A memo released by the Department of Justice last week should have companies examining with a critical eye their internal investigations practices. In a speech to the New York University School of Law, Deputy Attorney General Sally Yates  elaborated: “Effective immediately, we have revised our policy guidance to require that if a company wants any credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company and provide all relevant facts about their misconduct. It’s all or nothing. No more picking and choosing what gets disclosed. No more partial credit for cooperation that doesn’t include information about individuals.”

We talked to compliance and FCPA expert Tom Fox about the implications of the new initiative and the need for companies to examine their internal investigations policies and practices.

A Q&A with Tom Fox

How does this new initiative change the way a company needs to react when there’s an allegation of corruption?

I think companies need to be more focused to respond even more quickly than they have in the past. This new initiative by the DOJ clearly means that every internal investigation really is not only under the gun to get it right but to get it right in an expeditious manner. And if you read the Yates memo, while her remarks directed towards prosecutors are that they are to look for individuals first that also means that companies are going to have to do the same thing because they are the ones who are bringing the initial information to the department of justice, either in terms of a self-disclosure or if they’ve been contacted by the department and then initiated an internal investigation.

What is likely to happen when investigations start focusing on nailing people to the wall rather than finding out what happened and why?

You know, I think that starts to take us down a very dangerous and unintended path. Determining the root cause of any problem, whether it be a chemical plant explosion or any other systems failure, including the system of compliance, is the only way to figure out what happened, but set the building blocks for remediating the problem. So if your focus is no longer on root cause analysis but on nailing someone to the wall, I think the value of those investigations in terms of fixing the problem and trying to make sure it doesn’t happen again, could well be not only lessened but certainly damaged going forward.

Do you think this could result in a culture of finger-pointing and how will this affect companies?

Yes, I’m afraid it could lead to that. I’ve worked in companies where there was very much a “gotcha” mentality because we had a corporate monitor and that was the mentality of the monitor. So I’ve seen that in action and it can be incredibly corrosive, starting at the very top level of management where they are really looking to protect their backsides in everything they do and not to take appropriate business risks so that the business can succeed. So it can start that high up, but then you get into even things like tribalism where groups are pointing the finger at other groups, whether that be us here in Canada and the United States pointing at those who are not in Canada and the United States, or vice versa where they are pointing back to the corporate headquarters and saying “it’s them not us”.

Do you think corporations are going to take this seriously? Is this going to affect their corporate culture when they realize that those at the very top could face jail time if they are ever implicated?

I think they are going to take it seriously in terms of their investigations. Whether it translates to being taken seriously to change to culture I think that’s really a couple of steps down the road. And I’m not sure this would be the one thing that would move a corporation’s culture but it’s certainly going to be a shift in investigation focus. And if some individuals get arrested and/or prosecuted, that could very well get companies to sit up and take notice.

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