Responding to Government Investigations: What to do when the Government Knocks. Gabriel Colwell Partner Squire Patton Boggs (US) LLP

Transcription

1 Responding to Government Investigations: What to do when the Government Knocks Gabriel Colwell Partner Squire Patton Boggs (US) LLP

2 Today s Agenda Corporate Criminal Liability Enforcement Environment General Types Of Government Inquiries Internal Investigations Upjohn Warnings Recent Enforcement Trends Yates Memo 2

3 Corporate Criminal Liability Individual Officers, Employees and Agents Prosecuted for Individual Conduct Corporations, under respondeat superior doctrine, may be held criminally responsible for the illegal acts of : (1) Employees or Agents (2) committed while acting within the scope of employment, and (3) the conduct was undertaken, at least in part, for the benefit of the corporation. 3

4 Corporate Criminal Liability Test: Whether agent is performing acts of the kind which he is authorized to perform, and those acts are motivated, at least in part, by an intent to benefit the corporation. United States v. Automated Med. Lab., Inc., 770 F. 2d 399, 406 (4th Cir. 1985) (false documents to a federal agency) 4

5 Corporate Criminal Liability Policy Factors Considered by DOJ: Nature and Seriousness of the Offense Pervasiveness of Wrongdoing History of Similar Misconduct Voluntary Disclosure and Cooperation Existence and Effectiveness of Pre-existing Compliance Program Remedial Actions Collateral Consequences Adequacy of Prosecution of Individuals Adequacy of Civil or Regulatory Remedies Principles of Federal Prosecution of Business Organizations 5

6 Enforcement Environment - ACFE Statistics on Detection 6

7 Enforcement Environment - False Claim Act Dept. of Justice - Fiscal Year 2015 Recoveries Exceed $3.5 Billion Fourth consecutive year to exceed $3.5 billion $26.4 billion - total recoveries 2009 thru FY 2015 (25 th anniversary party at DOJ) 7

8 Enforcement Environment - False Claim Act (continued) Dept. of Justice - Fiscal Year 2015 Most false claims actions come from Qui Tam Whistleblower (relator) sues on behalf of government Whistleblower receives up to 30% of recovery. $2.8 billion from qui tam (out of $3.5 billion recovered) $597 million awarded to whistleblowers. 638 qui tam suits filed

9 Enforcement Environment - False Claim Act (continued) Health Care Fraud DaVita Healthcare Partners, Inc. Sources of Qui Tams Housing and Mortgage Fraud First Tennessee Bank N.A. Government Contracts Lockheed Martin Integrated Systems Other Fraud Recoveries and Actions Fireman s Fund Insurance Company Government claims are allegations only; except where indicated, there has been no determination of liability. 9

10 Enforcement Environment - SEC 10

11 Enforcement Environment SEC (continued) Source: 11

12 General Types Of Government Inquiries Informal/Letter Requests Subpoenas Records and/or Testimony Search Warrants 12

13 Informal/Letter Requests Informal Visits/Contact from Law Enforcement Cooperation may yield benefits, but should proceed with caution Attempt to determine subject of inquiry then contact counsel to interface with law enforcement Letter Requests A serious, but informal way for agency to gather information Not obligated to respond; but risk the agency will escalate its demands Third-party interests: may necessitate a subpoena before disclosing information 13

14 Informal/Letter Requests Do s Contact counsel Initiate document hold Consider interests of 3 rd parties, may need to notify Don ts Ignore or delay a response Destroy/delete documents certify completeness of response 14

15 Interviews Voluntary Individual can agree to talk, not talk, terminate the interview at anytime Statements are legal admissions; can and will be used against you, organization or both Must tell truth; false statements may be a crime May also be asked to sign a written statement Right to counsel throughout the process Do not prohibit employees from speaking with government but do educate them on their rights 15

16 Interviews Do s Know your rights Consult with counsel Educate employees on their rights Consult with witnesses Consider Pool Counsel Don'ts Misrepresent or give false statements Forget to ask agent for ID, purpose of interview Waive privilege or breach privacy rights Provide documents without a subpoena Forget to debrief with counsel 16

