When The Alphabet Agencies Come A Knockin’ – Weathering The Storm Of A Criminal Investigation
Tips for the Corporate Lawyer in the Initial Stages of a Criminal Investigation
David M. Eldridge & Troy S. Weston, Eldridge & Blakney, P.C.
Chaos. In the most simplistic terms a criminal investigation into a corporation’s activities creates chaos on all fronts. In-house counsel suddenly becomes inundated with questions – many of which do not have neat or immediate answers. Non-legal employees are suddenly subject to increased scrutiny, extreme internal stress, and anxiety. All the while, the everyday activities and demands on the corporate entity continue on, seemingly oblivious to the on-going investigation.
The lawyers are supposed to come armed with sage wisdom and a legal panacea. Though, it is at this very time that counsel is likely to feel like the beleaguered general ready to waive the white flag of surrender. Despite the chaos and confusion that follows the revelation of an on-going criminal investigation, it is precisely at that time that counsel – both in-house and outside counsel – need to be precisely focused on their responsibilities, ensuring quick compliance and preparation, anticipating what the next steps, both best and worst case, will be, and how to appropriately address future developments. This article will address the first and immediate steps that should be followed upon learning about an on-going criminal investigation.
As an initial matter, corporate entities can be held criminally liable for the actions of individual agents and employees of the corporation. Generally, a corporation will be held liable for the criminal acts of an individual agent or employee when that agent’s actions are within the course and scope of their employment, and when the allegedly criminal actions are for the benefit of the corporate entity.[i] Moreover, a corporation cannot escape liability by merely asserting that its agents and employees were only authorized to engage in lawful activities if the employee or agent possessed, at minimum, the apparent authority to act on behalf of the corporation.[ii] Thus, upon learning of an on-going criminal investigation, it is of paramount importance that an “all-hands on deck” mentality develops between corporate management, in-house counsel, and outside counsel.
Investigations are often commenced without any notification to the entity under investigation. Often, the first time that the entity is aware of an on-going investigation is upon the issuance of a subpoena, information that employees are being interviewed by law enforcement outside the workplace, or the most invasive step – the execution of a search warrant. By the time that the entity learns of an investigation, it is often months or years after the investigation was initially begun. In order for the corporation to successfully get up to speed with the status of the investigation and determine what corrective measures may be necessary, the corporate entity must undertake a comprehensive internal investigation to determine potential liability and possible criminal exposure. The following checklist will outline the necessary immediate steps that the corporate entity should endeavor to take upon learning of an active criminal investigation:
- The corporation should put together a team to respond to the crisis. The team should consist of a response coordinator for each facility it operates, in-house counsel, and managers of all relevant work areas/departments.
- If a search warrant is executed, the response coordinator must know to monitor the search and to immediately notify the corporation’s counsel (the response coordinator should be aware that law enforcement agents will secure the area to be searched and restrict employees access to their normal workplace, as well as interview as many of the employees as they can at that time). A copy of the search warrant should be obtained by the response coordinator, as well as the accompanying affidavit,[iii] if available.
- The response coordinator should inform law enforcement and employees that any questions that arise during the search should be directed to the response coordinator.
- Law enforcement should be informed that privileged materials may be present during the search, and that the corporation does not, in any way, consent to the search of privileged materials.
- The response coordinator should accompany the agents at all times during their search, carefully recording, including possibly videotaping, the conduct, statements, and questions of law enforcement. Access to areas not specifically detailed in the search warrant may be denied and it should be noted whether the agents confine their search to the areas described in the warrant.
- Relevant and basic rights should be explained to corporate employees.
- Procedures should be established to protect privileged information from being disclosed. This may include the creation of a “privilege log”[iv] by the corporation’s counsel, or agents thereof, of all relevant documents and materials, including subject matter, date, author, and any other such information that will allow members of the response team to identify and quarantine privileged materials.
- The response team should begin planning for media reaction following the revelation of a criminal investigation. The response team should immediately plan what, if any, response will be made in light of media inquiries.
If a search warrant is executed, the response coordinator and other agents of the corporation must remember that, while they cannot interfere with the execution of the search warrant, they are entitled to monitor the search in its totality. At the conclusion of the search, the response coordinator and counsel should request a debriefing from law enforcement.
