Companies have enough of a hard time tracking all the information and data that could become part of a domestic lawsuit. Add a multinational component to the mix and the task becomes far more complex.
There are cultural disparities and differences in technology platforms that need to be considered, and the miles between international units and corporate headquarters have a way of distorting e-discovery and data retention policies, not to mention the language barriers. Then there are the data privacy laws that restrict how data is used or where it can be moved to in the organization. Indeed, the e-discovery challenges of Foreign Corrupt Practices Act investigations are part of what makes them so expensive and complex.
“The thing about FCPA investigations is that they are inherently cross-border,” making access to evidence and witnesses that much more difficult, says Kimberly Parker, a partner at law firm Wilmer Cutler Pickering Hale and Dorr.
As more companies are facing the risk of charges from FCPA violations or other types of international corruption, they are revisiting their e-discovery policies and making sure that any data that could become part of a legal action is being retained.
What many are finding is that the e-discovery practices of foreign offices aren't up to snuff. Companies often don't classify information correctly—or at all—so they end up with all this “Wild West” data, says Howard Sklar, senior counsel at e-discovery software firm Recommind and former head of FCPA compliance and anti-corruption at Hewlett-Packard. “They know where it is, but they don't know anything about it,” he says.
Inconsistent and decentralized information management practices no longer hold water in today's enforcement environment. Due to the regulatory focus on enforcement of anti-bribery laws around the world, “corporations need to get a better understanding of the information that they're holding, so that the investigations that need to be performed can be performed as easily as possible,” says Craig Earnshaw, a managing director in the technology practice at FTI Consulting in its London office.
A recent survey conducted by FTI Consulting reflects the belief that as FCPA enforcement continues to intensify, many companies will face related e-discovery challenges. According to the survey of 114 legal and accounting professionals who regularly assist companies with e-discovery matters, half of all respondents predict that the biggest challenge with cross-border investigations over the next five years will result from FCPA investigations.
International data privacy “will become the number-two overriding investigative issue over the next several years,” Sklar says. Because e-discovery calls for the immediate accessibility and production of electronic records, the challenge presented by data protection laws is that they directly affect where and how data must be collected, stored, and reviewed.
According to the FTI survey, 54 percent of respondents said data privacy was the number-one challenge to multinational discovery matters and 76 percent anticipate an increase in data privacy requirements around document review.
New European Union data privacy rules, set to take effect in 2014, pose especially significant e-discovery challenges for companies conducting an FCPA probe. Because the EU considers personal data to be any information about an individual, the processing of personal data—including e-discovery investigations and the transferring of data across borders—would be prohibited unless certain restrictions are met. For example, companies must get individuals' consent to process personal data.
“Corporations need to get a better understanding of the information that they're holding, so that the investigations that need to be performed can be performed as easily as possible.”
—Craig Earnshaw,
Managing Director in the Tech Practice,
FTI Consulting
Companies need to be able to walk that fine line of performing the investigation, while staying in compliance with the data privacy laws. “You have to take it on a country-by-country basis,” says Patrick Burke, senior director and assistant general counsel for Guidance Software.
To avoid potential legal issues with such data privacy laws, companies may want to consider requiring employees to sign consent forms at the outset of an investigation, Sklar says.
Foreign blocking statutes, which generally prohibit production of documents or information in that foreign jurisdiction for use in litigation in another country, are another hurdle for e-discovery. Countries with such blocking statutes—some that were specifically enacted to thwart U.S.-style discovery—include France, Germany, and Canada.
Then there are countries like China, where local companies—often with ties to the Chinese government—can invoke “state secrets” rules to prevent documents from being taken out of the country.
Such country-based discovery hurdles may prove especially problematic, given the prevalence of cases that take place in those countries. According to the FTI survey, for example, the top jurisdictions where investigations originate include Britain (66 percent); China (46 percent); Germany (46 percent); France (34 percent); and Brazil (34 percent).
Some companies are overcoming the difficulties of obtaining and securing evidence outside of the United States by choosing to keep the data within the jurisdiction that it resides and undertake the review and investigation in-country. “There isn't the necessity to transfer that information across borders and, therefore, come up against some of these cross-border data privacy challenges,” says Earnshaw.
“The worst thing that can happen is that you move data from one country to the other and discover only after the fact that there were restrictions on what you could do with the data,” says Parker. “It's at that point that you're trying to un-ring the bell, and that's difficult to do.”
Reducing Costs
The inherent global reach of an FCPA investigation means the costs of conducting an investigation can be astronomical. Among respondents of the FTI survey, 40 percent said they spent more than $500,000 on e-discovery for multinational matters, and 33 percent said that they did not even know how much they spent.
“A lot of the costs that come from e-discovery really stem from the overwhelming amount of electronically stored information,” says Bryant Bell, senior product marketing manager for Guidance Software. “The majority of the ways to reduce that cost come from technology.”
Traditionally, investigators perform keyword searches on mass volumes of material to look for specific evidence in the course of an investigation. “The problem is that keyword searches are only as good as your knowledge of the data,” says Sklar. “You have to know things like code words and project names—all these things that you don't know going in.”
New, sophisticated tools are emerging, however, that offer better searching and data retrieval, such as e-mail threading, topic grouping, and concept searches, limiting the review of data to what is relevant to the investigation. According to Sklar, they offer a far more effective way to search through documents.”
Companies also may want to enlist the help of forensic accountants to conduct independent analysis of financial records, such as expenses and invoice payments, in order to track the flow of funds associated with suspected wrongdoers, advises Earnshaw. “It becomes a much more holistic approach than just looking at e-mails,” he says.
Another way to reduce costs is to regularly review your contracts with outside counsel and legal service providers, says Bell. Companies that don't review their contracts end up paying significantly higher rates for the processing, review, and production of documents, he says.
Costs can also be reduced by adhering to a document destruction policy. “Companies often preserve too much data, especially with the advent of the cloud,” says Sklar.
Having a document destruction policy in place isn't spoliation—the intentional or negligent failure to preserve relevant documents. “It's only once you know there is a problem that the requirement to preserve evidence comes into being,” says Sklar.
The same technology that allows for concept searches on the review side also allows companies to better classify information on the front end by having a better understanding and awareness as to what information the company is storing, where, and how far back. “Having a better front-end system in place alleviates a lot of the problem from the back end during an investigation or during litigation,” says Sklar.
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