17 Subpoenas Civil/Administrative or Grand Jury Records request for documents; must respond, though counsel may negotiate scope/time Limited Bases to Challenge No probable cause requirement No Fifth Amendment Rights Overly Broad/Unduly Burdensome subpoenas may be tailored and re-issued Grand Jury signals criminal investigation underway May request Documents and/or Testimony May be served at home or work 17

18 Subpoenas Do s Contact counsel Initiate document hold Assess time, effort to respond Locate responsive documents (including ESI) Absent conflict, offer/obtain counsel for witness Ascertain status of witness Don'ts Ignore or delay a response Lie, cover-up, misrepresent Produce privileged documents Obstruct investigation Delete/destroy documents Forget about ESI Forget interests of 3 rd parties 18

19 Subpoenas - Target/Subject/Witness Witness someone who the government believes has helpful information for the investigation Subject gray area between a witness and a target a person whose conduct is within the scope of the grand jury s investigation. (US Atty s Manual) Target A target is a person as to whom the prosecutor or the grand jury has substantial evidence linking him or her to the commission of a crime and who, in the judgment of the prosecutor, is a putative defendant. (US Atty s Manual) 19

20 Search Warrant Court authorized trespass - subject to later challenge Warrant will have been approved by a Judge/Magistrate upon showing of probable cause, based upon detailed Affidavit Precisely describes where to search and what agents expect to find Does not mandate interview No ability to stop agents from executing warrant Goal limit/control flow of Additional information during search and document execution 20

21 Search Warrant Do s Be calm, polite, cooperative Contact counsel Identify lead agent Ask to read the Warrant and Affidavit prior to search Send unnecessary personnel home Monitor, take notes, inventory seized property Advise employees of their rights Don'ts Obstruct/interfere Destroy, alter or remove evidence Prevent employees from talking Consent to expand search Volunteer substantive information w/o counsel Sign inventory or consent documents without counsel s review Overlook privileged or businesscritical information that is seized 21

22 Internal Investigations: Benefits Benefits of Effective Internal Corporate Investigation Facts Revealed Stops on-going wrong doing Demonstrates Good Faith Response Potentially Defends/Mitigates Against Corporate Liability Promotes Ethical Behavior 22

23 Internal Investigations: Action Plan Establish framework for the investigation Choose the right investigator Preserve relevant documents and ESI Interview employees Determine whether employees need separate counsel Obtain counsel/provide legal advice to corporation Preserve the Privilege Maximize umbrella of privilege so that can make informed decision in resolving inquiry. 23

24 Upjohn v. United States Upjohn v. United States, 449 U.S. 383 (1981) Corporate counsel represents the corporation Communications with employees are privileged Privilege is held by corporation, not the employee Supreme Court ruled employee communications with counsel are privileged Expanded privilege beyond the corporation s Control Group 24

25 Upjohn Warning ABA suggested Upjohn Warning I am a lawyer for Corporation A. I represent only Corporation A, and I do not represent you personally. I am conducting this interview to gather facts in order to provide legal advice for Corporation A. This interview is part of an investigation to determine the facts and circumstances of X in order to advise Corporation A on how best to proceed. Your communications with me are protected by the attorney-client privilege. But the attorney-client privilege belongs solely to Corporation A, not you. That means that Corporation A alone may elect to waive the attorney-client privilege and reveal our discussion to third parties. Corporation A alone may decide to waive the privilege and disclose this discussion to such third parties as federal or state agencies, at its sole discretion, and without notifying you. 25

26 Upjohn Warning ABA suggested Upjohn Warning (Cont d) In order for this discussion to be subject to the privilege, it must be kept in confidence. In other words, with the exception of your own attorney, you may not disclose the substance of this interview to any third party, including other employees or anyone outside of the company. You may discuss the facts of what happened but you may not discuss this discussion. Do you have any questions? Are you willing to proceed? 26

27 Example of Problematic Upjohn In re Grand Jury Subpoena, No (4 th Cir. July 18, 2005) Counsel interview certain employees, and provided an Upjohn warning, adding: Could represent the employee as long as no conflict appear[ed]. We can represent [you] until such time as there appears to be a conflict of interest, [but]... The attorney-client privilege belongs to the company and the company can decide whether to keep it or waive it. Counsel tells employee when asked that he does not recommend retention of personal counsel 27

