Resource alert: This is what cooperation with the DOJ looks like

When companies have FCPA problems, their decision to cooperate with the DOJ can save them tens of millions of dollars. What is cooperation?

Leslie Caldwell, the chief of the DOJ’s criminal division, talked Friday at the NYU Law School about corporate compliance and enforcement. Her description of cooperation should help company lawyers and compliance officers explain to executives what it takes to earn credit from the DOJ in an FCPA case.

Here’s part of what she said:

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During my first year in leading the Criminal Division, we have tried to make as clear as possible what we expect from those companies that choose to cooperate. Put simply, if a company wants cooperation credit, we expect that company to conduct a thorough internal investigation and to turn over evidence of wrongdoing to our prosecutors in a timely and complete way. Perhaps most critically, we expect cooperating companies to identify culpable individuals—including senior executives if they were involved—and provide the facts about their wrongdoing.

As this sophisticated audience knows, there is no “off the rack” internal investigation that can be applied to every situation at every company. Effective investigations must be tailored to the unique misconduct at issue and the circumstances of each company. But, there are hallmarks of all good internal investigations.  Chief among them is the identification of wrongdoers. Prosecuting individuals, including corporate executives, for their criminal wrongdoing is a top priority for the Criminal Division. Corporations seeking cooperation credit should conduct their internal investigations with those principles in mind.

The mere voluntary disclosure of corporate misconduct — by itself — is not enough. All too often, corporations expect cooperation credit for voluntarily disclosing and describing the corporate entities’ misconduct, and issuing a corporate mea culpa. True cooperation, however, requires identifying the individuals actually responsible for the misconduct — be they executives or others—and the provision of all available facts relating to that misconduct.

Investigations must also be independent and designed to uncover the facts, not to spread company talking points or whitewash the truth. We expect that the complete facts about the wrongdoing will be provided, and in a timely way. . . .

The Criminal Division, meanwhile, will conduct its own investigation. We will pressure test a company’s internal investigation with the facts we gather on our own, and we will consider the adequacy of an internal investigation when we evaluate a company’s claim of cooperation.

Let me be clear, however, the Criminal Division does not dictate how a company should conduct an investigation. If a company decides to conduct an internal investigation and seek cooperation credit, that company must determine how best to conduct its own internal investigation. Although we can provide guideposts, the manner in which an internal investigation is conducted is an internal corporate decision.

All too often, criticism is leveled against the Justice Department for purportedly causing companies to spend years, and many millions of dollars, investigating potential violations. This is particularly true in the FCPA context where the need for international evidence can add to the expense and burden of an investigation.  Critics wrongly question the wisdom of disclosing misconduct and cooperating with the government in light of what they perceive to be the department’s requirement that companies then must conduct unnecessarily costly, time consuming and widespread investigations.

There is no question that some cooperating companies spend large sums of money investigating potential misconduct and correcting internal controls issues that allowed the misconduct to occur. The decision to incur those costs, however, is one made by those companies, not a requirement of the department. When a company chooses to cooperate with the government, the manner in which the company approaches its cooperation, and its own investigation of the conduct, can significantly affect the length of the investigation and the costs incurred by the company.

Although we expect internal investigations to be thorough, we do not expect companies to aimlessly boil the ocean. Indeed, there have been some instances in which companies have, in our view, conducted overly broad and needlessly costly investigations, in some cases delaying our ability to resolve matters in a timely fashion.
For example, if a company discovers an FCPA violation in one country, and has no basis to suspect that violations are occurring elsewhere, we would not necessarily expect it to extend its investigation beyond the conduct in that country. On the other hand, if the same people involved in the violation also operated in other countries, we likely would expect the investigation to be broader. 

This example is not intended to suggest the proper scope of an investigation of any given matter. My point instead is that, to receive cooperation credit, we expect companies to conduct appropriately tailored investigations designed to root out misconduct, identify wrongdoers and provide all available facts. To the extent a company decides to conduct a broader survey of its operations, that decision, and any attendant delay and cost, are the result of the company’s choices, not the department’s requirement.

To assist cooperating companies in appropriately targeting their investigations, to the extent possible, we will make clear to those companies our areas of interest. I tell my prosecutors that where possible, if it would not compromise our own investigation, we should share information about our investigation with a cooperating company to help focus the company’s internal inquiry. I encourage an open dialogue between company counsel and our prosecutors about the progress of the internal investigation. Companies that truly demonstrate a commitment to cooperation will find that this dialogue comes easily.

As is their right, corporations may also choose not to cooperate with the government. But, they too must understand the consequences of their decisions. . .

Likewise, a company’s decision not to cooperate may delay, but rarely thwarts, our investigation. In a recently announced FCPA case against Alstom, a French power and transportation company, the company opted not to cooperate for years. The Criminal Division performed an extensive investigation without the company’s cooperation. Today, four individual Alstom executives have been charged with FCPA crimes; three of the executives have pleaded guilty; Alstom’s consortium partner, Marubeni, was charged and pleaded guilty after also opting not to cooperate, and Alstom pleaded guilty and paid a $772 million penalty — the largest criminal penalty in the history of the FCPA.

These are all facts that a company must consider in deciding whether to cooperate with our criminal investigation. A company must choose on its own whether to conduct an internal investigation or to cooperate.  For our part, when we have them, we can openly provide facts and reference points to allow the company to make an informed decision about the scope of its investigation. . . . 

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Assistant Attorney General Leslie R. Caldwell’s full remarks at New York University Law School’s Program on Corporate Compliance and Enforcement in New York City on April 17, 2015 are here.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.