Tag: DOJ

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Principled Podcast

Season 10 Episode 1 – How Does the US Department of Justice Evaluate Ethics and Compliance Programs?

What you’ll learn on this podcast episode

The US Department of Justice Criminal Division has been increasingly vocal about what makes organizations’ ethics and compliance programs effective. This input on program effectiveness takes the form of guidance to prosecutors about what questions to ask when companies negotiate to resolve DOJ investigations into corporate wrongdoing on favorable terms. What does this guidance on program effectiveness mean in practice for E&C professionals? In the season 10 premiere of LRN’s Principled Podcast, host Susan Divers speaks with John Michelich, who retired last November after 35 years as a federal prosecutor with the Department of Justice’s Criminal Division. Listen in as they explore how the DOJ evaluates E&C programs, as well as best practices for companies settling misconduct investigations. 

Guest: John Michelich

John Michelich – Grayscale

John Michelich is a retired career prosecutor, who has served at the state, federal, and international levels for 45 years. A native of Illinois, John received his undergraduate education at Illinois Wesleyan University and then attended Drake University Law School in Des Moines, Iowa. For 10 years, John served as Assistant State’s Attorney and First Assistant State’s Attorney in Springfield, Illinois, where he prosecuted all types of state criminal felony violations including armed robbery, aggravated sexual assault and capital murder.   

In 1988, John moved to Washington, DC where he began his 35-year career as a prosecutor with the US Department of Justice, Criminal Division. As a federal prosecutor, John has handled a wide variety of cases including child pornography and obscenity, narcotics distribution and all types of white-collar criminal cases. John served for 30 years as a prosecutor with the Fraud Section of the Criminal Division where he handled numerous cases including health care fraud, bank fraud, telemarketing fraud, commodities and securities fraud and violations of the Foreign Corrupt Practices Act. Because Washington DOJ lawyers are traveling prosecutors, John has handled grand jury proceedings or jury trials in more than two dozen federal districts nationwide from Guam and Hawaii to Puerto Rico, and California to New York. Over his long career, John has tried dozens of jury trials to verdict.  

In 1998, the Justice Department sent John on loan to the United Nations’ International Criminal Tribunal for the Former Yugoslavia, also known as the War Crimes Tribunal, in the Hague, Netherlands, where he handled investigations and Tribunal proceedings involving crimes against humanity and serious breaches of the Geneva Convention that occurred during the Yugoslavian civil war.   

For over 40 years, John has been an active instructor of Trial Advocacy and has appeared regularly on the faculty of the NITA Trial Practice course offered at Georgetown University Law Center. In addition, John has served as an Adjunct Professor at Georgetown, teaching Trial Practice courses to third-year law students. In his retirement, John is available as a legal consultant to trial lawyers to advise them in preparation for jury trials and to consult with corporate counsel concerning internal investigations and to advise them on how to approach the government when there are allegations of wrongdoing, especially foreign bribery. 

John is licensed to practice in the states of Illinois and Iowa, and several federal courts, and is a licensed Solicitor of the Senior Courts of England and Wales.   

Host: Susan Divers

Headshot_Susan_Divers_S7E18_Principled_Podcast

Susan Divers is a senior advisor with LRN Corporation. In that capacity, Ms. Divers brings her 30+ years’ accomplishments and experience in the ethics and compliance area to LRN partners and colleagues. This expertise includes building state-of-the-art compliance programs infused with values, designing user-friendly means of engaging and informing employees, fostering an embedded culture of compliance and substantial subject matter expertise in anti-corruption, export controls, sanctions, and other key areas of compliance.

Prior to joining LRN, Mrs. Divers served as AECOM’s Assistant General for Global Ethics & Compliance and Chief Ethics & Compliance Officer. Under her leadership, AECOM’s ethics and compliance program garnered six external awards in recognition of its effectiveness and Mrs. Divers’ thought leadership in the ethics field. In 2011, Mrs. Divers received the AECOM CEO Award of Excellence, which recognized her work in advancing the company’s ethics and compliance program.

