A U.S. bribery investigation at ride-hailing company Uber Technologies Inc will likely go on for a year or more and could lead to snowballing legal and compliance costs if lawyers find systemic problems.
Uber, which is the subject of a U.S. probe into whether it paid bribes oversees, has started a review of its Asia operations and notified U.S. authorities about payments made by staff to police officers in Indonesia, a person familiar with the matter has told Reuters.
The following explains the possible fallout for the company.
What is under investigation?
Uber said in August that it was cooperating with a preliminary investigation led by the U.S. Department of Justice into whether its managers violated a 1977 anti-bribery law, known as the Foreign Corrupt Practices Act (FCPA). The law bars U.S. companies and some other entities from paying bribes to foreign government officials to obtain business.
The bulk of the investigative work may be handled by O‘Melveny & Myers, a large law firm that represents Uber and is conducting an internal probe. The law firm is expected to turn over its findings to the Justice Department, which would then weigh charges or a settlement with Uber.
How much money is at stake?
There is a wide range for the potential financial impact on Uber. The company will have to pay O‘Melveny & Myers and any other lawyers it hires. It may need to increase its spending on compliance training for employees.
One measure of how high costs can go: Wal-Mart Stores Inc (WMT.N), which has faced a massive and prolonged FCPA investigation of its operations abroad, says it has spent $865 million on FCPA- and compliance-related expenses over the past five and a half years, according to Mike Koehler, a law professor at Southern Illinois University who writes about the FCPA.
Companies often sign agreements and pay penalties to the Justice Department or the U.S. Securities and Exchange Commission to close investigations.
The settlement amounts can range from under $1 million to the record $800 million agreed to between Siemens AG and U.S. authorities in 2008. Various factors go into the calculations, including ability to pay and level of cooperation with the U.S. government.
How long does it take?
A company might wrap up an FCPA investigation within a year if the matter is confined to one country or is otherwise an isolated example of wrongdoing.
Examples abound, though, of probes that went on for much longer. Cosmetics seller Avon Products Inc launched an investigation of its China operations in 2008; six years later, it agreed to plead guilty under the FCPA and pay the U.S. government $135 million.
What non-monetary penalties are involved?
The FCPA is a criminal statute, meaning that individuals could be charged and, if they are found guilty, sent to prison for violations. That has been rare.
In cases of significant wrongdoing, U.S. authorities generally seek the appointment of a monitor – a person from outside the company, often a lawyer, who serves as a watchdog to prevent recidivism. The monitor may be given wide access to employees and documents and the authority to issue recommendations, which the business has to accept unless it is able to persuade the government otherwise.
How much of a distraction can it be?
This depends on the scope of the investigation, but an FCPA probe can cause turmoil within companies. Lawyers will seek interviews with employees and pore over documents such as expense reports. Memos may go out company-wide telling people to preserve records.
Companies also must assess risk differently and be more careful, knowing they will face scrutiny from U.S. authorities for any further potential wrongdoing. They may be more cautious, for example, when entering a risky local market where bribery is common – a serious consideration for a company like Uber that wants to expand aggressively abroad.
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