By Lene Powell, J.D.
International coordination in anti-corruption cases just keeps getting better and better, and settlements are getting bigger and bigger, said panelists in a PLI program on FCPA enforcement. But cutting against that trend, strong privacy and labor protections can impede investigations, particularly in Europe, where enhanced privacy restrictions will take effect in May 2018. These cross-currents create complexity for multinational companies trying to comply with conflicting demands.
The panel, “FCPA Investigations and Enforcement: Developments and Updates,” was part of PLI’s White Collar Crime 2017 program and was moderated by F. Joseph Warin, chair of the litigation department of Gibson Dunn’s Washington, D.C. office.
Authorities are working together. Increasing international coordination between enforcement authorities has been a big-picture trend over the past few years, said Charles Cain, acting chief of the SEC FCPA unit. Calling it “the wave of the future,” he expects to see this trend to continue and to result in more coordinated resolutions. The SEC participates in many international efforts, including the Working Group on Bribery, which is part of the Organisation for Economic Co-operation and Development (OECD). Belonging to this group, which includes representatives from the Department of Justice, Department of Commerce, and State Department, allows members to strengthen peer-to-peer relationships and facilitate cross-border coordination, Cain said.
One recent big multinational success is In the Matter of Telia Company AB, a $965 million settlement announced in late September that was one of the largest criminal corporate bribery and corruption resolutions in U.S. history. The case involved a Swedish company’s payment of bribes government to officials in Uzbekistan, as well as money laundering. Cain observed that the structure of the settlement was a little unusual because the SEC, DOJ, and Dutch authorities reached a resolution that allowed for the possibility of a Swedish resolution, and the next day, Swedish authorities filed charges against three individuals. In all, over a dozen different jurisdictions assisted in the investigation. Cain pointed out that even though the company delisted, this does not extinguish jurisdiction.
Process can vary. How multinational investigations and prosecutions begin is very case-specific, said Alixandra Smith, of the U.S. Attorney’s Office for the Eastern District of New York. Sometimes the foreign country has already begun an investigation, and the question is how far along the investigation is and what resources can each country bring. Sometimes the U.S. starts first, and in the course of assisting, the other jurisdiction will decide to bring its own investigation, or the U.S. can actively encourage this.
As the case proceeds, the U.S. can obtain records and service of process via Mutual Legal Assistance Treaties (MLATs), which the U.S. has with most countries, said Smith. For example, to serve a subpoena for records in the U.K., a package is put together and submitted to the DOJ’s Office of International Affairs, which sends the request to and receives the records back from the U.K. authorities. The process is certified, so the records can be used in court in the U.S. Smith explained that although this is the formal process, obtaining records through informal law enforcement contacts can sometimes move more quickly.
According to Matthew Cohen, director of global anti-corruption at Hewlett Packard Enterprise, over the last five years the number of outgoing requests through the OIA has increased 75 percent over the last five years, and incoming requests have increased 150 percent.
Getting ducks in a row. To facilitate coordination in the U.K. in particular, the DOJ has seconded a prosecutor from the fraud section to law enforcement in London, said Warin. The prosecutor is doing a two-year stint, with one year at the Financial Conduct Authority and one year at the Serious Fraud Office.
Investigations by various authorities sometimes proceed at an uneven pace and it can be challenging to get resolutions over the finish line at the same time, Smith said. In U.S. v. Odebracht and U.S. v. Braskem, the investigation stemmed from another investigation that snowballed and took on a life of its own. Although the investigations by the U.S., Brazil, and Switzerland went at their own pace, cooperation by the two companies helped the jurisdictions come together to coordinate a single resolution. Smith observed that sometimes events can intervene. In the fall of 2016, there was a lot of political unrest in Brazil, and there were actually attempts in Brazilian legislative bodies to take away the ability of prosecutors to charge the case, she said.
Warin pointed out that post-resolution, companies need to think through what disclosures they need to make in all jurisdictions and for all authorities. For example, stock exchanges have dramatically different requirements for notifications than the SEC.
Case types are sometimes mixed. One aspect worth mentioning is that FCPA might be just one aspect of a larger case, said Cain. For example, a case filed in late September (In the Matter of Alere Inc.) is really an accounting case with an FCPA component. It had revenue recognition fraud, but also involved bribery. Other cases that were a mix of FCPA and accounting fraud were OrthoFix and General Cable. This serves to remind that a company that has problems with controls in the FCPA area might well have a larger controls problem, he said.
“There might be stealing, self-dealing. It’s all happening in that poor controls environment,” Cain said.
Cain explained that even though the FCPA unit is specialized, consisting of about 40 people, the unit will handle the non-FCPA aspects, because it doesn’t make sense to break up the case.
Employee rights can complicate investigations. One factor that can potentially throw a wrench in multinational enforcement efforts is data privacy laws, which are stronger in some countries than in the U.S. For example, in some countries, the law requires consent from the employee before searching their email. Cohen said this puts a real premium on doing “jurisdictional scoping” when conducting an internal investigation. His company looks first to in-house regional counsel to educate investigators on what the laws are in that country that will impact the ability to gather information. Then they will consult local counsel, and will also work with outside counsel in the country on an as-needed basis.
According to Frances McLeod of Forensic Risk Alliance, under “blocking” statutes in some countries, it is a criminal offense to comply with investigations conducted by another sovereign state. So, for example, French companies would not be allowed to produce documentation in an SEC or DOJ investigation. Then, on top of that, there are data protection laws, which requires informed consent from employees to harvest emails and certain other information.
As of May 2018, said McLeod, there will be harmonized data protection regulation across Europe that will be even more onerous than what is currently in place. For example, there will be the “right to be forgotten,” so when an employee leaves a company, they can demand that their records be expunged. From a practical perspective, it’s often possible to get signed consent forms directly from the employee by explaining that you’re not going to use the information for any nefarious purpose beyond getting to the bottom of what’s going on, McLeod said. After the data is received, it must be culled to remove personal information, by running searches and allowing employees to create files to put their personal information in.
Another wrinkle is differing labor and employment laws. Warin noted that in the U.S. corporate setting, it’s “talk or walk.” Most U.S. companies have policies that if an employees do not turn up for a mandatory interview, their employment can be terminated. But in some countries, said Cohen, you have to let the employee know what questions you intend to ask in the interview. In fact, in some countries, you have to actually turn over the investigative record to the employee before the interview. And, some countries allow employees to have representation at the interview, whether that’s legal counsel, or works counsel, or a spouse.
Navigating the complexity. Multinational companies are facing strong and increasing enforcement coordination across jurisdictions, and authorities have hefty expectations of compliance. Yet, in attempting to cooperate with investigations, companies can increasingly run afoul of strong employee and privacy protections in many countries, especially in Europe. To avoid these potential snares, companies may want to consider increasing resources for internal investigations and engaging local counsel in countries in which they operate.