Q: We recently received an anonymous hotline call that said the president of one of our foreign subsidiaries had hired a consultant to channel bribes to the government’s tax officials in order to receive favorable tax treatment. Can you give me some guidance on how to proceed with an investigation in a foreign location?
A. International investigations can be a very challenging proposition. I suggest that you advise the Corporate General Counsel before beginning any formal or informal investigation. Anonymous hotline calls can come from any one of a number of sources such as competitors, contractors and current or former employees. Hotlines are a two edged sword; they can provide you with excellent investigative leads, or they can be tainted with bias toward whatever end the individual desires. Some of them are individuals bent on revenge and the information will be found to have no basis in fact. Once you have determined the tip seems legitimate, you can proceed.
The issue you describe in your question involves a possible violation of the United States Foreign Corrupt Practices Act (FCPA). Fines and penalties for violations of the act can be significant, depending upon the circumstances. The bigger concern is the stain it puts on the company’s reputation with the public and stakeholders, which can be far more costly than anything that might be imposed by our government. Companies that self-report suspected violations generally receive more favorable treatment from the Department of Justice.
In most cases, the General Counsel will select a senior member of the legal department as the lead person to assist you in investigating the allegations. It is very important that the circle of knowledge be kept as small as possible to avoid too many people becoming involved. Investigations should not be undertaken if they are based on a “committee” approach, which can lead to possible leaks and bad investigative decisions. They should be based on a true “need to know” basis. This will usually include corporate staff members such as legal, internal audit, possibly human resources and other internal specialists as the need arises.
The legal department lead will usually seek outside legal counsel from the venue where the activity is alleged to have taken place. This is important because the local counsel will have a better understanding of the local law and customs. They can also provide valuable assistance in identifying trusted investigative and other outside professional support as required.
With a small team in place, you are ready to proceed. A word of caution, in many countries you may be required to inform law enforcement in the country of your investigation. This is where local counsel can be of vital assistance in navigating this requirement. In some cases, regrettably, the police, prosecutors and even judges will want “under the table” payments to perform their jobs. This approach will usually be directed to the local counsel for transmission to the company’s investigative team. In my experience, when you make it perfectly clear that bribes won’t be paid, they usually recant and let you investigate and handle the matter as necessary.
Once the company team has cleared all the initial hurdles they can begin the process of gathering evidence, interviewing witnesses and reviewing the subsidiary’s accounts payable to see whether or not their expenses are in line with similar organizations. In the past, money for bribes and kickbacks were found in areas such as consultants, lawyers, advertising and promotions, printing costs and other service vendors. If the violations have gone on for any considerable length of time, more than likely they will have gotten careless and you will be able to spot the suspicious expenses. We have also found that interviewing competitors and former employees can be a rich a source of information, although they should be carefully evaluated before accepting the information they provide is accurate.
If the investigators discover the source of the bribes, they should keep in mind that many times the person authorizing the payments may also be receiving payments from that same source. At the end of the day the old adage applies that you need to “follow the money.”
Answer provided by Randy Arnt, Security Executive Council Emeritus Faculty.