A Guide to Disclosing Corruption Investigations in SEC Filings (Part One of Four)

When a company becomes aware of a bribery allegation, various difficult decisions materialize.  For public companies, chief among those decisions is whether, when and how to disclose the matter in an SEC filing.  Public companies are required to disclose material information or events affecting the company, but the definition of material can be amorphous, and the stakes are high.  Public disclosure of a corruption problem exposes companies to civil lawsuits, stock price instability, reputational damage, waning employee morale and productivity, loss of current government contracts and debarment from future contracts.  The potential consequences add urgency to the questions: “When does a company have to disclose?” and “How can a company minimize the negative impact of the disclosure?”  The Anti-Corruption Report is addressing these questions and others in a four-part series that will serve as a reference guide for disclosing corruption matters in SEC filings.  Specifically, this series will provide guidance on whether and at what stage of an internal investigation to make the disclosure and how to craft language to mitigate the fallout from such disclosure.  In addition to analysis and insight from sources, this series will include a compendium of actual FCPA-related disclosures from recent SEC filings.  These real-world examples of relevant disclosures can serve as precedents for counsel tasked with drafting or reviewing SEC filings relating to an FCPA issue.  This article, the first in the series, discusses: factors that companies should consider when determining whether a public disclosure is appropriate; what experts a company should retain to help it make appropriate disclosure decisions; and the risks and benefits of disclosing at different stages of the anti-corruption investigation.  The second article in this series will: detail the risks inherent in disclosure and non-disclosure; address ways to diminish those risks, including how to handle the media; and discuss best practices when disclosing foreign investigations to the SEC.  The third article will provide insight on the most beneficial language to use in disclosures, and will analyze Walmart's disclosures at different times in its FCPA investigation.  The fourth installment will be the referenced compendium of SEC disclosures, categorized by their attributes.

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