28 Why is Upjohn Important? Preserve Privilege Maintain ability to waive attorney-client privilege Do not create individual representation 28

29 Upjohn Warning Ability to Waive Attorney-Client Privilege Benefit of Retaining Ability to Waive Privilege Criminal Investigation Reduce likelihood of indictment Federal Sentencing Guidelines Reduce penalties Other Statutes Reduce monetary penalties Defense of Civil Matter Case decided on facts, not on adverse inference 29

30 Benefits of Upjohn Warning and Proper Internal Investigation Non-Prosecution Reduce Penalty through Cooperation Deferred Prosecution Agreement Non-Prosecution Agreement 30

31 Corporate Criminal Liability Deferred Prosecution Agreements Criminal Information Filed With Court Admission of Wrongdoing Agreement to Cooperate Payment of Fine and Restitution Corporate Reforms Independent Monitor Waive Charges Upon Completing Terms of DPA 31

32 Corporate Criminal Liability Non-Prosecution Agreements Agreement to Cooperate with Government Agreement for Corporate Reform No Criminal Information Filed No Admission of Wrongdoing No Independent Monitor Charges Filed if Corporation Breaches the Agreement 32

33 Fifth Amendment Concerns Parallel Proceedings A civil and criminal, administrative or judicial proceedings arising out of the same set of facts. Civil Lawsuit v. Criminal Investigation/Indictment Regulatory Agencies v. Criminal Investigation 33

34 Parallel Proceedings Fifth Amendment Concerns Risks Potential Waiver of Fifth Amendment Privilege in Civil Litigation Answering Complaint Civil Discovery Use of Evidence from Civil/Regulatory Investigation in Criminal Prosecution Expose Defense Strategy against Criminal Prosecution Adverse Inference in Civil Case 34

35 Parallel Proceedings Fifth Amendment Concerns Individual v. Corporate Defendant Individual has a Fifth Amendment right against selfincrimination. Corporation does not have a Fifth Amendment right Corporate Representative Depositions What if no one can testify? Appoint Representative Stay of Civil Proceedings/Protective Order 35

36 Recent Enforcement Trends The Yates Memo Individual Accountability for Corporate Wrongdoing - Yates Memo DAG, Sally Quillian Yates announced a revised DOJ policy on September 9, 2015, Re: Individual Accountability for Corporate Wrongdoing (revised US Atty s Manual 9: et seq.) (1) To be eligible to receive any consideration for cooperation credit, a company must fully disclose all individuals involved in or responsible for the misconduct at issue, and all facts relating to that misconduct ; this is a threshold test requirement the company must meet before receiving consideration under the traditional cooperation credit principles. (2) The DOJ will focus on individual wrongdoers from the inception of any criminal or civil investigation 36

37 Recent Enforcement Trends The Yates Memo (3) Prosecutors and civil attorneys (and other agency attorneys) will increase coordination to pursue individual defendants. (4) Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals. (5) Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to such individuals must be memorialized. (6) Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual s ability to pay. 37

38 New Features of the Yates Memo Three new features of the memo (1) Before a prosecutor can resolve a case against a company (i.e., decline or prosecute), he or she must explain to a designated supervisor (US Atty, Criminal Chief, etc.) why they did not bring charges against any individuals (2) In order to get any cooperation credit under the US Sentencing Guidelines, a company must provide all information about individual bad actors to the government (3) Prosecutors are now instructed to evaluate whether to bring civil actions against individuals without regard to their ability to pay any damages or fines 38

39 Impact of Yates Memo Cases take longer to resolve because prosecutors are now required to report on their efforts to prosecute individuals before the case can be resolved; The decision on whether a corporation should self-report and/or cooperate with the government is now much more complicated; all-or-nothing policy requires careful analysis before beginning cooperation to determine whether company can meet the threshold now purportedly required to earn any credit; Individual prosecution conflicts between a company and its employees have been exacerbated. 39

40 Thank you Gabriel Colwell Partner Squire Patton Boggs (US) LLP