The days of the US Justice Department being the sole prosecutor of international corporate corruption are long gone. Recent news reports are replete with anti-corruption enforcement actions by agencies in China, Brazil, Italy and elsewhere. Academic research also suggests that DOJ enforcement actions against a country’s nationals frequently leads to that country becoming more rigorous in its own anti-corruption efforts. According to Sarah C. Kaczmarek & Abraham L. Newman, the odds of a country enforcing its first anti-corruption case are 20 times greater if a country has experienced extraterritorial application of the Foreign Corrupt Practices Act than if it has not. So, the DOJ’s continued prioritization of FCPA cases is having a multiplying effect, encouraging other governments to also step up their anti-corruption efforts and actively seek large penalties. The need for a global mindset for multi-national companies is greater than ever. Governments across the world are no longer working independently of each other. The DOJ is exchanging information and otherwise collaborating with foreign governments much more broadly and frequently than in the past. The DOJ is also actively reaching out to other governments. For instance, in a recent speech, the DOJ’s number two official at the Criminal Division noted that he was arriving from a working trip to London. He emphasized that the DOJ has ‘‘dramatically increased our coordination with foreign partners when they are looking at similar or overlapping criminal conduct–so that when we engage in parallel investigations, they complement, rather than compete with, each other.’’ His point: the DOJ does not merely rely on a company’s internal investigations, but gathers its own information from whistle-blowers, cooperating witnesses and foreign governments. And the DOJ is not just strengthening its ties with well-established countries in Europe; it is increasingly reaching out to lessdeveloped emerging markets to coordinate its prosecutions.
Especially in the FCPA context, which by definition will involve misconduct in a foreign country, companies and their outside counsel need to adapt their strategies and assumptions when cooperating with the U.S. government. Implications include:
- When cooperating with one government agency—be it the DOJ, the Securities and Exchange Commission or a foreign governmental authority— assume that the information is being disseminated to other government agencies that may have an interest in the investigation. When making a self-disclosure or otherwise cooperating with one agency, companies should carefully consider whether it is appropriate to make simultaneous disclosures to agencies in other relevantcountries. This is a very nuanced decision that will require an assessment as to how likely it is that a foreign enforcement authority will actually proceed against a company. Where less-developed countries see the opportunity to assess large penalties, that likelihood is increasing.
- Moreover, the agency with which the company is cooperating may be receiving additional information or cooperation from elsewhere, completely unknown to the company. Notwithstanding foreign data privacy laws and other hurdles the company may face to its internal investigation and disclosure efforts, the DOJ may be obtaining information directly from foreign agencies.
- Consider the potential for arrests of ex-pats and other company employees working abroad. Whether company employees would be subject to extradition requests, the local authority may execute search warrants and arrest local employees during the pendency of the company’s cooperation with the DOJ, regardless of whether the company is also cooperating with the foreign country’s government. China has been particularly aggressive in this regard. The company may wish to consider providing key employees with separate counsel promptly who can address the officer’s potential liability both in the host country and the U.S.
- Companies with a potential FCPA matter should seek outside counsel that have a global presence as broad as their own. It is no longer sufficient for anticorruption practitioners to simply have a working knowledge of the FCPA and DOJ and SEC protocols. Outside counsel need to be able to advise on legal constraints in multiple countries and potentially engage those countries’ prosecutors and law enforcement agencies in addition to engaging in the more-traditional negotiations with the DOJ and SEC.
There is a silver lining to the DOJ’s new collaboration with foreign governments. In the appropriate circumstances, companies may wish to engage in a type of forum shopping by pushing a desired country’s prosecutors to take the investigative lead or intercede for them with the DOJ. For instance, a British company with a U.S. presence, but minimal U.S.-related misconduct may consider encouraging the U.K. Serious Fraud Office to take a primary role in a negotiated settlement. Although the DOJ is unlikely to abstain from any involvement, it may allow a more directly interested government agency to take the lead and shape the resolution. At the least, there is precedent for the DOJ and SEC to credit fines paid to foreign governments in the assessment of appropriate U.S. penalties. Regardless, in today’s international regulatory environment, companies must assume that regulators have the same types of global connectivity and relationships that the companies have themselves. Corporate cooperation with the DOJ and other law enforcement agencies means adapting to a more-sophisticated environment and making critical multi-jurisdictional disclosure decisions promptly to place a company in the best position for a definitive resolution. Reproduced with permission from Corporate Accountability Report, 13 CARE 06, 02/06/2015. Copyright 2015 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com