internal and government investigations: a deep dive · •implications of yates memo on analysis...

Internal and Government

Investigations:

A Deep Dive

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

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

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

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

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

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

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

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

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


10

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

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


– 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


• 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


• Upjohn: may require more fulsome warning

13


• 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


– 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


• 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

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

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

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

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

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

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


21

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

Other Privilege Issues

• Disclosure to Auditors

• Different Privilege Laws/Standards In Other Countries

23

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

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

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

Remediation

• Should be considered throughout

• Stop all improper conduct

• Discipline wrongdoers

• Prevent future misconduct

• Document plan and timeline for remediation

27

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

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

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

DOJ Launches New One-Year FCPA Pilot Program

• On April 5, 2016, Assistant Attorney General Leslie Caldwell announced a one-

year 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

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

Whistleblower Programs

33

False Claims Act 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 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.

•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

SOX & Dodd-Frank

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

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

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

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

Internal and Government

Investigations:

A Deep Dive

internal and government investigations: a deep dive · •implications of yates memo on analysis...

Documents