As more US companies expand operations into other parts of the world, the risk of corruption increases. Especially in emerging markets, so attractive to growing organizations, laws governing bribery of officials are often non-existent. In some countries, it’s just part of the cost of doing business, not considered to be illegal, immoral, or even underhanded. However, US companies operate under US laws, and the tightening legislation means that they are being scrutinized carefully to ensure they are not engaging in corruption overseas.

The risk of getting caught for an FCPA violation is greater than ever before, said Charles Duross, the deputy chief of the US Justice Department's FCPA Unit, at the Association of Corporate Counsel's Annual Meeting in Los Angeles in October. He said that the DOJ had a “steady stream of cases” and that every major US attorney’s office was in the process of investigating foreign bribery allegations.

Self-Disclosure

But what happens when a company, either through a whistleblower or otherwise, finds out before anyone else does that bribery may be occurring within its operations? The US government encourages companies to self-report when such a situation occurs, with the DOJ offering assistance with the investigation and the potential for deferred-prosecution or non-prosecution agreements. The benefits of self-disclosure can be significant and, more importantly, the risks of failing to report bribery even more significant.

Nevertheless, companies may have a difficult decision to make when they discover possible FCPA violations among their ranks. Sometimes it may be better for a company to complete an internal investigation and deal with the problem, instead of opening itself up to DOJ, as well as public, scrutiny.

Before Making the Decision

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“It is important to note that there are no legal or ethical obligations to self-report a violation under the FCPA,” says Braden Perry, partner in the Kansas City-based law firm of Kennyhertz Perry, LLC. So the decision to report is just that: a decision.

“Before making that decision, it’s important to ensure that all options have been considered and an internal investigation has been completed. In deciding to self-report, a company should ensure that the investigation leading to the potential FCPA violation has been thorough and all the facts are known,” says Perry. “You should also consider the nature of the violation and have a plan to retain control of the investigation.”

Why Self-Report

“Overall, there is no real policy or documented evidence, other than anecdotal, regarding the benefits of self-reporting,” says Perry. Before making the decision, he recommends conducting a risk-based analysis, individual to each particular company, to determine if the potential leniency by the DOJ and the SEC outweighs the risk the prosecution. The analysis should take into account:

• likelihood of independent discovery
• nature of the violation
• strength of evidence
• industry in which the company is conducting business

Based on the outcome of your analysis, you may find that self-reporting is the safest way to go. It certainly keeps the DOJ, law firms and accounting firms happy. On the other hand, if you can avoid the public and governmental scrutiny and possibility of sanctions without exposing your company to major risk, it’s certainly worth considering handling the problem in-house.