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Cost Effective FCPA Investigations

Cost Effective FCPA Investigations

JANUARY 10, 2013

This spring, on April 2, I will be moderating a top-notch panel at the Dow Jones Compliance Symposium in DC on the high cost of FCPA investigations.  The experienced panel of Jamie Gorelick, Ty Cobb and Kevin J. O’Connor knows the issues from both sides.  I’d like to hear from anyone out there who has suggestions for controlling costs while conducting a credible and effective FCPA investigation.  If you are not sure that your suggestions will pass muster with the regulators, send them along anyway and I will put them to the panel. After all, there will be years of prosecutorial experience on the podium to make an honest appraisal.

Some things to think about:

I divide costs into direct and indirect.  Examples of direct costs would be legal, accounting, investigative and public relations fees.  Examples of indirect costs would be loss of market value, diversion of executive talents, malaise and stagnation.

These categories are not perfect, but you get the idea.

And in my view, what is the single greatest accelerator of all Direct and Indirect costs: It is TIME.

And in my view, what is the second biggest accelerator of all Direct and Indirect costs: It is PUBLIC KNOWLEDGE.

Notice, the seriousness of the allegations is not a factor, except to the extent that it impacts or is impacted by time and the public knowledge.  Why is that?  I think one reason is that we fail to make the distinction between, well, the Big Mac and the Dollar Menu Burger. Both are burgers, but they are not the same.

You may agree or disagree or have additional thoughts. I would like to hear them.

So where does this analysis take us?  I think it is a starting point to thinking about how resources now spent on investigations could be better spent on solutions. After all, once you know the key wrongdoers, the ones who should be punished, isn’t it best to focus on how to change the system that allowed them to operate and, for a time, succeed.

Don’t misunderstand me. I am a great believer in individual responsibility.  That is why I would rather see key individuals punished and the rest of the budget used to make sure it does not happen again, rather than spend enormous sums of money with very limited returns in terms of punishment and responsibility.  (Unless you consider the cost of the investigation itself to be a legitimate punishment.  I do not.)

Enough for this first discussion.  Perhaps in the future we can discuss negotiating an investigation the same way you would negotiate a resolution of a case.  Also, how and when a voluntary disclosure is made might be an influence on the scope of the investigation required.  Another thought, how has BIG DATA and the resultant analytics provided tools to test a company’s compliance and thus possibly dramatically reduce investigative costs?  Of course, that raises the question about analytics that we all have heard in another context: are we there yet? I think we are.

About the author

schwartz_bBART M. SCHWARTZ

Bart M. Schwartz is the chairman of Guidepost Solutions LLC, a global leader in investigations, due diligence, security and technology consulting, immigration and cross-border consulting, and monitoring and compliance solutions. Bart can be reached at


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