Adequate Procedures, Concerned about possible bribery?, Internal investigations - Written by on Monday, April 25, 2011 23:13 - 0 Comments

1) What do you do WHEN a possible bribe is uncovered?

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Adequate Procedures to prevent bribery (put in place to provide a defence under the Bribery Act) force organisations to smoke out problems. Knowledge of potential problems and importantly knowing how to deal with them are paramount in a Bribery Act world.

So, what do you do if when the phone rings and someone tells you they think you might have a bribery “issue”.

Over the next few weeks we’ll take a look at what to do from a very practical perspective, starting today.

In practice: what do you do?

Is it a burning building?

First, it will be critical to get to grips with what you are dealing with. This will impact on your method of dealing. Not every 999 (or 911) call to the fire department will be for a burning building.

To work out if you need to send fire trucks (and if so – how many) there are some critical questions which need to be answered.

Here are 3 questions we ask when we get the call:

1. Are the allegations material? Who, and how much, is involved. On the who: are they in control or in position(s) of trust. On the how much: look at both sides of the coin, what was given and in turn what was received – how much was the contract worth?

2. How credible are the claims? Is there any history of fraud or corruption claims? In what context (including the motives) are they being made, and by who. Is that person in a position to know?

3. Who has been told about the claims (if you can find out). If claims are about to appear on the front page and/or the six ‘o’ clock news perspectives can be different.

Who do you tell and should the investigation be done internally?

Good anti-bribery policies should have a notification process written into them. On top of these, consider who may be implicated early on – this can impact who in senior management is informed.
If, and when, the Board (if that is different to senior management) should be informed will in part depend on the answers to our top 3 questions.

Importantly, not every allegation will need outside counsel to undertake the investigation.

If concerns are speculative any initial investigation can and should be undertaken internally (for example by internal audit). It may be worth touching base with outside counsel – who can act as a useful sounding board on the decisions being taken. Also, involving external counsel on a limited basis can create some limited legal privilege opportunities.

On the other hand, if the allegations are material and come from a credible source (a.k.a. the burning building) then it is likely prudent that outside counsel undertake the investigation. External counsel investigations have two significant benefits.

First, they will ensure legal privilege over the materials generated as a result of the investigation itself. Keep in mind that allegations of corruption often go hand in hand with competition law questions and under EU law there is no legal privilege for in-house communications in a competition context.

Second, and more importantly in a criminal law context an investigation conducted by outside counsel will give the investigation credibility – a valuable commodity if prosecutors and/or other regulators appear on the scene.

Should the regulators be told?

We have written on numerous occasions about the UK’s money laundering legislation. Broadly, this can impose an obligation to report a suspicion of bribery on the senior officers of an organisation failing which they will commit a brand new criminal offence.

It will be important to take legal advice on this at an early stage. However, avoid the temptation to report too soon. We caution our clients against reporting on a hair trigger and if at all possible not before an investigation has confirmed a reported suspicion of bribery.

No-one will thank you for calling out the fire brigade, the police, the ambulance service and the coastguard to rescue a cat up a tree.

Next week. The skills investigators need to possess and the foundations of the investigation.

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