How Tech Can Immunize Corporations Against FCPA Fines

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Catalyst’s John Tredennick argues that the same technology that corporations and litigators already use to quickly get to the core of eDiscovery is equally adept at helping in-house counsel and compliance staff get to the nub of a Foreign Corrupt Practices Act investigation.

John  Tredennick

By John Tredennick

John Tredennick, Esq., is the founder and CEO of Denver-based Catalyst Repository Systems, www.catalystsecure.com, which builds and runs the world’s fastest and most powerful software platform for complex eDiscovery, regulatory investigations and compliance, and a former litigation partner with a large law firm in Colorado.

It remains to be seen whether under the new administration the U.S. Department of Justice will continue the vigorous enforcement of the Foreign Corrupt Practices Act it has pursued in recent years. But there is no reason to believe it will let up.

Recent DOJ Activity

Already in 2017, the DOJ has announced multi-million-dollar agreements with multiple corporations to resolve FCPA investigations. Among them was an agreement with Rolls-Royce to pay the U.S. nearly $170 million as part of an $800 million global resolution of investigations by the U.S., the U.K. and Brazil.

Also in 2017, the DOJ reached an agreement with Zimmer Biomet Holdings Inc. under which it will pay a $17.4 million criminal penalty for FCPA violations involving the company’s operations in Mexico and Brazil.

In addition, Las Vegas Sands Corp. agreed to pay a $6.96 million criminal penalty in connection with business practices in the People’s Republic of China and Macao.

And in the back of the mind of every corporate counsel is the haunting memory of the largest FCPA settlement to date, when Siemens agreed in 2008 to fines totaling $1.6 billion to settle bribery charges brought by U.S. and German authorities.

New DOJ Activity

Making this issue all the more urgent for corporate legal departments is a pilot program launched in April 2016 by the DOJ’s Criminal Division to facilitate more robust FCPA enforcement.

The pilot is designed to motivate companies to voluntarily self-disclose FCPA-related misconduct, cooperate more fully with the DOJ and, where appropriate, remediate flaws in their controls and compliance programs.

For companies that comply with the program’s requirements for self-disclosure and transparency, the payoff can be significant. The DOJ may decline to prosecute FCPA violations entirely.

Even if criminal charges result, cooperating companies are eligible for significant mitigation credits—most notably up to a 50 percent reduction off the bottom end of fines under the U.S. Sentencing Guidelines and elimination of the requirement for appointment of a federal monitor.

A Critical Proviso

To be considered compliant for these purposes, a company must have in place an effective program that can root out potential violations and enable it to swiftly ascertain and disclose to the DOJ all relevant facts about the individuals involved in the wrongdoing.

That is not always an easy task. For a multinational corporation, evidence of FCPA violations could lie hidden in emails, electronic documents and other files that might be stored anywhere across the company’s global footprint and in any mix of languages.

This is where technology comes in. Searching all that data both thoroughly and quickly can be done only with the help of the right technology.

Perhaps not surprisingly, a number of corporations are now using for their compliance investigations the same technology that litigators use to get to the root of a matter in eDiscovery. eDiscovery software provides the sophisticated search and analytics tools that compliance investigators need to quickly identify all relevant facts.

The DOJ’s Pilot

The details of the DOJ’s FCPA pilot program were announced April 5, 2016, by Leslie R. Caldwell, assistant attorney general in charge of the Justice Department’s Criminal Division.

“The principal goal of this program is to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA-related misconduct, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs,” Caldwell said.

At the same time, the DOJ significantly stepped up its ability to investigate and prosecute FCPA violations. It added 10 prosecutors to its FCPA Unit, increasing the unit’s size by more than 50 percent. As a corollary to that expansion, the FBI established three new squads of special agents devoted to FCPA investigations and prosecutions. The DOJ also strengthened its cooperation with its foreign counterparts.

“This should send a powerful message that FCPA violations that might have gone uncovered in the past are now more likely to come to light,” Caldwell said.

Under the pilot program, which continues in effect, a corporation can mitigate criminal penalties or avoid prosecution altogether through “timely and voluntary self-disclosure.”

In evaluating the disclosure, the DOJ will look at whether the company:

  •  Discloses the conduct within a reasonably prompt time after becoming aware of the offense.
  •  Discloses all relevant facts known to it, including all relevant facts about the individuals involved in any FCPA violation.
These disclosures, the DOJ said, should be as specific as possible and should include relevant documents and information about where the documents were found.

How eDiscovery Software Helps

When a company has reason to suspect unlawful FCPA activity within its ranks, eDiscovery software can help it quickly identify evidence of the activity or rule out any wrongdoing.

eDiscovery software helps uncover such evidence by providing in-house compliance professionals with sophisticated tools for searching and analyzing corporate data.

