The Power of Documentation : Transparency Inconsistent with Criminal Intent

Documentation of decision-making provides critical protection from individual or corporate criminal liability.  In the absence of a contemporaneous record of why an individual/ company made a decision, such an entity may be exposed to allegations of improper actions and intent and particularly if the allegations are untrue, would have lost a critical opportunity to provide a robust defence to such allegations.  Having a culture of documentation can also hinder and stymie a potentially corrupt employee from pursuit of below the board intent.

Adequate documentation is said to be a powerful instrument in any effective Anti-Corruption Compliance Programme. 

Michael Volkov, Partner, Mayer Brown in his paper on "Anti-Corruption Compliance : Drilling down on Documentation" describes the documentation process as requiring the following three (3) specific steps:

1. A Documentation Protocol -- As part of a compliance program, the company needs to define exactly when and what type of documentation is required, and how documents should be created and preserved. This will be an important (but small) part of the company's document retention policy.

2. When Should A Company Create A Document? -- Documentation should be required in two situations: (1) issues identified at the senior management level; and (2) issues which come up vertically through the organization. Some issues will be delegated to legal and compliance officers below the senior management level. These issues should be identified in advance (e.g. gifts, meals, entertainment pre-clearance; hiring of former government officials ore relatives of government officials). Some discretion will reside in the senior management level but this is where the chief compliance officer, general counsel and internal auditing offices need to collaborate and coordinate so that information is shared, and decisions are coordinated.  Timing of the record could serve to strengthen or weaken a company's defence.  As a rule of thumb, documents should be recorded contemporaneously.

3. What Type of Documentation is Needed? When addressing a legal issue, the general counsel and chief compliance officer need to develop prescribed formats for describing the circumstances and the specific compliance issue and how the issue was resolved. The basic requirements for such documentation include:
(a) a description of the surrounding facts and circumstances;
(b) the legal and compliance policy issues;
(c) the resolution of the issue(s); and
(d) a brief statement as to the analysis and reasons for the decision. A record of review of the memo should identify who was involved in the decision-making process. The memorandum does not have to be lengthy, and the reasons do not have to be exhaustively explained. Some of the legal background paragraph(s) can be copied into each memorandum. The reasons for a decision are the important part of the memorandum.

By documenting the decisions reached by company officers and employees, a company acts with transparency which is inconsistent with criminal intent. The open consideration of a legal issue demonstrates good faith and negates a potential claim by prosecutors of corrupt intent.

Adequate documentation is of overwhelming importance particularly in the area of public procurement decision-making which is an area statistically demonstrated to be most vulnerable and attractive to potentially corrupt intent and actors. Documentation of the justification for the following decisions in a procurement process is critical:

(a) Reason(s) for the decision to acquire a particular good, work or service. This should include details of the requesting/recommending department or entity (eg, Ministerial or Board motivated)
(b) Reason(s) for the decision to buy/outsource as opposed to lease or handle in-house?
(c) Reason(s) for the choice of tender call format (eg., ITT, RFP, RFI, Sole Source, Negotiated, Limited, Open etc)
(d) Reason(s) for selection of winning bid/proposal. This should include who took the final decision and the process which was followed in Evaluation.
(e) If intentional, reason(s) for failures throughout the process (eg failure to sign contract prior to initiation of work)
(f) Reason(s) for changing project scope, variations, change orders etc.,

Establishing a Documentation Protocol is not the end of the matter and is certainly not an absolute guarantee.  Corporate leaders must demonstrate a commitment to such protocols by ensuring that employees are provided with adequate and effective training and by conducting random audits to ensure compliance. 

One potential danger exists where, there is a Documentation Protocol in place which is not faithfully followed. Failures in such a situation may serve to strengthen a case of impropriety against a company or individual.  If the company records some but fails to record a particular aspect of a matter which is subsequently deemed to be important, or seriously misstates the facts, or only makes a record some time after allegations are made, it may be aggressively argued that such conduct was deliberately subvertive and evidenced a criminal intent to deceive. Such a claim is very hard to rebut, especially when the documentation policy, and the other documents themselves can be cited as evidence of the company's good faith intent to comply.

That being said, to throw out the 'baby with the bathwater' cannot be a tenable solution as overwhelmingly, adequate documentation does serve to protect the documentor from claims of irrational (and potentially corrupt) decision-making. The benefits of a documentation policy far outweigh the possible risks and any effective compliance program must include a specific Documentation Protocol and Programme.


Excerpts from article by Michael Volkov, Partner, Mayer Brown in his paper on "Anti-Corruption Compliance : Drilling down on Documentation"