By Robert Edward Dugdale.
Stung by criticism in the aftermath of the 2008 financial crises that those perceived to be responsible for the crises were not properly held accountable for their conduct, the Department of Justice (“DOJ”) in recent years has attempted to place a greater emphasis on the prosecution of white collar offenses in the criminal, civil, and regulatory spheres.
For instance, in recent years the DOJ has placed a greater focus on aggressive civil enforcement actions aimed at fraud, including the increased use of the False Claims Act[1]; it has conducted aggressive outreach to the relators’ bar in an effort to use qui tam filings brought by corporate whistleblowers as a method to jumpstart criminal and civil actions that have resulted in high visibility settlements and awards[2]; and it has aggressively pursued Foreign Corrupt Practices Act (“FCPA”) cases that have netted settlements in the hundreds of millions of dollars against dozens of worldwide conglomerates.[3] It has even incentivized companies to be proactive in rooting out criminal actors within their own organizations by conditioning any leniency that a company may obtain from the government through a plea deal or settlement on the company undertaking steps to identify lawbreakers within the company to the government.[4]
While the new administration may be realigning some of its enforcement priorities from those established during the tenures of Attorney Generals Holder and Lynch, it is unlikely that the DOJ’s emphasis on prosecuting white collar crimes will diminish substantially; and with the DOJ having taken the recent steps referenced above to beef up its efforts to target suspected corporate wrongdoing, it is important for those corporate actors on the receiving end of an unwelcome call from the government – be it in the form of an approach for an interview that comes out of the blue, the receipt of a target letter, or an agent handing you a subpoena, or worse yet, a search warrant – to know what to do when the feds come knocking.
When such an approach occurs there may be a natural inclination for a corporate executive confronted with news that his company is under investigation by the federal government to believe that all he has to do is to tell his side of the story and the investigation will simply go away; or conversely, the executive may think that there is nothing that he can do when faced with the specter of the most powerful government in the world putting his company under a microscope, and that executive may simply surrender to the inevitability of whatever the process brings. Obviously, neither of these approaches is the correct one. Instead, when one receives that knock on the door from the feds, corporate leaders who open that door should keep the following “dos” and “don’ts” in mind. All are grounded in common sense, but there are countless examples of white collar defendants who failed to follow these few simple rules and paid the price of their freedom and the downfall of their business as a result.
- KNOW YOUR RIGHT TO REMAIN SILENT AND ACTUALLY EXERCISE IT: You are completely within your rights to speak – or not to speak – with a law enforcement agent who wants to question you. However, there are virtually no circumstances in which talking to the government before consulting with counsel will benefit you. Whether you believe that you have anything to worry about or not, the government has some reason to think that you have information relevant to their investigation, and unless you consult with counsel, it is very difficult to assess whether it is in your interest to speak with an agent. Speaking with the government without the benefit of counsel almost never makes the matter “go away”: It simply provides the government with another piece of evidence to use in building its case against either you, your company, or someone else connected to you in some way. Worse still, there is always a possibility, if not a probability, that you will say something that you believe is completely innocent in the course of such an interview, but may, in fact, be incriminating in light of what the government believes it has learned during its investigation, an investigation that you likely know little to nothing about at the time you submit to such questioning. Accordingly, as tempting as it may be to accept the invitation to talk to a government agent who wants to interview you, either because you want to appear cooperative or because you think you can talk your way out of the situation, do not give into that temptation. There is rarely an upside to submitting to an uncounseled interview in these circumstances, and the downside is potentially devastating. In virtually all circumstances, the only thing you should tell an agent who approaches you for an interview is that you will not talk to the agent without counsel present and you wish to respectfully decline the request to speak with the agent.
- ONLY AGREE TO SPEAK TO LAW ENFORCEMENT WITH COUNSEL PRESENT: If you are going to speak with law enforcement at some point after learning that you, your company, or someone within your company is under federal investigation, you should only do so with the benefit of having your attorney present for such an interview. Indeed, as mentioned above, if you are approached without notice by a member of law enforcement who wishes to interview you, your best way to gracefully exit that circumstance is to advise that agent that you will not speak to him without your attorney present. Once you make such an invocation, the agent questioning you should cease his questioning immediately, and, if he does not, there is a high probability that whatever you subsequently say to him will not be usable against you in any legal proceeding unless you were the one who voluntarily re-initiated the questioning. An attorney serves as a much-needed buffer in the interview setting between you and the agent looking to extract incriminating information from you or, at the very least, information that is helpful to the government’s case. Your attorney can also provide you with counsel to make sure that you do not inadvertently say or do anything in such an interview that you will later regret, where the agents questioning you will almost certainly use tactics they have honed for years in an effort to get the information from you that they need.
- DON’T RUSH TO SPEAK WITH THE GOVERNMENT UNTIL YOU GET TO THE BOTTOM OF THE SITUATION YOURSELF: Upon learning that you, your company, or an associate is under investigation by the government, one’s natural impulse may be to try to speak with the government as soon as possible in an effort to appear cooperative and to clear up the matter as quickly as you can. This again is the wrong approach. Before committing to speaking with the government, the most essential thing that one should do after retaining counsel is to investigate that within your company that is the focus of the government’s investigation. This may be the one point in the investigation where you may have an opportunity to obtain an informational advantage over the government, so before you agree to speak with the government about the subjects that interest it, conduct a thorough and honest investigation of the aspects of your company that have caught the government’s attention, drill down to identify any misconduct occurring within your company, take measures to stop such misconduct as soon as it is identified, and speak with the government only after you have a crystal clear understanding of the issues the government is investigating and are confident that you will be able to provide satisfactory answers to the issues raised in your interview.