Mrs. Divers’ background includes more than thirty years’ experience practicing law in these areas. Before joining AECOM, she worked at SAIC and Lockheed Martin in the international compliance area. Prior to that, she was a partner with the DC office of Sonnenschein, Nath & Rosenthal. She also spent four years in London and is qualified as a Solicitor to the High Court of England and Wales, practicing in the international arena with the law firms of Theodore Goddard & Co. and Herbert Smith & Co. She also served as an attorney in the Office of the Legal Advisor at the Department of State and was a member of the U.S. delegation to the UN working on the first anti-corruption multilateral treaty initiative.

Mrs. Divers is a member of the DC Bar and a graduate of Trinity College, Washington D.C. and of the National Law Center of George Washington University. In 2011, 2012, 2013 and 2014 Ethisphere Magazine listed her as one the “Attorneys Who Matter” in the ethics & compliance area. She is a member of the Advisory Boards of the Rutgers University Center for Ethical Behavior and served as a member of the Board of Directors for the Institute for Practical Training from 2005-2008.

She resides in Northern Virginia and is a frequent speaker, writer and commentator on ethics and compliance topics. Mrs. Divers’ most recent publication is “Balancing Best Practices and Reality in Compliance,” published by Compliance Week in February 2015. In her spare time, she mentors veteran and university students and enjoys outdoor activities.

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Report from IMPACT 2023

Report from IMPACT 2023: Larry Thompson on the Evolution of Compliance

ECI’s IMPACT 2023 was one of the leading compliance events in 2023. At this conference, Tom Fox, the Voice of Compliance, was able to visit with several of the speakers, exhibitors, participants, and one group of ethically-minded Girl Scout Troop. In this limited podcast series, Report from IMPACT 2023, Tom explores many of the most cutting-edge topics in ethics and compliance through short podcast episodes. Check out the full series of interviews. You will be enlightened and informed and come away with a fuller and more thorough understanding of the most cutting-edge topics in ethics and compliance. In this episode, Tom visits with Larry Thompson, former Deputy Attorney General and well-known compliance professional. Join Tom and Larry as they delve deeper into these topics on this episode of the Report from Impact 2023.

Larry Thompson is a seasoned professional in the field of compliance, with a career that spans several decades, starting as a young lawyer working with defense contractors in the late 1980s. Thompson’s unique insights on the evolution of compliance programs and ethical culture stem from his firsthand experience of the shift from a rules-based, legalistic approach to a values-based approach. He emphasizes the importance of companies having a common set of values that employees can embody and reflect in their actions, contributing to their long-term sustainability. Thompson also acknowledges the changing values and expectations of the new generation of employees, who prioritize working for companies that align with their own values and have a culture of integrity and purpose. These insights were shaped by his involvement in the establishment of the organizational Sentencing Guidelines in the early 1990s and his roles as a board member of various public companies and an active participant in the National Association of Corporate Directors.

 Highlights Include 

·      The evolution of compliance programs

·      The role of the DOJ in compliance

·      A new generation in the workforce

 Resources 

Larry Thompson

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All Things Investigations

All Things Investigations: The FCPA Unit in the DOJ with Laura Perkins

In this episode of All Things Investigations, Tom Fox and Laura Perkins delve into the workings of the FCPA unit within the fraud section of the Department of Justice. This unit, pivotal in investigating and prosecuting Foreign Corrupt Practices Act violations, operates within a robust hierarchy and collaborates extensively with other agencies.

Laura Perkins is a Hughes Hubbard partner whose practice focuses on representing clients in Foreign Corrupt Practices Act and white collar criminal investigations. She also advises clients on issues related to the FCPA, the federal securities laws, the False Claims Act, and other federal statutes. 

 

You’ll hear Tom and Laura discuss:

