When Tyson Foods Inc. and Wal-Mart Stores Inc. received internalreports that employees may have paid bribes in Mexico, each facedthe same vexing question: should they turn themselves in to U.S.authorities?

Tyson, the biggest U.S. food processor, admitted bribinggovernment-employed inspectors and paid $5.2 million to avoidprosecution. Wal-Mart, the world's largest retailer, began aninternal probe in 2005, shut it down and didn't disclose the matterto regulators and prosecutors until late last year, after learningthe New York Times was investigating, the paper said.

The U.S. offers leniency to companies like Tyson thatself-report. Yet many choose to remain quiet, calculating that theywill cooperate with the government if it uncovers their bribery.Companies root out their wrongdoing and improve their complianceprograms, assuming that any credit the government gives them forself-reporting is not worth the fines and penalties and negativepublicity that follow disclosure.

“I've represented many, many companies that have electedreasonably not to disclose, and management at those companies washighly ethical,” said Joel Cohen, a former federal prosecutor nowat Gibson, Dunn & Crutcher LLP's New York office. “Disclosureis not some magic bullet. The magic bullet is having a good systemto mitigate corruption.”

Since 2008, the U.S. has resolved 50 corporate foreign briberycases, costing companies $3.9 billion in fines and penalties. Noneof the top 10 cases involved voluntary disclosures, including thoseagainst Siemens AG, Europe's largest engineering firm; KelloggBrown & Root LLC, which was spun off in 2007 from Houston-basedHalliburton Co., the oilfield services company; and Daimler AG, themaker of Mercedes-Benz cars and trucks.

At least 21 companies self-reported, including Tyson; Johnson& Johnson, the world's second-largest health care company; andAon Plc, the world's largest insurance broker.

Lawyers who have prosecuted or defended such companies estimatethat only about a third of the 150 pending criminal cases resultedfrom voluntary disclosure. They said that hundreds of businessesdon't reveal foreign bribery. The U.S. Foreign Corrupt PracticesAct bars corporate employees or their agents from paying bribes togovernment officials to obtain or retain business or to secure animproper advantage.

Because FCPA cases are hard to detect and investigate, the U.S.offers the possibility of reduced penalties or charges forcompanies that self-report, cooperate with the government andstrengthen their compliance programs.

'What's the Point?'

Lawyers typically urge self-disclosure for bribery allegationsthat involve senior management, an important contract, awhistle-blower, external auditors or a foreign regulator, saidClaudius Sokenu, a former SEC attorney. Some industries alsorequire self-reporting to the government.

“If it doesn't meet those factors, there's a significant chancethat I would advise a client not to self-report,” said Sokenu, nowat Arnold & Porter LLP. “What's the point? No good deed goesunpunished.”

Wal-Mart said it's cooperating with probes by the JusticeDepartment and the Securities and Exchange Commission. TheBentonville, Arkansas-based retailer, which had sales of $444billion in 27 countries in fiscal 2012, said it's working tostrengthen corporate compliance worldwide.

The Justice Department and SEC encourage voluntary disclosure.Assistant Attorney General Lanny A. Breuer spoke to FCPA lawyers inNovember 2010, saying he understood the question of whether toself-report is a difficult one.

“If you do not voluntarily disclose your organization's conduct,and we discover it on our own, or through a competitor or customerof yours, the result will not be the same,” he said. “There is nodoubt that a company that comes forward on its own will see a morefavorable resolution than one that doesn't.”

Breuer said in a speech last November that the JusticeDepartment will release “detailed new guidance” this year on theFCPA's criminal and civil enforcement provisions. Alisa Finelli, aJustice Department spokeswoman, said this week that Breuer wasn'tavailable for further comment.

FCPA enforcement has increased as the Justice Department and SEChave targeted the oil and gas industries, freight-forwardingbusinesses, pharmaceutical companies and device makers, andfinancial institutions that deal with sovereign wealth funds. Thegovernment may generate cases through overseas regulators,whistle-blowers, media accounts, competitors, customers or stingsby the Federal Bureau of Investigation.

Prosecution Guide

Prosecutors follow a nine-step guide on business prosecutions indeciding how to resolve cases. The criteria include the seriousnessof the crimes, a company's history of wrongdoing, its willingnessto cooperate, and the extent of compliance programs. The governmentmay decide to charge a company or its subsidiaries, enter intodeferred-prosecution or non-prosecution agreements or bring nocharges at all.

Companies that disclose wrongdoing will be regarded favorablyfor being honest, said Richard Grime, a former SEC assistantdirector of enforcement.

“They're not going in after the government found out about it orit was in the press,” said Grime, now at O'Melveny & MyersLLP's Washington office. “They're walking in proactively andsaying: 'This is something we found out about and want you to knowabout.”'

Disclosure helps companies to “crystallize whatever liabilitymight be there,” he said.

“You have identified an issue and don't want it hanging on yourbooks,” Grime said. “If they choose to move forward on theenforcement track, you know what the issue is, how the governmentframes it and what the fines and penalties may be.”

Prosecutors and regulators follow the U.S. Sentencing Guidelinesand may reduce fines and penalties for companies that voluntarilydisclose. That amount is difficult to measure because thegovernment also credits the extent of a company's cooperation andits compliance program, and it doesn't break down the weight ofeach, said attorney Danforth Newcomb of Shearman & SterlingLLP.

“None of those calculations are algebraic or scientific orprecise,” Newcomb said.

Companies also send a laudable message by disclosing wrongdoing,Newcomb said.

“Where there is a voluntary disclosure, there is a message thatthe senior management is not supportive of the conduct beingalleged,” Newcomb said. “The tone at the top is one of the measuresof an effective compliance program.”

