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Managing the Fallout: What to Do When You Learn That Your Employee Has Been Talking to the Government

By John T. Graff and John T. McInnes

Among the growing concerns for smaller and medium-sized companies is the federal investigation. Rapidly evolving statutes and regulations are among the many issues all businesses encounter as they attempt to reduce costs and enhance profits in an increasingly competitive global economy. However, standing at the intersection of competition and compliance are the enforcement arms of government agencies, including the Department of Justice (DOJ), ready to investigate and charge companies with criminal wrongdoing at a time when corporate transparency and accountability are the order of the day. These investigations often involve employee cooperation, with or without notice to the company.


The DOJ’s Principles of Federal Prosecution of Business Organizations (the Prosecution Manual), which have been incorporated into the U.S. Attorneys’ Manual, regulate the conduct of a DOJ investigation.[1] Corporate counsel must recognize that, although the Prosecution Manual repeatedly refers to the “corporation” when describing DOJ investigative procedures, it expressly applies to “all types of business organizations, including partnerships, sole proprietorships, government entities, and unincorporated organizations.”[2] White collar defense counsel should be intimately familiar with the Prosecution Manual because it provides valuable insight into factors considered by the government when determining the course of an investigation. More importantly, it reveals ways in which a company might mitigate potential fallout. Among the more notable provisions is the prosecutor’s discretion in considering the company’s cooperation during an investigation.[3] The company that knows it is being investigated, and is represented by informed defense counsel, is well-poised to successfully navigate the complexity of a federal investigation.


This is all well and good when the company knows the government is investigating. It can try to “get ahead” of the investigation by managing what is provided to the government—that is, proactively controlling the flow of information. However, when an employee has already leaked information to government investigators, the company necessarily finds itself in a reactive posture. As a result, defense counsel must determine what to do to regain control of the situation and level a battlefield that is pitched heavily in favor of the government. Following is a non-exhaustive list of steps that should be taken upon learning that an employee has been communicating with government investigators without the company’s knowledge.


Talk to the Employee
It is imperative that counsel establish communication with the employee who has been speaking to government investigators. Counsel must attempt to identify the purpose of the investigation before approaching the government, and interviewing the employee is the most expedient way of doing so. Counsel should cordially ask the employee to describe in detail the nature of his or her conversations with investigators. Performed properly, this interview can be telling of the government’s focus.


Consider a Forensic Computer Analysis
If possible, counsel should consider executing a forensic computer search to determine what, if any, documents the employee may have downloaded and/or emailed to others, or to his or her own email account. Consider halting any document or backup-tape-destruction policies so the government cannot argue that the company knowingly spoliated potential documentary evidence.


Reach Out to the Government
Counsel should consider establishing contact with the government as soon as possible after learning that the company is being investigated. Conversations should be amicable and be designed to gather as much detail about the government’s case as possible. In addition, counsel must, without committing to disclosures, demonstrate the company’s interest in cooperating through counsel. The prosecutor’s office will determine whether the company is charged, and if so, what the disposition short of formal proceedings will be. While the company needs the assistance of the prosecutor, the prosecutor may also need to rely on disclosure from the company itself in determining how to effectively handle the matter to accomplish the government’s objective. Cooperation between both sides is the key. And establishing a positive tenor to the discussions should help to facilitate a quicker resolution to the matter.


Your discussions with the government should help develop an understanding of its concerns, areas of inquiry, and what it seeks to accomplish through the investigation. While you cannot prevent the government from talking with your employees outside your presence, a simple request that the government talk to employees only in the presence of corporate counsel may prove helpful in avoiding further covert meetings between government agents and company employees.


Consider Notifying Employees
Also consider alerting some, or all, employees that an investigation is underway. Inform employees that the company is cooperating in a government investigation and that the employees too may be contacted by investigators. Employees may speak with government investigators without a company representative present. However, the company may ask employees to allow company representatives to sit in on interviews with agents.


Because many investigators may show up at employees’ homes at inopportune times, offer the use of company conference rooms or meeting areas, and ask employees to schedule interviews during business hours. Such an offer demonstrates the company’s cooperation in the investigation, and will make it more likely that a company representative can attend and monitor the interview.


Perform an Internal Investigation
Defense counsel knows full well that it cannot rely on the government’s version of events to inform strategy. Accordingly, counsel should immediately begin an internal investigation. There are pros and cons to having the investigation conducted by counsel, company officials, or third parties. Regardless of which method is chosen, an internal investigation must be conducted. A focused and thorough investigation should inform counsel’s understanding of the matter and related strategy. In addition, it should allow counsel to identify relevant facts that might be disclosed to the government with the goal of earning cooperation credits.


Manage the Outflow of Information
Establishing yourself as the point of contact is necessary to manage the outflow of information to the government. Even if the government refuses counsel’s request, once defense counsel is communicating with the government, it can disclose facts in a sequence and manner that should serve to contain damage created by the informing employee.


Do Not Discipline an Employee Who Has Spoken with the Government
Often, the gut reaction of company officers is to terminate an employee whom the company perceives as disloyal. As an initial matter, it is advisable to execute confidentiality agreements with employees prohibiting disclosure of company information to third parties without company authorization. Such agreements serve to remind employees that loyalty to the company includes preserving the company’s confidence with respect to all inquirers.


However, even in the event an employee breaches such an agreement, counsel must advise clients to refrain from terminating or disciplining the cooperating employee. As a matter of public policy, companies are prohibited from terminating or disciplining an employee for cooperating with a government investigation. And many federal statutes creating company liability also prohibit retaliation against an employee who is assisting with or participating in a government investigation or proceeding. In any event, the government is likely to view termination or disciplinary action as obstructionist, or at the very least, suspicious. One of defense counsel’s objectives is to gain the confidence of the government, not to raise suspicion. Perceived retaliation or attempts to silence vocal employees will undoubtedly be interpreted by the government as “consciousness of guilt.”


Make a Deal
Federal investigations are often aimed at restoring the status quo and maintaining the public’s confidence in the integrity of the law and a company’s obligation to comply with it. While many cases are presented for indictment and formal prosecution, most can be resolved through settlement or consent agreements with the government. Accordingly, your investigation, conversations with the government, and interactions with company employees should be aimed at bringing the matter to a conclusion as quietly, swiftly, and cost-efficiently as possible.


Keywords: Criminal litigation, government investigation


John T. Graff and John T. McInnes are with Mirick O’Connell in Worcester, Massachusetts.

This article appears in the Spring 2009 issue of Criminal Litigation.

 

End Notes


  1. See Principles of Federal Prosecution of Business Organizations (Aug. 28, 2008).
  2. Id. 9-28.100 n.1.
  3. See id. §§ 9-28.700 to 9-28-760.

 

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