  • There was a recent transition in leadership within the DOJ’s FCPA unit, with an acting head taking the reins. Such changes can potentially shift the direction or focus of the unit.
  • The FCPA unit maintains a collaborative approach, liaising closely with other agencies such as the IRS, FBI, and the Department of State, ensuring a holistic investigative process.
  • Despite being two distinct units, the DOJ’s FCPA and the SEC’s FCPA work closely during parallel investigations. However, certain limitations arise from grand jury issues, preventing complete sharing.
  • Operating within the fraud section, this unit plays an instrumental role in evaluating corporate compliance programs, selecting compliance monitors, and contributing to policy developments and department-wide initiatives.
  • The Corporate Enforcement, Compliance, and Policy Unit has the task of handling FOIA requests, underscoring its role in promoting transparency and information access.
  • The relationship between the chief of the FCPA unit and the head of the fraud section is important as their interactions can potentially influence the direction and outcome of cases.
  • The fraud section provides weekly case summaries to the Deputy Assistant Attorney General’s office. This demonstrates the department’s diligent and ongoing monitoring and reporting system.
  • The FCPA unit doesn’t operate in isolation; it partakes in international collaborations on bribery issues, highlighting its commitment to global anti-corruption efforts.

 

KEY QUOTES

“[In] the FCPA unit, prosecutors and supervisors handle investigations and cases involving Foreign Corrupt Practices Act or potential Foreign Corrupt Practices Act violations.” – Laura Perkins

 

“[The DOJ and SEC have] a very close relationship, and often cases are worked in parallel, not necessarily jointly, because there are potential discovery issues that can be created if it’s a joint investigation.” – Laura Perkins

 

“The [Corporate Enforcement, Compliance and Policy Unit] has a major role in assisting prosecutors in evaluating corporate compliance programs as well as overseeing any compliance monitors that are put in place.” – Laura Perkins

 

Resources

Hughes Hubbard & Reed website 

Laura Perkins on LinkedIn

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program: Day 19 – Compliance Culture At The Bottom

One of the most important focuses of the DOJ’s 2023 ECCP was around culture. This means how far has the culture of compliance been driven down into an organization. The 2019 Guidance posed the following:
Culture of Compliance – How often and how does the company measure its culture of compliance? Does the company seek input from all levels of employees to determine whether they perceive senior and middle management’s commitment to compliance? What steps has the company taken in response to its measurement of the compliance culture?
These questions point to a CCO or compliance practitioner demonstrating how a culture of compliance is being burned into the very fabric of an organization. While leadership at and from the top has long been considered by both the DOJ and compliance professionals as a key element to move compliance forward, the 2019 Evaluation has also crystalized thinking around compliance culture throughout the organization, including at the bottom
Too often, strategies to move a compliance program or even an initiative come from the top of an organization and are pushed down. To fully operationalize compliance, you must have leadership in compliance further down the organization which (hopefully) has been a part of the design process and can lead the implementation throughout an organization.

Three key takeaways:

  1. While tone at the top is critical, the tone at the bottom can work to more fully operationalize compliance.
  2. 95% of the work is done at this bottom level.
  3. Use HR to come up with a strategy to move compliance into the bottom for more complete operationalization.

For more information, check out The Compliance Handbook, 4th edition, here.

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Daily Compliance News

Daily Compliance News: August 24, 2023 – The Climate Conscious Employee Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance brings to you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen in to the Daily Compliance News. All, from the Compliance Podcast Network. Each day we consider four stories from the business world, compliance, ethics, risk management, leadership, or general interest for the compliance professional.

  • Poverty a direct result of corruption. (Time)
  • The climate conscious employee. (FT)
  • Ed Siskel named as White House Counsel. (Reuters)
  • DOJ charged 3100 with Pandemic fraud. (NYT)
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Blog

Executive Compliance Comp and Compliance: From Incentives to Clawbacks

There are two problems that every company must deal with at the intersection of executive compensation and compliance. The first is the presence of perverse incentives within organizations, where executives are often encouraged to take excessive risks because they personally profit from them. This misalignment of incentives can lead to unethical behavior and non-compliance, ultimately harming the organization and its stakeholders. The second is both the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) mandates for executive clawbacks.

Incentives

To address this issue, companies need to tie positive incentives directly to senior executives. By holding them accountable for compliance failures, we can align their compensation with compliance objectives. This approach ensures that executives have a personal stake in maintaining ethical practices within the organization. What makes this approach unique is that it is a business response to a legal problem, rather than a government mandate. A business response is always a better way to go, as it allows organizations to take ownership of their compliance programs and tailor them to their specific needs.

