When, Why and How Should Companies Discipline Employees for FCPA Violations?

When a company discovers an FCPA violation, and is faced with formulating a strategy to remediate the problem, one of the important and delicate considerations it must make is how to discipline the employees involved.  There are competing interests at work – the company needs to show the DOJ and the SEC that it reacted promptly and decisively, but it also must induce cooperation from key individuals in order to get to the root of the problem.  Termination may be appropriate for some employees, but companies must do so properly so as not to trigger retaliation; and other forms of discipline may be appropriate for employees with a less central role in the prohibited activities.  Determining the best proactive procedures to prevent misconduct, as well as the best reactive procedures once there has been a violation, and remedial measures to prevent reoccurrence, are paramount to minimize liability.  The government, once it is involved, may also pressure the company to take disciplinary action.  A further challenge hinges on the fact that information being provided in cooperating with the company, since it is not privileged, may be provided to the government for use in a possible criminal investigation.  This article provides context and practical guidance to companies navigating the disciplinary process.  In particular, this article discusses the application of the FCPA to employee conduct and how the government has treated employee discipline in the FCPA context.  Based on insight from experienced FCPA practitioners, this article addresses how to balance discipline with cooperation from employees during an internal investigation; strategies for inducing cooperation during the investigation; the privilege implications of cooperation; and considerations a company should weigh in considering disciplinary action, including government pressure and scrutiny of decisions, seniority of management, as well as disciplinary challenges in different jurisdictions.

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