Assembling the Right Team Can Prevent Investigation from Spinning Out of Control

Conducting an investigation concerning business misconduct is challenging enough and it only gets more complex when taken abroad. As global commerce has evolved there has been a corresponding increase in misconduct and risk. International corruption is difficult to prevent. It is difficult to investigate. And ultimately the allegations may be difficult to prove.

The Foreign Corrupt Practices Act was established in 1977 to curtail questionable or illegal payments by U.S. companies to foreign officials and restore confidence in the integrity of American business. There are two main provisions to the FCPA one that addresses accounting transparency and the other regarding bribery of foreign officials.

Enforcement has stepped up in recent years as global business has increased. With thirty-three enforcement actions between the Department of Justice and Securities and Exchange Commission the statute’s dual enforcers 2008 was the second busiest numerical year on the books trailing only 2007. The Latin American region has traditionally been notorious for corruption and in 2008 was no stranger to the FCPA. Ecuador Argentina Venezuela Bolivia Brazil and Mexico were among some of the countries most referenced in FCPA allegations.

Several enforcement trends have emerged in recent years: escalating financial penalties increased prosecution of individuals internationalization of enforcement increased scrutiny of M&A activity coupling of FCPA prosecutions with other charges and increased litigation.

Conducting a cross-border investigation poses a range of challenges.  Below are four common challenges companies face along with some tips to help tackle them.

It’s tough to see the truth from far away

When allegations arise it’s difficult to assess their validity from far away. If there has been misconduct it’s tough to see the scope. How widespread is the misconduct is one person responsible or is it more pervasive? Subtle distinctions are nearly impossible. For example the FCPA provides an exception for facilitating payments to expedite the performance of duties an official is already required to perform.   How can you tell the difference from 2800 miles away?  The best plan is to assemble the right team and get yourself on site quickly.

The team requires a unique skill set

The right team can make or break a cross-border investigation. You need language skills. You need familiarity with local culture and business practices. And you need expertise in technical investigations. An early assessment of the nature of the allegation will help you identify the appropriate resources and build the right team.

It may be beneficial to bring in local management to facilitate introductions and staff cooperation and provide advice on the local operations. This can be particularly valuable when conducting employee interviews as part of the investigation to increase their people’s comfort level. Of course it can be difficult to decide who to rely on at the local level. Who can you trust? Who is part of the scheme? Do background research and attempt to evaluate the level of corruption. Be selective.

Can you get the data?

In the U.S. we’ve grown accustomed to acquiring preserving filtering and reviewing large amounts of electronically stored information in the course of an investigation. However cross-border investigations pose a unique challenge in locating and preserving relevant data. In many countries overseas particularly in emerging markets companies may be using less sophisticated technology. I’ve seen a number of companies keep their financial information manually. Accuracy and availability may be questionable.

A bigger obstacle to data gathering can be regulation. Rules regarding privacy and confidentiality will differ and the requirements for document retention will as well.

Don’t pretend you’re home

Cultural differences can begin with the different languages and dialects from country to country and even in specific regions within one nation. The same phrases may have very different connotations. Gestures and body language can be even more varied: in Brazil for example the “OK” hand gesture is considered vulgar. How long your handshake lingers has meaning in parts of Latin America withdrawing too quickly is an insult. When conducting an interview it’s important that the interviewer demonstrates respect and is sure that both the questions and the answers are clearly understood. Be aware of how you are perceived: this is key to gaining local cooperation with an international investigation. This is another area where a local resource or guide can be invaluable. Business practices and expected corporate behavior vary as well. What you might think is inappropriate may be nothing more than business as usual in a foreign country.

Careful planning and comprehensive preliminary research can make a cross-border investigation more efficient and effective. Having an appropriate response to an international incident or allegation is key to preventing an allegation from spiraling out of control.