Various proposals are discussed in the podcast to ensure senior executives are held personally accountable for compliance failures. One solution, suggested by William Dudley, former president of the Federal Reserve Bank of New York, is for senior management and material risk takers to forfeit their performance bond in the case of large fines. This not only disciplines individual behavior and decision-making but also incentivizes individuals to flag issues when problems arise.

Another approach, outlined in an article titled “Ties That Bind Codes of Conduct,” recommends automatic reduction of pay for officers, directors, and advisors for failures of corporate governance. Executives would agree to pay back a portion of their gross compensation for a set period before the beginning of any improprieties, regardless of their knowledge of misdeeds within the company.

While corporate leaders may not be enthusiastic about being held accountable, these proposals offer a business solution to a legal problem. Holding senior executives responsible for the conduct of others aligns with their obligations under Sarbanes-Oxley and ensures that they are not shielded from the consequences of non-compliance. Shareholders are also becoming less accepting of the argument that leaders should not be responsible for the actions of their employees.

Data from an article by Gretchen Morgenson titled “Ways to Put Your Boss’s Skin in the Game” further supports the need for accountability in executive compensation. The article explores how to make senior executives more responsible for corporate malfeasance, with implications that apply to compliance programs and compensation tied to compliance.  Creating accountability in executive compensation is a critical step towards promoting ethical business practices and compliance within organizations. By tying positive incentives to senior executives, we can ensure that they have a personal stake in maintaining compliance objectives. The proposals discussed in the podcast, such as forfeiting performance bonds and enforcing pay reductions for failures of corporate governance, offer practical solutions to address perverse incentives and drive ethical behavior.

Clawbacks

Clawbacks, often seen as a form of guarantee for businesses, play a vital role in addressing employee misconduct. These provisions, typically included in written contracts, serve as a deterrent and allow organizations to reclaim incentive or bonus funds from employees engaged in wrongful activities. It is important to note that clawbacks apply to compensation received as incentives or bonuses, rather than salary.

The SEC has provided guidance on constructing effective clawback provisions. In their final rule titled “Listing Standards for Recovery of Erroneously Awarded Compensation,” (the Rule) the SEC directs National Securities Exchanges and Associations to establish listing standards for issuers to develop and implement policies for recovering incentive-based compensation in the event of required accounting restatements.

The DOJ has also weighed in on subject of clawbacks, most recently in the 2023 Evaluation of Corporate Compliance Programs (ECCP), it stated “Are the terms of bonus and deferred compensation subject to cancellation or recoupment, to the extent available under applicable law, in the event that non-compliant or unethical behavior is exposed before or after the award was issued? Does the company have a policy for recouping compensation that has been paid, where there has been misconduct? Have there been specific examples of actions taken (e.g., promotions or awards denied, compensation recouped or deferred compensation cancelled) as a result of compliance and ethics considerations?”

In summary, both the SEC and DOJ have now laid out the foundations for both incentives and consequence management.

SEC: The SEC Rule encompasses a wide range of scenarios. Companies are required to claw back incentive compensation erroneously received by current or former executives during the three-year period preceding the required restatement date. The definition of “received” is broad, considering incentive compensation earned even if not yet paid. The recoverable amount may differ from what executives would have received based on the required restatement. The SEC rule prohibits companies from obtaining indemnity insurance to protect executives from clawbacks. This step ensures that executives are held personally accountable for their actions and fosters a culture of compliance within organizations.

DOJ: In the ECCP has emphasized the significance of clawbacks in compliance programs. The ECCP directs companies to develop and apply compensation and clawback policies, shifting the burden of financial penalties away from innocent shareholders. The clear intent to prevent companies from shielding employees involved in illegal and unethical conduct. The DOJ will consider whether a company has incentivized compliance by designing compensation systems that defer or escrow certain compensation tied to conduct consistent with company values and policies. Enforcement of a contract provisions that permit the company to recoup previously awarded compensation if the recipient of such compensation is found to have engaged in or to be otherwise responsible for corporate wrongdoing is now a critical metric that prosecutors will consider. Finally, prosecutors may consider whether provisions for recoupment or reduction of compensation due to compliance violations or misconduct are maintained and enforced in accordance with company policy and applicable laws.