If there is suspicious activity within a particular office, for example, the company’s compliance staff can collect all the emails and other electronic records for that office and then use these tools to zero in on possible evidence.

If the investigation turns up questionable activity warranting further inquiry, the company may deepen its probe, refer it to outside counsel, or work directly with the DOJ.

Some of the leading eDiscovery platforms are cloud-based and able to process and search data in multiple languages. This makes them ideal for use by multinational corporations, because compliance staff have access to the platform from anywhere, can easily load data from anywhere, and can search across all the languages in which the corporation does business.

A Case Study

A number of companies now use eDiscovery technology in compliance investigations. One example is a multinational medical device company that uses a leading eDiscovery platform to streamline and standardize its process for investigating anti-bribery and other compliance issues involving its offices in Asia, Europe and elsewhere.

Like many corporations, the company has set up a hotline to receive tips of potential anti-bribery violations. These tips are directed to regional compliance staff in offices across the company’s Asian and European regions. Staff also initiate inquires internally.

Historically, once it commenced an investigation, the company’s standard procedure was to collect emails and other electronic files from the appropriate custodians and then search through it all for evidence of suspicious activity.

However, for a long time, the company lacked the right technology that would enable it to do this efficiently and effectively.

The company’s Singapore office was the first to adapt eDiscovery technology for use in internal compliance investigations. Its legal staff had used an eDiscovery platform elsewhere and believed it could be an effective tool that would enable data related to alleged violations to be quickly loaded, searched and analyzed.

The platform worked so well in Singapore that regional offices in locations as disparate as Bulgaria, India, Japan, Spain and Thailand followed suit. In short order, the company adopted the eDiscovery platform as the standard application to use for all its compliance investigations worldwide.

The Process

For each new investigation, the regional office involved sets up a new site within the cloud-based eDiscovery platform dedicated to that matter. A site can be up and running within an hour.

Then, using the platform’s automatic loading and processing capabilities, custodian data specific to the country is exported from the company’s Exchange servers in the United States and loaded into the site.

From there, regional staff use the platform’s search and analytics tools to look for evidence of the alleged impropriety. If the initial search uncovers evidence warranting further inquiry, a local law firm is engaged to more thoroughly review the data and determine how to proceed.

For the company, a key feature of the eDiscovery platform is the ability to control the process itself without having to wait for a third party to process and load data.

An entire investigation—from when the initial tip is received to when it is either closed or referred out—often takes no more than two weeks.

Features that Enhance Investigations

While an eDiscovery platform can be a highly effective internal investigation tool, proprietary software with the following specific features can make an investigation even easier:

  •  Automated case creation, so the company can quickly set up investigation sites as needed without requiring third-party involvement.
  •  Automated processing and loading, so the company can load its own data into the platform and quickly get started with review.
  •  Robust and intuitive search capabilities, so that compliance staff can rapidly hone in on key information.
  •  Visual analytics such as timelines and relationship maps, enabling investigators to identify and explore patterns in email correspondence and other data.
  •  Integrated batching, export and production capabilities to easily deliver documents externally to outside counsel or government investigators.

For FCPA cases, a critical capability is multi-language document handling. In such a case, the emails and documents under scrutiny could be in any of a range of languages or even contain multiple languages within a single document. Insight is able to process documents in multiple languages and, more importantly, search them in multiple languages.

More Effective Compliance Through Technology

Even though there is a new administration in Washington and a new attorney general in charge of the DOJ, there is no reason to believe that the department will ease up on its FCPA enforcement or its emphasis on voluntary compliance.

In an interview published Feb. 1, Andrew Weissmann, chief of the DOJ’s Criminal Division Fraud Section, reiterated his goal of holding companies to a high standard for compliance and to empower a robust compliance function within organizations. A week later, on Feb. 8, the Fraud Section issued a new guidance on evaluating corporate compliance programs that reiterates the principles outlined in the pilot program.

In light of the DOJ’s pilot program to encourage self-reporting of FCPA violations and its concomitant increase in FCPA investigations and prosecutions, corporations have more incentive than ever to adopt strong compliance programs that include rapid and thorough responses to suspicious internal activity.

As it turns out, the same technology that corporations and litigators already use to quickly get to the core of a case is equally adept at helping in-house counsel and compliance staff get to the nub of an investigation. The same sophisticated search and analytics tools that let litigators explore documents, patterns and timelines can be used by compliance professionals to identify or rule out suspicious activity.

Given the DOJ’s policy, that could make the difference in whether a corporation is prosecuted and in what penalties it would face if it was.

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