J&J, which admitted making improper payments to governmenthealth care providers in Greece, Poland and Romania, got a 25percent discount on its criminal fine of $21.4 million. Its totalcriminal and civil payments were $70 million.

BizJet

BizJet International Sales and Support Inc., a Tulsa,Oklahoma-based provider of aircraft maintenance, paid $11.8 millionin March to resolve a bribery case. It got a 30 percent reductionon its criminal penalty for its voluntary disclosure,“extraordinary cooperation” and extensive remediation.

The biggest FCPA case ever settled involved Siemens, whichagreed to pay $800 million to the U.S. and $814 million to Germanauthorities in 2008. It didn't self-report, but U.S. prosecutorscited the “exceptional” cooperation and remediation of Siemens,which spent another $1 billion on lawyers, accountants and internalcontrols. Its settlement followed a raid by authorities on itsGerman offices.

In a case involving $6 billion in contracts in Nigeria, jointventure partners that built liquefied natural gas facilitiesadmitted using agents to funnel $182 million in bribes togovernment officials.

The partners resolved their cases by paying a total of $1.5billion. Houston-based Kellogg Brown & Root LLC settled in2009; Paris-based Technip SA and Amsterdam-based SnamprogettiNetherlands BV reached accords in 2010; and Tokyo-based JGC Corp.settled last year.

In January, Tokyo-based Marubeni Corp. paid $54.6 million as acriminal penalty to resolve charges related to its role as agentfor the joint venture. Each got credit for cooperation andremediation, not voluntary disclosures.

Voluntary disclosures might increase because of the passage ofthe Dodd-Frank Act of 2010, which lets corporate whistle-blowerscollect as much as 30 percent of penalties when they reportfinancial wrongdoing, said Timothy Dickinson, an attorney at PaulHastings LLP's Washington office.

Game Changer

“The big game changer has been the Dodd-Frank bill,” Dickinsonsaid. “If a company is doing an internal audit and came acrosssomething 10 years ago it might have said, 'We have a problem, andwe'd better fix that.' Today, one of the first things a company hasto ask is, 'Should we self-report?”'

Many FCPA lawyers believe that self-reporting means thatcompanies lose control of an investigation being handled by anoutside law firm, Dickinson said.

“While that may be the case in certain circumstances, I wouldexpect the government to act reasonably even after a disclosure ifthe government expects to build trust and confidence with the FCPAbar,” he said.

Newcomb said that lawyers working in voluntary disclosure caseshave some measure of control over investigations.

“I was brought in for a case with a company doing business in100 countries,” he said. “I talked the government into letting thecompany's lawyers do investigations in only about 20 of thosecountries.”

Faced with evidence of possible wrongdoing in distant corners ofthe globe, top managers at multinationals must make hard choices inauthorizing expensive investigations by outside law firms, saidGregory Bruch of Willkie Farr & Gallagher LLP.

'Costs are Apparent'

“The costs are apparent, and quantifiable, while the benefitsseem very intangible,” Bruch said.

When chief executives try to quantify the cost of majordecisions, they lack specific guidance from the Justice Departmenton FCPA cases, Bruch said.

“The attorney-client privilege is an intangible asset,” he said.“You're talking about giving up assets and spending money in anarea where there are uncertain liabilities and uncertainbenefits.”

FCPA cases typically are run by one or two Justice Departmentlawyers, working with SEC attorneys and FBI agents. They work withlaw firms for companies that turn over documents and e-mails, whileinterviewing corporate witnesses.

Steven Tyrrell, a Justice Department fraud section chief from2006 to 2009, said that voluntary disclosures mean that governmentlawyers with little knowledge of the facts may direct attorneys forcompanies to expand their investigations.

“It's a negotiation,” Tyrrell said. “The company lawyers may saythey talked to witnesses in China and Vietnam, and the governmentmay say 'Why don't you talk to witnesses in Indonesia?' I wouldn'tsay that's losing control. But you have to answer to someone who'sgoing to make decisions about whether your investigation has beenappropriately thorough.”

Tyrrell, a partner at Weil Gotshal & Manges LLP inWashington, estimated that about one-third of the DOJ's 150 pendingFCPA investigations involve voluntary disclosures.

Many companies have concluded that they can't see a concretebenefit in making a voluntary disclosure, said Paul Berger, aformer SEC associate director of enforcement now at Debevoise &Plimpton LLP.

“It's very, very tough to answer your client's question and saythere is a real, palpable benefit from self-reporting,” Bergersaid. Many companies conclude they will avoid the sanctions thatfollow from self-reporting, he said.

'Fully Compliant'

“They say, 'We'll fully investigate the issue, fix the problemand make sure we're fully compliant with the law, discipline orfire employees, and enhance our compliance system,”' he said. “Theysay, 'We'll do everything the government would have told us to dohad we gone in, but we won't have a sanction.”'

Companies have a hard time in deciding what to do, he said.

“Most of them want to do the right thing,” Berger said. “Theproblem is there's not enough information out there in publicdomains as to the benefits of voluntary disclosure. The governmentneeds to issue more guidance as to what the true benefits are.”

Grime said that many companies fear the consequences ofvoluntary disclosures.

“The unknowable benefit is either not sufficiently clear ordoesn't neutralize the fact of dealing with your problem publicly,”Grime said.

“The reality is that all the government can do is take adiscount on fines and penalties,” he said. “At the end of the dayfor companies, money is not the issue. Wal-Mart can stomach thefines, but it's the collateral consequences, the publicity and thereputational harm that makes voluntary disclosure unpalatable.”

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