DOJ Declines to Bring Enforcement Actions Against Two Companies in FCPA Matters

We have seen an escalation in recent years in the number and severity of enforcement actions against companies regarding violations of the Foreign Corrupt Practices Act (FCPA). However, two companies recently received declinations from the Department of Justice (DOJ). BKD’s Forensic & Valuation Services practice served as forensic accountants for one of those two companies, Layne Christensen. Here are some of the takeaways from the investigation that I believe contributed to the declination to prosecute.

The client self-disclosed – When our client became aware of potential FCPA violations, it initiated an internal investigation it took very seriously. The initial investigation lasted approximately two months and was intensive, requiring travel to foreign locations. Representatives from the law firm heading up the investigation, Stinson Leonard Street, took BKD forensic accountants with them on those foreign trips to gather accounting information and assist in the interview process. Lawyers working together with forensic accountants quickly spotted the issues and risks. That allowed management and the board to determine self-disclosure was appropriate.

The client fully cooperated with government enforcement groups – As noted by Stinson lead attorney Russ Berland in a recent Compliance Week article, “the idea was to approach the government with the mindset, ‘This is your area. We’ll take whatever direction you give us on how this is done. At every step, we not only cooperated with the government’s request, but tried to anticipate what they might need. We found it to be an extremely cooperative relationship.’” I saw this mentality in action firsthand. When we met with DOJ representatives, we would lay out what we had done to date and the results, answer their questions fully and ask what else they thought we should consider. This was helpful to both the client and DOJ, as both received better investigative results with which to make decisions.

The client implemented effective compliance enhancements – The client began to implement an enhanced system of internal controls and compliance monitoring during the ongoing investigation. It addressed issues as they were encountered and redesigned its FCPA controls and procedures. The client chose to implement a very robust compliance program with face-to-face training for employees and third-party vendors. Third parties now are subject to enhanced due diligence processes, which have resulted in the client’s decision not to do business with some vendors. In addition, BKD helped the client set up a compliance reporting dashboard focused on monitoring and auditing certain transactions to make sure payments to third parties are appropriately reviewed and approved.

The client tangibly exhibited management and board support of efforts to remediate FCPA issues and ensure things were handled appropriately going forward – The client made efforts to exhibit its commitment to turning things around at every opportunity. For instance, the client’s general counsel attended all meetings with the DOJ and the chair of the audit committee often attended as well. The message sent was that the client “got it.”

So, if your organization finds itself facing FCPA issues, these approaches can help you navigate the upcoming waves. However, it’s best not to find yourself adrift in that ocean at all. Therefore, when it comes to safeguarding your organization from FCPA violations, here are some helpful recommendations in a recent Corporate Counsel article (registration required).

Take the threat seriously – Understand what underlies the FCPA and your organization’s operations that could give rise to potential FCPA problems. Consider whether you have the appropriate controls in place to alert you to potential concerns.

Approach it systematically – FCPA and other anticorruption laws are extensive and complex. They can be overwhelming to try and tackle at once. Focus on the business units with a higher FCPA risk profile, e.g., those doing business in high-risk markets. Prioritize the risk profiles of your business units and start at the top.

Don’t forget due diligence with third parties – Some of your highest-risk areas may arise from people who aren’t even on your organization’s payroll. Here are four practical steps suggested in the Corporate Counsel article:

  1. Find out who the principals are and what their relationships are with government regulators.
  2. Identify any business interests or potential interests within the company.
  3. Be sure all third parties have agreed to your code of conduct in writing.

If you handle a large volume of imports and exports, work closely with your trade department or customs staff to monitor shipments.

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Shauna has more than 20 years of experience providing dispute analysis, forensic investigations and valuation services to the business and legal communities. Her dispute analysis experience includes litigation consulting, trial, deposition and arbitration testimony and prelitigation financial analysis.

Shauna Woody-Coussens – who has written posts on BKD Forensics.


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