Clarifying Export Control Internal Investigations
U.S. government contractors operating in the defense sector compete in a highly regulated and scrutinized market that is subject to investigation by federal enforcement agencies.
With respect to U.S. export controls, contractors must ensure compliance with the International Traffic in Arms Regulations — which prohibit the unlicensed transfer of defense articles, defense services and technical data through training, software and other technology transfers — as well as the Export Administration Regulations, which control the export, reexport and transfer of commercial and dual-use commodities, software and technology, as well as certain less sensitive military items.
Internal investigations of potential violations have grown increasingly commonplace, both in the United States and globally. Contractors must carefully consider and establish the contours of any internal investigation to maximize benefits while simultaneously avoiding potentially serious, negative consequences.
Many situations demand an internal investigation to address both business and potential liability concerns. Such investigations are often a crucial part of an effective overall compliance program, aiding companies to not only identify potential issues that have already occurred but also to identify and rectify compliance program vulnerabilities. While internal investigations are often tailored to the specific needs of the business/issue at play, there are at least five key components to success.
A clearly defined, mutually agreed upon scope is perhaps the most important but often overlooked component. While many high profile, high stakes internal investigations have grown exceedingly expensive and time-consuming, this does not always need to be the case.
The investigation mandate should clearly define the nature of the potential violations to be investigated. For example, the scope can be limited to one particular realm of export controls (e.g. ITAR) or can be broader to include, for example, export controls, anti-corruption and economic sanctions concerns. An appropriately targeted investigation will alleviate concerns of “mission creep.”
It should also define the period of time being examined. Such investigations generally focus on a five-year “look back” period, coinciding with the statute of limitations for most non-capital offenses.
Additionally, the business should determine whether an internal investigation will cover a single country, an entire region, or an examination of global operations. Particularly for contractors with multinational operations, this is a key factor, and companies will be well-served when geographical limitations are provided at the outset.
The maintenance of privilege is a critical element to any successful internal investigation. One important consideration is the privilege afforded to communications with in-house versus outside counsel, both within the United States and in other countries. While the law continues to evolve, U.S. courts have generally applied strict standards for in-house counsel when determining the applicability of privilege. Several foreign courts have also held that in-house counsel are not afforded the same attorney-client and work-product privilege protections as they are in the United States.
Standard practice in an internal investigation is to issue a document hold notice as soon as possible to ensure the preservation of all potentially relevant documents. The notice should clearly identify the relevant parties and the importance of preserving all potentially relevant documents and communications related to the investigation.
The notice typically states the applicable time period, type of documents covered, and confirms that the terms “documents” and “communications” should be broadly interpreted to include information stored in any medium. It should also confirm that the company’s normal document retention schedule is suspended and should provide relevant contact information for any questions. Importantly, the notice will generally highlight the importance of preserving attorney-client privilege and will advise that the notice, itself a privileged communication, is not to be forwarded to anyone else, particularly anyone outside the organization.
Witness interviews are a key component of the internal investigation process and are generally conducted once all relevant documents have been reviewed and analyzed. Once again, attorney-client privilege is particularly important in this context, as is the need to provide the witness with the “Upjohn” warning at the start of the interview. In Upjohn Co. v. United States, 449 U.S. 383 (1981), the Supreme Court held that communications between company counsel and employees are privileged, but noted that that privilege belongs to the company, not the employee. This warning makes clear that the interviewing counsel represents only the company, and that any claim of privilege rests with the company, not the employee.
Finally, at the conclusion of an investigation, the company may request a written report summarizing the findings. Such a report generally summarizes the circumstances that gave rise to the investigation, the findings and suggested remedial measures to ensure that circumstances that gave rise to the investigation do not recur. It may also discuss the appropriateness of submitting a voluntary self-disclosure to the appropriate government agency.
While internal investigations necessarily vary across businesses and industries, these five key components are essential to ensuring that they proceed efficiently and successfully.
Source :- Nationaldefensemagazine.org