? • What compliance measures/controls were in place to deter such a violation?

5. Conducting Internal Investigations, Cont’d • Maintain policies that set forth procedures for responding to and investigating reports of non-compliance. Policies should: • Ensure investigations are conducted promptly • Ensure issues to be investigated are identified • Identify who will conduct investigation • Ensure investigator is experienced and capable of conducting an objective and independent investigation • Engage management in the investigation and in crafting a response to the investigation • Determine whether, based on initial review, the investigation should be expanded to include other business units, other business transactions, other regions, etc.

6. Considerations for Effective Ethics and Compliance Programs • For Ethics Programs: • Select values that are tailored to your business or risk profile • Define and communicate values in a manner that makes sense to employees • Ensure leadership engagement in promotion of values • For Compliance Programs: • Review and improve ethics and compliance training, policies, internal controls, practices and strengthen in light of investigation findings, lessons learned

7. Considerations for Effective Ethics and Compliance Programs, Cont’d • Identify your risk areas based on your organization’s specific industry, the nature and location of its operations, and the activities in which it engages • When tailoring the program, pay particular attention to high risk areas – Ex. FCPA, FCA, FSA violations • Periodically evaluate and update risk areas to reflect new contract requirements and changes in law and regulation • Screen principals and other high level personnel to mitigate against the hiring of unethical actors • Conduct periodic compliance audits particularly in high risk areas

8. Considerations for Effective Ethics and Compliance Programs, Cont’d • Regularly remind employees to report concerns and the channels available to them • Train those who may receive reports on how to respond following a report • Educate and train employees based on lessons learned from investigations and audit findings • Ensure violators of company policies are disciplined appropriately • Evaluate the ethics and compliance programs of prospective suppliers during supplier approval process • Require employees to review and re-certify compliance with the Code of Business Ethics &Conduct annually

9. Disclosure Practices - Mandatory • Mandatory Disclosures • Maintain a policy establishing procedures for analyzing and handling events giving rise to potential mandatory reporting obligations • Be aware that mandatory disclosures are often shared with the relevant agency SDO so the disclosure should address the present responsibility concerns implicated by the disclosure • SDOs often take action against individuals identified in disclosures so consider addressing the present responsibility of any individuals identified

10. Disclosure Practices - Voluntary • Voluntary Disclosures • If no mandatory disclosure obligation, assess whether it would be beneficial to make a voluntary disclosure • Consider disclosing to the SDO events that are likely to raise present responsibility concerns even if they do not fall within the mandatory disclosure rule • When making a voluntary disclosure, treat it as formally as a mandatory disclosure with the same considerations in mind • Disclosures should be complete; vague or incomplete disclosures are likely to trigger further review and/or investigation and may dissipate the benefits of making the disclosure

11. What Happens if a Contractor Does Not Make a Disclosure? • Suspension and Debarment Officials frequently receive Reports of Investigation from agency Offices of Inspector General that detail alleged or proven wrongdoings by contractors or settlement agreements between contractor and US Government • Suspension and Debarment Official will review report, and if necessary, engage contractor by: • Exploratory Letter: Show Cause Letter, Request for Information • Exclusionary Letter: Suspension or Proposal for Debarment Notice

12. Lead Agency Determination • Process of coordination among Agencies through the Interagency Suspension & Debarment Committee (ISDC) to ensure that the most appropriate agency, the one with the strongest nexus to the company/ issue, receives the disclosure • Nexus Considerations: • Current and past contracts and subcontracts- volume and dollar amount • Specific statutory authority • Nature of (alleged) violation • Whether (alleged) violation occurred on a particular contract or subcontract

13. Engaging the Suspension &Debarment Official (SDO) • Know who your lead agency SDO is likely to be before non-compliance events occur • Make disclosures and engage the SDO early and often! • Even if the FCPA (alleged) violation did not occur in relation to a Federal Government contract or subcontract, does the company do any Federal business? • If so, contractor should meet with SDO as the (alleged) violation may be a basis for suspension and debarment action • Company should decide whether or not to engage outside counsel to handle matters before SDO

14. Engaging the SDO, Cont’d • Be candid and complete in communications with SDO • Keep the SDO informed of developments • Identify and address compliance issues before meeting with the SDO • Invite the SDO to maintain an open line of communication with the company

15. Considerations When Appearing Before an SDO • Understand the process and what to expect, including the requests the SDO may make • Use the right tone with the SDO - candor and transparency are critical • Anticipate the agency’s perspective and specific concerns and be prepared to address them • Ensure written submissions address all the issues raised by the non-compliance event • The SDO expects the contractor to lead the meeting and to control the agenda so be prepared

16. Purpose of Meeting with SDO • To demonstrate to the SDO that despite the past bad act or omission, the contractor is presently responsible • DO NOT re-litigate your case • Do not get stuck on legalese • Confront and address the underlying (alleged) wrongdoing (cause for disclosure or suspension or debarment) • SDO has discretion • Present responsibility determination is in part subjective • Meetings help to inform the SDO’s discretionary decision

17. Preparing for a Meeting • Review the extent of the issue: Has it affected distinct business units, individuals, subsidiaries? Is it localized? • Affiliation and Imputation • Company vs. Individuals • Prepare Written Submission • If you have already provided a submission on behalf of client, not necessary to prepare a second submission unless new information/ change in case status • Prepare Your Client!

