When encountering misconduct in its operations, a corporation faces the dilemma of whether to self-report to the authorities immediately or to proceed with an internal investigation before disclosure and risk missing out on a penalty discount for early reporting. For the regulators, though, there is no doubt that early reporting is the way to go.
"To be timely, a company needs to bring things to our attention so we can do something about it," said Daniel Kahn, chief of the Foreign Corrupt Practices unit in the fraud section of the criminal division of the Department of Justice. "If they go around and interview everyone and alert wrongdoers that we're on to them," chances are that the organization has missed the window for securing the greatest discount to penalties for early cooperation, he said, speaking at a Trace International conference in London on Thursday.
Besides, the DOJ has the ability to get subpoenas to access bank accounts and other types of records that investigators usually don't, and "if the company is choosing to do all of that, it may be to the detriment of our investigation," said Mr. Kahn.
Voluntary and timely reporting, cooperation and remediation are what the DOJ expects from a company if it is to be considered for a non-prosecution agreement, deferred prosecution agreement or declination, said Mr. Kahn.
"But another very important thing to keep in mind is, in order to get credit you have to be first in the door --the longer it takes, the higher the chances we'll get a tip, a whistleblower," said Kara Brockmeyer, chief of the FCPA unit in the division of enforcement of the Securities and Exchange Commission, speaking at the same panel.
A common risk of missteps in investigations that will potentially harm a company's chance of gaining cooperation credit is having management directing investigations, said Ms. Brockmeyer.
"The gold standard of cooperation, the one that gets significant credit on our side, is where the counsel is not reporting to the company's management, but to outside directors," she said.