Multi-Jurisdictional Criminal Investigations Pose Challenges

, New York Law Journal


Corporate criminal investigations across borders are increasing. This is no surprise: The worldwide economy is global and many companies conduct their business across borders, so the very nature of their enterprise will implicate the laws, including the criminal laws, of more than one country. Some criminal laws specifically focus on conduct abroad. The Foreign Corrupt Practices Act, adopted in 1977, by its terms applies to corrupt payments made to recipients outside the United States; since the adoption of the OECD Anti-Bribery Convention in 1997,1 similar prohibitions to those contained in the FCPA are now found in the legislation of many countries around the world. Potential violations of antitrust laws, such as through offshore cartels, have long been the focus of criminal investigations;2 concern about evasion of the tax laws by use of offshore "fiscal paradises" has spurred cross-border activity designed in particular to pierce veils of confidentiality.3

Trans-border criminal investigations can pose different kinds of problems depending on whether there is a single investigating authority (often the U.S. Department of Justice), or if the investigating authorities in more than one country are simultaneously involved. Even the relatively straightforward "one prosecutor" situation may pose vexing problems relating to finding and assembling the relevant evidence and information when such evidence is located outside of the United States; much more complicated are situations when not only the Department of Justice but investigating authorities in other countries are also involved. The purpose of this article is to provide a preliminary and basic checklist to identify the key variables in both situations necessary to develop an effective strategy.

Step One: Identify Interested Countries

The first step is to preliminarily identify the countries that may be involved, either because potentially relevant evidence is found there or because its prosecuting authorities might get involved. It is critical to make this high-level evaluation quickly and early, even before organizing a possible internal investigation: Because local laws may well have impact on both the execution and the use of an internal investigation, it is important to identify the relevant countries before commencing one.

Identifying countries where relevant evidence might be found is generally straightforward, but nonetheless may have some complexities. For example, specifying the physical location of different kinds of information has become complex, as much data is now stored in the "cloud" or on servers that span continents; the classic physical "file cabinet" in which documents could be found is often non-existent. The location of witnesses—and the places where potential interviews might take place—is sometimes complex in situations where individuals may regularly travel or have offices in more than one place. Some employees located in one country may believe that they have rights under the laws of a different country, either the country of their nationality or the country where they were hired.

In any event, a relatively simple preliminary review should permit a company to develop a prioritized map where critical information must be sought. Identifying which countries' prosecutorial authorities may become involved, however, is more nuanced and complex.

One problem is that countries' criminal laws may have different "jurisdictional hooks," that is, their laws may have different means of defining the territorial and extra-territorial application of their criminal laws. The FCPA, for example, applies to U.S. nationals (including companies incorporated in the United States); to companies whose shares are listed on a U.S. exchange; and to acts that took place, even in part, on the territory of the United States. While this should generally be clear, the Department of Justice has aggressively applied the FCPA to a broad range of conduct including activities of dependent or subsidiary corporations and activities of which took place only in small part in the United States.4 Other countries may have different principles of territorial application of their criminal laws and may interpret them less aggressively; many complain about what they perceive to be overreaching by American authorities in applying its laws, and in some instances have, for example, filed briefs as amici curiae in the Supreme Court urging a limited application of U.S. laws overseas.5 And principles of extraterritorial application of criminal laws may evolve. Just recently, for example, the U.S. Court of Appeals for the Second Circuit concluded, in the context of a federal securities prosecution, that the Supreme Court's decision in Morrison,6 which essentially did away with the "effects test" and limited civil application of the federal securities laws to American-issued securities or to fraudulent acts that take place on U.S. territory, also applies to criminal securities claims, rejecting broader claims by the prosecutor. United States v. Vilar, No. 10-521-CR, No. 10-580-CR, No. 10-4639-CR, slip op. at 4 (2d Cir. Aug. 30, 2013). The Vilar decision, however, left open many important questions as to exactly how the courts will apply the "purchased or sold within the United States" test and, in particular, how courts will determine under what circumstances an act, portions of which took place inside and outside U.S. borders, must be found to have occurred in the United States. It is also very much open to further elaboration whether the Vilar reasoning—assuming it is not disturbed by the Supreme Court—applies to other criminal activity such as cartels.

