Worldwide settlement of international corporate corruption offences

February 2022  |  SPECIAL REPORT: CORPORATE FRAUD

Financier Worldwide Magazine

February 2022 Issue

To draw a line in the sand, to move on, to turn over a new leaf, to make a clean slate of it – it is human nature to give a second chance to those who see and own up to the error of their old ways. Any multinational company in the crosshairs of a corruption scandal should aim to find global resolution as quickly, calmly and efficiently as possible.

Ask the boards of Siemens, Rolls Royce, Och Ziff, Odebrecht, Alstom or Airbus, to name but a few, and they will tell you of the corrosive, diverting, commercially destructive nature of significant corruption allegations that historically have dragged on for between five and 10 years, sometimes longer – and that is before you factor in the personal emotional toil inflicted on individuals implicated, both rightly and wrongly, in the alleged wrongdoing. Internal division in senior management may develop. Divisions within a multinational company may be pitted against one another. Shareholders may lose confidence. Reputational damage may erode customer trust and the ability to tender for or, more importantly, win major government contracts. From the outset of a corruption scandal, a company should work with its advisers on a strategy that permits timely settlement if there is truth to the corruption allegations.

Significant corporate corruption will likely play out in many jurisdictions. Under the US Foreign Corrupt Practices Act 1977 (FCPA), the UK Bribery Act 2010 and other domestic legislation of major trading nations, jurisdiction on multinational corporate corruption can be wide. Transacting in a specific currency or listing on an equity market in a specific jurisdiction can, for example, be sufficient to grant a specific jurisdiction with the authority to charge companies and individuals within those companies with criminal offences for offences committed in far-flung places.

The timely resolution of a corporate corruption scandal is easier said than done. In a big data world, searching for evidence can be slow and painstaking. It is unlikely that criminal conduct within a multinational company will play out on the company server these days. More likely is the need, for example, to piece together the circumstantial evidence revealed by detailed analysis of an acquisition chronology or to look at the evidence emerging from a deep dive into open-source material about company members, their commercial partners and agents. That said, the right advisers will explain efficiencies and credible focus to avoid punishing costs and delays.

The precursor to law enforcement investigation is normally internal investigation. An independent law firm is engaged to survey the facts and advise the special investigation committee of the board. There is often significant merit in placing a second layer of legal oversight in the internal investigation – a second pair of investigative eyes to peer review the costly and time-consuming job of the investigative lawyer. Lawyers instinctively like to know all the facts before advising but in the context of multinational corruption allegations, this desire can lead to mission creep, delay and uncalled for expense. The savvy board, as a discerning consumer of legal services, should demand strategy that will ape the approach of the jurisdictions most likely to investigate and potentially prosecute if the matter comes to the attention of law enforcement.

Investigating allegations of corruption is a multidisciplinary activity. Lawyers must be able to work in close partnership with forensic accountants, specific industry experts, data scientists and corporate intelligence experts to piece together what has happened. It is arrogant for lawyers to think that they alone can provide the ideal conditions for settlement. In recent years, often it has been the data scientists, corporate intelligence experts and forensic accountants who have provided the final magic to reaching settlement. Think, for example, of the Serious Fraud Office’s (SFO’s) legal professional privilege robot in the Rolls Royce investigations, coded by a bright machine learning expert, which cut the task of a legal privilege review of millions of documents to a process taking weeks rather than years. Alternatively, consider the work of expert forensic accountants in the Airbus investigations that allowed law enforcement in the UK, US, Brazil and France to be happy with the numbers and calculations for the circa $4bn settlement finally reached.

From the outset of any internal investigation, the multinational company should begin a parallel review of its own compliance and anti-bribery and corruption programme. This must be rigorous and straightforward. In the UK and US, companies seeking leniency and early settlement resolution now need to demonstrate that they can walk the walk as well as talk the talk. Law enforcement and the courts do not judge the priority a company places on its compliance programme by the weight of its compliance manuals, their cost or the slickness of its video training. In the recent sentencing of NatWest Bank to a fine of £264m in the UK for egregious money laundering offences, the company had to accept fundamental systemic errors despite an army of compliance professionals within its ranks. Increasingly, the complexity of compliance systems and management structures means that the wood cannot be spotted for the trees. Care should be taken to provide a compliance system which is permissive of suspicions being raised. In settlement discussions with the SFO, for example, the organisation has recently reinforced the need for a robust, stress tested compliance programme as a precursor to any settlement. If a company’s compliance programme has, in the language of the Bribery Act 2010, ‘failed to prevent’ a bribery offence under the Act, it is axiomatic that significant enhancements to the programme will need to be invoked before settlement will be countenanced by the state.

If an internal investigation reveals potential criminal conduct to be reported, the multinational company should quickly strategise the jurisdictions in which to report. If whistleblower reports or investigative journalism have inspired law enforcement action, the luxury of choice is most likely lost. It is not uncommon for the company to suddenly face investigations from several different jurisdictions. This is the nightmare scenario in which a company must do all it can to engage lawyers to get ahead of the state investigations. Different jurisdictions offer different potential benefits in settlement outcome for the company. In the US, for example, it may be possible to construct a complex cooperation strategy in which the company provides evidence on other participants to a bribery and corruption scheme to potentially avoid prosecution altogether. Alternatively, cooperation with Swiss prosecutors may lead to a swift resolution which is purely financial. The benefits of working with UK law enforcement is that the complexity of current corporate criminal liability concepts is such that the state will, most likely, push toward a deferred prosecution agreement (DPA), albeit court sanctioned.

It is a fundamental mistake, however, to believe that competing law enforcement bodies in different jurisdictions can be set against one another to the benefit of the corporate corruption suspect. The reality is an ever-growing community of corporate criminal prosecution bodies that communicate, liaise, cooperate and share intelligence. UK, US and French prosecutors and investigators worked in close cooperation throughout the Airbus investigations, for example. Information gateways, intelligence channels and the formal provision of admissible evidence between law enforcement is now the norm rather than the exception. For this reason, one of the fundamental tasks of lawyers representing companies embroiled in a multinational corruption investigation is to commence meaningful, straightforward dialogue with the key lawyers and investigators deployed by each investigating jurisdiction. Rather than fine analysis of the various written guidance offered by most law enforcement bodies as to what ‘cooperation’ means, it is better to establish at the outset, face to face with law enforcement, what actual cooperation really looks like.

Of course, old-fashioned defence strategies are sometimes still preferred by some corporate suspects. Deny, obfuscate, delay and accuse is not an unfamiliar tactic for those without shareholder accountability and with deep pockets. But such a strategy is extremely high risk and eliminates the opportunity for settlement in almost every jurisdiction likely to be seized with the task of holding those intent on corruption to account. As sand is kicked in the eyes of law enforcement, so the sands of time run slowly through the hourglass. The second chance, the opportunity for redemption is lost. Even if the corporate corruptors escape penalty through the effluxion of time and the enrichment of their lawyers, one cannot help but wonder whether, with the benefit of hindsight, they regret the failure to deploy a coherent settlement strategy from the outset, thereby avoiding years of painful uncertainty and anxiety.

 

John W. Gibson is a partner at Cohen & Gresser LLP. He can be contacted on +44 (0)20 8037 2324 or by email: jgibson@cohengresser.com.

© Financier Worldwide

BY

John W. Gibson

Cohen & Gresser LLP

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