 Practical Steps

To create a robust compliance program that promotes ethical behavior and compliance, companies should consider the following practical advice:

  1. Documented Policies and Procedures: It is crucial for companies to document and reflect clawback policies and procedures in their compensation agreements. This documentation showcases a commitment to compliance and serves as a deterrent for potential misconduct.
  1. Clear Disciplinary Procedures: Companies should have appropriate and clear disciplinary procedures in place when enforcing a compliance program. Publicizing disciplinary actions internally and under local law can have a deterrent effect on employees, emphasizing the consequences of engaging in unlawful or unethical behavior.
  1. Personal Accountability: The DOJ and SEC prioritize holding individuals accountable for misconduct. Prosecutors evaluate whether a corporation’s compensation agreements incorporate clawback provisions that enable penalties to be levied against employees, executives, or directors involved in criminal conduct.

 Conclusion

Clawback provisions have become a crucial element in compliance programs, promoting ethical behavior and ensuring accountability within organizations. The SEC Rule, along with the DOJ’s emphasis on clawbacks from the Monaco Memo to the ECCP, highlights the significance of these provisions in the business world. By implementing well-documented clawback policies, companies can create a culture of compliance that rewards ethical behavior and protects innocent shareholders. Both initiatives prioritize ethical practices and compliance to build a better business environment for all stakeholders.

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FCPA Compliance Report

FCPA Compliance Report – Mike DeBernardis on the Cognizant Investigation Ruling

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. In this episode, Tom Fox welcomes back fan favorite Mike DeBernardis, partner at Hughes Hubbard Reed. We take a deep dive into the trial court ruling in the Coburn and Schwartz claim that the Cognizant internal investigation which identified them was run by the DOJ and should be tossed for the lack of federal criminal procedural protections.

A recent district court decision on an FCPA case has significant implications for future investigations. The trial court emphasized the importance of a fully developed record and provided guidance for companies conducting internal investigations while cooperating with the government. The episode emphasizes the need for independent investigations, the distinction between government-directed investigations and cooperation with the DOJ, and the timeline of events that shows the importance of self-disclosure by the company. It also discusses the significance of independent decision-making in corporate investigations and the importance of documenting investigations to build a strong record. The restrictions placed on employee interviews during investigations are also addressed, with a suggestion for clear guidelines and procedures to ensure fair and effective interviews. Overall, the episode highlights the practical implications of the court decision and sets a standard for future investigations in FCPA cases.

 Key Highlights

·      FCPA Pretrial Work

·      Importance of Independent Decision-Making

·      Importance of Documenting Investigations

·      Restrictions on Employee Interviews

·      Investigation world cases

Resources

Mike DeBernardis

Hughes Hubbard Reed

Court Opinion in US v. Coburn

Tom Fox

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program: Day 10 – Sales Incentives and Compliance

In the DOJ’s 2023 ECCP, Incentives and Disciplinary Measures it stated:
Incentive System – Has the company considered the implications of its incentives and rewards on compliance? How does the company incentivize compliance and ethical behavior? Have there been specific examples of actions taken (e.g., promotions or awards denied) as a result of compliance and ethics considerations? Who determines the compensation, including bonuses, as well as discipline and promotion of compliance personnel?
When considering how a company could use incentives to further a compliance program and the role of HR in this process, we should also consider how incentives might lead to the converse, as they did in the now-infamous Wells Fargo fraudulent-accounts scandal. When you misalign these two concepts with a faulty sales strategy it can lead to a catastrophic failure, literally costing the company millions of dollars in fines, loss of business and depreciation of shareholder value. Whatever your incentive structure, there will be employees who try to game the system. Some will do it with the tacit or explicit approval of management. You, as the CCO, may be required to act.

Three key takeaways:

  1. Even a benign sales incentive program came become skewed.
  2. A sales incentive program can become high risk or illegal if not properly monitored.
  3. If there is alignment between the strategy, purpose and structure of an incentive system, it often makes the difference between a good and a bad one.

For more information, check out The Compliance Handbook, 4th edition here.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program: Day 9 – Clawbacks

In this podcast series, host Tom Fox explores the growing emphasis on clawback provisions in compliance programs and employee compensation.

