Internal and Government Investigations: A Deep Dive

Transcription

1 Internal and Government Investigations: A Deep Dive

2 Speaker Biographies Alexander Bopp The Boeing Company Alex Bopp is an Associate Counsel in the Litigation (Investigations) Group at The Boeing Company (Boeing). Along with Boeing s Chief Counsel for Investigations, Alex manages Boeing s compliance with the Federal Acquisition Regulations Mandatory Disclosure Rule and several other FAR provisions that drive internal investigation activity. Alex serves as the Company s liaison with government agencies to whom Boeing makes disclosures, regularly reporting to and resolving inquiries from DODIG, DCIS, DOJ, DCMA and DCAA. He also serves as the Law Department s gatekeeper for potentially significant investigations reviewing allegations that arise both internally and externally to determine whether Law Department involvement in the investigation of the allegation is necessary. Alex also serves as the primary investigations attorney for Boeing s DC-area operations. Alex holds a BA from Columbia University and JD from Boston University School of Law. After law school, Alex clerked for Federal Magistrate Judge Justo Arenas in The United States District Court for the District of Puerto Rico. Prior to joining Boeing in 2006 Alex worked one year for Schertler & Onorato, LLP in Washington, DC and prior to that for five years for Indiano & Williams, PSC in San Juan, Puerto Rico. 2

3 Speaker Biographies Maria Gonzalez Calvet General Electric María Gonzalez Calvet is Executive Counsel, Global Investigations, for General Electric supporting GE Energy Connections and the Latin America region generally. María most recently was at DOJ in the FCPA Unit where she served as a trial attorney for 4 years. Prior to DOJ, María worked at Morgan Lewis & Bockius for 6 years where she focused on white collar defense and complex litigation. After receiving her law degree from the University of Pennsylvania, María clerked for US District Judge Legrome Davis in the EDPA. María received her Bachelor of Arts from the University of Pennsylvania where she majored in English/minored in Spanish and received her Master s degree in English from Penn State. María is the recipient of numerous academic awards from the schools she attended. She has also served in leadership positions in the Pennsylvania and National Hispanic Bar Associations. Most notably, she was counsel to the HNBA in connection with the then-president's testimony before the Senate Judiciary Committee during the confirmation hearings of Justice Sonia Sotomayor. She is a 2010 recipient of the Women of Distinction Award from the Legal Intelligencer and a 2008 recipient of the Pennsylvania Bar Association s Pro Bono Award. 3

4 Speaker Biographies James Cole Sidley Austin LLP Jim Cole, former Deputy Attorney General of the United States, focuses his practice on the full range of federal enforcement and internal investigation matters, with a particular emphasis on cross-border and multi-jurisdictional matters. He has extensive experience overseeing sensitive and controversial matters, both within the government and while in private practice. 4

5 Speaker Biographies Kristin Graham Koehler Sidley Austin LLP Kristin Graham Koehler has handled numerous United States Department of Justice (DOJ) criminal and civil investigations involving healthcare fraud, antitrust, securities fraud, and violations of the Foreign Corrupt Practices Act (FCPA). She has significant experience representing clients in qui tam matters, State AG investigations, and congressional investigations, and has negotiated numerous Corporate Integrity Agreements with the HHS Office of Inspector General. 5

6 The Yates Memo September 10, 2015 In September 2015, Deputy Atty. Gen. Sally Yates announced new policy guidance, emphasizing DOJ priority to identify culpable individuals in corporate investigations. Expands on already-existing DOJ practices. Requires DOJ to fully leverage its resources to identify culpable individuals at all levels in corporate cases. No cooperation credit awarded if information on individuals not provided. Yates described the new approach to corporate cooperation as all or nothing, analogizing a company that fails to identify responsible individuals to a drug trafficker who is unwilling to testify against a cartel boss. DOJ attorneys must do more to pursue individuals in corporate enforcement actions. Approval by Assistant AG or US Attorney required if no action. States a preference for resolving individual cases before corporate ones. Before corporate settlement, DOJ attorney must have a clear plan to resolve individual cases and memorialize any declinations. Whether to bring a civil suit should be based on considerations beyond an individual s ability to pay. Now separate credit for self reporting, but unclear how it works in tandem with requirements noted above. 6

7 Potential Impact of Yates Memo and Outstanding Questions Prolong open investigations (great deal of work for prosecutors to establish case against an individual). Increase cooperation work required by company and attorney s fees. Remains unclear how the DOJ will address assertions of privilege in the assessment of total cooperation. This is particularly true with regard to any decisions not to share interview memos reflecting statements of individuals who may be potential targets for prosecution. Companies may be put in the untenable position in which maintaining privilege and receiving cooperation credit are mutually exclusive aims. Potential impact on: scope of internal investigations; employee cooperation; defense counsel for employees; JDAs; Upjohn. Could impact disclosure decision. Question of whether Yates Memo being implemented correctly and uniformly. 7

