Conducting Effective Internal Investigations

Transcription

1 Conducting Effective Internal Investigations June 15, 2011 Matthew M. Curley Eli J. Richardson

2 Six Changes to the Landscape (1) Increased Funding for Anti-Fraud Initiatives (2) Greater Push for Criminal Cases (3) Expanded Use of Private Contractors (4) Significant Amendments to False Claims Act (5) Enhanced Investigative Tools (6) Dodd-Frank Whistleblower Provisions

3 What Do the Changes in the Landscape Mean for Businesses and In-House Counsel? (1) Continued emphasis on compliance. (2) Increased likelihood of facing enforcement actions. (3) Increased likelihood of facing whistleblower complaints. (4) Increased likelihood your company will undertake internal investigations.

4 When is an Investigation Warranted? Red Flags (1) Anonymous Tips/Whistleblowers (2) Corporate Culture (3) Business Aberrations (4) Government/Auditor Inquiry (5) Internal Audit

5 Who Should Oversee the Investigation? Key Considerations (1) Options: Exec. Management, Legal Dept., Internal Audit, HR, BOD, Audit/Special Committee (2) Independence of Overseers (3) Perspective of the Government/Regulators/ Auditors (4) Who is the Client?

6 Who Should Conduct the Investigation? Alternatives (1) Compliance/HR/Internal Audit (2) In-house Counsel (3) Outside Counsel (4) Other Consultants

7 Who Should Conduct the Investigation? Key Considerations (1) Resources (2) Attorney-Client Privilege (3) Risks v. Efficiencies (4) Role of In-House Counsel

8 In re John Doe Corp.,, 675 F.2d 482 (2d Cir. 1982) We recognize that corporate counsel coming upon evidence of criminality in communications protected under Upjohn are placed in an uncomfortable position. Their superiors or clients may well fear the commercial or even more serious personal consequences of disclosure. The lawyers professional relationship to the corporation may extend well beyond aspects relating to criminal liability and leave them torn between a desire to see the firm prosper and their professional and legal obligations. In such cases, the wiser course may be to hire counsel with no other connection to the corporation to conduct the investigations....

9 What is the Appropriate Scope of the Investigation? Goals (1) Counsel should seek authority to allow for a credible and competent investigation of the issues. (2) Defined boundaries should be established to avoid fishing expeditions but with care to avoid limits that preclude performance of the agreed task competently and completely. (3) The results of the investigation must not be predetermined by scope or methodology.

10 What is the Appropriate Scope of the Investigation? Key Considerations (1) Request a workplan to guide the investigation. (2) Consider potential future disclosure obligations. (3) Consider who needs to be in the loop. (4) Consider scope of document preservation. (5) Maintain focus and resist chasing irrelevant/ unimportant issues that may arise.

11 How Can Costs Be Managed Effectively? Key Considerations (1) Selection of Outside Counsel (2) Budgeting/Stages of the Investigation (3) Understand the Continuum of Risk ( silver, gold, or platinum plan)

12 How Can Costs Be Managed Effectively? Role of Outside Counsel in Controlling Costs (1) Counsel must monitor itself (i.e., staffing, interviews, document review). (2) Counsel must monitor vendors. (3) Counsel must proactively look for ways to reduce expense. (4) An on-going dialogue between counsel and the client regarding cost and continuum of risk is critical.

13 Should a Written Report Be Prepared? Considerations (1) What is the purpose of the investigation? Has the investigation been conducted for the purpose of reporting the results to the Government? (2) What is the purpose of the report? Will an oral report suffice? (3) If a written report exists, the Government will request to see it. (4) Will there be litigation related to the investigation?

14 Considerations in Dealing with the Government (1) What factors guide interaction with the Government? (2) What are the Company s disclosure obligations? (3) What will the Government otherwise expect to be disclosed? (4) What remedial efforts might the Government expect?

15 Let me offer one additional piece of guidance on this topic. When a problem has been discovered, the corporation should seriously consider seeking the government s input on the front end of its internal investigation. We encourage a company to come in and describe its work plan for conducting the investigation. Often we have questions, or helpful suggestions, or we may ask the corporation to expand the scope of the investigation. Regardless, the dialogue can be very helpful in ensuring at the outset that the corporation has an effective, cost effective plan in place to investigate and deal with the problem. Lanny A. Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice, Prepared Remarks to Compliance Week 2010 (May 26, 2010)

16 Special Issues in Conducting Internal Investigations (1) Separate counsel for certain employees (2) Indemnification and advancement of legal fees (3) Protection of whistleblowers against retaliation (4) Obstruction of justice (5) Fiduciary obligations of board members (6) Recovery of costs under the MVRA

17 QUESTIONS?