0. Resolution of external investigations: strategies and limitations
Paul Lomas Helen Buchanan Tim Coleman
Laurent Garzaniti
10 July 2012

1. Today’s agenda and speakers
Introduction Do you have to make admissions? What about publicity?
Paul Lomas Partner, London T M
E freshfields.com
Process for reaching a settlement
Helen Buchanan
Partner, London
T M E freshfields.com
Reasons for settlement– pros and cons
Tim Coleman Partner, Washington T
M E freshfields.com
Multi-jurisdictional settlements Follow on litigation risks
Laurent Garzaniti Partner, Brussels T M
E freshfields.com

2. Introduction
Companies should aim to coordinate a global resolution with all regulators that have an interest in the investigation
Issues to consider include:
What form of resolution is available in each jurisdiction
How to coordinate resolutions with multiple jurisdictions
What disclosures and admissions are required to reach resolution in each jurisdiction
The impact of settlements on related investigations and related civil litigation
How to minimise the PR and capital market impact of any resolution

3. Process for reaching a settlement
Process for reaching a settlement will vary across jurisdictions
Also depends on the regulator that you are dealing with
Examples:
US – can reach deferred prosecution agreements/non-prosecution agreements with DoJ/SEC/settlements with other regulators
Brazil – settlements possible with federal and state prosecutors; leniency programme offered by Brazilian anti-trust authorities
UK – negotiated settlements possible with the FSA and HMRC; leniency programme/early resolution offered by OFT, proposals for deferred prosecution agreements with the SFO
Hong Kong – settlements available with SFC, HKMA and stock exchange
France – AMF can settle cases involving administrative breaches using composition administrative; settlement also available with Autorité de la Concurrence; Law of 13 December 2011 now enables public prosecutor to accept guilty pleas for all offences

4. Process for reaching a settlement
NB Not all regulators are able to enter into settlements
Japan – unable to agree formal settlements
Italy – regulators unable to enter into formal settlements but possible to reach an understanding with the regulator(s) that no further action will be taken. Plea bargaining is available for criminal actions
Germany – no official settlement mechanism but regulators will often enter into discussions and reach informal agreements
China – no official settlement procedures to resolve enforcement action by CSRC, SAIC, NDRC for market manipulation, bribery and securities law related offences; no plea bargaining or amnesty arrangements under criminal-procedural law BUT settlement mechanism is available with SAIC and NDRC for anti-monopoly law offences. Leniency programme has been introduced in anti-trust context

5. Do you have to make admissions?
Again practices vary between jurisdictions and between regulators
UK – anti-trust regime requires admission to infringement to benefit from leniency regime; but FSA/UKLA only requires that facts and matters in enforcement notice won’t be disputed; certain admissions likely under proposals for DPA
US – SEC, DOJ and other civil settlement agreements can include no admissions or even denials; criminal plea agreements and DPAs require binding admissions
Spain – admissions are not necessary in proceedings with CNMV or competition authorities; enables a corporate to undertake to change conduct without admitting a prior infringement
Italy – making an admission likely to be viewed as cooperative behaviour by the regulator and could lead to a reduction in sanction
Hong Kong – admission not required for settlements with SFC or stock exchange but SFC will only do so in appropriate cases, eg Lehman ‘minibonds’ settlement

6. What about publicity?
Can you negotiate terms of the settlement announcement with the regulator?
Settlement will usually trigger disclosure obligations to the capital markets
Timing of disclosure?
What information should the announcement contain?
Information about the termination of the investigation
Report on the findings/conclusions
Any remediation steps that are being taken
Details of any redress
Include details in normal reporting requirements eg auditing reports/periodic returns (eg US SEC 10K filings)

7. What about publicity? Dealing with other interested parties:
other regulators (potentially in other jurisdictions)
briefings to analysts
inquiries from shareholders to the investor relations department
employees
customers
the press
trade bodies – when industry-wide issues are involved
consumer bodies

8. Reasons for settlement – pros and cons
Enables the company to demonstrate good corporate governance – being ‘a responsible corporate citizen’
Implementation of remediation and redress plans
Reduced penalty may be possible eg DPA/NPA/leniency programmes
Avoids further civil or criminal litigation by regulator
Generally minimises damage to the company’s reputation
one PR hit vs continued PR coverage
Can minimise impact on shareholder value
Brings finality to the investigation

9. Reasons for settlement – pros and cons
Impact of disclosures/admissions made during the settlement process
Can lose control over the outcome
The penalty (can be significant in some jurisdictions)
Other consequences – eg debarment risk
Impact on the business model – significant changes may be required as part of the settlement deal (eg exiting certain lines on business)
Ongoing conditions of settlement – eg use of monitors
Risk of follow-on civil litigation from other interested third parties

10. Follow-on litigation risks
Risk of follow-on litigation from a number of parties
Other regulators in same jurisdiction
Regulators in other jurisdictions
Civil litigation by third parties
Examples:
cartel damages claims
securities litigation

11. Can you do multi-jurisdictional settlements?
Trend towards coordinated multi-jurisdictional settlements
Recent examples:
European Commission settlement with DRAM producers
DOJ/SEC/Munich prosecutors with Siemens
DOJ/SEC/OFAC/SFO with Innospec
DOJ/SFO with BAE
World Bank/SFO with Macmillan
CFTC/DOJ/FSA settlement with Barclays

12. Can you do multi-jurisdictional settlements?
Need a coherent strategy that considers actual/potential interests of all relevant regulators and prosecutors
Issues to consider:
Different objectives in different jurisdictions
Substance of resolution in each jurisdiction
Disclosures and admissions in each jurisdiction
Cross-impact of resolutions
Impact on related investigations/civil litigation
PR and capital markets impacts

13. Conclusion
A coordinated approach to resolution across jurisdictions is vital to the success of any cross-border investigation.
Regulators are increasingly cooperating with each other’s efforts and sharing information, so consistency of approach between jurisdictions is essential.

14. Questions?

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© Freshfields Bruckhaus Deringer LLP 2012
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