18. Written Submissions • Preparing a Written Submission • Written submissions and presentations are helpful and required by most SDOs • Written submissions often contain: • Written explanation of the underlying issue • Presentation of matters in opposition • Relevant supporting documentation • Submit written materials in advance of the meeting to provide the SDO and his/her staff adequate time to review

19. Preparing Your Client • Preparation of the client prior to the meeting is the most important job of counsel • Client should: • Understand what suspension and debarment is • Recognize that the meeting is not an adversarial proceeding • Be prepared to address underlying issue, investigation (if applicable), company’s ethics and compliance programs, company plan going forward

20. Preparing Your Client- Cont’d • Client should do most of the talking • Attorney can provide road-map, but then turn floor to client • Client has unique knowledge of the day-to-day information about the company’s past and present • Bringing various company officials, employees may be helpful to tell an effective story

21. Who to Bring? • Ineffective for only counsel to meet with SDO • Who to bring? –People with power to effectuate change • Head of company (CEO/President) if possible • Individual in charge of particular business unit (if applicable) • Individual in charge of ethics and compliance (if applicable) • Individuals in charge of Government business (if applicable) • Other individuals as dictated by the situation/corporate structure

22. The Meeting with the SDO • Level of formality varies agency-by-agency (mostly informal) • For most agencies, transcripts of the meetings are not created and info not part of record (EPA exception) • Generally, the floor is provided to contractor and counsel to present materials about underlying issue and the company’s present responsibility • Providing a road map at the outset of presentation is helpful • SDO and staff may: • Ask questions of the contractor and counsel • Ask for additional information or documentation to be provided after the meeting

23. Following the Meeting with the SDO • If SDO asked for additional information/ documentation, provide this as soon as possible • If the issue is at a point where a final decision regarding the company’s present responsibility can be made, SDO will provide a written decision as soon as possible • If the issue is not at a point where a final decision regarding the company’s present responsibility can be made, SDO and company will continue to engage via meetings or providing SDO documentation until decision-making point is reached

24. SDO Decision-Making Process –Present Responsibility • Focuses on the present and future ability of a contractor to responsibly contract with the Federal Government • Includes a contractor’s ethics, integrity, compliance with applicable laws, and ability to adequately perform • A determination that a contractor is presently responsible is an overall evaluation of the contractor itself, not of any particular act or omission • Mitigating Factors in FAR 9.406-1(a)(1)-(10) are used in present responsibility determination

25. SDO Decision-Making Process Cont’d -Overview of Present Responsibility Factors • Standards of Conduct • Voluntary Disclosure of Issue • Internal Investigation • Full Cooperation • Paid Costs/Restitution • Disciplined Employee(s) • Agreement to Implement Remedial Actions • Ethics Training • Amount of Time passed • Management Recognition of Problem

26. SDO Decision-Making Process, Cont’d • SDO takes various factors into consideration: • Company response/ mitigating factors established in FAR 9.406-1(a)(1)-(10) • How the Government found out about the issue • Disclosure vs. qui tam vs. Government-initiated investigation • Stale event vs. recent event • Current leadership’s position on ethics, compliance

27. Potential Outcomes Suspension Proposed Debarment/Debarment Administrative Agreement/ Corporate Monitor Termination of Review

28. Administrative Agreements • When Considered: Contractor must have demonstrated to the SDO’s satisfaction that the contractor is “substantially on the way” to being presently responsible • Administrative Burden • On Government • Tracking and review of submissions • On Contractor • May require a significant investment of resources • Must be prepared to fulfill requirements. Violation of terms is an independent cause for debarment.

29. Corporate Monitors • Considered when: • Entering into an Administrative Agreement and SDO would prefer an independent third party review of the company • Alleged misconduct is pervasive and ingrained in company culture • Are beneficial for companies, as they provide: • A neutral opinion on the state of the company’s culture, practices, procedures, ethics, compliance, internal controls, etc. • Concrete ways for companies to improve processes

30. Important Links • System for Award Management:www.sam.gov • Interagency Suspension and Debarment Committee:http://www.epa.gov/ogd/sdd/isdc.htm • FAR 9.4: https://www.acquisition.gov/far/current/html/Subpart%209_4.html#wp1083280