As reported recently in Corporate Counsel (click here to see full story), the Department of Justice and Securities and Exchange Commission have embraced the use of “industry sweeps” against suspected violations of the Foreign Corrupt Practices Act (“FCPA”). Based on the government’s belief that conduct in violation of the FCPA has occurred, industry sweeps are FCPA investigations into numerous companies in a particular industry. Industry sweeps have been used within the oil and gas, medical device, pharmaceutical, and financial services industries.
One reason why industry sweeps are attractive to government enforcement agencies is that they offer an efficient way of discovering FCPA offenses. FCPA government enforcement agencies typically send out letters of inquiry – sometimes called “Hello There” – letters – encouraging recipients to provide information about particular business practices. The vaguely worded letters are backed by the implicit threat of an FCPA investigation and can yield disclosures from companies that can result in the payment of millions of dollars, along with new compliance commitments. However, industry sweeps risk ensnaring compliant companies in expensive and time-consuming investigations.
Businesses can take reasonable precautions to mitigate the impact of a potential industry sweep, including: (1) establishing an FCPA “early alert system” by designating internal and external personnel responsible for keeping the company informed of corruption investigations or risk practices that might attract attention from authorities; (2) selecting a possible response team such as law firms in high-risk geographical locations that are well-versed in data privacy and local attorney-client privilege rules and arming them with the necessary information to deploy quickly, and (3) maintaining a robust corporate compliance program with routine risk assessments.