International Corporate Fraud Investigations

INTRODUCTION

With fraud and corruption accounting for more than 2% of the U.S. gross

domestic product, and with it being even more prevalent in many foreign

countries, U.S. corporations which have overseas operations are finding it

increasingly necessary to conduct internal fraud investigations in foreign

countries.

Numerous issues arise in U.S. based fraud investigations, which require the

lawyer conducting them to be knowledgeable in areas of commercial law, white

collar criminal law, parallel proceedings and other areas. When a U.S.

corporation, particularly a major one, begins an investigation in a foreign

country, whether of its own operations or of third parties, the lawyer

conducting the investigation must be cognizant of many factors that would not

arise in the United States and must plan the investigation to deal with these

factors.††This is particularly true where the corporation is a major

employer, or revenue from it is important to the local or national economy, or

if there are local joint venture partners, third party companies or prominent

persons who may be implicated in wrongdoing.

Overseas investigations can arise in a number of different

ways.††The host foreign government may commence an

investigation.††In some instances, the United States government will

commence an investigation of a U.S. corporation for work done overseas. In many

instances, the corporation will itself want to conduct an overseas investigation

because of concerns that it has been defrauded or because of concerns regarding

its operations or relationships with third parties.

Those with the requisite education and business experience to perpetrate

large scale frauds are often schoolmates, business associates or family to those

in government positions of power.††The close personal and business

relationships which exist between government, on the one hand, and wealthy

families and powerful business executives on the other, such as joint-ownership

of target companies, family intermarriages resulting in joint business interests

and even joint legal/professional representation, can cause great difficulty for

the investigation.

Often, as a result of the fact that the "upper echelons" move in

the same social arenas, third parties may be hesitant to provide information

against the subjects of the investigation for fear of retribution specifically

associated with their continued social positions.††Or they may funnel

information to the persons being investigated while appearing to fully

cooperate.††These people frequent the same churches, country clubs and

vacation spots and are firm in their belief that, once the furor passes, they

will again be interacting with the subject(s) of your investigation.††

Yet an investigator may have no clue of the relationship and thus not know that

real assistance will not be forthcoming.

One clear impediment to an overseas internal...