United States: Key Considerations In Investigations

Last Updated: October 10 2019
Article by Stephanie L. Carman and Tziporah Tapp

Some high-level considerations regarding what a company could do before and when faced with a government investigation.

Companies in all industries regularly find themselves under the United States' government's microscope and broad investigations powers when faced with subpoenas and other agency requests.  A company's initial organization and response will allow for a smooth process through what may be a years-long journey.  A tailored strategy should be developed early with counsel. 

Planning for an Investigation

Over the past decade, federal law enforcement has come to expect that companies have in place dynamic and robust compliance policies and procedures that educate their employees on industry specific regulatory requirements and aim to ensure that potential problems are timely reported and appropriately addressed.  Additionally, the company would be well advised to develop a crisis communication plan that provides a roadmap for the initial response to a subpoena.  The plan should cover who is informed, how, and when.  It should also name the main contact for the internal and external communications regarding the matter.  Further, the company should develop a policy regarding what employees should consider if they are contacted by government agents.  While the company cannot restrict the investigation, it can provide employees with counsel, time during the workday, and a comfortable location if desired, and advise employees of their rights in connection with an investigation or interview.  Employees should be trained regularly on these policies and evidence of the training should be preserved.

An Understanding of the Request and Interaction with the Government

The first response to an investigation is determining which government entities are involved in the investigation, what stage the government is in its investigation of the company, and if possible, the scope of the government's investigation.  If a subpoena was issued, was it under civil, criminal and/or administrative statutes or issued by Congress?  Communication with the government is important to determine timeline, prioritization, and rules of engagement e.g., how the documents should be produced.  Another important consideration is determining how to limit the subpoena with respect to number of custodians, time frame and searches/requests, and related companies and working with the government to reach an agreement on this.  For example, can you negotiate having the parent company released from the investigation or narrow the number of subsidiaries involved if appropriate corporate governance was followed?  All communications with the government should be truthful and accurate.  Generally, counsel will handle these communications. 

Hiring Outside Counsel

In making the decision whether to hire outside counsel, consider the expertise and independence that outside counsel brings to an investigation. The company should also consider the resources required to conduct an internal investigation and to defend an investigation.  Does the general counsel's office have the personnel required for extensive reviews and interviews and can their efforts be divert from their normal work to do this?  If it's a cross-border investigation, does the company have attorneys with the language skills and expertise in local law to handle the investigation?  Further, the company will also want to consider what is the alleged wrongdoing; what are the potential violations and penalties; who was involved in the issue; who knew about the issue and when; and what is the potential extent of the issue.  It is important to consider the possibility of future criminal or civil litigation when making this decision, including potential shareholder disputes and employment actions.  If outside counsel is hired, other considerations include:  is it appropriate for outside counsel to represent multiple parties?  If so, under what circumstances and how should the representation be structured?  Are there circumstances where outside counsel must withdraw from the representation?

Document Preservation

Before a subpoena, the company should have a policy on document retention and destruction and follow it.  After a subpoena, the company needs to evaluate what data to preserve and quickly preserve it.   As soon as possible, document preservation notices should be implemented.  The notice should be sufficiently broad, addressed to the appropriate people and their subordinates, and include a person to contact with questions.   It is also important to suspend document retention policies.  Additionally, notify IT and have them implement document/litigation holds including removing a back-up tape from rotation and initializing automatic retention of emails.  It is important to keep all documentation organized and forensically sound.  The company likely will want to hire a vendor to assist with document collection, processing and/or production.  In every case, this effort requires careful analysis of systems and challenges.

Additional Regulatory Requirements Associated with Investigations

The company needs to consider whether disclosure of the investigation is required and if so, to whom.  Disclosures could include filings under the U.S. Security laws for public companies as well as other regulators, contract parties and agencies.  Companies operating outside the U.S. need to consider whether it is required to alert foreign government entities.

Reliance on Prior Internal Investigations

If an internal investigation was completed previously, the company needs to consider whether to share it with the government and when to do so.  In making the decision consider:  did the investigation cover the same alleged conduct, were the findings set forth in a written report, and were the findings shared with the board and others.

Develop an Investigation Plan

A few things to consider as you develop a plan include:  what is the scope of the investigation?  What are the objectives of the investigation?  Who are the key players?  How will documents be gathered and organized?  If outside counsel is hired, how will the work be divided between in-house counsel and outside counsel?  What is the company's posture:  full cooperation, disclosure, or challenge?  While a plan needs to be well-thought out and followed, the company needs to recognize when it needs to be modified and modify it accordingly.

Preparing for and Conducting Interviews

Consider who you want to interview and when.  Timing will be important.  For example, in what order should the individuals be interviewed?  Details regarding the interviews are also important including whether you need a translator; whether you plan to interview employees in their offices or at another location, and do you plan to do it during work or after hours.  You also need to determine who will participate in the interviews.  Generally, at least two individuals should be present so one person can focus on taking notes.  Also, consider whether any special precautions are required when interviewing company employees.

Preserving Privileges

U.S. law affords various privileges, such as the attorney-client privilege and work-product doctrine and you want to make sure to preserve them.  Only attorney-client communications (a confidential communication from the attorney for the purpose of obtaining legal advice) are protected.  The work product privilege also protects communications that contain attorney's mental thoughts, impressions, or opinion.  Additionally, documents prepared in preparation for litigation are protected.  However, the underlying facts themselves are not protected.  These privileges can by waived by inadvertent disclosure, voluntary disclosure, or disclosure to a government agent.

Another important consideration in conducting an investigation relates to local data protection laws.  Many foreign countries have enacted laws which regulate how documents are collected, used and transferred outside the country's jurisdiction.  These laws protect things, such as, individual's privacy, employment information and state secrets.  These laws may impose restrictions on what data is collected and how the data is used.

As we are seeing more and more, even the most responsible and prepared company may be subject to a government investigation.  The above topics should initiate proactive steps to prepare for it and to develop a response to it.

Originally published by FEI Daily

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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