global investigations las vegas, nv, usa workshop · including defamation/libel actions brought by...

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Global Investigations WorkshopP13 - Responding to Globalized Law Enforcement in Transnational Bribery: A German, Indian, and U.S. Perspective

Society of Corporate Compliance and Ethics

October 15, 2017

Las Vegas, NV, USA

David Rieks, LL.M.

ROXIN Rechtsanwälte LLP

Sherbir Panag

Law Offices of Panag & Babu

David W. Simon

Foley & Lardner LLP

Workshop Agenda

� Internal investigations – Nuts and Bolts

� Introduction of Case Study: Duff/GutBier

– Small group discussions and presentations

� Indian Internal Investigations – What’s Different?

� Case Study Part 2: Allegations Escalate


� The View from Germany: Internal investigation and defense perspectives

� Case Study Part 3: Investigation Results – Looks like we have a problem

� Panel Discussion: Investigation Results and Assessment

� The Voluntary Self-Disclosure Question

� Case Study Part 4: India Enforcement Action and Media Coverage

� Panel Discussion: Now What?

– India Defense Issues

– Germany Defense and Governance Issues

� Case Study Part 5: U.S. Enforcement and Cooperation


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Internal Investigations

� A technique for responding to allegations of management or employee misconduct that attempts to assure corporate compliance with various legal/regulatory obligations

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Investigation Triggers

Exit Interview

Whistleblower

Internal Audit

Subpoena/CID

ComplianceProgram

Industry “Sweep”

CustomerComplaints

Civil LitigationSocial Media

Investigations Gone Wrong

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Purpose of Investigation

FOUR KEY GOALSFOUR KEY GOALSFOUR KEY GOALSFOUR KEY GOALS

1. Figure out what happened (or what is still happening)

2. Assess the potential legal consequences

3. Take corrective action

4. Reassess compliance program & internal controls

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INTERNAL INVESTIGATION: Key Steps

STEP 1:

Decision toInvestigate

STEP 2:

Structuring theInvestigation

STEP 3:

Initiating theInvestigation

Witness Interviews

STEP 4:

FactualDevelopment

STEP 6:

ConcludingInvestigation

STEP 5:

SynthesizingFacts/Law

Document

Collection/Analysis

Reporting Out

Decision to Disclose

STEP ONE: Decision to Investigate

� Discovery of alleged wrongdoing– Are you in “investigation mode”?

– Avoid slipping into an investigation

STEP TWO: Structuring the Investigation

� Define nature and scope of investigation– Key Question: Am I comfortable defending the scope of the investigation if it were to made public?

– Scope must be reexamined periodically““““CONCLUSION: No issues identified

with respect to Suite 1912.””””

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� Who is the client?

� Who should conduct the investigation?

Business Unit /

HR

In-House

Counsel

Historical

OutsideCounsel

Special

OutsideCounsel

Privilege Safeguards / Appearance of Independence


� Determine appropriate level of investigation

– Issues giving rise to criminal liability– Ethics hotline complaints – misuse of employee data– Financial controls and accounting– Falsification of records– Commercial issues – potential liability for Company– Employee conflict of interest issues– Regulatory compliance– Environmental issues– Employee theft– HR issues


� Issue a delegation letter– Formal retention of counsel and authorization to conduct investigation; preserve attorney/client privilege

� Letter from management to in-house counsel authorizing investigation

FROM: ManagementTO: Attorney

■ Scope of investigation

■ Providing legal advice

■ Potential for litigation

■ Importance of maintaining

confidentiality

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STEP THREE: Initiating the Investigation

� Initial notification and communication issues

– Insurance carrier?

– Regulators?

– Outside auditors?

– Public relations?