- DON’T LIE; DON’T OBSTRUCT: The old adage that “the cover up is worse than the crime” almost always rings true in the context of accessing a corporate actor’s vulnerabilities when being targeting in a federal criminal investigation, and targets of white collar criminal investigations often find themselves in deeper trouble as a result of lying to a federal investigator or obstructing a federal investigation than what the investigation into their underlying activity would have yielded. If you do decide to speak with the government, it is absolutely essential that you do not lie. Lying to a government agent is its own crime,[5] and lying during an interview is the surest way of only digging yourself a deeper hole. Indeed, you may be doing a federal agent itching to have you prosecuted a tremendous favor by lying during your interview with that agent, as the fact you have lied to an agent during an interview may ultimately be easier for the government to prove than the underlying crimes it is investigating, your lies will add strength to the notion that you must be guilty of the underlying crimes the government is investigation, and you may even be lengthening the statute of limitations for your underlying offense or creating a way for the government to prosecute you for activity that is otherwise time-barred by committing the new offense of lying to a federal agent. For similar reasons, you need to avoid all conduct that could be viewed, rightly or wrongly, as obstructing the government’s investigation. Preserve documents; don’t destroy them (the government will most likely figure it out if you do so, particularly if you attempt to destroy computer data given the government’s forensic capabilities in that area). Interview suspected whistleblowers and address their concerns; don’t terminate them or otherwise retaliate against them. Respond to subpoenas in a full, complete, and timely manner; and do nothing to give the government a whiff of an idea that you are attempting to hinder what it views as its pursuit of the truth.
- KNOW THE RULES OF THE GAME YOU ARE PLAYING: In addressing how you should respond to learning that you or your company is the target of a government investigation, you should also take a big-picture view of your situation by taking heed of what considerations the government will ultimately be looking at when it turns, perhaps years later, to the question of whether you or your company should face criminal prosecution – and all of the potentially serious consequences that a criminal prosecution might entail, such as suspension or debarment – or some lesser sanction, such as a deferred prosecution agreement, a non-prosecution agreement, or a civil resolution to the matter. These considerations are not a secret. They are published in the United States Attorney’s Manual, which states the following “Corporate Prosecution Principles” are those factors the Department of Justice will consider when deciding whether or not it should move forward with a corporate prosecution: (1) the nature and seriousness of the offense at issue, including the harm done to the public; (2) the pervasiveness of the wrongdoing at issue within the company; (3) the company’s history of misconduct; (4) the collateral consequences of a criminal prosecution brought against the corporation, including the impact of such a prosecution on innocent third parties; (5) the adequacy of other remedies apart from criminal punishment, including whether justice can be achieved through civil and regulatory remedies or the prosecution of individuals within the corporation; (6) the company’s timely and voluntary disclosure of its wrongdoing; (7) the company’s cooperation in the investigation; (8) the effectiveness of the company’s corporate compliance program; and (9) remedial actions taken by the company.[6] Knowing these factors and earnestly confronting them by putting the company in the best position possible, as early as possible, to argue that these considerations favor non-prosecution due to proactive efforts undertaken by the company and individuals within the company, will go a long way toward staving off what may otherwise be the disastrous fallout of a corporate criminal prosecution.
[1] See DOJ Press Release, dated December 14, 2016, “Justice Department Recovers Over $4.7 Billion From False Claims Act Cases in Fiscal Year 2016 – Third Highest Annual Recovery in FCA History” (https://www.justice.gov/opa/pr/justice-department-recovers-over-47-billion-false-claims-act-cases-fiscal-year-2016).
[2] See Remarks by former Assistant Attorney General for the Criminal Division Leslie R. Caldwell at the Taxpayers Against Fraud Education Fund Conference, dated September 17, 2014 (see https://www.justice.gov/opa/speech/remarks-assistant-attorney-general-criminal-division-leslie-r-caldwell-taxpayers-against).
[3] See Harvard Law School Forum on Corporate Governance and Financial Regulation, “2016 Year-End FCPA Update,” dated January 17, 2017 (noting that 2016 was arguably “the most significant year of enforcement” in the FCPA’s 39-year history, as the DOJ and the Securities and Exchange Commission combined to bring 53 enforcement actions in 2016 involving violations of the FCPA; federal courts in the United States levied in excess of $2 billion in corporate fines stemming from FCPA violations; and foreign regulators, working on coordinated prosecutions with their U.S. counterparts, collected billions more in additional penalties from FCPA offenders worldwide) (https://corpgov.law.harvard.edu/2017/01/19/2016-year-end-fcpa-update).
[4] See Memorandum re: “Individual Accountability for Corporate Wrongdoing” by former Deputy Attorney General Sally Quillian Yates, dated September 9, 2015.
[5] See 18 U.S.C. § 1001.
[6] See United States Attorney’s Manual, Sec. 9-28.300 (Principles of Federal Prosecution of Business Organizations (Factors to Be Considered)).