8 Why Conduct an Internal Investigation? Fulfill requirements of Corporate Ethics and Compliance program to investigate allegations of potential misconduct / violations of company policy Determine potential liability and enact remediation Assess defense to potential claims or resolution of the conflict Avoid regulatory action, indictment, or civil litigation Ask government to stand down during course of investigation Leverage to put company in best position to obtain a favorable settlement or reduce penalties at sentencing Maintain or improve public reputation 8

9 Who Should Conduct The Investigation? Options: Company Managers / HR In-House Counsel Regular Outside Counsel Outside Counsel Retained Solely To Conduct The Investigation Driver: How serious is the allegation of wrongdoing, and how high in the organization are the people who are accused of wrongdoing? In today's climate, regulators are less likely to rely upon the results of investigations by in-house counsel unless they involve minor allegations by low-level employees Implications of Yates Memo on analysis 9

10 Who is the Client? Generally, management If senior management directly or indirectly supervised or had personal knowledge of the subject matter, investigators generally should report to Board of Directors or Committee of the Board (Audit or Special Committee) Board may authorize investigator to work with in-house counsel, but Board retains decision-making authority Scope of investigation and lines of reporting should be delineated from the outset Implications of Yates Memo on analysis 10

11 Witness Interviews Practice Tips Consider whether internal or external counsel should be present Explain the nature of investigation and purpose of the interview at the outset Set the tone: collaborative and courteous, not adversarial Give admonitions Upjohn warning oral or written? Preserve potentially relevant documents Contact with third parties/government Confidentiality reminder at end 11

12 Witness Interviews Common Questions Do I have to talk to you? Let employees know from the outset that the company expects them to participate fully in the investigation, which means that they must retain and produce documents and submit to interviews If the employee asks if he can refuse to be interviewed, explain that the company expects the employee to cooperate fully and honestly with the investigation Implications of Yates Memo on analysis Employee cooperation: employees may be reluctant to speak to counsel if they believe companies are looking for and will disclose wrongdoing on their part 12

13 Witness Interviews Common Questions Will you tell anyone else what I say here? Explain that the company may disclose what the witness says to the company or third parties, including the Government But at present it is intended to keep the communications confidential Implications of Yates Memo on analysis Upjohn: may require more fulsome warning 13

14 Witness Interviews Common Questions Do I need my own lawyer? Remind the witness that you do not represent him/her and cannot provide him/her with legal advice Explain that the employee is free to consult with his/her own lawyer at any time Implications of Yates Memo on analysis Defense counsel for employees may be necessary before employees will cooperate with an internal investigation; may only be able to acquire information under a JDA Could result in multiple company executives needing counsel in general, and at a much earlier stage in the process 14

15 Witness Interviews Common Questions Will the company pay for my lawyer? Issue as to whether employees will be authorized to retain separate individual counsel whose fees will be advanced or reimbursed by the company Governed by state law and company s by-laws to large extent Company may decide to expand scope of indemnity to include employees who might not be covered by the by-laws, but are likely to be witnesses, subjects, or targets of inquiry Filip Memo: Prosecutors cannot take into account whether a corporation is advancing or reimbursing attorneys fees or providing counsel and prosecutor may not request that a corporation refrain from taking such action Important to make sure the employee s lawyer is competent Implications of Yates Memo on analysis Increased attorneys fees 15

16 Interview Memorandum To prepare or not to prepare? If written: Memo or Bullet Points? Necessary Intro Paragraphs: This memorandum reflects information obtained during interviews conducted on [X date] by [Counsel] of Sidley Austin LLP. Prior to each interview we described the purpose of the interview. We stated that we represented the Company and were not the witness attorney. We explained that the interview was to gather factual information that we would use in providing legal advice to the Company. We stated that the conversation was protected by the Company s attorney-client privilege and that the Company could decide, at its discretion, whether to disclose the conversation. We asked each witness to keep our conversations confidential, and each agreed to do so. The purpose of this memorandum is to record factual information necessary to provide legal advice to the Company. This memorandum does not contain a verbatim, or substantially verbatim, transcript of the interview. Rather the memorandum sets forth our thoughts, impressions, conclusions, and opinions in connection with the pending matters involving the Company. In particular, this memorandum reflects our judgment as to the relevance of certain information and the interpretation of factual disputes. This memorandum incorporates privileged and confidential information and is protected by the attorney-client and work product privileges. 16

