190 likes | 331 Views
Internal Investigations By Outside Counsel: Implications for Anti-Corruption Enforcement. JAMES E. HOUGH. February 19, 2007. American Bar Association’s “The Role of Lawyers, the Bar, and the Bench in Preventing and Combating Corruption within the Justice System”.
E N D
Internal Investigations By Outside Counsel:Implications for Anti-Corruption Enforcement JAMES E. HOUGH February 19, 2007 American Bar Association’s “The Role of Lawyers, the Bar, and the Bench in Preventing and Combating Corruption within the Justice System”
Internal Investigations By Outside Counsel WH0conducts corruption-related investigations? WHATis investigated? WHENare investigations performed? WHYare investigations conducted?
Internal Investigations: WHO? • Global companies whose home jurisdictions prohibit foreign corrupt payments. • Thirty-six “supply-side” countries now prohibit use of corporate funds to pay bribes to foreign officials.
Examples of Companies Subject to Prohibitions on Foreign Bribery France USA Netherlands South Korea Switzerland UK Germany USA Japan USA
Internal Investigations: WHAT U.S. FOREIGN CORRUPT PRACTICES ACT • Anti-Bribery Provisions • Apply to all U.S. companies (including officers, directors, employee, agents and shareholders) and all U.S. nationals • Apply to non-U.S. companies and nationals who act in U.S. • Accounting/Books and Records Provision • Applies only to U.S. “issuers” • Affect foreign subsidiaries and affiliates of issuers
Internal Investigations: WHAT • PrimarilyFact Investigation • Collecting, reviewing and preserving evidence • E-mail and electronic data • Hard copy documents • Conducting interviews • Key executives • Staff • Consultants, agents and/or customers
Internal Investigations: WHEN • Whistleblower allegations • SOX provides protections and incentives • M&A due diligence • Auditor questions • Investigations already underway by authorities
Internal Investigations: WHY? “. . . Foreign bribery is a difficult offense to detect, since it is committed in secret and involves two satisfied parties . . . .” OECD Mid-Term Study of Phase 2 Reports, p. 92 (available at: http://www.oecd.org/dataoecd/19/39/36872226.pdf)
Internal Investigations: WHY • Reduces exposure to government action • Puts company in better position to respond to charges/lawsuits • Prevents future wrongdoing • Provides information that management needs to fulfill responsibilities
Internal Investigations: WHY Advantages of outside counsel: • Increased control over information discovered • U.S. law: Attorney-Client Privilege; Work Product Protection • Independence from management • Ethical obligations • Avoids conflicting interests • Credibility if company decides to self-report
Internal Investigations: WHY • Voluntary disclosure to government over improper conduct discovered by internal investigation • U.S. reporting FCPA violations made both to DOJ and SEC • Criminal case against company by DOJ less likely • Lowers or eliminates SEC penalty
Self-Reporting Example: Schnitzer Steel • Korean subsidiary made over $1.8M in improper payments to customers, many of whom were Chinese state-owned entities • Self-reported to DOJ and SEC • Reported both bribery of foreign government officials, and books and records violations • Korean subsidiary entered guilty plea; Schnitzer Steel entered deferred prosecution agreement with DOJ • Schnitzer Steel and Korean subsidiary paid over $15M to settle matter
Self-Reporting Example: Baker Hughes • Paid $75,000 through an agent to Indonesian tax official to reduce assessed tax • Self-reported • Company, CFO, Controller charged by SEC • $30 million estimated cost of remediation required by government
Internal Investigations: WHY • U.S. Law: incentives to disclose if find problems • Governments increasingly likely to share information with authorities where corrupt activity took place • OECD Convention incorporates “Mutual Legal Assistance” • UN Declaration Against Corruption and Bribery in International Business Transactions
THANK YOU James E. Hough Morrison & Foerster LLP