Individual & Company Risks for Bribery: Navigating the Minefield
By John P. Rupp
Posted: 5th August 2013 08:54
The vast majority of the bribery investigations that we have handled over the past 20 years have begun with a call from a company representative. After having described the source and nature of the bribery concerns that have arisen, the tasks we have been asked to undertake have tended to focus upon a series of company interests – among them, determining whether bribes have been paid by or on behalf of the company; advising on mandatory and voluntary disclosure issues; and consulting on remediation options.
If the statutes prohibiting bribery – including, in particular, the bribery of foreign government officials – focused exclusively upon potential company liability, a singular focus on the company’s interests would be entirely appropriate. In fact, however, most anti-bribery statutes are not so limited. Because most anti-bribery statutes reach individuals as well as companies, a singular focus upon the company’s interests can have unexpected – and far from optimum – results.
I. Divergent Interests
Even if no bribes are determined ultimately to have been paid, individual and company interests often will diverge at various points in the investigation process. That generally will be true as soon as a report or inquiry has been received or evidence has been discovered suggesting possible bribery.
In the usual case, the company’s interests will be served best by determining as quickly and efficiently as possible who did what and when. Although the interests of the company’s board of directors and audit committee as well as most senior managers and employees may coincide with the company’s interests, others may feel threatened by any investigation that is authorised. If so, they may conclude that their interests will be served best by seeking to impede the investigation at every turn.
The tools that individuals can use to impede an investigation are many. They may seek, for example, to assert their rights under pertinent employment legislation, their employment contract or data privacy legislation to deny access to their electronic communications. They also may destroy or remove pertinent evidence. In addition, they may refuse interview requests or agree to such requests only if represented by a lawyer or other professional counselor, who may seek to delay or otherwise obstruct the interview.
They also may try to impede the investigation in other ways. They may refuse, for example, to volunteer pertinent information – or, even worse, seek to rewrite history, providing explanations that have only a fleeting connection with the truth. In some instances, their rewriting of history may consist of unwarranted denials. In others, it may consist of an effort to deflect attention from themselves to others.
Under the “whistleblower” provisions of the Dodd-Frank Act in the United States – which provides a powerful monetary incentive for supplying original evidence of bribery by companies subject to the US securities laws and regulations, an individual may be tempted to manufacture evidence of bribery rather than obscure such evidence. For the company’s business partners, including business partners who have agreed to keep adequate books and records and make such records available upon request, the temptation may be simply to refuse all requests for cooperation.
II. Overcoming Investigative Impediments
Many of the defensive reactions summarised above can be eliminated or greatly ameliorated by appropriate advance planning. Among the planning steps we frequently have advised for that purpose are the following:
- Employment contracts should contain a series of provisions requiring company personnel to cooperate fully in any investigation that is deemed to be needed.
- The employee handbook should place all company personnel on notice of the company’s right to access without further consent electronic communications using company issued communication devices.
- Employees should be discouraged from using company issued communication devices for personal communications.
- Back-up tapes from the company’s central server or servers should be retained for an extended period.
- Business partners should not be reimbursed for expenses they purportedly have incurred without having supplied appropriate supporting documentation, which should lessen the need for access to a business partner’s books and records after bribery concerns have surfaced.
- The company’s contract with business partners, in addition to including an audit provision, should authorise the company to terminate the contract in the event the business partner refuses to cooperate with any investigation the company deems to be needed.
- The company’s contract with business partners should relieve the company of any obligation to reimburse the business partner for any problematic payments the business partner has made.
- Those conducting the investigation should bear in mind that a carrot generally produces more than a stick, thus generally opting for an approach to the investigation that is – and would be deemed by any reasonable person to be – fair and otherwise appropriate.
- The investigation should be sequenced in an appropriate way – often delaying the interview phase until after at least core documents have been assembled and reviewed, thus enabling interviews to be conducted in a targeted manner and reducing the need to repeat interviews.
