Federal Judge Rules Internal Investigation Interviews Not Fairly Attributable to Government Despite U.S. Justice Department Incentive Program

A New Jersey federal judge has denied two executives’ efforts to suppress statements made during an interview conducted as part of an internal investigation of alleged bribe payments in India even though their employer was hoping to take advantage of a U.S. Department of Justice FCPA Pilot Program.

In 2016, the DOJ launched its FCPA Pilot Program “to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose FCPA-related misconduct.” The program offers a range of potential benefits for companies that self-disclose and cooperate, including a potential declination of prosecution.

The executives argued that their interviews were compelled by their employer and that its investigation was attributable to the government. The judge agreed that the interviews were compelled by company policy, which required employees to cooperate fully with internal investigations.

However, the court held that specific state involvement is needed to attribute the interviews to the government. Here, despite the company’s hope of obtaining a declination under the FCPA Pilot Program, the court ruled that its investigation was not attributable to the government. According to the court, the company had “ample reasons” to investigate the alleged misconduct aside from the “additional” self-disclosure incentives, citing evidence about compliance with its own policies and concerns about potential securities litigation, employment litigation, and shareholder derivative lawsuits. The “mere existence of such voluntary disclosure policies” did not amount to the requisite level of government “influence [over] specific conduct” such as conducting interviews.  As the court held, “acting in furtherance of generally applicable Government policies does not render all of [a company’s] actions state actions.”

The court also flagged a significant timing issue regarding the executives’ state-action argument. At the time the first interviews occurred, the company had not yet self-disclosed. The only interview conducted after self-disclosure was a follow-up interview of one of the executives. Importantly, however, the court found that there was “literally no document or testimony establishing that the Government provided any direction to [the company]” regarding that interview. Critically, the Government did not ask the company to conduct the interview nor did it instruct the company on which topics to address.  Moreover, as the court noted, “acts that are taken by a private company in response to government action, and that have as one goal obtaining better treatment from the government,” do not, as a categorical rule, “amount to state action.”

The court also denied the executives’ motion to compel the government to search the company’s corporate files for exculpatory (i.e., Brady) material. The court found that the government did not have constructive possession of materials held by the company because the government did not have the power to access its files, and the company did not relinquish its role as an independent actor.

The court’s ruling has immediate implications on corporate internal investigations, including:

• Corporate policies which require employees to cooperate with internal investigations do not, in and of themselves, transform such investigations into state actions.
• Internal interviews that are part of a company’s attempt to benefit from the FCPA’s cooperation program are unlikely to be attributed to the government, unless there is specific evidence showing that the company took direction from the government.
• Cooperation with a government investigation and selective production of materials in furtherance of a company’s interest in obtaining credit from the government does not mean that the government has constructive possession of all of the company’s files for Brady

With this in mind, companies should be cautious about how much they communicate with the government throughout an FCPA investigation and how much information about the investigation they share with the government.

Crowell & Moring LLP will continue to monitor this case, as well as new developments in the FCPA investigations space. Please reach out to your Crowell White Collar and Regulatory Enforcement contact, including the below contacts, for additional information and further developments.