Companies that might become embroiled in seemingly perpetual DOJ FCPA investigations recently received some mixed messages from DOJ’s Criminal Division. On April 17, Leslie Caldwell, the AAG of the Criminal Division, delivered remarks at New York University Law School’s Program on Corporate Compliance and Enforcement.
AAG Caldwell emphasized that companies under investigation for potential FCPA violations are not required to “boil the ocean” in their internal investigation “look-backs,” and that DOJ prosecutors, absent the potential for compromising investigations, are being encouraged to “assist cooperating companies in appropriately targeting their investigations” by sharing information about the government’s investigation. Somewhat surprisingly, however, AAG Caldwell seemed to place the blame for the arduousness of government FCPA investigations squarely on companies for “spend[ing] years, and many millions of dollars, investigating potential violations.”
Although AAG Caldwell’s candid remarks provide enough reason to be hopeful, they don’t address critical distinctions between corporate internal investigations and the government’s own overarching criminal investigations that may serve to cause investigatory delays.
As an initial observation, it remains an unavoidable fact that companies simply are not incentivized to incur substantial costs by acting needlessly in the conduct of those internal inquiries. Moreover, while it may be true that, on occasion, a company has “boiled the ocean” in the conduct of an internal investigation, the notion that federal investigators would routinely permit an “aimless” internal inquiry to negatively affect the course or duration of the government’s investigation is, at base, unconvincing.
There is no doubt, however, that, regardless of the level of corporate cooperation, government investigators and prosecutors are not merely museum docents here. As AAG Caldwell pointed out, the government does not (and cannot) sit idly by and rely exclusively on the company’s internal investigation in making its charging decisions, but rather, conducts its own independent inquiry and “pressure tests” the company’s internal investigation. As such, the government plainly is the driver of the investigatory bus.
Lastly, in view of the OECD’s 2014 Foreign Bribery Report and DOJ’s most recent FCPA corporate resolution statistics, it would be impractical to believe that the recent radical upward deviation in investigatory timeframes from historical norms is the primary result of some newfound ineptitude in the conduct of internal inquiries. As I discussed in a recent op-ed piece in the Wall Street Journal here, other factors are most certainly the root cause of increasingly longer and more expensive FCPA investigations.
The trend toward lengthy and expensive FCPA investigations, in my opinion, should not be standard fare. Specific time-tested constructive steps are available to the government to address the problem. For example, a renewed focus on training prosecutors and agents to effectively manage the investigation and prosecution of complex corporate fraud cases in “real time,” once a cornerstone of the President’s Corporate Fraud Task Force, is certainly one important aspect of a solution. Consistent and open communication as to the nature of the government’s concerns and the breadth of any required look back, as advanced by AAG Caldwell, is another.
As I discuss in more depth in an upcoming article in the Westlaw Journal of White Collar Crime, several other measures need to be considered in order to reduce the unnecessary costs and length of FCPA investigations, including eliminating some of the bureaucratic challenges within DOJ.
Justice is best served and deterrence is best achieved when both cooperating companies and outside counsel are empowered and encouraged to conduct efficient and appropriate internal investigations. In this regard, the Criminal Division’s renewed efforts to increase transparency and collaboration in corporate investigations are most certainly laudable. In my view, further introspection into the causes and cures for these costly investigative delays in corporate FCPA investigations by the DOJ would help to further reduce wasteful spending by targeted companies and would also fairly serve the ends of justice.
Paul E. Pelletier (pictured above) is a partner in the Washington, D.C. Office of Mintz Levin Cohn Ferris Glovsky and Popeo PC. His practice focuses on white collar criminal defense and compliance. He previously spent more than 25 years at the U.S. Department of Justice, serving as Chief of the Economic Crimes Section for the U.S. Attorney’s Office in Miami and from 2002 to 2011 as Acting Chief and Principal Deputy Chief of the Criminal Division’s Fraud Section. He can be contacted here. Find him on Twitter @PePelletier.
Nice summary of a complex problem, Paul. It has been said that the two "great motivators" of human conduct are fear and greed. One could argue that greed is the underlying reason for FCPA violations (combined, perhaps, with a fear of "losing out" if the bribe isn't paid). One could also argue, quite compellingly, that fear is the underlying reason for a retrospective investigation that leaves no possible stone unturned. In this case, fear is both fear of the unknown (i.e., uncertainty regarding Government expectations of the investigation) and fear of the consequences of an investigation that the G may deem inadequate when it comes time to resolve the matter. To your point, then, the only way one can reduce the "fear factor" is to reduce the unknowns, that is, to require and expect more transparency and consistency from Government enforcers. This requires not only an honest and free flow of information from the G to the target but also an effort on the Government's part to think strategically and practically, to focus its own efforts, and to encourage reasonable, risk-based, and cost-effective investigative approaches. Only by reducing the uncertainty that engenders the fear can the Government have the necessary positive impact on the cost and duration of FCPA investigations.
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