Avoiding the “Al Capone” version of an FCPA enforcement action—Are your internal controls in order?

Notorious gangster Al Capone likely was guilty of numerous crimes, including bootlegging, maintaining a house of prostitution, bribery, racketeering and multiple counts of murder.  Yet he was never convicted of those crimes.  He ultimately was convicted of tax evasion and contempt of court in 1930.  Although federal prosecutors were unable to obtain the evidence necessary to convict him for his more well-known crimes, by addressing his failure to maintain accurate books and records (in this case, his tax filings) they were able to send him to jail for 11 years, including a lengthy stint at the notorious Alcatraz Federal Penitentiary. The United States Government, through the Securities Exchange Commission (“SEC”) or the Department of Justice (“DOJ”), sometimes employs a similar tactic when prosecuting persons engaged in foreign bribery as well as in other violations of federal law.  The most well-known section of the Foreign Corrupt Practices Act (“FCPA”) is the bribery provisions, the primary U.S. law used to prosecute the bribery of foreign government officials.  15 U.S.C. § 78dd-1 et seq.  The bribery provisions prohibit offering to give anything of value to a foreign official with the corrupt intent of gaining an improper business advantage.  Lesser known is the FCPA’s requirement that issuers keep accurate books and records and maintain and devise a system of internal accounting controls.  15 U.S.C. § 78m(b)(2).  These requirements are known as the “accounting provisions” and never mention the word “bribery.”  The accounting provisions only apply to “issuers,” which are generally thought of as those companies listed on U.S. stock exchanges (including their non-U.S. operations and majority-owned subsidiaries).  Because foreign entities sometimes issue their...

Protecting Internal Investigations from Disclosure: Suggested Best Practices

A recent case out of the D.C. Circuit highlights some best practices that can boost the odds that the attorney-client and work product protections will shield internal investigation records. Although not precedential outside the D.C. Circuit, United States ex rel. Barko v. Halliburton is an important victory for the protection of attorney-client communications in internal investigations.  In addition, the District Court below offers helpful advice on how to bolster protection of your internal investigations materials and information. The Basics A company can avail itself of two primary protections for communications and documents created during an internal investigation: the attorney-client privilege over communications primarily designed to gather facts that a lawyer may need to provide the company with legal advice the work product doctrine over documents if the company anticipated, or was in the midst of, litigation at the time they were prepared and their primary purpose was related to the litigation The attorney-client privilege provides absolute protection for communications outside the context of anticipated or actual litigation. Unfortunately, the privilege is difficult to create and easy to lose. Some examples of information not covered by the privilege are: uncommunicated thoughts, such as notes to the file, unless they memorialize or serve as the basis for attorney-client communication underlying facts uncovered in an investigation even they are referenced in a privileged communication pre-existing documents that are forwarded to legal counsel final versions of documents created with the intention that they be made public communications made for the purpose of furthering a criminal or fraudulent act communications to an attorney who is not acting in a legal capacity The work product...

An Anti-Corruption Compliance Reminder

With the US Department of Justice’s frequent press releases announcing large fines and wide-reaching investigations into allegations of foreign bribery under the Foreign Corrupt Practices Act, it’s easy to see why it makes good legal sense to comply with US anti-corruption laws.  But compliance also makes good business sense.  Why?  Here are five common sense reasons. [jbox radius=”1″ jbox_css=” background-color:#3bace1; border:0px;” content_css=”color:#FFFFFF;”]Reputation:  When it becomes public knowledge that a company has violated FCPA, customers and potential business partners wonder what other shortcuts the company has taken.  Will the company still be around to do business if it is faced with large fines for non-compliance?  Will doing business with the company drag a potential partner into an investigation?[/jbox] [jbox radius=”1″ jbox_css=” background-color:#3bace1; border:0px;” content_css=”color:#FFFFFF;”]Employee Conduct:  By modeling good behavior and exhibiting an unwillingness to tolerate corruption, employers let their employees know they expect compliance with legal and ethical standards throughout the company. [/jbox] [jbox radius=”1″ jbox_css=” background-color:#3bace1; border:0px;” content_css=”color:#FFFFFF;”]Simplicity:  A straight forward policy of compliance is much easier to administer and easier for employees to follow without subjecting the company to liability. [/jbox] [jbox radius=”1″ jbox_css=” background-color:#3bace1; border:0px;” content_css=”color:#FFFFFF;”]Deterrence:  When a company consistently refuses to pay bribes, corrupt foreign officials often realize the futility of asking and move on to weaker targets. [/jbox] [jbox radius=”1″ jbox_css=” background-color:#3bace1; border:0px;” content_css=”color:#FFFFFF;”]Snowball Effect:  The more a company pays bribes, the more foreign officials will ask for them (and for higher amounts). [/jbox] And if those reasons weren’t enough, bear in mind that the US isn’t the only country with a robust anti-corruption enforcement program.  Many countries now have anti-corruption laws with a wide...