By far the most important component of the first step evaluation is to prioritize the relative probability and aggressiveness of prosecutorial activity in those countries that may be competent to investigate. The periodic reports issued by the OECD evaluating the anti-corruption efforts of the various countries signatory to the OECD Convention provide some indication of the level of prosecutorial activity and priorities in those countries in the area of foreign corruption.7 But to be effective, such an evaluation requires knowledgeable local counsel who can provide current advice on prosecutorial policy, and who know the relevant personnel.

Even before considering whether—and how—to conduct an internal investigation, it is critical to have a preliminary idea of the potential use an investigated company may make of one. In the United States, that may be clear: Once an investigation has been completed, a company should be in a position to evaluate its risks and the strength of its defenses, and can make a determination whether or not to "self report" to the Department of Justice or the Securities and Exchange Commission. In other countries, however, the procedural end games are far less clear, and thus the ultimate purpose of an investigation is open to debate. In France, for example, there is currently no procedural basis on which to "self report" to a prosecutor or other investigating authority, nor any basis to enter into a "deferred prosecution agreement" or other non-criminal outcome.8 A decision regarding whether, how, and when to self-report may be similarly nuanced and complex in other countries as well. As a result, a company that does an internal investigation with the view of ultimately making the decision of whether to share it with a prosecuting authority of the United States may be surprised to find that, once revealed to the Department of Justice, the report may get into the hands of the authorities of another country that will neither recognize any deal that was cut with the Department of Justice nor provide a predictable path to defer or avoid prosecution.

Step Two: Conducting an Investigation

Once the ultimate goals have been identified to as great a degree as possible, as well as the location of the target information, counsel can devise a strategically sound strategy for conducting an investigation. This must involve evaluating an array of local issues that may include the following.

Blocking Statutes. A number of countries limit—and in some cases criminalize—the conduct of foreign investigations on their soil. The so-called French "blocking statute,"9 for example, makes it a criminal offense—which has been brought to bear against a Franco-American lawyer who conducted an investigation in France and was convicted under the statute—to request, provide, or obtain economic or financial information "for use in a foreign [i.e., non-French] administrative or judicial proceeding." The latter phrase would appear to exclude purely private internal information gathering, and thus a company that is simply informing itself of the extent of its activities in France should not encounter a problem under the statute. If, however, an internal investigation is done at the request of or in coordination with a non-French authority such as the Department of Justice, it would appear that such an activity would violate the blocking statute and therefore must be avoided.

Privacy and data-based laws. European laws mandate that European Union member states must adopt privacy laws that, generally speaking, are far more specific and protective than those in the United States.10 Separately, France has enacted extensive regulation of the maintenance of any kind of database—irrespective of the kind of information stored in it—and has set up a national commission called CNIL (Commission Nationale d'Informatique et des Libertés) to enforce these rules. Taken together, these rules—or similar ones in other countries around the world—may make it illegal to obtain and use certain kinds of information, or to send it outside the country. Often there is a means to address this issue through negotiation with local authorities, which must be done in close consultation with local specialists.11

Maintenance of confidentiality. Companies in the United States doing internal investigations generally maintain control of the process by using counsel whose efforts are protected under the American attorney-client or the work product privilege; this permits protection of gathered information until a point when the company can make a decision whether or not to share some or all of the work product with the authorities. Non-American professional rules must be consulted to avoid two sets of problems. First, in many countries in Europe and elsewhere, the attorney-client privilege does not apply to or protect communications with in-house counsel, who may not be considered "attorneys" irrespective of their training or function. Separately, in France, the rough equivalent of the attorney-client privilege, called le secret professionnel, strictly applies to all communications with a member of a French bar, but the privilege cannot necessarily be waived by the client. Therefore, interviews conducted by a French attorney may not directly be shared with the prosecuting authorities or be used in court. For this reason, there is significant resistance in a number of the European countries to allowing attorneys to participate in U.S.-style internal investigations.

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