Chapter 1: Three Triggers for an Internal Investigation

Chapter 2: Internal Investigations Save You Money

Chapter 3: Weighing the Costs of Investigations

Chapter 4: Cooperation, Self-disclosure and Reputation

Fines and sentences from the US Sentencing Commission (USSC) are on the rise. With the recent round of federal sentencing guideline amendments, the USSC hopes to encourage companies to take appropriate action upon discovery of criminal conduct within the workplace, and will give them credit for doing so. This credit will come in the form of fine/penalty reductions, which can bring about significant savings.

Undertaking an internal investigation before an official criminal investigation is launched is one of the most effective ways to save money in fines and penalties.

But there’s also the reputational cost. The court of public opinion can sometimes be even more demanding than a court of law, and no matter how good your compliance and ethics program, allegations of misconduct can be damaging to your brand. Voluntarily launching an internal investigation and timely self disclosure can go a long way in saving your company’s reputation from long-term damage.

On the day that Walmart announced that it had launched an internal investigation into FCPA violations the company’s shares rose by 40 cents in morning trading. Investors see the value in a company that has a robust compliance and ethics program and an effective internal investigations process.

Federal Sentencing Guidelines

According to Chapter 8 of the Federal Sentencing Guidelines:

“To qualify for a reduction under subsection (g)(1) or (g)(2), cooperation must be both timely and thorough. To be timely, the cooperation must begin essentially at the same time as the organization is officially notified of a criminal investigation. To be thorough, the cooperation should include the disclosure of all pertinent information known by the organization. A prime test of whether the organization has disclosed all pertinent information is whether the information is sufficient for law enforcement personnel to identify the nature and extent of the offense and the individual(s) responsible for the criminal conduct. However, the cooperation to be measured is the cooperation of the organization itself, not the cooperation of individuals within the organization. If, because of the lack of cooperation of particular individual(s), neither the organization nor law enforcement personnel are able to identify the culpable individual(s) within the organization despite the organization’s efforts to cooperate fully, the organization may still be given credit for full cooperation.”

During the recent Siemens case, the company’s level of cooperation in the bribery investigation significantly reduced the cost of the settlement with the SEC. An article in the New York Times, “At Siemens, Bribery Was Just a Line Item,” also noted that Siemens was provided with additional leniency, only having to plead guilty to accounting violations, “because pleading to bribery violations would have barred Siemens from bidding on government contracts in the United States.”

In the Ethisphere article “Prepared Remarks to Compliance Week 2010- 5th Annual Conference for Corporate Financial, Legal, Risk, Audit & Compliance Officers,” Assistant Attorney General Lanny A. Breuer outlines the significant savings Siemens realized due to its wise handling of the investigation:

“In the end, the benefits Siemens received through its cooperation, even in the absence of a voluntary disclosure, were plain – the $450 million fine that was paid to the Justice Department, although quite substantial, was a far cry from the advisory range of $1.35 billion to $2.7 billion called for in the Sentencing Guidelines. Put another way, Siemens received a penalty that was 67 to 84 per cent less than what it otherwise could have faced had it not provided extraordinary cooperation and carried out such extensive remediation.”

Chapter 5: How Case Management Software Helps