The Growing Importance of Internal Investigations: Effectively Coordinating a Global Enforcement Approach for your Company William Michael, Jr. Joseph M. Alesia J. Gregory Deis Stroz Friedberg LLC Mayer Brown LLP June 27, 2013 Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & ChequerAdvogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
Internal Investigations Overview Overview • Key Considerations In Conducting an Internal Investigation • High Risk Areas • Multinational Investigations – Foreign restrictions on transfer and review of certain – Foreign restrictions on transfer and review of certain information – Privilege issues – Practical concerns/limitations • Minimizing Risks Associated With Global Enforcement Actions/Investigations 2
Internal Investigations Key Considerations Key Considerations Internal investigations have become a recognized practice for businesses, which are required, through a myriad of obligations, to respond to allegations of misconduct in an ever-increasingly complex legal environment. With increased coordination in global enforcement actions by regulators and law enforcement officials, the complexities regulators and law enforcement officials, the complexities associated with global investigations have increased exponentially. 3
Internal Investigations Key Considerations Key Considerations Properly performed internal investigations assist in: – determining whether the allegations have substance; – who may have been involved and what level of involvement they had; – what the proper responses should be and the legal risks associated with failing to respond; associated with failing to respond; – how to minimize the regulatory, civil and criminal exposure of the corporation and its senior management; and – what, if any, preventive measures are appropriate to prevent repetition of the events in question. 4
Internal Investigations Key Considerations Key Considerations Duties of Care, Obedience and Loyalty – Directors and officers owe fiduciary duties to the corporation, including the duties of care, obedience and loyalty. – The duty of care requires a director to act in good faith and in a manner the director reasonably believes to be in the best interests of the corporation. interests of the corporation. – The duty of obedience requires a director to act within the corporation’s scope of powers, as set forth by its charter or by the laws of the state of incorporation, and mandates that directors not exceed those powers. – The duty of loyalty requires that a director act in good faith and that the director not allow personal interests to prevail over the interests of the corporation. 5
Internal Investigations Key Considerations Key Considerations Timing of the Investigation Scope of the Investigation Determining the Investigative Team Members – Attorneys – Experienced Investigators – Industry Specific Experts Investigative Methods – Documents – Electronic Evidence – Personal Interviews 6
Internal Investigations Key Considerations Key Considerations Who is the Client? Multiple Representations/Common Interest Agreements? Who is Provided Details of the Investigation? How to Preserve Privilege? How to Preserve Privilege? Written or Oral Report? Self-Reporting to Government? Collateral Consequences? 7
Internal Investigations Corporate Investigation Protocol Corporate Investigation Protocol While two investigations are rarely identical, investigators should tailor and apply certain practices as appropriate, using their best judgment in each situation, to ensure that the goals of every investigation are attained in the most fair, effective and efficient manner possible. An Investigations Protocol fulfills two important purposes. An Investigations Protocol fulfills two important purposes. – Companies must maintain a process to investigate and remediate allegations of wrongdoing under the federal Sentencing Guidelines and other applicable laws. – Demonstrates a commitment to compliance with legal and regulatory requirements. 8
Internal Investigations Corporate Investigation Protocol Corporate Investigation Protocol Areas a protocol should address – Stated purpose – Investigative goals – Dealing with reports of misconduct – Investigative triage – Investigative triage – Maintaining attorney-client privilege – Forming the investigative team – Documenting an investigation – The investigative plan 9
Internal Investigations High Risk Areas High Risk Areas • FCPA • Antitrust/Competition • Money Laundering • False Claims Act • False Claims Act • Data Breach • C-Suite Misconduct 10
Internal Investigations FCPA FCPA 11
Internal Investigations FCPA FCPA 12
FCPA Overview of FCPA Provisions Overview of FCPA Provisions • The FCPA prohibits bribery of foreign public officials and requires issuers to maintain accurate books and records and to devise and maintain systems of internal accounting control. – The anti-bribery provisions prohibit any offer, payment, promise, or authorization to pay money or anything of value to any foreign official, political party, or candidate for public office, which is intended to influence any act or decision in order to assist in obtaining or retaining influence any act or decision in order to assist in obtaining or retaining business. – The accounting provisions contain two subsections, termed the “books and records” and “internal controls” provisions. • Books/records: Issuers must “make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.” • Internal controls: Issuers must “devise and maintain a system of internal accounting controls …” 13
FCPA Enforcement of FCPA Enforcement of FCPA • Enforcement of the FCPA is divided between the U.S. Securities and Exchange Commission (SEC), which may enforce the civil provisions of the statute against issuers, and the U.S. Department of Justice (DOJ), which may enforce the criminal and civil components of the statute. • Recently, the enforcement efforts are coordinated between • Recently, the enforcement efforts are coordinated between the US and foreign officials, as most countries now have anti- corruption laws and the foreign countries can ride the coattails of U.S. enforcement agencies. 14
FCPA • “Business should be won or lost on the merits of a company’s products and services, not the amount of bribes paid to government officials. This indictment reflects our commitment to holding individuals, as well as companies, accountable for violations of the FCPA.” Assistant Attorney General Lanny Breuer on Siemens FCPA charges (December 2008) 15
FCPA Summary of 2012 FCPA Enforcement Activity Summary of 2012 FCPA Enforcement Activity • 27 resolved cases by DOJ/SEC – 20 against companies – 7 against individuals • Why so weighted towards companies? – Individuals litigate – Individuals litigate – Companies do not – cost is too high • Siemens: $1.6 billion in penalties – Attorneys fees, investigative fees and consultant’s fees were $900 million • 29 known investigations initiated • 100 known pending investigations by DOJ/SEC 16
Internal Investigations Antitrust Antitrust 17
Antitrust Summary of 2012 Criminal Antitrust Enforcement Summary of 2012 Criminal Antitrust Enforcement • Over $1 billion recovered by DOJ from criminal antitrust offenders in 2012 – $500 million fine imposed against AU Optronics Corporation – $470 million fine imposed against Yazaki Corporation • International cartel investigations • International cartel investigations – Auto parts ( e.g. , Yazaki Corporation) • Increased cooperation/coordination between DOJ and foreign authorities • Increased enforcement activity by foreign authorities – EC: € 1.875 billion ($2.45 billion) 18
Internal Investigations Money Laundering Money Laundering 19
Money Laundering Recent Enforcement Actions Recent Enforcement Actions • HSBC – $1.9 billion and Deferred Prosecution Agreement • Other recent cases – Bank of Tokyo – $250 million – Standard Chartered – $250 million – Standard Chartered – $250 million – ING Bank NV – $619 million 20
Internal Investigations False Claims Act False Claims Act 21
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