• Document preservation memorandum

– In writing; hard copy documents and electronic data

– Separate document hold to IT department• Suspend automated deletion and recycling processes

• Computers/PDAs of former employees

STEP THREE: Initiating the Investigation

� Additional organizational issues– Conflict issues (multiple representation)

– Employee/officer indemnification

� Experts/Consultants?– E.g., forensic accountants

� Attorney-client and work-product privileges– Segregate/notate privileged communications

– Instruct employees re: need for confidentiality

STEP FOUR: Document Collection

� Collecting and analyzing documents– Designate point person

– Consider document collection interviews

– Track documents and efforts to collect documents

� Employees - no new documents

� Segregate privileged documents

� Create unique Bates-label for investigation

– Designate “key” documents; consider summaries

– Prepare Chronology of Events

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STEP FOUR: Interviewing Witnesses

• Give and document Upjohn warning– Beginning of every interview– Memorialize in attorney notes/outline

I am a lawyer for Company. I represent only Company, and I do not represent you personally.

I am conducting this interview to gather facts in order to provide legal advice for Company. This interview is part of an investigation to determine the facts and circumstances of Incident in order to advise Company how best to proceed.

Your communications with me are protected by the attorney-client privilege. But the attorney-client privilege belongs solely to Company, not you. That means that Company alone may elect to waive the attorney-client privilege and reveal our discussion to third parties.

Company alone may decide to waive the privilege and disclose this discussion to such third parties as federal or state agencies, at its sole discretion, and without notifying you.

In order for this discussion to be subject to the privilege, it must be kept in confidence. In

other words, with the exception of your own attorney, you may not disclose the substance of this interview to any third party, including other employees or anyone outside of the company. You may discuss the facts of what happened but you may not discuss this discussion.

[American Bar Association Model Language]

ETHICS MOMENT

� Question: “Do I need a lawyer?”– Model Rule 4.3� The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.

� Should I interview former employees?


� Practical Pointers– Interview with a “prover”

– Start with recollection, then documents� Do not use work product (e.g., timelines, witness memos) to refresh recollection

– Avoid tape recording interviews

� Unless good reason to “lock” in witness

– Remember the purpose: To elicit the whole truth� “Anything else I ought to know?”

– Collect documents referenced by witnesses

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� Formal interview memoranda?– Prepare interview memos ASAP…or not

– Document Upjohn warning

– Include paragraph:

� Just a summary;

� Contains mental impressions of attorney; and

� Prepared in anticipation of litigation

– Identify location and participants

– Avoid “substantially verbatim” interview reports

– Attach key documents

The Yates Memo: “We Want Names”

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DOJ INSTRUCTIONS TO LINE PROSECUTORS

1. Companies must provide all relevant facts about individuals involved in corporate misconduct to get any cooperation credit.

2. Criminal and civil investigations should focus on individuals from the beginning.

3. Criminal and civil government attorneys should communicate.

4. With few exceptions, corporate resolutions should not shield individuals from criminal or civil liability.

5. Do not resolve corporate cases without a clear planto resolve individual cases.

6. Civil attorneys should focus on individuals too (regardless of their ability to pay).

STEP FIVE: Synthesizing Facts & Law

� Preparing the Investigation Report– First Question: Is a report necessary and appropriate?

– Who will get the report?

– Contents of the report:� Here’s the scope� Here’s what we did� Here’s our findings� Remedial steps?

– Consider potential audiences (i.e., general public)

– Summary of facts often better than legal analysis of claims

– Limit number of copies in circulation

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STEP FIVE: Synthesizing Facts & Law

� Advantages/Disadvantages to Oral Report– Hard to discover in civil litigation (attorney-client privilege)

– Less costly

– Less reliable to regulators

� Advantages/Disadvantages to Written Report

– May be discoverable in civil litigation� Including defamation/libel actions brought by disciplined employee

– More expensive

– Easier to digest

– More thorough

– More credible to regulators

– Dealing with the accountants

STEP SIX: Decision to Disclose

� Disclosure to the Government?

– To which agency should disclosure be made?

