Controlling the costs of an FCPA internal investigation
When potential FCPA violations rear their head, a thorough investigation into what went wrong and why is crucial.
May 21, 2013 at 08:00 PM
3 minute read
Read more about the impact and continuing evolution of the FCPA in June's feature story.
When potential FCPA violations rear their head, a thorough investigation into what went wrong and why is crucial. But when you are criss-crossing borders and double-checking every party along a supply chain, the cost of an investigation can easily balloon out of control. Take Wal-Mart, which says it voluntarily disclosed internal investigative activity to the government in November 2011 (well before the New York Times first reported bribery allegations). In its March 26 10-K, Wal-Mart reported that it had spent $157 million in the last fiscal year on FCPA investigations, a figure that includes defending related shareholder lawsuits.
Few companies have legal-funding pockets as deep as Wal-Mart does—and it can be argued that few have supply chains and global reach to the extent Wal-Mart does. Still, their annual report made clear that FCPA investigations take time and cost money. There are a few areas where some focus can potentially save companies big money.
“Companies are much more attuned to the need to conduct (or have their outside counsel conduct) cost-effective investigations,” says Homer Moyer, an FCPA lawyer at Miller Chevalier. “The need to investigate continues, but the reported costs of some of those investigations have been breathtaking. Being able to respond to issues by conducting investigations efficiently and in a proportionate, sensible way is on companies' radar screen much more now.”
The following factors are key to controlling cost, Moyer says.
Experience
A veteran outside counsel with numerous internal investigations under his or her belt may charge more by the hour but will be far more familiar with the various issues that can arise in an FCPA investigation and thus far more efficient than people for whom FCPA isn't yet second nature. “There's not a learning curve, and they're not puzzling over the law. Rather, they're identifying the issues and developing recommendations about how to respond,” Moyer says.
Team Size
Investigating potential bribery will often lead to global investigations that span multiple countries. Deploying a different team of lawyers to each of the different sites and then trying to piece together all the arms of the investigation can be enormously expensive and inefficient.
Language
While you want to keep your team streamlined, lawyers that speak the local language at investigation sites can give their teams a huge leg up. Translators and interpreters provide vital services, but a lawyer on the investigation who can communicate in real time in the local language can make for smoother, faster and easier entry—and fewer dead ends.
Length of Investigation
Knowing when to bring an investigation to a halt is important—and tricky. It's similar to the voluntary-disclosure dilemma. The government of course is never the one to tell a company to wrap it up, and it is known to offer incentives to companies that extend their investigations. But companies also can't let them go on forever. And in some cases, extensive and boundless investigations can actually impede proper remediation measures. “Sometimes, for example if you uncover a systemic problem, it makes more sense to stop and to promptly address the issue with effective remediation than to continue going to great lengths to uncover more and more examples of the problem,” Moyer says.
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