FCPA investigation prompts establishment of due diligence program
Investigation, due diligence program
A whistleblower complaint
A large, publicly listed company with worldwide locations engaged Grant Thornton LLP to perform a Foreign Corrupt Practices Act (FCPA) investigation at one of their international office locations. The company had received a whistleblower complaint alleging potential FCPA violations by one of its employees, and had agreed with the U.S. Department of Justice (DOJ) to conduct an internal investigation and report back to the DOJ. The company’s attorneys recommended Grant Thornton, based on prior experience working with the firm’s anti-corruption team specialists.
Deep probe into distributor practices
The company needed to determine if an employee’s expense reimbursements were related to and/or resulted in an increase in government contracts. In that pursuit, the company would need to understand its relationship with certain distributors, particularly with respect to sales of specific products. Along with that determination, the company’s relationships with other primary distributors would require examination. In addition, the company’s anti-corruption and FCPA control environment would need to be assessed, along with its compliance policy. Based on those findings, Grant Thornton would determine the validity of the whistleblower allegations and prepare an analysis of the profits obtained from any alleged illegal activity conducted by the company.
WHAT THE TEAM DID
Compliance: In-country vs. United States
The Grant Thornton consultants began by performing interviews of employees in the United States to better understand the accounting system and FCPA compliance policies and procedures currently in place at the company. We conducted walkthrough interviews of the current compliance workflow system and obtained documentation related to the location named in the allegations. We then used a mixed team of FCPA specialists from the United States and in-country staff to perform an FCPA investigation. The team reviewed specific documentation from the compliance, accounting, legal and internal audit departments in-country to compare the procedures that should be in place per the U.S. operations. Based on the whistleblower complaint and interviews performed, the team reviewed a large set of transactions to identify potential activity that could validate the complaint. Transactions reviewed were related to accounts payable, employee expenses, and accounts receivable involving credits and discounts.
The team assessed all information obtained by the client and gathered additional background information via interviews of key personnel. With a strong effort to understand the company’s internal controls and processes related to the FCPA and general accounting activities, the team reviewed the specific allegations to determine if they had merit. We expanded the investigation after unveiling additional areas of concern. We identified a matrix of employees, distributors, customers, products and events leading to revelation of additional alleged violations. The team eventually quantified the various alleged violations, as well as the financial gain from potential illegal activity.
Bridging the control gaps
As a result of this project, Grant Thornton presented the company’s attorneys with information that outlined the process used by the alleged individual to perform transgressions. We also provided details of transactions that were potentially FCPA violations, based on the documentation available, as well as details of control gaps and design failures. Through the preparation of documentation and schedules, the team assisted the company’s attorneys in thorough reporting of the investigation’s findings to the DOJ. As a result of the investigation, the company initiated enhancements to its compliance program, which was in need of a strong third-party due diligence and transaction-monitoring program. Grant Thornton’s investigation assisted the company in recognizing the value of such a format in structuring its third-party practices, procedures and compliance-monitoring techniques. We then worked with them to create and implement an innovative and effective third-party due diligence and monitoring system.
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