– Mandatory disclosure

– Discretionary disclosure

� Guidelines for Charging Corporations

� Disclosure to the US Attorney’s Office

� Fiscal Intermediary/Carrier

� DoD Voluntary Disclosure Program

� IRS

� State Agencies

– If you disclose, be prepared to cooperate fully

Odebrecht/Braskem ($3.5 billion) (U.S., Switzerland, Brazil)

Rolls Royce ($809 million) (U.S., Britain, Brazil)Vimpelcom ($795 million) (U.S., Netherlands)

Embraer ($205 million) (U.S., Brazil, Saudi Arabia)

Global Investigations

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27 government agencies around the world with active investigations into FCPA-related activity

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Global Investigations – Settlement (or Not)

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■ December 21, 2016: $3.5B “Global Settlement” reached

− Brazil, United States, Switzerland

■ February 17, 2017: Announcement by Mexican Prosecutor-General

Global Investigations: Germany

� A relatively new phenomena in Germany

� “Import” of U.S. as a consequence of the Siemens case

� (Meanwhile) accepted as being part of an effective compliance organization but not regulated

� Prosecutors endorse internal investigations and give credit

� Legal privilege – not comparable with U.S.

– No protection for in-house counsel

– Status unclear with respect to law firms conducting internal investigations

� Growing importance of data protection law

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Global Investigations: India

� Internal Investigations – Nascent jurisprudence

– No formal mechanism for granting credit

� Be concerned about predicate offences

� Keep the circle tight

� Establish a “dawn raid” response protocol at the time of commencing the investigation

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Case Study – Part 1

� Lisa Simpson is Chief Compliance Officer at Duff Inc., a publicly-traded food and beverage conglomerate based in Springfield. Duff has aggressively expanded beyond its core brewing business in recent years, and now owns a number of food and beverage businesses that operate all over the world. Duff's strategy is to grow rapidly in emerging markets and has been and continues to acquire new businesses at a rapid rate.

� In 2012, Duff entered into a 50/50 joint venture with GutBier AG, a publicly-listed German company based in Munich. Among other things, the Duff /GutBier joint venture owns and operates Kingslosher, a brewery in India that brews and distributes throughout the country. The JV acquired Kingslosher from the Mallja family, who continue to manage and run the business under a management services contract.

� The Duff/GutBier JV adopted the Duff compliance policies and procedures and uses the Duff ethics hotline, which ultimately goes to Lisa. Yesterday, Lisa received an anonymous email report from an employee of Kingslosher, raising concerns about management.

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� Lisa is concerned but not alarmed. She decides that an investigation is required and brings in your team to develop a plan. Please outline an initial investigation plan and present it to the group. Be sure to address the following:

– Who will coordinate and oversee the investigation?

– Who will conduct the investigation?

– Privilege issues?

– Scope and objectives

– Documents: preservation, collection, review

– Interviews: who? how?

– Disclosures: who should be informed?

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India Investigation: Appointment of Legal Counsel

� Formally appoint legal counsel for the investigation

� Do not rely on old engagement letters

� Establish invoicing protocols

� Retain local counsel / senior counsels

� Develop “dawn raid” protocol

� Sign Vakalathnama

� Consider privilege issues

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India Investigation: Establishing Contact

� Be respectful and culturally sensitive

� Communication must be specific and firm, but not too stiff

� Don’t fall in the trap of too much detail

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India Investigation: Don’t Miss the Real Issue

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“He is lazy .”

“She talks to male staff. Must be corrupt person.”

“My back was hurting, he still did

not give me the front seat of van.”

“He is junior to me and has an iphone. IT head is taking

kickbacks.”“The canteen food is terrible. There is so much corruption.”

“Why he is getting white car and I

am getting maroon? The

company has lost its soul.”

“She is only drinking coffee and doing politics.”

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India Investigation: Interviews

� Consider conducting interviews off the company premises

� Interviewers must be fluent with languages spoken by company employees

� Try to keep the process as collegial (but professional) as possible; avoid providing Upjohn warnings verbatim (i.e., don’t read from a prepared script)

� Ensure scheduling gaps to prevent overlap

� Emphasize the need for confidentiality

� Be wary of recordings

� Close the loops quickly

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India Investigation: Cash is King!