We normally distribute to company personnel before they are interviewed a written document setting the ground rules for the interview and responding up front to questions that frequently are asked by those being interviewed. Such documents normally –
- describe the interviewee’s obligation to cooperate fully in the investigation, pointing in that connection whenever possible to pertinent provisions of their employment contract and/or the employee handbook;
- mention their obligation to be as truthful during the interview as they are required to be when questioned by their supervisor on a company business issue;
- emphasise that the request to submit to an interview was not prompted by an assumption that bribery or other illegal conduct has occurred and that the interviewer has pledged to remain objective throughout the investigative phase of the process; and
- ask them to avoid discussing either the fact or substance of the interview with anyone, including their work colleagues, spouse/partner or friends.
In some instances, we have chosen to address in the foregoing document the question that many interviewees have concerning whether he or she should retain his or her personal counsel or other advisor prior to being interviewed. The short answer to that question is that those conducting the interview cannot, because of their status as company counsel, provide legal advice to the person being interviewed.
When the issue of personal representation arises during an interview, we always say that we are prepared to suspend the interview if the person being interviewed decides that he or she wants counsel. In all but very rare circumstances, the fairness of that response tends to add to the comfort level of the person being interviewed, thus permitting the interview to be completed without interruption.
IV. Preserving Pertinent Legal Privilege
There is an old saying about the difficulty, if not impossibility, of returning a wild horse to the barn after the horse has escaped into an open field. And so it is with a company’s ability to claim legal privilege for documents that are prepared during an investigation.
We have seen many instances of a company’s having failed to take adequate steps to preserve its ability to assert legal privilege documents prepared during an investigation, an observation that we readily could extend to risk assessment documents revealing problematic conduct by or on behalf of a company. Decisions to preserve legal privilege must be made up front – before potentially incriminating documents are written.
The greatest failing that we have seen in the foregoing connection is permitting those to whom the attorney/client and work product privilege does not extend to prepare documents over which legal privilege cannot be asserted. Failing to take at the beginning of investigation the steps that are needed to protect the company’s right to assert legal privilege can seriously impair the company’s ability to protect its interests. It also can add to the risks faced by company personnel.
V. Liability Risks for Members of the Company Board and Senior Management
In view of the increasing number of individual prosecutions for bribery over the past several years – including but not limited to the United States – along with the responsibility of board members and senior managers to avoid acquiescing in bribery, board members and senior managers often ask what risk of liability they may have personally for any bribery that has occurred in the past or may occur in the future, including investigation related liability.
Unfortunately, space limitations prevent our dealing with those important issues in this article in a comprehensive manner. We can offer here, however, a few core observations on liability risks for board members and senior managers – some of which may be obvious but others less so.
Among the obvious observations is that the development and implementation of state-of-the-art – but nonetheless proportionate – policies and procedures to combat bribery will tend to reduce the prospect of bribes being paid by or on behalf of a company. That tends, of course, to make almost academic the up-the-line liability questions that we increasingly are being asked by board members and senior managers.
Just as obviously, an overt act by a board member or senior manager to approve the payment of one or more bribes is prosecutable. One need not in that event worry greatly about the possibility of situational liability – the liability that can occur if a board or senior manager fails to respond appropriately to a report, inquiry or evidence suggesting past bribery.
That leaves two exceedingly difficult issues: first, in what circumstances is a board member or senior manager at risk of prosecution if he or she is deemed to have failed to respond appropriately to past bribery and history repeats itself as a consequence; and, second, in what circumstances may a board member or senior manager have a personal obligation to report past bribery under the money laundering statutes to which he or she is subject.
Without getting here into the nuances of the advice we have been giving to the foregoing questions, suffice it to say that any up-the-line risks of prosecution for future bribery, similar to the bribery that already has occurred, can be reduced significantly, if not eliminated entirely, if board members and senior manager respond proactively to any report or evidence of past bribery. One component of their potential liability if they fail to do so can be triggered by any future bribe that is paid, in which they reasonably can be deemed by omission to have acquiesced.
Further, if alerted to the possibility of past bribery, board members and senior managers should consider – with their professional advisors – their responsibilities under any money laundering statute to which they are subject. Their exposure in that connection often will depend in part upon whether the company is operating in the regulated or unregulated sector so far as the operative money laundering statute is concerned.
To be sure, whenever a bribery issue has arisen, the impact – including reporting implications – of any applicable money laundering statutes should considered both early and often, both before and during any investigation that is authorised.