FCPAméricas Blog
When to Use Outside Counsel for FCPA Investigations
2.12.2014
These days, more and more companies are developing internal resources to manage potential FCPA violations. They bring to bear triage committees, internal audit teams, investigation units, and in-house lawyers when running issues to ground.
This trend makes sense. Companies in high-risk industries and countries frequently need to vet indications of foreign bribery. Using outside lawyers, accountants, and investigators every time can be expensive.
Given these trends, when should companies rely on outside counsel for FCPA investigations? The answer is guided by various considerations.
Is the investigation record likely to be reviewed by others? One of the main reasons to hire outside counsel is credibility. Investigations by inside counsel are subject to suspicion as biased – or, worse, as a whitewash. Outside counsel bring (or should bring) both independence and expertise to the table. If your record of investigation could end up on the desk of a DOJ attorney, you will want it to be as credible as possible.
Thus, it is important to consider whether a potential whistleblower, disgruntled employee, or aggressive journalist might bring the issue to light. This analysis can admittedly be difficult, as bribery issues tend to come to light in ways that companies might not expect.
What is the company’s reputation? Jeffrey Knox, the chief of the DOJ’s Criminal Fraud Section, recently stated, “I think credibility and reputation go a long way with us . . . A lot does have to do I think with the reputation of the company and the counsel and even to some extent the outside law firm.” Certain companies with leading compliance practices, like GE and Siemens, have built strong reputations (see posts about Siemens here, here, and here). Their internal reviews will inevitably carry more weight. Others that are unknown might not have the same automatic credibility.
What are the company’s internal capabilities? Investigations are often complex because foreign bribery schemes tend to touch multiple jurisdictions, actors, and cultures. Companies must consider whether they have the staffing to handle the matter – teams are often already stretched thin. Does personnel have local language skills, expertise in local laws, and the manpower to handle complicated reviews? By relying on internal resources, will individuals get pulled away from their normal duties? If the answers are yes, companies are more likely to look externally for help.
How severe are the allegations? Many companies tend to start reviews internally and assess whether outside legal assistance is necessary as they go. For example, they will seek outside assistance as soon as information collected indicates violations of law rather than merely violations of internal policy. They will look outside when evidence implicates the involvement of high-level executives or systemic rather than isolated problems.
How credible are the allegations? When allegations are credible because tips are corroborated by evidence, a whistleblower is known and reliable, or the person making the report has direct knowledge of the wrongdoing, this suggests that companies should use outside counsel. When tips appear baseless, internal reviews tend to be more appropriate.
These determinations are rarely easy and involve numerous factors. In my experience, companies that have already made significant investments in their compliance programs generally come out on the issue in one of two ways. They have built impressive internal capabilities for foreign bribery matters and can field many issues themselves. They also recognize that, at times, reliance on qualified counsel is essential. As one former compliance officer told me: “When a company makes significant investments to build a robust compliance program, it shortchanges itself by attempting to go the last mile on the cheap.”
The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.
© 2014 FCPAméricas, LLC
Post authored by Matteson Ellis, FCPAméricas Founder & Editor
Comments
February 12th, 2014 at 4:17 pm
Very good points. Credibility along with good historical track records cant be replaced. I think from time to time every company should seek externaal advise and certification to make sure its compliance program is still up to date and effective. Sounds to me like a good policy.
March 30th, 2014 at 7:03 pm
Thanks Matt for sharing these observations. We also see more and more companies build up internal investigation capabilities. As you noted, external counsel often gets instructed where there are independence or resource issues. One common concern in this area appears to be how to best ensure that these internal investigations are legally privileged where the investigation is conducted by non-lawyers (e.g. Internal audit teams). And as you know, there has been a recent federal court decision which suggests that legal privilege in internal investigations will continue to be tested (the KBR case). It remains to be seen how this will influence the set-up of the internal investigation function and the investigation process, but clearly internal investigations will need to be scoped and closely supervised by the Legal (in-house) function to have the best arguments for legal privilege.