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� Watch for Cash. Cash often not as critical to conducting business as Indian managers might claim; monitor cash carefully, and view cash payments as potential red flags

� Carefully Examine Third-Party Intermediary Expenditures. Third parties often used in India to facilitate illicit payments; third parties should be monitored closely

� Watch for Key “Red-Flag” Terms. Certain fees and expenses should be scrutinized: brokerage charges or fees; consultancy charges; covering charges; management fees; documentation charges; managing expenses; out-of-pocket expenses; protection fees; and special expenses.

– Red-Flag phrases on invoices and other business documents:

– “for obtaining license”; “liaisoning” or “government liaisoning”; “for clearances”; “for getting NOC” [Notification of Change]; “for obtaining approvals”; any other grammatically awkward or vague references (e.g., “motivation amount”)

– India-specific terms

– rishwat, baksheesh, ghoos, hafta, chai-pani, “black money”


� You have developed a plan, assembled a team, and started an internal investigation. A little more than a week into the investigation, however, Lisa receives the following:

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� You now have a second email from the whistleblower. Should your approach to the internal investigation change? Be sure to address the following:

– Management of whistleblower

– Introduction of GWT

– Potential involvement of Germans

– Revisit scope

– Revisit procedures

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The German Perspective

� Thorough legal analysis: what would the prosecutor do with these findings?

� Challenge: the “smoking gun” of corruption might be in India

� No proof of corruption: prosecutor might assume embezzlement if marketing payments are not justifiable

� Risk of investigations initiated against Board of Gutbier AG

� Key question of “disclosure” (So better not to disclose?)

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Defense Strategy – Disclosure

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Compliance Incident

1. Preventive Compliance

» “Tone from the Top“» Codexes» Employee trainings» Whistle-blowing» Controlling

2. Compliance Incident

» Evaluation» Internal Investigation» Findings

3. Repressive Compliance

» Disclosure?

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Defense Strategy – Disclosure

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Are (external)

investigations

initiated?

Disclosure isgenerallyadvisable

Three questions:

» Duty to disclose?» Probability of exposure?» Nature of the crime?

no yes

Case Study: Probability of Exposure?

Criminal Law – Global Enforcement

� Increasing trend due to globalization and digitalization

� Every state has the option to extend the jurisdiction of its criminal courts beyond the territorial domain, so long as the principle of non-intervention (and double jeopardy in the EU) is not infringed

� Some multilateral treaties expressly demand this extension

– OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 1997

– United Nations Convention against Corruption, 2003

� Tightly knit web of competing criminal law systems

� More and more countries are implementing a criminal liability regime for companies

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Criminal Law – Global Enforcement

“We do not presume to know exactly what this brave new world of international criminal enforcement will entail.”

United States v. Allen, No. 16-898 (2d Cir. July 19, 2017).

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Eurojust: Cooperation with Third States

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Trend of Cross-Border Cases: 2002 – October 2016

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202

300

381

588

771

1085

1193

13721424 1441

15331576

1804

2214

1763

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Comparison October 2015: 1792

Defense Strategy – International Dimension

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German authoritiesGermany

IndianauthoritiesIndia

American

authoritiesUSA

ProsecutionAdversarial Defense

ProsecutionAdversarial Defense

ProsecutionCooperation

Institutional Vehicle for Exchange/Cooperation

P

R

O

S

E

C

U

T

I

O

NTransmitting Documents

Break-down of

defense strategy

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Defense Strategy – International Dimension

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German authoritiesGermany

IndianauthoritiesIndia

American

authoritiesUSA

» Knowledge Exchange

» Cooperation

Prosecution

» Knowledge Exchange

» Cooperation

Defense

Vehicle for Exchange/Cooperation: Institutional Vehicle for Exchange/Cooperation

Press Conference: Siemens AG

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Department of Justice

FOR IMMEDIATE RELEASE

Monday, December 15, 2008

WWW.USDOJ.GOV

OPA

(202) 514-2007

TDD (202) 514-1888

Transcript of Press Conference Annoucing Siemens AG and Three Subsidiaries Plead Guilty

to Foreign Corrupt Practices Act Violation

[…] This marks the first time that United States and foreign prosecutors have coordinated

their law enforcement efforts as extensively as they have here today to address violations of the

anti-bribery laws. I expect it will not be the last. […]

[…]There are a few other aspects of this case that I would like to comment on. First, this is a case

in which we have worked from the beginning in close cooperation with German law enforcement.

