Foreign Corrupt Practices Act (“FCPA”) investigations typically involve third parties or subsidiaries located outside the US since most FCPA violations arise out of the activities of foreign third parties or foreign subsidiaries. But most guides on how to conduct FCPA investigations and interviews (or run an FCPA compliance program–fodder for the next post) seem to ignore this rather obvious fact. It has not however escaped the attention of the U.S. Department of Justice or the U.S. Securities & Exchange Commission.
Oddly, most guides on compliance investigations and interviews give scant attention to the fact that most of the truly useful interviews will be conducted outside of the US. Many seem to blithely assume that the interviews will occur in a comfortable office in downtown New York, San Francisco, Los Angeles or Singapore. When the foreign component of an investigation or interview is mentioned, there is typically a pro forma reference to language and “cultural issues,” a warning about data protection laws and maybe a travel tip or two about electrical outlets and food hygiene, but little else.
There seems to be a near consensus view that preparation is the key to a successful interview, but little guidance on how to prepare for an interview in a foreign jurisdiction. And this may be justified. A simple suggestion about being sensitive to cultural differences isn’t much help when faced with the reality that every culture is different. Indeed, suggestions about how to interview employees and intermediaries in Asia alone can be downright misleading. Asia is a big place with major cultural, religious, historical and language differences. What works in China could be disastrous in Thailand.
An exhaustive guide on the cultural nuances of compliance interviews in Thailand would require an Encyclopedia Britannica size treatise. The discussion here will be limited to a few major points.
Thailand is not Taiwan, although not everyone seems to know this. Taiwan ranks 29 and scores 63 on Transparency International’s Corruption Perceptions Index 2017 (better than Israel but worse than Chile) while Thailand ranks 97 and scores 37 (the same as Indonesia). The higher the score, the lower the perceived level of public sector perception on a 0 to 100 scale, and there is a big difference between 63 and 97. There is also a big difference between the languages, culture and history of these two countries. This is only one real-world example of Asia’s diversity.
At least one commentator has said that the federal prosecutor approach to compliance interviews is not necessarily the best one and, with apologies to former federal prosecutors, this is particularly true in Thailand. (No idea about Taiwan). It’s best to start with an exchange of pleasantries and compliments. This is important everywhere, but it is doubly important in Thailand. This may seem like a frustrating waste of time to a US trained lawyer, but many of the tools that are available to compel an interview or press for cooperation are simply not available in Thailand. And a polite manner matters in Thailand. Compliance interviews everywhere often require difficult questions that employees would prefer to avoid answering, and for that you need to develop a rapport with your witness. This is true everywhere, but it is particularly true in Thailand.
There is a flip side to this. Expect to be treated with an extraordinarily high level of politeness and, yes, even flattery. It may or may not be genuine. It may or may not be designed to deflect attention from relevant, and sometimes damning, facts and details. But no matter what the purpose, it is often extraordinarily effective. Even seasoned investigators are often completely oblivious to how this has influenced their own “objective” assessment of a witness.
Grenjai (เกรงใจ) complicates candor in Thailand (I take full ownership of transliteration errors). The term refers to something akin to obligation, but that definition misses its many nuances. And it is pervasive. It’s the deference a junior employee may employ when discussing a senior employee that prevents absolute candor. Thailand is a hierarchical society and expecting a junior employee to be absolutely candid about a senior employee when interviewed by a lawyer who will be returning to New York in a few days is folly. There is much more that can and has been said about this aspect of Thai culture, but there isn’t enough space to do so here. Instead, a few practical points:
- Language: A Thai employee of a major multi-national will likely speak some English. She or he might also be able to read and write English near fluently, but often does not understand everything, particularly idioms. And because there is a bias towards agreement and against contention, you may think an employee agrees with your summary of her or his testimony of an issue when the employee does not really understand what you are saying. And lawyers tend to employ idiomatic language more frequently when trying to summarize a complicated subject (“so the big picture here is that…”) before moving to the next.
- Document Preparation will be Challenge:Even when the documents are in clear English, this can be a challenge. But when they are in a foreign language that uses script most foreign lawyers have never seen before, it can be particularly challenging. What appears to be a smoking gun (an idiom) in an email because of the timing and participants involved, may actually be a heated (idiom alert) discussion about lunch plans. There are many cheap translators in Thailand, but good legal translators familiar with compliance issues are rare and never cheap. Poor translations can lead to catastrophically expensive mistakes. I have seen them.
- Staffing the Interview:Generally there should be at least two lawyers present at the interview. In Thailand this is particularly true. At least one of those lawyers should have substantial familiarity with Thai culture and law and, in many cases, be able to assist on language issues. And because Thailand does not have a robust or well-defined attorney-client privilege, one of the participants should be from a jurisdiction that does.
- Taping the Interview:There are good reasons for not taping interviews, but they must be balanced against local considerations. One hard reason is set out in point number 6 below. But there are other “cultural reasons” pertaining to face and societal considerations that don’t exist in other jurisdictions-even in Asia. And don’t be surprised if the witness is also surreptitiously taping the interview.
