Constance Vigilance, the General Counsel of Strategos Inc., receives two concerning phone calls on a Friday afternoon. The first is from the CFO informing her that an anonymous whistleblower alleged inappropriate payments of 10% of sales to government officials in Southeast Asia to facilitate sales. These payments were recorded as "consulting fees." The second call is from the US Treasury Department regarding information that Strategos exported night-vision goggles to Southeast Asia which were later re-exported to Iran in violation of regulations. Constance must now determine how to investigate these matters while also preparing for an upcoming quarterly financial report and addressing obligations to report issues to regulators.

1. Pitchbook Panel: Ashish S. Joshi, Lorandos Joshi P.C., Program Chair Michael Clark. Duane Morris, Moderator Mark Mendelsohn, Paul Weiss, Speaker Leslie Caldwell, Morgan Lewis, Speaker Dr. R. Chris Barden, Speaker

2. International Investigations: Too Fast, Too Furious Case Hypothetical It’s 4 pm on a Friday afternoon and Constance Vigilance’s phone rings. Constance is the General Counsel of Strategos, Inc. a US subsidiary of a French corporation manufacturing defense and security products. The Chief Financial Officer, based in France, has received an anonymous written complaint from a whistle-blower alleging inappropriate payments made during the past year to several high-ranking government officials in Southeast Asian countries.

3. International Investigations: Too Fast, Too Furious Case Hypothetical According to the whistle-blower, this fee was not separated from the sales price on Strategos’ purchase invoices, but the company, after it received payment for sales, had deposited the 10% fee in bank accounts in several banks across Southeast Asia. The CFO informs Constance that Strategos had never reported that it was paying 10% more of sales because of this fee either in the US or France.

4. International Investigations: Too Fast, Too Furious Case Hypothetical In addition, Strategos’ US and French executives had, using local independent contractors, wined and dined their counterparts in Southeast Asia – all high-ranking government employees – and offered gifts to them including vacations in Europe. These payments were recorded in the company’s books as payments for “consulting fees” made to the independent contractors.

5. International Investigations: Too Fast, Too Furious Case Hypothetical Shortly after she finished the conversation with the CFO, Constance’s phone rings again. This time, it’s a high-ranking official in the US Treasury Department’s Office of Foreign Assets Control (OFAC) who Constance has known for years.

6. International Investigations: Too Fast, Too Furious Case Hypothetical The OFAC has received information that a significant portion of Strategos’ night-vision goggles that were exported to a company in Southeast Asia were later re-exported or sold to a corporation deemed to be the “Government of Iran” in violation of the OFAC Regulations. OFAC officials are interested in interviewing Strategos’ executives in charge of exports and are preparing to issue a formal request for documents.

7. International Investigations: Too Fast, Too Furious Case Hypothetical While thanking the OFAC official for the call and promising that she would get back to him about this matter right away, Constance mentally makes a note to have Strategos’ outside counsel interview the company’s executives in charge of the exports. Constance is aware that the outside counsel is currently representing these executives in an unrelated civil litigation.

8. International Investigations: Too Fast, Too Furious Case Hypothetical Strategos, Inc. has recently started trading depository receipts on the New York Stock Exchange and is scheduled to release its quarterly financial results in ten days.

9. International Investigations: Too Fast, Too Furious Case Hypothetical Questions come fast and furious to Constance who starts jotting them down questions on a legal pad:

11. If so, who should undertake it? Should Constance or her French counterpart lead the investigation or have Strategos’ outside counsel lead it?

12. Will the review be privileged in France as well as the US?

14. Should Strategos or its outside counsel be concerned about interviewing the company’s executives concerning re-exports to Iran?

15. Will the investigation delay the company’s ability to issue its quarterly financial report?