Indeed, this case began with the execution of searches by German authorities in November of

2006. […]

Beware of Searches!

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No attorney/client privilege for in-house counsel in Germany!

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Jones Day Dawn Raid vs. Attorney-Client Privilege

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Conducts internal investigation

Offices searched by german investigators to gain facts about theinternal investigation


� The investigation is now largely completed. It included, among other things, a background check on Siddharth, review of emails and other documents, employee interviews, and the preparation of a preliminary report.

� The key investigative findings were as follows:

– No “smoking gun” documents (though several troubling emails).

– Siddharth’s background report shows that he was a former actor and that he has a criminal record (i.e., passing a bad check in 2010). He is listed as the sole shareholder of Global World Trade Pvt. Ltd., an import/export company with an office located in Mumbai.

– While the background report did not find any business ties between Siddharth and the Kalljafamily, a Google search shows that Siddharth attended several high-profile cricket matches with Apu Kallja.

– Sales in India, generally, and the Kingslosher’s relationship with Siddharth, specifically, were handled by one GutBier manager, Rainier Schulz.

– Payments to Siddharth were approved both by Schulz and by GutBier’s senior manager, Hans Wolfcastle. Wolfcastle stated during his interview that he relied on Schulz to conduct business in compliance with GutBier’s policy.

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� The key investigative findings were as follows (cont’d):

– After several years of declining sales, sales of Kingslosher’s Baksheesh IPA rebounded after the hiring of Siddharth. Net profits increased at a rate slightly above budgeted forecasts. The primary drivers of the net profits were increased sales at duty-free liquor stores.

– Siddharth’s marketing expenses were very high, and Schulz and Wolfcastle had approved several increases in the past year. To the extent invoices were provided by Siddharth, they simply stated: “Professional marketing services rendered.”

– Kingslosher obtained a contract with the New Delhi International Airport to be a preferred supplier to the airport’s hotels and restaurants. Schulz stated that Siddharth had arranged this business relationship, presented Schulz with a contract, and Schulz signed because “it was a great deal.”

– Schulz stated that he had no knowledge of any bribes being paid to obtain business.

– Schulz’s direct reports in India stated that Schulz had a “just get it done” attitude and responded angrily to delays. Several reported that they “wouldn’t be surprised at all” if Schulz paid bribes, citing the fact that some managers (no longer with the company) had made small payments to safety inspectors and electricity technicians from the petty cash account, which Schulz “had to know about.”

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� Key Emails

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� Key Emails

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� Key Emails

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� The Duff Board of Directors is set to meet in two days, and, in preparation for the meeting, the Board reviewed a summary of the investigation. It remains concerned about the continuing allegations from the reporter and, more generally, the “inconclusive smoke” uncovered from the investigation. The Board has asked Lisa to explain the options available to the Company, including whether Duff should consider “self disclosing” potential violations to U.S. enforcement agencies.

� Lisa comes to you for guidance. What recommendations should Lisa give the Board?

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Investigation Results and Assessment

� Prepare to Field Questions from Duff Board:

– What issues do you see in the investigation results?

– Is there an FCPA violation? A violation of German law? A violation of Indian law?

– Risk of enforcement in US? Germany? India?

– What do we do with Siddarth?

– What do we do with Schulz? Wolfcastle?

– Do we need to disclose this on our financial statements? Issue an 8K? What do the external auditors need to know?

– Is there personal exposure/liability here?

� Consider Potential Questions from GutBier Board

� What do the external auditors in India need to know? How will the investigation reflect in the company’s annual accounts and directors responsibility statements?

