FCPA Compliance and Ethics Blog

November 18, 2014

FIFA and Good-Faith Investigations

CautionYou know things are getting bad when the Wall Street Journal (WSJ) questions a business’ moral authority. Things certainly cannot be much better when the regulators begin nosing around your own self-indulgence. What happens when you realize all of a sudden that all those actions you have taken may actually fall under the jurisdiction of both the United Kingdom and the United States and their respective anti-corruption laws, the UK Bribery Act and the US Foreign Corrupt Practices Act (FCPA)? It turns out all of this may have come through for our friends at Fédération Internationale de Football Association (FIFA).

Last week FIFA announced that it had considered the investigation into allegations of corruption into the awarding of the 2018 World Cup tournament to Russia and the 2022 World Cup tournament to Qatar and found, as reported in the Financial Times (FT) by Roger Blitz in an article entitled “Fifa thrown into fresh turmoil over Qatar World Cup corruption claims”, that “any improper behaviour in the bidding process for the tournament was “of very limited scope.”” This conclusion was made by a FIFA appointed former judge, “Hans-Joachim Eckert, who is chairman of the adjudicatory chamber of Fifa’s ethics committee.” Eckert had reviewed a 350-page report by investigator Michael J. Garcia, who is a former US prosecutor now practicing law in New York. Eckert released a 42 page “summary study” of the Garcia report, which he claimed supported his decision.

Unfortunately for FIFA and Eckert, Blitz reported in another FT article, entitled “Garcia and Eckert set for showdown over Fifa report”, that “Mr Eckert’s summary was disowned within hours of its publication by Mr Garcia, who claimed it misrepresented his findings. He has protested to Fifa’s appeals committee.” Garcia’s statement “has blown apart Fifa’s attempt to bring to a close nearly three years of allegations of unethical behaviour and has left Mr Eckert under increasing pressure to publish the Garcia investigation.” This action by FIFA led Reinhard Rauball, president of the German football league (DFL), to say, “Europe would have to consider breaking away from Fifa unless the Garcia investigation was published in full.”

All of this came after the summary itself noted that documents and evidence surrounding the Russian bid were lost because the computers on which they were stored had been destroyed. Garcia was not even able to speak with all the relevant witness in the Qatar bid as well. Even with this lack of full investigation, Garcia issues a statement which said that Eckert’s summary contained “numerous and materially incomplete and erroneous representations of the facts and conclusions detailed in the investigatory chamber’s report.”

What does all of this mean for FIFA? Certainly if the head of the German football league says that the European soccer federations may have to pull out of the organization because it is so corrupt that portends poorly. In another article in the FT, entitled “Brussels launches sliding tackle against Fifa”, Alex Barker reported “The EU’s top sports official is urging Fifa to come clean with findings from its corruption investigation, in a warning that signals a Brussels rethink over the commercial freedoms enjoyed by football’s scandal-tarnished governing body. In a direct swipe at Fifa’s attempt to clear Russia and Qatar to run the next two World Cups, Tibor Navracsics, the EU commissioner for sports, has called for full publication of a graft report into the 2010 bidding process to “remove doubts” about its findings. While Sepp Blatter’s Fifa is an unregulated Swiss body independent from government, its lucrative business activities in the European market are subject to rules overseen by EU regulators, including sales of television rights.”

What about any criminal issues? A quick Google search reveals that FIFA has offices in both the US and the UK. Given the very broad jurisdiction of the FCPA and perhaps the UK Bribery Act, it does not seem too far a stretch for either the Department of Justice (DOJ), the FBI, the UK Serious Fraud Office (SFO) or even the Overseas anti-corruption unit of the London police might want to open an investigation. Indeed CNN reported that the FBI is investigating FIFA at this time, saying “Investigators are moving ahead with their probe, which could result in charges against senior FIFA officials, the U.S. law enforcement officials said.”