17 Special Issues When the Government Is Involved Perjury Subornation of Perjury Obstruction of Justice False Statements Witness Tampering Document Destruction Computer Associates: DOJ has taken the position that an employee can be indicted for obstruction of justice if he lies to private counsel conducting an investigation, if he knows his statements will be shared with a government agency such as the SEC or DOJ, which is conducting its own investigation Fifth Amendment and Adverse Civil Inferences Parallel Investigations 17

18 Government Contacts with Current and Former Employees Employee has the right: To decide whether or not to speak to an investigator To insist that counsel be present Sometimes, the Company will recommend counsel and pay attorney's fees To schedule the interview at a time and place convenient to them (and counsel) To decide who should be present Company counsel should not advise employee regarding whether or not they should speak with an investigator If they are contacted by an investigator, company counsel can request that they notify the company's attorneys 18

19 Attorney-Client Privilege In general, the attorney-client privilege protects confidential communications made for the purpose of securing legal advice In order to protect privileged communications during an investigation, counsel should: clearly identify who counsel represents avoid conflicts of interest designate privileged material as such limit dissemination of privileged material on a need-to-know basis 19

20 Work Product Doctrine Work product doctrine protects documents and other tangible things prepared by counsel, or by persons working at the direction of counsel, in anticipation of litigation Is an internal investigation in anticipation of litigation? Yes, if active government inquiry has commenced Maybe, if solely an internal review If take position in the internal investigation that litigation is reasonable anticipated, note related need for appropriate document preservation measures 20

21 Joint Defense Privilege Joint defense privilege essentially extends the attorney-client privilege and work product doctrine to confidential communications designed to advance the representation of parties sharing common interests Frequently used between company and employees in investigations Counsel should consider memorializing the agreement in writing, which is required by some courts; clearly identifying the parties and defining the common interest Agreement should make clear that communications are confidential and disclosure of confidential information among members of agreement does not constitute waiver of attorney-client privilege or work product doctrine Implications of Yates Memo on analysis 21

22 Joint Defense Privilege Agreement should prevent disclosure of confidential information by any member of group to third party unless member that provided the information agrees Agreement should make clear that confidentiality requirement remains in force for members who withdraw from group Joint defense agreements usually permit members to withdraw only upon express notification to other members of group Agreement should make clear that joint defense agreement does not give rise to attorney-client relationships between party to agreement and counsel for another party Agreement also should state that parties understand and agree that sharing of privileged information will not be basis for disqualification of counsel or claim of conflict in event that one or more parties withdraws from joint defense or otherwise becomes adverse 22

23 Other Privilege Issues Disclosure to Auditors Different Privilege Laws/Standards In Other Countries 23

24 Use of Experts or Consultants Generally, retained by company and law firm, with bills to be paid directly by the company Engagement letter should be clear that engagement is designed to help counsel provide legal advice and is undertaken in anticipation of litigation 24

25 Report of Investigation Decision concerning how to report results of internal investigation will depend upon client s goal in conducting investigation Counsel may choose to report informally to company s general counsel or officers In other cases, written report may be necessary to formally report to the board, to voluntarily disclose to the government, or to influence the decisions made by prosecutors or a sentencing court In drafting a written report, counsel should minimize the potential waiver of privileges and the likelihood of use of the report against the company in future enforcement actions or civil litigation Dissemination of the report should be limited and only to those in a position to take action in order to maintain the privilege 25

26 Report of Investigation Internal investigation reports will (to varying degrees) usually summarize: Circumstances that led to the investigation Scope of the investigation and whether it was limited in any way Relevant facts uncovered and the applicable law Arguments for and against liability, prosecution or sanctions Internal policies, procedures, or practices that led to the event Appropriate remedial actions 26

27 Remediation Should be considered throughout Stop all improper conduct Discipline wrongdoers Prevent future misconduct Document plan and timeline for remediation 27

28 Disclosure to Government Agencies Voluntary Versus Required Disclosure How, When, and What to Disclose? Weigh Advantages against Disadvantages of Disclosure in each Situation Waiver Considerations 28

29 Voluntary Disclosure Advantages: The potential benefits of voluntary disclosure include: government may take into account voluntary disclosure when determining civil penalties voluntary disclosure may decrease likelihood of criminal prosecution even if there is a prosecution, voluntary disclosure is a mitigating factor under Federal Sentencing Guidelines voluntary disclosure may solidify relationships with government agencies, save litigation costs, and stave off government intervention in qui tam suits 29

30 Voluntary Disclosure Disadvantages: The potential downside to voluntary disclosure, particularly where the conduct falls into a gray area or is not ongoing, include: alerts the government to a problem it otherwise might not have known existed requires the disclosing party to provide facts and to analyze the data for the government in a way that the government might not have been able to accomplish on its own often requires waiver of the work product and attorney-client privileges requires companies to engage in the difficult process of identifying culpable employees risks expansion of investigation to other related or unrelated issues even the most extensive and complete voluntary disclosures do not always guarantee a positive outcome 30