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DOJ’s FCPA “Pilot” Program

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If Company self-discloses FCPA violation…

� Up to 50% reduction off bottom-end of Sentencing Guidelines fine range

� Generally will not require appointment of a monitor (if effective compliance program in place)

� Will consider a declination of prosecution

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“disclosure on a timely basis of all facts”

“proactive cooperation”“making employees available for Department interviews”

“de-confliction of an internal investigation with the government investigation”

“attribution of facts to specific sources”

“preservation, collection, and disclosure of relevant documents”

“timely updates on internal investigations”

“all facts relevant to potential criminal conduct by all third-party companies and individuals”

“disclosure of overseas documents”

“facilitation of third-party production of documents and witnesses”

“provisions of translations of relevant documents”


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“establish a culture of compliance”

“criminal conduct will not be tolerated”

“sufficient resources to compliance function”

“quality and experience of compliance function”

“independence of compliance function”

“compliance program tailored to risk assessment”

“performed effective risk assessment”

“compliance personnel compensated and promoted”

“auditing of compliance program”

“reporting structure”


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� The Board meeting is about to start when the news hits…

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THE DAILY TRIBUNE OF INDIA

BREAKING NEWS

September 11, 2017 By Ajay Gulati

Brewing Up Controversy

Whistleblower claims self-dealing, fraud at Kingslosher by new owners

New Delhi – An employee at Kingslosher’s New Delhi plant is reporting that new owners, DuffInc. and GutBier AG, have entered into sweetheart deals to enrich management and haveengaged in fraudulent practices designed to conceal a decline in sales of Kingslosher’s iconicBaksheesh IPA beer. Duff/GutBier has struggled to integrate Kingslosher since the acquisition in2016, leading to unethical practices in order to maintain existing business, according to thewhistleblower. Central Bureau of Investigation agents contacted by the Daily Tribune stated thatCBI had learned of the allegations and would investigate fully. “We are committed to ensuring the


� Hours later, agents from India’s Central Bureau of Investigation (“CBI”) arrive at Kingslosher’s New Delhi facility and arrest Kingslosher’s India CEO, Director of Sales, and CFO.

� The morning news cycle in Germany picks up the story…

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Deutschland TodayBREAKING NEWS

September 12, 2017 By Hans Reuter

Nicht Gut! Arrests at GutBier’s Kinglosher Factory

Kingslosher under investigation by India Authorities for fraud

New Delhi – Indian enforcement authorities arrested three top executives at Kingslosher’sNew Delhi plant in a late-night raid. Early reports state that India’s CBI agents received info-


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Now What?

� U.S. Self-Disclosure Revisited

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OH WOW!PARADIGM SHIFT!

Arrests in India!

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� Anticipatory Bail

� Bail Strategy

� Preparing for search and seizure

� Factor in the length of the proceedings and make budget appropriations

And It’s Not Just Bail…

� Contract Cancellation

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� The SEC and DOJ open an investigation into allegations of bribery involving Kingslosher. The Duff Board has taken the position that it wants to cooperate fully with the U.S. regulators. But “cooperating” has proven far more difficult than expected.

� The U.S. regulators have asked for relevant business records and images of mobile devices and computers for key employees and management. Many of these records, computers, and mobile phones are located in India and Germany.

� Citing the Yates Memo, U.S. regulators request that Duff make the implicated GutBierand Kingslosher executives available for witness interviews. But some of the executives either refuse to cooperate with U.S. authorities or are in jail.

� The U.S. regulators point out that Schulz, the GutBier executive in charge of India operations, also oversees a portion of GutBier’s Asian operations, including, most notably, several subsidiaries in China and an expansion project into Indonesia.

� U.S. regulators are becoming frustrated that Duff isn’t cooperating fully. Lisa comes to you for guidance. How should Duff deal with these issues?

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ATTORNEY ADVERTISEMENT. The contents of this document, current at the date of publication, are for reference purposes only and do not constitute legal advice. Where previous cases are included, prior results do not guarantee a similar outcome. Images of people may not be Foley personnel.© 2017 Foley & Lardner LLP

Sherbir PanagLaw offices of Panag & BabuNew Delhi, [email protected]

David RieksROXIN Rechtsanwälte LLPHamburg, [email protected]

David W. SimonFoley & Lardner LLPMilwaukee, WI [email protected]