For the compliance practitioner there are a couple of important lesson in all of this. First and foremost, in your internal investigations, you need to provide access of both documents and witnesses to your counsel. If you do not that alone may certainly compromise your investigation. This point was recently re-emphasized in the ongoing General Motors (GM) scandal over its ignition switch problems. It turns out that over two months prior to the public announcement the company had ordered over 500,000 new switches from its supplier. According to Hilary Stout and Bill Vlasic, writing in the New York Times (NYT) in an article entitled “G.M. Ordered a Half-Million Replacement Switches 2 Months Before Recall”, the order was placed after an internal company committee met. But no records of the meeting were provided to company’s outside counsel investigating this matter, Anton R. Valukas. Interestingly Valukas released a statement which the article quoted, ““To my knowledge, G.M. provided me access to all information in its possession related to G.M. inquiries regarding various repair options and part availability as G.M. considered potential fixes for the ignition switch in the event that a recall would occur,” the statement said.” That is lawyer-speak for I looked at what they showed me.

Hiding or not providing access to internal or outside counsel can be a recipe for disaster with the DOJ. The reason is the same as it is a disaster for FIFA in Europe. There is no trust left for the organization. Ask any ex-DOJer and they will tell you that it is all about credibility when you self-disclose to the DOJ or when you are in negotiations with the DOJ over a potential FCPA penalty. I regularly hear Stephen Martin and Mike Volkov say precisely that when they talk about their experiences from working for the US government. If you do not allow your investigators access to all relevant documents and those witnesses under your control, the DOJ will most probably not consider the results of your investigation valid. The DOJ may not even consider your exertions worthy of a good-faith effort.

One thing is also very relevant for the compliance practitioner. If your outside counsel disavows him or herself from the company’s interpretation of it going forward, you are in big trouble. Even the WSJ, in its Op-Ed piece said, “FIFA’s moral failure stands out.”

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2014

February 20, 2013

Interview with Scott Moritz

Ed. Note-today we continue with our series on thought leaders and practitioners in the compliance arena. Today, we have an interview with Scott Moritz, who is a Managing Director, Protiviti (www.protiviti.com)

============================================================================================

1. Where did you grow up and what were your interests as a youngster? 

I grew up on the North Shore of Long Island, the youngest of six kids. Our father owned a swimming pool construction company whose workforce at various times consisted of my legendary grandfather, brothers, many cousins, a wide variety of parolees and, for a few summers during high school, me. Since I can remember, I was always fascinated with police work and detective stories and grew up watching TV shows like Baretta, The Rockford Files and Police Story. From an early age, people thought I looked like a cop. When I was 16, some of my knuckleheaded friends brought me along to New York City as “security,” because they wanted to buy fireworks, which were illegal at the time. In fact, I played the security role a lot with my friends, because they always seemed to attract the kind of attention that necessitated someone securing their safety. Our misadventure in the city was my first exposure to a recurring theme in my law enforcement experience: even if something is illegal to make, sell or possess, it is still readily available. In no time, one of my friends was in negotiation with a gang member who took one look at me and said “He’s a cop, get lost.” My undercover career was over before it started.

2. Where did you go to college and what experiences there led to your current profession?

I graduated from Jacksonville University in Jacksonville, Florida with a double major in marketing and management and a minor in psychology. Throughout college, I worked as a bouncer, bartender, DJ and eventually manager at a rock nightclub. As a 5’8” bouncer in Jacksonville, where the average male is 6’3,” I quickly developed negotiation, persuasion, de-escalation and other crisis-related skills. I also had to be able to read body language and know when a  negotiation had broken down, and it was time to take action. I prided myself on how frequently I was able to get people out of the club peacefully. I witnessed more violent crimes, including shooting incidents, in my four years as a nightclub employee than I did in nearly 10 years as an FBI agent.

3. How did you come to join the FBI? What were your duties as an agent?

After college, I applied to take the NYPD entrance exam. At the time, my sister Stacey was an Assistant U.S. Attorney in the Southern District of New York. When I mentioned to her that I had applied to take the police exam, she asked “What about the FBI?” She put me in touch with her friend, who was a Special Agent in the New York Field Office. This was in 1985. I called the number she gave me and a deep, booming voice answered, “TERRORISM!” I was so startled, I nearly fell off my chair! Whatever preconceptions I had in terms of how the FBI might answer the phone, that one didn’t make the mental checklist. I collected myself and had a great conversation with the agent, who encouraged me to apply to the FBI.

