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The authors explain how a new Department of Justice pilot program has changed the landscape for Foreign Corrupt Practices Act investigations and why taking a more collaborative approach might benefit both the target corporation and the government.
By Scott Herber and Amelia Hairston-Porter
Scott Herber, EVP and General Manager at VIA, works with legal, compliance, eLearning and related business users from some of the largest companies in the world to provide the highest quality translations.
Amelia Hairston-Porter, Counsel at Miller & Chevalier, focuses her practice on internal and government investigations, international corporate compliance, and white collar defense, primarily involving the Foreign Corrupt Practices Act.
In a traditional Foreign Corrupt Practices Act (FCPA) investigation, the relationship between the Department of Justice and the entity under investigation can often be adversarial and contentious, and investigations can last for years.
In an effort to streamline these investigations, maximize efficiency and use of resources and promote transparency and accountability, the DOJ has launched a one-year pilot program.
The Pilot Program is intended to encourage companies to self-report FCPA-related misconduct, cooperate with the Justice Department and remediate as appropriate, all in return for substantial mitigation credit.
Given this new landscape and the potentially substantial savings for both sides, a more collaborative approach might actually be the best strategy for both the corporation and the government.
While the pilot program does not require a company to voluntarily disclose, cooperate or remediate, the decision to do so can be beneficial for the corporation in the long run.
The decision to voluntarily disclose and cooperate is essentially a risk calculus: a company may decide that the risks outweigh the benefits and therefore choose to forgo disclosure; however, an incorrect calculation can be costly and disruptive should the government independently learn of the misconduct.
The DOJ understands that some companies may prefer to self-remediate without incurring a government investigation, and this pilot program is the department's attempt to encourage voluntary disclosure.
Accordingly, companies who self-disclose “may accord up to a 50% reduction off the bottom end of the Sentencing Guidelines fine, if a fine is sought.”
Further, if a company does not voluntarily disclose but later cooperates and remediates in a timely fashion, the organization can still receive limited credit of up to 25 per cent.
In instances of voluntary disclosure and full cooperation, the DOJ may also consider a declination of prosecution, which allows a company to avoid an enforcement action altogether.
For example, on June 7, 2016, the DOJ issued full declinations to Akamai Technologies and Nortek Inc. These declinations were the first the DOJ has issued since the launch of the pilot program on April 5, 2016. (Both companies also received Non-Prosecution Agreements (NPAs) with the SEC. While both companies agreed to pay disgorgement fees and interest, they were not charged with FCPA violations or required to pay additional monetary penalties.)
According to Andrew Ceresney, Director of the SEC Enforcement Division,
“When companies self-report and lay all their cards on the table, non-prosecution agreements are an effective way to get the money back and save the government substantial time and resources while crediting extensive cooperation.”
In each case, Akamai and Nortek self-reported the misconduct, promptly conducted efficient internal inquiries, and cooperated extensively with the ensuing DOJ investigations.
In similar letters issued to each company, the DOJ explained that its decision to decline prosecution was based on a number of factors, including, but not limited to
“prompt voluntary self-disclosure of the misconduct, the thorough investigation and fulsome cooperation by the Company (including by identifying all individuals involved in or responsible for the misconduct and by providing all facts relating to that misconduct to the Department) and its agreement to cooperate in any ongoing investigations of individuals, the steps that the Company has taken to enhance its compliance program and its internal accounting controls, [and] the Company's full remediation.”
Both the DOJ and the company have a vested interest in keeping an investigation moving forward quickly and efficiently. Therefore, to the extent that ongoing collaborative discussions with the DOJ help to effectuate that process, counsel should endeavor to work cooperatively with the agency to appropriately manage expectations and ensure that the best interests of the company are balanced with the needs of the enforcement agencies.
Managing eDiscovery and data privacy is a major part of cooperation, especially given that document review and production is one of the largest drivers of investigation cost.
The DOJ is sensitive to the cost concerns of companies and has a vested interest in a positive outcome for all parties with the least amount of resource expenditure.
In addition, while the DOJ has increased its man power by 50 per cent, its resources are not unlimited and it is to the agency's advantage to push for a focused and efficient investigation.
Although the DOJ has increased the number of prosecutors available to investigate potential violations, it does not have the resources to effectively deal with the large data volumes typically generated by an investigation.
As a result, the agencies often rely on company counsel to conduct the investigation and then provide access to the data via productions of relevant documents, including data from other countries.
