Government Investigations: How to Respond and Manage Efficiently Bart Daniel Rob Lindholm David Rice (Wells Fargo) Association of Corporate Counsel October 16, 2018

Introduction How An Investigation Begins Initial Response Investigative Scope Developing a Plan Document Collection/Review/Production Interviewing Witnesses Avoid Pitfalls Avoiding Litigation

How An Investigation Begins: Origins Origins of a Government Investigation Criminal investigators (e.g, DOJ, FBI, AG, OIG, Local PD) Civil/Administrative agencies (e.g, SEC, HHS, CFTC, OFAC, FTC) Audits Whistleblower/Disgruntled employees Media coverage Referrals from other investigations Government focus on issue or industry

How An Investigation Begins: Notice Notice of Investigation Administrative Demand Civil Investigative Demand Civil Subpoena Target or Subject Letter Grand Jury Subpoena Execution of Search Warrant

How An Investigation Begins: Potential Consequences Parallel investigations by other regulators Private civil litigation/class actions Reputational damage Loss of partners/clients/deals Stock price decline Scrutiny from investors, auditors, lenders Loss of time/productivity from company employees

Initial Response Contact Counsel Institute a Legal Hold Have Outside Counsel Contact AUSA or Other Agent Counsel should meet with the AUSA/Regulator ASAP to determine nature and scope of the investigation; convey spirit of cooperation

Initial Response: Retaining Counsel Determine Need for Outside Counsel Independent investigation Protect investigations & results with Attorney-Client and Attorney Work Product Privileges If outside counsel, regular corporate counsel or another firm? Consider nature of the allegations If related to disclosures in public filings, better to select other independent counsel Designate employee to work with outside counsel Determine flow of information and chain of command internally

Initial Response: Organizing the “Team” Define “team” early on May include consultants, PR, individual attorneys, company criminal counsel, and civil defense counsel Avoid duplication of effort and ensure clearly defined roles Appoint a point person to streamline communication

Initial Response: Instituting a Legal Hold Institute a Legal Hold Early On All with relevant info and access to systems with relevant info Hard copy and all electronically stored information (“ESI”) Suspend all routine and non-routine document deletion protocols and identify all backup processes in place Coordinate document retention policy with outside & in-house counsel, and IT Follow up periodically

Initial Response: Contact with DOJ or Regulator Contact the AUSA or Regulator early Determine nature and scope of the investigation (witness/subject/target). That will in turn guide the scope of your investigation Seek AUSA/Regulator input Outline a document collection and review plan to demonstrate you have reasonable and defensible plan in place Identify Constraints Deleted documents Unavailable witnesses Continually interact with AUSA/Regulator

Initial Response: Protecting Privilege If outside counsel is engaged, counsel should retain hired consultants Copy outside counsel with relevant internal emails/memos (maintains privilege) Educate employees – need to know basis Discussions not involving counsel likely discoverable Issues that may come up: Common Interest/Joint Defense Agreement Joint Representation Employee Counsel

Initial Response: Disclosures Is Disclosure of Investigation Required? To Whom? Internal disclosure (Board or Board committees, senior management, general employees) External disclosure (other regulators, SEC, insurance providers, lenders, auditors)

Investigative Scope: Considerations Expense Cost Disruption Cooperation Optics Avoid artificial limitations Consider sharing scoping decision with AUSA/Regulator

Investigative Scope: Considerations Timing Determine the initial scope at the outset Scope may be broadened/narrowed as government investigation proceeds Geographic and Temporal Scope Identify all offices and individuals that may have documents and other electronic information Documentation Document scoping decision Include outside counsel to protect privileges

Developing a Plan Stop the alleged conduct or practice if it is still ongoing Inform the Board Not every investigation requires Board involvement Any investigation involving senior management or those which might have material effect on the company’s financials requires board involvement

Developing a Plan: Oversight Committee Select an Oversight Committee if Needed Should be independent and disinterested SEC guidance suggests solely outside directors (may not be practical or necessary) Best practice: appoint outside directors unless minor investigation

Developing a Plan: Who Else to Notify? Identify and Inform “Need to Know” Individuals In-house counsel Those critical to the fact-gathering process

Developing a Plan: External Messaging Strategy Determine External Messaging Strategy The External Strategy Needs to Consider: Materiality—from a disclosure standpoint Confidentiality concerns Commercial reputation Cooperation optics External Message Is Critical “No comment” “We’re not able to speak on the details of an ongoing investigation, but can tell you we are cooperating fully.”