- Work Permits:Thai law has an extremely broad definition of work. It can be found here, but work is defined as “engaging in work by exerting energy or using knowledge whether or not in consideration of wages or other benefits.” And the penalties for working without a work permit can be severe, although they typically involve deportation and a fine. But that is enough to delay and add significant costs to a compliance interview. Work permit arrests are often initiated by someone with an interest in having that arrest occur. As polite as an employee may appear to be, if she or he may lost face or if some embarrassing or some incriminating information has or may come to light, you are much safer having a work permit. For short visits, this typically takes the form of a 15-day urgent work permit, which is relatively easy to procure.
- Defamation – Truth is Not a Defense in Thailand:An interview will result in a memorandum summarizing that interview (which will likely include the impressions and views of interviewing counsel), discussion about that interview and follow-up questions that are likely to incorporate factual matters raised during the interview. Be careful about what you say during an interview and what you write following an interview. Truth is not a defense to a criminal defamation claim in Thailand. Thai defamation laws are interpreted broadly and if a statement impugns the integrity of a person or company, that person or company can file a criminal claim directly. Private parties can prosecute claims directly (without review by a public prosecutor), and it is not unusual for private parties to file criminal defamation claims when they don’t like something they have heard or think has been said. Thai companies do and have filed criminal defamation claims against reporters and others that have made claims and statements they don’t like, particularly about sensitive subjects, such as human trafficking and corruption. Your Thai counsel will know this, and she or he will not want to be dragged into a criminal action, particularly if the party asserting the claim is thought to have “dark influence” (อิทธิพลมืด).
- There are No Secrets in a Thai Office:This is true, to a varying extent elsewhere, but it is particularly true in Thailand. There really are no secrets in a Thai office. Complicating matters, Thailand is sometimes ranked as the social media capital of the world. Witnesses should be given an Upjohn warning and specifically admonished to keep the contents of an interview confidential, but don’t simply assume that everything was actually kept confidential. Even if strong measures are taken to segregate interviewed witnesses from other witnesses, don’t be surprised if information leaks back to the office or disseminated to the public at large. And it should go without saying that witnesses should be interviewed individually and not in groups.
- Connections Really Matter in Thailand:Connections matter everywhere, but they really matter in Thailand. It’s not unusual for an employee to have a cousin or uncle holding a senior position in the government. This is not necessarily nefarious, but it could be. The professional technocratic middle class is still relatively small in Thailand and it can be near impossible to find qualified staff who do not have a relative in a senior government position. This is changing as the Thai economy grows and efforts are made to provide a quality education to larger portion of the Thai population, but it’s a risk now.
- Employee Cooperation:Thai employees enjoy considerable protections and rights. There is no concept of “at will” employment here. If terminated, Thai employees are typically entitled to mandatory benefits, absent the most egregious of circumstances. This is one of the reasons why extra effort must be put into developing a rapport at the start with employees that will be interviewed. The threat of termination and other disciplinary measures is weak at best here.
- Business Practices:Thai parties sometimes engage in practices that are intended to minimize their tax liability or evade regulatory requirements. This type of conduct would often be considered unacceptable in the US. Questionable books and records do not necessarily establish an FCPA violation (but they could), and it is often difficult to know if a party is stone-walling because it fears that disclosure of an FCPA violation (or Thailand’s own anti-corruption laws) or because it doesn’t want others to know about its questionable practices under Thai tax and other laws.
- Red Tape Intensive:Thailand does not have a monopoly on red tape, but it seems to have more than its fair share. It has licensing and permitting requirements that you would not find or expect in the US. Many Thai regulations grant broad discretion to Thai officials. There are expectations that junior officials will provide funding for the extravagant life style of their superiors, and the combination of unnecessary regulation and broad discretionary authority gives junior officials the opportunity to provide that funding.
- Government Agencies and SOEs:Thailand is not China, but many businesses that would be private enterprises in the U.S. are actually state-owned enterprises (“SOEs”) in Thailand. Fortunately, it is not difficult for local counsel to identify SOEs.
- Limits to On-Line Research:It is often impossible to conduct on-line research. Information that could be obtained in a short and simple on-line search in the US (e.g., California State Bar membership) is either not available because its considered “confidential” or requires a manual search and the cooperation of officials. Information that could be obtained with 15 minutes of work in the U.S. could take 15 days or more of work in Thailand.
- Not all Thai Government Agencies the Same: Although Thailand fares poorly on Transparency International’s Corruption Perceptions Index, it would be a mistake to assume that all government agencies suffer from the same transparency problems. Some are much cleaner than Thailand’s rating would suggest. And some are worse. The Thai Securities and Exchange Commission, in my experience, is relatively clean. But for reasons mentioned in point number 6, the notoriously corrupt agencies will not be listed here. For that, you need to hire counsel for privileged advice or perhaps, for a high-level overview, take a look a look here.
- Sensitivity to Reputation & Face:Many Thais are seriously embarrassed by its reputation for corruption. It’s a loss of face, and face is very important and very complicated in Thailand: it’s not just personal. Some contend that face is a form of social capital in Thai leadership. Thais also have a deserved reputation for patriotism and taking tremendous pride in their country. A visiting lawyer conducting a compliance investigation gains little and risks much by publicly highlighting transparency problems. Those who live here are already very much aware of Thailand’s transparency problems: they live with them on a daily basis. But a foreign compliance lawyer who will soon fly home to Singapore or San Francisco does not. She or he also does not face the very difficult and sometime dangerous repercussions of the full disclosure that is required in compliance investigations. Although this is not an argument for anything less than full disclosure, it is a feature of the social terrain that all compliance investigators must keep in mind.