The FBI recruitment process is very involved, with many aspects to it, and candidates fall by the wayside at every stage. Back then, there was an initial application, a written exam, the completion of a very detailed application, a panel interview with three FBI Special Agents and finally a background check investigation, and as far as I know, that’s still the case today. Completing the application was quite an undertaking because you had to provide very detailed information about you, your siblings, their spouses, your parents and every roommate you’ve ever had. The application was used as the roadmap for the intensive background investigation that follows.

I entered on duty as an FBI Special Agent in October, 1986. Special Agent trainees lived at the FBI Academy for four months, and academy training was divided equally between academics (minimum passing grade is 85%), physical training/defensive tactics and firearms training.

FBI Special Agents investigate and enforce an incredibly wide variety of criminal violations, counter-intelligence and counter-terrorism. My first assignment was the Memphis, Tennessee field office. At the time, Memphis was a relatively small FBI office, so agents had much broader responsibilities than in the larger field offices where agents tend to be more specialized. For most of my time in Memphis, I was assigned to a White Collar Crime squad, which also had responsibility for the Civil Rights and Fugitive programs. I worked on a wide array of primarily financial crime investigations, including on the bank robbery response team and worked with the narcotics task force. While white collar crime was my primary focus, each agent on the squad carried multiple fugitive cases. The FBI has primary jurisdiction to enforce Unlawful Flight to Avoid Prosecution (UFAP) in support of state and local law enforcement when there is evidence that violent offenders have fled their jurisdictions.

In 1991, I was transferred to NYC and assigned to the money-laundering and asset forfeiture squad.  There, the entire mission was to conduct parallel financial investigations alongside the largest, most complex criminal cases being investigated by the New York FBI. I worked on many organized crime, narco-laundering, and trafficking and white collar crime cases, and our squad seized and forfeited nearly $1 billion during my five years there.

4. How have you utilized the skills you learned in law enforcement in your current profession?

I use the skills I learned as an FBI Special Agent every day in my current profession and have since the day I left the Bureau nearly 17 years ago. Many crimes are revenue-generating crimes; making cases against criminal defendants and their criminally-derived assets means painstaking financial analysis. Tracing criminal proceeds back to their source provides evidence of the crime, quantifies it and enables the government to dismantle criminal organizations by seizing assets obtained by the specified unlawful activity or used to facilitate the laundering of criminal proceeds. I am usually surrounded by mountains of banking records and financial records. However, reviewing banking and financial records alone often doesn’t reveal the full picture. While at the FBI, I developed the ability to use publicly available information to identify the financial holdings and business interests of criminal subjects and their associates, as well as any prior illegal conduct or civil disputes that could help build the case against them. These same background investigation techniques can be used in a commercial context both after the fact as part of the ensuing financial crime investigation and also to vet prospective relationships in an effort to determine whether a company would make a suitable business partner. Likewise, interviewing and interrogation skills are something you use in a variety of settings. Unlike interviews depicted on many TV crime dramas, interviewing is often all about building a rapport and establishing some common ground, no matter how despicable the subject of the interview may be. People also give off hidden cues that signal when they are uncomfortable with your questions and when they are outright lying. These same skills are very helpful when conducting interviews of executives and employees, whether in the course of evaluating a corporate compliance program, conducting anti-corruption due diligence or interviewing a suspect.

5. You recently changed companies, moving from Navigant to Protiviti. What can you tell us about your new position and some of the things that you would like to achieve?

I’m incredibly excited about my new role at Protiviti. I’ve joined an established and very experienced firm whose professional staff includes investigators, forensic accountants, anti-corruption practitioners and technologists in over 70 offices in 23 countries. Protiviti also has a very powerful technology platform in its Governance Portal. The Portal manages data intake, risk scoring, work-flow management, case management and decision-making ‑ so that all the aspects of an overall ethics and compliance program, or a single aspect of it, such as managing third-party anti-corruption programs, can be brought together on a single platform. (The Portal has received industry recognition: Protiviti has been positioned as a “Challenger” by Gartner in the October 2012 Magic Quadrant for Enterprise Governance, Risk and Compliance Platforms.)

I really look forward to continuing to help clients apply their limited resources strategically on a risk basis and also to better position them so that they can manage their regulatory risk proactively and deploy investigative and forensic resources rapidly when issues emerge.

============================================================================================

Scott Mortiz can be reached at scott.moritz@protiviti.com.

============================================================================================

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. 

Blog at WordPress.com.