Tom Fox delves into the crucial topic of clawback provisions in compliance programs and employee compensation. In light of the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) prioritizing individual accountability for misconduct, clawbacks have become essential in promoting ethical behavior and ensuring compliance. So, let’s dive in and explore the significance of clawbacks in today’s evolving compliance landscape.

Understanding Clawbacks and Incentive-Based Compensation:

Clawbacks, as discussed in the podcast, are provisions that enable organizations to reclaim incentive or bonus funds from employees engaged in misconduct. They serve as a powerful deterrent and hold individuals accountable for their actions. Previously, clawbacks were not seen as necessary, but the DOJ now mandates their inclusion in compensation agreements.

The DOJ’s Focus on Ethical Business Practices:

The DOJ, in its pursuit of punishing officers and employees who fail to conduct business ethically, has made clawbacks a part of best practices compliance programs. To evaluate a company’s compliance program, the DOJ and SEC consider whether the organization has appropriate disciplinary procedures in place. Publicizing disciplinary actions internally and under local law can have a deterrent effect, emphasizing the importance of transparent consequences for misconduct.

The Role of Clawbacks in Compliance Programs:

Having clawback provisions is now seen as a crucial aspect of a good corporate compliance culture. It promotes compliant behavior and demonstrates a company’s commitment to its compliance program. The DOJ investigates whether corporations have included clawback provisions in their compensation agreements and taken steps to execute on such agreements. This highlights the significance of documenting and reflecting these policies and procedures in a company’s own compensation practices.

The SEC’s Final Rule on Clawbacks:

The SEC’s final rule, titled “Listing Standards for Recovery of Erroneously Awarded Compensation,” directs issuers to establish policies for recovering incentive-based compensation in the event of required accounting restatements. This rule applies to both Big R and Little R restatements and provides guidance in the anti-corruption world. Companies are now required to claw back incentive compensation erroneously received by current or former executives during the three-year period preceding the required restatement date.

Ensuring Compliance with Clawbacks:

It is essential for companies to construct well-documented clawback programs that align with the SEC’s guidance. The recoverable amount may differ from what executives would have received based on the required restatement, emphasizing the need for clarity and transparency in compensation agreements. Additionally, the SEC’s final rule prohibits companies from obtaining indemnity insurance to protect executives from clawbacks, further reinforcing the importance of accountability.

Conclusion:

As we’ve explored in this episode, clawbacks play a vital role in promoting ethical behavior and compliance within organizations. The DOJ’s emphasis on individual accountability and the SEC’s final rule on clawbacks demonstrate the evolving landscape of compliance. By implementing well-documented clawback provisions, companies can deter misconduct, hold individuals accountable, and showcase their commitment to ethical practices. Remember, incorporating clawbacks into your compliance program is not just a regulatory requirement but a practical step towards fostering a culture of integrity and responsibility.

 Three key takeaways:

1. The DOJ now mandates clawbacks in a compliance program.

2. The SEC has passed a clawback rule apart from the Monaco Memo.

3. Your clawback program should be well-documented.

For more information, check out The Compliance Handbook, 4th edition, available on LexisNexis.com.

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Blog

Farewell to Robbie Robertson and a Welcomed District Court Decision in the FCPA World

Robbie Robertson died this week. He was the lead songwriter and one of the five members of a rock and roll group that was so impactful, it was simply known as The Band. Robertson came from Canada but wrote in a genre which is now called ‘Americana’. He had one of the sharpest senses for songwriting I fhave ever seen or more appropriately heard. According to his New York Times (NYT) obituary, “wrote for the Band used enigmatic lyrics to evoke a hard and colorful America of yore. With uncommon conviction, they conjured a wild place, often centered in the South, peopled by rough-hewed characters, from the defeated Confederate soldier in “The Night They Drove Old Dixie Down” to the tough union worker of “King Harvest Has Surely Come” to the shady creatures in “Life Is a Carnival.””

Robertson himself said of his musical writing, in a 1995 interview for the public television series “Shakespeare in the Alley”, “I wanted to write music that felt like it could’ve been written 50 years ago, tomorrow, yesterday — that had this lost-in-time quality. We just went completely left when everyone else went right.”

