International investigations are the heart and soul of FCPA inquiries. As denoted by its title, the Foreign Corrupt Practices Act deals with bribes and offers to foreign officials and those of foreign state owned enterprises.
While U.S. domiciled law firms may lead such investigations from the U.S., there can also be a large international component staffed by law firm partners, associates and employees outside the United States. For U.S. lawyers, two of the most sacrosanct rules are the attorney-client and work-product privileges. Now such protections may be in jeopardy outside the United States.
The New York Times reported that German prosecutors raided the offices of the U.S.-based law firm Jones Day, which is heading the Volkswagen internal investigation.
The raid, which removed documents and other materials, “suggests that the authorities believe the firm has not divulged all documents that may be relevant to the case. If so, it would be a blow to Jones Day’s reputation while raising the possibility of new revelations that would further tarnish Volkswagen.”
While I would opine that such a raid in the United States would be almost unheard of, unless the law firm was part of a criminal conspiracy, in Germany things are more fluid. Matthias Jahn, director of the Institute for Economic Crimes Law at the University of Frankfurt, told the Times the ”rules on lawyer-client privilege are less absolute in Germany.”
Also, the raid had court approval, so there must have been some reasonable basis presented to a presiding magistrate who granted the order.
One of the things German prosecutors may been seeking is evidence of senior management or even Board level knowledge or involvement. VW has resolutely denied that higher-ups participated in the fraud or were even aware of the existence of the defeat device for its almost 10 years of existence. Yet VW has steadfastly “refused to disclose Jones Day’s findings.”
Even if viewed as an outlier of prosecutorial conduct, this raid opens up one very large can of worms not only for VW but also U.S. law firms that use their foreign offices to lead or even participate in international investigations.
If the most basic U.S. legal privileges can be tossed aside, things will become much more difficult in conducting FCPA investigations outside the United States.
Tom Fox is a Contributing Editor of the FCPA Blog. He has practiced law in Houston for 30 years. He’s the creator of the award winning FCPA Compliance and Ethics website. He is the Compliance Evangelist. His best-selling seminal book, “Best Practices Under the FCPA and Bribery Act: How to Create a First Class Compliance Program” (available from Amazon here) is widely viewed as one of the top volumes on the nuts and bolts of compliance.