While corporate officers and members of the response team must first understand the nature of the investigation and prepare an effective way to organize and respond to inquiries; simultaneously, it is critical that counsel function to disseminate information to the corporation employees. During the course of the investigation, it is the employees of the corporation that will be responsible for the maintenance of the day-to-day operations of the company. Counsel must provide sufficient information to the employees to ease their natural concerns, and to ensure appropriate conduct in light of the on-going investigation.
Employees need to know as immediately as practicable that an investigation in on-going and that the corporation is seeking to (1) conduct a thorough internal investigation, and (2) ensure compliance with all applicable state and federal laws. Additionally, employees should be made aware of the following rights:
- Law enforcement/investigators have the right to contact the employee to request an interview.
- Employees have the right to speak with law enforcement. The employee has the right to request a time and place for an interview that is convenient to the employee.
- The employee also has the right to decline to be interviewed.
- The employee has the right to consult with legal counsel prior to deciding whether to submit to an interview. (It is generally recommended that the corporation pay for the costs associated with such a consultation, and recommend an attorney for consultation, though the employee has the right to obtain their own private counsel.)
- If the employee consents to be interviewed, the employee has the right to have an attorney present, to consult with an attorney prior to the interview, and to terminate the interview at any time.
- Any statements made to law enforcement may constitute legal admissions which may later be used as evidence against the employee, the corporation, or both in subsequent legal proceedings.
- Employees should tell the truth, and should only state matters that they know to be a fact. It must be stressed that a false statement to law enforcement could very well constitute a federal or state criminal offense.[v]
In addition to apprising employees of their personal rights, counsel should also clarify necessary safeguards that should be implemented in the corporation’s employees’ daily responsibilities. This list will largely be dependent on the specific nature of the corporation’s business and the subject matter of the investigation; however, one necessary instruction involves the retention of all relevant corporate documents. In the wake of Congress’ passage of the Sarbanes-Oxley Act and subsequent amendments in the early part of the last decade, document retention is of vital importance during the course of a criminal investigation, as a corporation’s destruction of relevant documents may result in the corporation being charged with obstruction of justice.[vi] Congress’ codification of the offense of obstruction of justice is such that the penalties associated with a violation thereof may likely be more severe than penalties associated with the subject matter of the government’s initial investigation.
The response team should immediately identify and retain an investigator to assist with the internal investigation. This investigator should be identified to corporate officers and employees, and must report directly to counsel for the corporation in order for the Attorney Work Product doctrine to apply and protect the fruits of the investigation from compelled disclosure.
With the investigator identified and retained, counsel for the corporation is ready to commence the fact-finding of the internal investigation. Communications between employees and counsel, or agents thereof (i.e., an investigator), are protected under the Attorney-Client Privilege.[vii] With this protection in mind, corporate counsel and agents thereof should quickly endeavor to interview all employees with relevant knowledge and information.
At the outset of these interviews, employees need to be advised that their communications with counsel are protected the Attorney-Client Privilege and should be kept confidential, that the lawyer conducting the interview represents the company and not them individually, and that it is the company that controls that privilege and will decide whether and under what circumstances to disclose what the employee tells them. These admonitions are commonly known as the “Upjohn” warnings.
After obtaining relevant information from corporate employees, counsel will then be in a position to develop a strategy to respond to the on-going criminal investigation.
Investigations often present themselves to the corporate target with a rush of activity comparable to the flood gates of a dam being thrown open. Chaos ensues, and everyone looks to the attorneys to set the tone for the response and internal investigation. While it may seem overwhelming to helm a corporation’s next steps following the revelation of a criminal investigation, as in-house or outside counsel, you are uniquely situated to provide the reassurance and guidance necessary to successfully weather the storm that is a criminal investigation.
[i] U.S. v. Carter, 311 F.2d 934 (6th Cir. 1963); Continental Baking Co. v. U.S., 281 F.2d 137 (6th Cir. 1960).
[ii] See Continental Baking Co. at 150-151.
[iii] If a copy of the affidavit is available, counsel should immediately obtain copies of any referenced state of federal statutes therein.
[iv] All materials prepared in response to a criminal investigation by members of the response team, including counsel and agents thereof, should be clearly marked on each page as “Attorney Work Product.”
[v] See e.g. 18 U.S.C. § 1001.
[vi] 18 U.S.C. § 1519.
[vii] See Upjohn Company v. U.S., 449 U.S. 383 (1981).