United Kingdom

Details

  • Service: Advisory, Risk Consulting
  • Type: Business and industry issue
  • Date: 20/03/2013

Joint Venture Investigations 

Boardroom
Conducting an investigation in a joint venture context is a complex undertaking.  A number of partner organisations will be required to engage and deliver in a situation of stress, where speed of execution can be critical to the achievement of a successful outcome.

Planning and preparation are key,  and should include: gaining an understanding of your Partners; agreeing upon the desired outcome; arranging access to relevant systems, records and people; considering cross-border issues; and articulating a sensible and robust response plan.    

 

Below are a few important points that should be considered prior to any investigation.

Know your Partners

Due diligence in advance of any Joint Venture being formed is key; as well as focusing on risks, prospective partners’ resources and capabilities in the investigation space should also be considered.  This should drive an informed dialogue with your partners about how any investigation will be structured and managed. You should also consider your partners’ culture and acceptance of risk.

Desired Outcome

Partners in a joint venture are unlikely to have identical views on the outcome of an investigation for a number of reasons.  It is vitally important that you gain an understanding at the outset, so that issues are recognised early and can be managed effectively.  A successful outcome of this phase of the planning process will ideally be a mechanism to ensure goal congruence across the partners and a strategy to ensure that your organisation achieves what it needs.

 

Where an investigation is concerned with potential fraud, there will be considerations around how the leakage of funds or value from the joint venture impacts the partners, especially if one partner has been unduly affected. 

Access issues

Another key area that can present issues is that of access, both to systems and records as well as to people.  The first is crucial to the sound collection of evidence, and the second to the effective conduct of investigation.

 

The nature and location of the books and records (as well as other relevant systems such as procurement, project management etc) will depend on type of business with which the investigation is concerned.  In a joint venture context, there will be an operator, likely to be one of the partners, who will maintain the books and records.  Joint venture books and records may be kept by the operator (a partner), but may also be kept by the joint venture entity; it is common that the systems are run on the servers of one of the partners.  Maintenance of the systems may even have been outsourced, in which case access may be required to the third party provider.

 

In relation to employees, the most likely issue will be access.  What is their contractual position – are they employed by the joint venture or partner entities?  If the latter, the employees may be bound by different terms.  In practical terms, the majority of staff are likely to be physically close to the relevant operations, but this may not necessarily be the case for IT staff.  You might consider development of a template document or checklist within your organisation to cover off these matters, which can be used by the joint venture and populated quickly with the relevant information at the outset of an investigation.

Cross-border investigation issues

When an investigation is to be undertaken in a different jurisdiction, there are some additional considerations to take into account in the planning and execution phase.

 

Perhaps most obviously, local legal and regulatory requirements will need to be adhered to.  These are particularly important when obtaining and processing evidence, be it electronic or from employees.  Considering electronic evidence firstly, you will need to be cognisant of local laws (as well as terms within contracts of employment) around data collection, which may prohibit certain actions but may also require representatives to be present.

 

Once the data has been collected, the next step is to ensure that you are comfortable with relevant law and regulations governing the international movement of data, for example for processing or further review.  Such laws are likely to cover processes around data movement as well as the type of data that may be exported. 

To collect evidence from employees, you need to understand what the local laws (as well as the relevant employment contracts) provide in relation to interaction with employees / individuals under investigation.  Do you have to ensure that the individuals have representation when you talk to them? Are you allowed to record interviews, and what is their admissibility?

Response Plan

Ideally, the results of your considerations of the factors discussed above will be crystallised in such a plan, developed in conjunction with your partners.  Such a document should seek to establish a framework of key positions, which can still be flexed to accommodate the particular needs of the investigation in question.  A strong plan will contain positions on the following:

 

  • Management & strategy – consideration should be given to the establishment of a steering committee within the joint venture, together with its composition.  It will need to have a mechanism to address differences of opinion between the partners.
  • Resources – who will conduct investigations?  Is the joint venture big enough to warrant a permanent team, or will teams come together dependent on the nature of the investigation?
  • Protocol – establishing the methodology under which an investigation will be conducted.  The watchword has to be harmonisation: you do not want to be in a situation where different team members are working to different frameworks.
  • Advisors –external advisors and / or legal counsel may be required to assist with an investigation.  Having this in the plan provides a chance not only to agree suppliers (thereby speeding up mobilisation when needed), but also potentially to optimise rates through pre-negotiated call-off agreements.
  • Confidentiality – this can be potentially difficult to manage in a joint venture scenario, so a plan can usefully set out guidelines to be adopted and followed.

Conclusion

The key is to have clarity at the outset, both in the joint venture documents where necessary, as well as in a comprehensive but flexible response plan.  This will provide a firm foundation in overall planning terms, which can then be backfilled at the outset of any investigation with more detailed points taking account of the facts and requirements of that particular investigation.

 

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James Maycock 

James Maycock

KPMG in the UK

+44 20 7694 5560

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