Investigations and Enforcement
by Wes Demory
Numerous clients have engaged Thomsen and Burke to charter and conduct internal investigations into possible violations of international trade and investment laws and regulations. The first step in the investigative process requires making some important threshold decisions, which are addressed in the following Frequently Asked Questions:
What is the scope of our investigation?
The scope of the investigation may be driven by an event, like a subpoena, complaint by a whistleblower, or directive from the audit committee of the board. It also may be determined by senior management at its discretion. For example, the scope might be: export transactions involving a distributor, unlicensed exports of a particular product, a specific transaction, misclassification of company products, unlicensed technology transfers to foreign nationals, or diversion of products to an embargoed destination. Notwithstanding how the scope is defined, the typical investigation would not include activity barred by the applicable statute of limitations.
Who is on our investigating team?
The decision of whom to include in the investigating team involves a balancing of interests. On the one hand, we want to include key personnel, like the general counsel, the trade compliance director or manager, and perhaps members of the internal audit staff. On the other hand, we want to ensure that the investigating team is limited to personnel who are neither involved in any potential corporate wrongdoing nor so large as to possibly compromise the confidentiality of the investigation. Once identified, we will issue the company a formal letter setting forth the core investigating team.
How do we protect the attorney client privilege?
Protection of the attorney client privilege requires following the guidelines articulated by the Supreme Court in Upjohn v United States, among others. From the beginning, it must be clear that the investigation is being directed by counsel. We will memorialize this in writing and articulate that the purpose of the investigation is to provide legal advice to the company. Once the investigation is underway, written communications should be properly marked to indicate that they are privileged. Any interviews of company employees will commence with the formal “Upjohn warning,” in which we explain that the lawyer represents the company and not the individual employee with whom the lawyer is dealing. This is intended to ensure that the employee understands that the company can waive the attorney-client privilege at any time and disclose the contents of the conversation between the lawyer and the employee, even if the employee objects.
How do we ensure the integrity of documentary evidence?
Soon after the decision on the scope of the investigation and formation of the investigating team, we will issue a document preservation order. Its contents will take into consideration the kinds of documents likely to contain relevant information and where such information is likely to be found. For example, export control and economic sanctions cases often focus first on information in the company’s customer relationship management and enterprise resource planning systems, as well as related communications by email, instant messaging, and similar methods.
How do we control costs associated with the investigation?
Not too long ago, the reproduction and review of documentary evidence involved copious copying of files and review by armies of associates. Today, we can collect and review the same (and even larger) amounts of documentation with a fraction of the manpower by using electronic discovery tools. We have relationships with electronic discovery solution providers who can deploy on short notice.
“By leveraging the latest technology, we ensure the collection, review and analysis of electronic evidence is completed in a timely and cost effective manner. Investigations no longer require the traditional large law firm ‘staffing up’ process.”
If we find a violation, must we disclose it to the Government?
The Departments of Commerce, State and Treasury have regulations governing filing of voluntary self-disclosures, where violations are found. In rare cases, the filing of a voluntary self-disclosure essentially may be compelled. For example, this includes situations where the company needs to avoid a continuing violation. More frequently, the filing of a voluntary self-disclosure is a business decision, based on the facts and circumstances.
What are the possible penalties for violations?
The possible penalties for violations of export controls and economic sanctions laws and regulations depend on the particular regulatory authority involved. For example, the maximum civil monetary penalties for typical violations are $1,094,010 per violation of the International Traffic in Arms Regulations (ITAR) and the greater of $284,582 per violation, or twice the value of the underlying transaction, for violations of the Export Administration Regulations (EAR) or sanctions administered by the Office of Foreign Assets Control (OFAC). In addition, there may be possible non-monetary penalties, such as denial of export privileges.
Strategic decisions concerning the scope and investigating team at the commencement of an internal investigation, and careful attention to protection of the attorney client privilege as the investigation proceeds, are essential to successfully conducting internal investigations into possible violations of export control and economic sanctions laws and regulations. Modern electronic discovery tools enable the investigation to be leanly staffed, and cost effective. Any decision to make a voluntary self-disclosure must be a business decision, informed by legal analysis.
Disclaimer: This document may be considered Attorney Advertising. It is provided for informational purposes only and is not to be considered legal advice. Its distribution does not establish an attorney-client relationship. Each situation is unique and the techniques used will differ depending on the facts and circumstances. Therefore, this document does not describe the work that may performed in any particular matter.