For example, after a company has self-disclosed, received a subpoena or otherwise become aware of the DOJ's investigation, there will be a meeting, or series of meetings, to discuss the relevant facts and determine how to best conduct the fact gathering portion of the investigation. This includes discussion of the scope and focus of document review and allows both sides to communicate their expectations and ensure an appropriately tailored investigation.
The DOJ will often provide a list of subject matter areas or individuals of interest to help focus the investigation. During this meeting, it is important to have experienced counsel who can walk the fine line between being collaborative and sensitive to the DOJ's needs, but not overly conciliatory and therefore fully conscious of the company's cost concerns and potential negative impacts of the investigation.
A credible reputation with the agencies is one of the most powerful weapons in a company's arsenal and can further increase the likelihood that a company will receive cooperation credit. Leveraging a positive reputation to gain agreement on the go-forward investigation strategy is an important first step.
In addition, per the Yates Memo, which was released in September 2015, if a company wants to be deemed cooperative it must be willing to provide information on the individual employees involved in the misconduct, not just the company itself.
With respect to the pilot program, satisfying the Yates memo is a threshold requirement for receiving cooperation credit. Therefore, document review and production must also focus on providing information about potentially culpable individuals.
The scope of such a review should be discussed with the agencies as noted above as part of the agreed upon investigation strategy. Significantly, even after a company has settled, ongoing cooperation agreements often extend to individuals, which requires the company to continue to review and produce documents and therefore should be taken into account during the negotiation of the scope of review.
Finally, because FCPA investigations are international, relevant documents often reside in other countries. Each country has its own data privacy rules and some, like Russia and China, are very stringent and can impose severe penalties for the unauthorized removal of data.
Until recently, there was an exception for the transatlantic transport of data between the European Union and the United States called the Safe Harbor; however, the Safe Harbor was overturned in October 2015.
As a result, until the recently approved new Trans-Atlantic Privacy Shield framework can be put in place, companies must be very aware of the potential dangers of disclosing overseas data.
However, because the disclosure of relevant overseas data is also a component of cooperation under the pilot program, data privacy issues should also be appropriately discussed with the DOJ as part of managing expectations regarding the scope of document review and production.
Translations are an inevitability in virtually all FCPA investigations. In fact, the Engagement Plan specifically states that “[w]here requested and appropriate, provision of translations of relevant documents in foreign languages” will be required for a company to receive credit for full cooperation under the pilot.
In FCPA matters there may be hundreds of custodians, millions of foreign language documents and terabytes of source data. What is considered “appropriate” is a judgment call by counsel that requires a defensible data collection process. Focusing on what the DOJ has specifically requested, as well as what is relevant to the matter is helpful in boosting the cooperation factor.
Based on the early discussions with the DOJ, a company should be able to find out what facts the agencies are really interested in and focus on reviewing and translating those first; thereby ensuring that the DOJ has an initial set of hot documents to work off of early on in the investigation.
As noted above, the DOJ is sensitive to the costs of an investigation and does not generally expect a company to “boil the ocean” reviewing matters that may not be relevant just to obtain full cooperation credit.
If an investigation results in terabytes of data, or if the parameters are so broad that there isn't sufficient clarity as to what should be produced, there are a number of ways to cull through the data in order to minimize the cost while maximizing the cooperative nature of the results.
One example of a process for handling large volumes of foreign language content is as follows:
Finally, counsel should be sure to comprehensively track and report back to the DOJ on the document production process in case the agency has questions about the protocol used or changes that need to be made. The entire process should be an iterative and collaborative discussion between the company and the agencies to ensure that expectations are managed on both sides and the company ultimately receives the appropriate cooperation credit.
Under the new pilot program, cooperating with the DOJ can benefit organizations financially, as well as helpget the investigation settled expeditiously with a positive enforcement result.
Managing eDiscovery and the fact development process within the parameters of the pilot program can be tricky unless expectations are clearly articulated and agreed upon between all parties, especially when international borders and foreign language data is involved.
Companies need experienced counsel that can help to manage the relationship with the agency, as well as understand the business impact an investigation can have on a company's financial health. Finally, companies should have a well-defined investigation process that can be detailed for the DOJ as defensible and prudent.
Ultimately, a thoughtful approach can empower counsel to better collaborate with the DOJ on behalf of the organization under investigation and help ensure the company receives the maximum cooperation credit available under the pilot program.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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