Developing a Plan: Internal Messaging Strategy Determine Internal Messaging Strategy Need to inform employees without paralyzing the organization Determine factual information with emphasis on confidentiality Convey that total cooperation is expected and that the information should be discussed only with counsel or other need-to-know co-officials who are part of the core investigative team Notify company auditors if issues raise material questions about the company’s financial statements

Document Collection/Review/Production What Document Sources to Collect Usually a subpoena/request from the Government will define “documents” very broadly E.g, emails, e-files, faxes, voicemails, text messages, instant messages, notes, photos, audio recordings Who Collects the Documents Options: custodian, in-house IT team, outside counsel, third party vendor

Document Collection/Review/Production Culling the Population for Review Counsel will face decisions to make on scope of review, including custodians and date range, deduplication, search terms, and use of analytics (TAR) Who Performs the Document Review Outside counsel, third party vendor, machine Cost should not always control Keep AUSA/Regulators Informed on the Status of Your Review/Production Provide periodic updates and set expectations for when they will receive productions In-person updates more effective, but email is the safest – consider combination

Interviewing/Prepping Witnesses Beating Investigators to the Punch Inform Employees of Right Not to Talk to Agents Furthers Internal Investigation

Interviewing Witnesses: Upjohn Provide an Upjohn Warning Make clear to the witness the following: You are the company’s attorney; you are not the witness’s attorney The discussion is privileged and the witness should not disclose the contents of the discussion to anyone other than an outside or in-house counsel The company “owns the privilege” and the company has the right to waive the privilege and disclose the substance of the interview to the regulator or other third parties

Interviewing Witnesses: Cooperation Emphasize the Importance of Cooperation In-house counsel should explain to employee that cooperation is expected and any failure to cooperate could result in disciplinary action Company executives should NOT be present

Interviewing Witnesses: Structure Staff the interview with two attorneys, or one with experienced paralegal Why two? One questions and the other takes notes Can observe witness’ demeanor The scrivener can incorporate his or her mental impressions to help protect the notes as work product If later someone has to testify, it’s not lead counsel Provides two sets of ears for receiving the witness’s answers Don’t be afraid to ask the tough questions – the Government won’t Conclude interview by reminding employee about confidentiality, document preservation and any applicable company policies Prepare an interview memoranda right after the interview

Avoid Pitfalls: Paralyzing the Company Failing to have a deployable plan in place can paralyze a company involved in an internal investigation Take action based on solid facts and balance efficiency with efficacy Strive not to repeat interviews or document gathering exercises—i.e., have a plan and execute

Avoid Pitfalls: Bad Relationship With Regulator Failing to Build a Rapport with the Regulator: Not an Option The importance of this cannot be understated Providing regular updates and scoping discussions demonstrate that the company is serious, and interested in getting to the truth Convey cooperation & understanding that AUSA/Agent has a job to do

Avoiding Litigation Leveraging Relationships Attitude Internal Investigation Can Lend Bargaining Chips Take Remedial Action Implement Vigorous Compliance Program

Questions?

Contact Information Bart Daniel (843) 534-4123 bart.daniel@nelsonmullins.com Nelson Mullins Charleston/Columbia, SC Rob Lindholm (704) 417-3231 robert.lindholm@nelsonmullins.com Nelson Mullins Charlotte, NC David Rice Wells Fargo Charlotte, NC