31 DOJ Launches New One-Year FCPA Pilot Program On April 5, 2016, Assistant Attorney General Leslie Caldwell announced a oneyear FCPA enforcement pilot program in the Fraud Section s FCPA Unit According to DOJ, the principal goal of the program is to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self-disclose, fully cooperate with the Fraud Section, and, where appropriate, remediate flaws in their controls and compliance programs Companies that adhere to these terms may receive tangible mitigation credit, including avoidance of a corporate monitor, a substantial fine reduction, or a DPA Caldwell also said that incentivizing companies to self-report misconduct will further enhance the Fraud Section s ability to prosecute culpable individuals, a logical next step following release of the September 2015 Yates Memo 31

32 Waiver Any agreement with the government to waive privilege should be in writing and should contain three key components: Scope of the Waiver The agreement should define the types of work product and communications waived, as well as the subject matter of the waiver Waiver Limitations The agreement should delineate any types of work product and communications for which privilege is not waived Limitations on Use The agreement should specify how the government will use the privileged information. For example, the government may agree not to use the information in any subsequent criminal or civil case against the company. Counsel should understand that, in waiving its privilege in a government investigation as to a given subject matter, the company is in all likelihood also waiving its privilege against all parties with respect to that same subject matter Most jurisdictions follow the Second Circuit rule, which does not permit selective waiver. See In re Steinhardt Partners LP, 9 F.3d 230, 236 (2d Cir. 1993). 32

33 Whistleblower Programs False Claims Act SOX & Dodd-Frank FIRREA Purpose: to incentivize reporting of fraud against the United States. Several states have similar laws. Incentive: an award of up to 15%-30% of the government s recovery. Anti-retaliation: private right of action to remedy any retaliation because of reporting of violation or efforts to stop violation. Purpose: to incentivize reporting of securities and commodities law violations to the SEC and CFTC Incentive: an award of up to 10% to 30% of monetary sanctions imposed as a result of violation Anti-retaliation: Criminal punishment for retaliating against anyone for reporting any Federal criminal offense to Federal officials Private rights of action to remedy retaliation because of reporting of mail, wire, bank, or securities fraud, or a violation of Consumer Financial Protection Act Purpose: to incentivize reporting to the DOJ of bank fraud, loan fraud, and mail and wire fraud affecting a federally insured financial institution Incentive: 20% to 30% of recovery up to the first $1 mil. recovered; 10% to 20% of the next $4 mil. recovered; and 5% to 10% of the next $5 mil. recovered. Thus, maximum share is $1.6 mil. Anti-retaliation: No separate anti-retaliation provision, but those of Sarb-Ox would apply. 33

34 Questioning Whistleblowers Be solicitous and open-minded Assume conversation will be shared elsewhere Underscore privilege if applicable, but make clear facts not privileged Communicate company's good faith interest in understanding allegations Put onus on whistleblower to share information Avoid expanding scope of allegations 34

35 Some Dos and Don ts of Investigating a Whistleblower Complaint Respect the allegations and the whistleblower Don t retaliate! Inform the complainant about the investigation, to the extent appropriate. Remember that the government is the potential audience Ensure steps are documented, proper warnings are given, and all evidence is preserved Address confidentiality and privilege issues from outset Focus on rooting out wrongdoing rather than damage control or trying not to rock the boat Work closely with auditors Explore insurance coverage 35

36 Investigation As A Defense In some instances, the Company may wish to use its internal investigation findings or related remedial actions as a defense in the employment context (e.g., claims of discrimination, harassment, retaliation, etc.) May result in a waiver of attorney client privilege and attorney product protections in whole or in part, depending on the nature of the claim, the defense, and the investigation Consider in advance whether the investigation will be conducted at the direction of counsel If investigation is directed by counsel, treat the communications as privileged but be mindful that investigative notes, statements, reports, etc. may be disclosed in the future Consult with counsel before asserting the defense or producing otherwise privileged materials 36

37 Key Takeaways: Is Your Internal Investigations House in Order? In light of the Yates memo, consider carefully at the outset of each investigation who is your client. If senior management directly or indirectly supervised or had personal knowledge of the subject matter, then your client likely needs to be the Board or some subset thereof. Consider carefully whether it is in the client s best interest for in-house counsel to be in attendance at witness interviews Have standard written protocols in place regarding Upjohn warnings and hold notices, as well as responses to the following questions: Do I need to meet with you? Will what I tell you be shared with anyone else? Do I need a lawyer? Will the company provide a lawyer? What do I do if contacted by the government? Review your indemnification policies to determine who is covered and see if any changes need to be made either in terms of coverage or limits Treat whistleblowers with care 37

38 Internal and Government Investigations: A Deep Dive