In 2010, Ralph Lauren Corporation (RL) was incorporating a global internal control and compliance program when they discovered some irregularities with their Argentinian operations. They uncovered a series of bribes that occurred over five years and involved customs brokers, government officials and RL’s General Manager in Argentina.
After an initial investigation, RL reported the violations to the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) and worked in tandem with them on the ongoing investigation. As a result of their timely self-reporting and co-operation, RL was able to receive substantial and tangible benefits for the company including a non-prosecution agreement. RL agreed to almost $1.5 million in disgorgement and penalties.
The lesson in this case is self-reporting is key to saving reputation, litigation, criminal and civil prosecution and even more severe financial penalties.
Proactive attention to compliance issues is key when setting up your global risk and compliance program. RL’s cooperation with the authorities saved the SEC time and resources and RL was subsequently rewarded for their participation in the investigation. Some of the key component’s of RL’s cooperation included:
Reporting preliminary finds of its internal investigation to the SEC within two weeks of discovering illegal payments and gifts;
Making multiple presentations of its findings to law enforcement
Voluntarily and expeditiously producing documents
Providing English translations of documents to the SEC
Summarizing witness interviews conducted by RL’s investigators overseas, and
Making overseas witnesses available for SEC interviews and bringing witnesses to the US.
The results of this situation is a strong indicator for public and private companies alike, to ensure that they have proactive and strategic action plans in place for when breaches are uncovered. The more quickly the situation is assessed and reported to the SEC and DOJ, the more likely the company is to mitigate the risks presented through any FCPA violations.
When considering the implementation of a compliance program, here are some general guidelines for consideration:
- Gifts and payments to foreign officials, representatives and associates
- Charitable giving
- Travel and entertainment
- Keeping accurate and complete books and records
- Compliance with local legal requirements
More so, your FCPA compliance policy should be embedded in your company’s overall compliance program and included in your code of conduct. Obtain professional certified translations of this compliance policy into the foreign languages used in the given country and posted them with other company policies.
Train your Personnel Regularly
Relevant personnel should understand that the FCPA has a very broad scope – it doesn’t just prohibit bags full of cash being passed under the table to high-ranking government officials. Donations to political parties, a few dollars to a low-ranking official to move your project along, meals and entertainment and even charitable donations can violate the FCPA. Your personnel should know that violating the FCPA can result in personal criminal liability, including large fines and lengthy prison sentences, and that the company can be fined up to $2 million per violation or face disgorgement of twice the amount gained from the bribe.
Establish an FCPA Compliance Team
The team can facilitate auditing of your compliance policy for operating effectiveness. The FCPA compliance team should have internal and external investigative capabilities and be positioned to investigate red flags quickly and remediate where necessary. Schedule periodic FCPA compliance reviews, including annual compliance certification. Spot-check, or routinely check, annual miscellaneous expenditures by your personnel and agents to determine if the aggregate exceeds limits where individual line items may fall below approval thresholds.
Identify Countries where In-House Counsel are not Covered by Attorney Privilege
Most European countries do not accord the protection of attorney-client privilege to communications between employees and in-house counsel. Therefore cross-border investigations require careful planning and your company should consider differences in approach to the handling of cross-border investigations involving jurisdictions where unfamiliar privilege doctrines apply.
Determine if other Country’s Anti-Bribery Laws may Apply
37 countries have enacted anti-bribery laws similar to the FCPA, meaning your company can face investigations on several fronts, leading to the possibility of penalties being levied in multiple jurisdictions.
Keep Accurate Books and Maintain a System of Internal Accounting Controls
Under the books and records provisions of the FCPA, even improper payments must be recorded accurately. Establish and implement a clear policy setting out how all transactions should be recorded and consider creating general ledger accounts specifically for gifts to and entertainment of government officials.
Make FCPA Review Part Due Diligence
While there is no due diligence defence as such under the FCPA, effective diligence can mitigate the risk that regulators will bring an enforcement action for a later-discovered violation, or could reduce the size of any resulting penalties. Effective pre-transaction diligence can help position your company to mitigate the risk of post-transaction violations of the FCPA.
Be Able to Demonstrate Robust and Verified Compliance
Law enforcers expect companies to self-report FCPA violations, but the costs, benefits and risks of self-reporting should be carefully weighed. Any internal investigation needs to be thorough and likely will benefit from the involvement of external counsel to assist with planning, coordination and execution. Experienced outside counsel also can help a company weigh the wisdom of reporting a potential FCPA violation to the government, as well as the relative costs and benefits of doing so and of not doing so.