BulletProofBlog the blog on crisis communications

Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, as international companies grapple with a renewed government focus on corruption, we interview Jim Mintz and Patrick Kelkar of the James Mintz Group, an international investigative firm that specializes in Foreign Corrupt Practices Act (FCPA) due-diligence and investigations for corporations and their legal counsel.

Mr. Mintz, the founder and president of the Mintz Group, has spent almost thirty years conducting investigations all over the world. Mr. Kelkar, a partner in the Mintz Group' s Washington, D.C. office, manages the firm' s FCPA practice group and focuses on complex transnational fraud and corruption investigations:
 
Assume a multinational company has a policy against paying bribes and tells its foreign agents not to pay bribes - is that enough, or does the company need to go further in the anti-corruption area?  Why does it need to conduct due-diligence investigations of its agents?
 
Jim Mintz and Patrick Kelkar: A clear corporate policy against paying bribes is important, as well as including explicit language in every agent agreement that prohibits bribery, but it is also critical for companies to conduct thorough pre-engagement due diligence on their agents and other third parties.

Certainly, U.S. government regulators expect nothing less. In a February 2009 FCPA settlement (for $579 million) by KBR and Halliburton with the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), the SEC criticized Halliburton' s due diligence policy and practice and its failure to conduct any due diligence on one particular agent in Japan. If the government shows up at your door asking to see the files on your foreign agent, you want to be able to produce sufficient documentation to demonstrate you' ve looked thoroughly at the background and reputation of your agent before engaging them to work on your behalf.

If you open your due diligence file to the government and it is empty or thin, you are going to be in a very uncomfortable position. In the event an FCPA violation is uncovered, it is increasingly apparent from past cases that the government is far more likely to be lenient on a company that has a commitment to an anti-bribery compliance program, including conducting robust due diligence on their agents and other third parties.
 
When a company asks you to check on someone they are considering hiring as an agent, what do you look for? 
 
Jim Mintz and Patrick Kelkar: In conducting FCPA due diligence, we are looking for any "red flags" or potential indicators of bribery or corruption concerns. First, we look to see whether the agent (either an individual or a company) has a real business track record and experience in the particular industry for which they are being engaged. We then examine the owners/directors/principals of a company to identify any connections to or relationships with local government, political, or military officials.

We also dig into the reputation of the agent in local circles to assess their business practices, integrity and any history of corrupt activities. Examples of some of the "red flags" we have uncovered in our cases include an alleged association of one agent with a Russian organized crime group; another agent' s shared side business with a local government official, and the fact that an agent, being considered for a relationship with a U.S company, was at the time under investigation for corruption and other illicit activities in two countries. We can tell you that this agent was not hired.
 
If I asked you to conduct due diligence investigations on one person in China, another in Miami, and a third in Liberia, would you do all three investigations the same way?
 
James Mintz and Patrick Kelkar: Yes and no. In all jurisdictions we typically follow a defined scope of work that tracks where we have uncovered problems in the past, but the investigative steps we take are different from one locale to another, based on the accessibility of various kinds of information.

For example, if we are conducting a background investigation on a person or company in Miami, we will have access to very comprehensive and reliable public records, including civil and criminal cases, business filings, and regulatory and government records. In China, where we are doing quite a bit these days, we can access certain corporate and litigation records, but they are not as reliable or comprehensive as in the U.S.  Public disclosure of court proceedings in China, for instance, is very limited. We have developed a particular expertise for unearthing relevant information from online sources and local-language media. And then there are other jurisdictions with virtually no reliable online or public sources, and in those places we focus on developing information on our subjects from contacts with individuals in commercial, diplomatic, and government circles.

We can often provide more meaningful insight on the backgrounds and reputations of the subjects from these contacts that are aware of how the subjects operate their business and their relationships with questionable parties or government officials. In a country such as Liberia, which falls into the category of jurisdictions with extremely limited public records to research, we would rely more on our inquiries with knowledgeable contacts to build the background on the individual or company, and to identify potential areas of concern.

Larry Smith is Senior Vice President of Levick Strategic Communications and a contributing author to Bulletproof Blog.