We recently saw the release of one of the most significant decisions ever involving internal investigations in the Foreign Corrupt Practices Act (FCPA) arena, that in the case of US v. Coburn and Schwartz or more colloquially known and the Cognizant investigation decision as it came from FCPA declination awarded to the company Cognizant Technologies even with allegations of Chief Executive Officer (CEO) and General Counsel (GC) involvement in the bribery scheme.

One of the central themes emphasized by the court’s decision is the significance of independence in company investigations. The reason is that if a company or their outside counsel act as a proxy for the government can compromise the integrity of the investigation process. Indeed the defendants in this criminal action wanted the entire investigation and everything that flowed from it thrown out of court in their criminal case. In its decision, the court firmly established the need for companies to maintain independent decision-making and avoid being coerced or directed by the government. This highlights the importance of conducting thorough and unbiased internal investigations.

The underlying Cognizant Technologies case was extremely significant under what was then the FCPA Pilot program as the company was able to obtain a Declination even with alleged C-Suite involvement. This decision turned many heads in the compliance arena and this procedural decision demonstrates importance of self-disclosure by companies before the involvement of the Department of Justice (DOJ). In the case discussed, Cognizant’s board became aware of bribery and corruption allegations and promptly made a self-disclosure to the DOJ. This proactive step demonstrates the value of companies taking responsibility and initiating the investigation process themselves. It also aligns with the FCPA corporate enforcement policy, which encourages extensive cooperation.

The Timeline on the claims that the DOJ directed this investigation are significant. From the Order it states

On  August 20, 2016 Cognizant’s outside counsel DLA Piper interviewed Srimanikandan Ramamoorthy, Cognizant’s Vice President of Administration. He stated that Cognizant’s General Counsel, Steven Schwartz, and its President, Gordon Coburn, authorized a $2.5 million payment to Indian officials to obtain a planning permit for a Cognizant facility in Chennai. Schwartz and Coburn were immediately removed from all aspects of DLA’s pending internal investigation.

Cognizant insisted that Schwartz and Coburn cooperate with the internal investigation, in particular by submitting to interviews.

On August 28, 2016, DLA conducted its first interview with Schwartz. The DLA attorneys who interviewed Schwartz, including Buch, set and enforced strict ground rules for the interview, including prohibiting Schwartz from having more than one lawyer present and not allowing that lawyer to take notes or ask questions.

Coburn was also interviewed by DLA in August 2016 but did not have a lawyer present.

On September 1, 2016, DLA contacted an attorney at the DOJ. During a meeting on the following day, DLA self- disclosed, on behalf of Cognizant, Cognizant’s potential FCPA violations. DLA also informed the Government of the company’s intention to “fully cooperate with the DOJ and the SEC” and asked that Cognizant “be considered for inclusion in the FCPA Pilot Program.” DLA had engaged in no contact with the Government on behalf of Cognizant prior to those communications.

So clearly there was a decision to self-disclose after the defendants were interviewed. This means the DOJ could not have directed the investigation. But there were several points that bear consideration for the court’s Order.

A crucial aspect highlighted by the court’s Order is the need for companies to document investigations thoroughly. This includes justifying decisions made during the investigation and building a fully documented record to address potential legal challenges or claims. Additionally, fair employee interviews play a significant role in the investigation process. The court’s opinion raises concerns about restrictions placed on employee interviews, such as not allowing note-taking. Companies should ensure that employees have proper legal representation and are given a clear choice while respecting the need for confidentiality.

The court’s decision emphasizes the importance of a fully developed record, which serves as a roadmap for conducting investigations. In complex investigations with a vast amount of information, maintaining a comprehensive record can be challenging. However, it is essential to meet this challenge head-on. A systematic approach, including investigative planning, document review, and retention, is crucial. This not only helps defend against potential challenges from the DOJ or individual prosecutions but also provides a solid foundation for shareholders and other stakeholders.

The recent district court decision has far-reaching implications for companies conducting internal investigations in FCPA cases. By emphasizing the need for independence, self-disclosure, and robust record-keeping, the court has set a standard for future investigations. Companies must take note of these practical insights and data-driven recommendations to navigate the complex landscape of FCPA cases successfully. By doing so, they can ensure compliance, protect their interests, and maintain the integrity of their internal investigations.