Association of Corporate Counsel Houston Chapter Meeting of June 8, 2010 What to Do When the Feds Come Knocking In-House Responsibilities for Criminal Enforcement Matters James Hurd Kenneth Polite

Charging Considerations LEGAL STANDARDS  Treat Corporations Like Individuals  Benefits of Corporate Prosecutions  Respondeat Superior  Vicarious Liability for Acts of Agents  Individual vs. Corporate Prosecutions

Charging Considerations Historical Background Historical Background Purposes of the Criminal Law Purposes of the Criminal Law Punishment Punishment Deterrence Deterrence Protection of the Public Protection of the Public Rehabilitation Rehabilitation Restitution Restitution

The Opening Salvo Initial Notice of an Investigation  Search Warrant  Grand Jury Subpoena  Questioning Witnesses Early Involvement by Counsel is ESSENTIAL

Initial Corporate Response Protection of Evidence Suspend Document Destruction Policies Suspend Document Destruction Policies Litigation Hold Strategy Litigation Hold Strategy Other Considerations for Documents and Electronic Data Other Considerations for Documents and Electronic Data

Initial Corporate Response Protection of Employees  Notify Employees  Should Counsel be Provided to Employees?

Initial Corporate Response Protection of Board of Directors and Management Prompt Disclosure Prompt Disclosure Special Committees? Special Committees? D & O Insurance Issues? D & O Insurance Issues? Internal Investigation? Internal Investigation?

Search Warrant Response Discussion with Agents Request a Copy of the Warrant Request a Copy of the Warrant Advise that Employees are not Prepared to be Interviewed at the Time of Execution of the Warrant Advise that Employees are not Prepared to be Interviewed at the Time of Execution of the Warrant

Search Warrant Response Advice to the Client Do Not Interfere with Agents Do Not Interfere with Agents Request Business Cards from the Agents Request Business Cards from the Agents Request the Presence of Counsel at any Interviews Request the Presence of Counsel at any Interviews

Search Warrant Response Call the Prosecutor Ascertain the Nature of the Investigation Ascertain the Nature of the Investigation Pledge Cooperation (if Authorized) Pledge Cooperation (if Authorized) Negotiate Employee Interviews, if Requested by the Prosecutor Negotiate Employee Interviews, if Requested by the Prosecutor

Document Requests Grand Jury Subpoena, Administrative Subpoena or Other Grand Jury Subpoena, Administrative Subpoena or Other Can Scope of Subpoena be Limited? Can Scope of Subpoena be Limited? Negotiate a Timeline for Production Negotiate a Timeline for Production

Coordinating the Defense Dealing with the Prosecutor:  Establish a Good Working Relationship  Credibility is Critical  Effective Communication

Coordinating the Defense Counsel for Employees & Officers:  Must Coordinate with Other Defense Counsel  Joint Defense Agreements Oral vs. Written

Parallel Proceedings Should Counsel Seek to Stay Pending Civil Litigation? Discretion of the Court Discretion of the Court Untenable Choices: Untenable Choices: Whether to waive right against self- incrimination to avoid deprivation of property without due process, or Whether to waive right against self- incrimination to avoid deprivation of property without due process, or Risk making statements that could be used in a criminal prosecution Risk making statements that could be used in a criminal prosecution

Cooperation A essential factor in a prosecutor’s exercise of discretion A essential factor in a prosecutor’s exercise of discretion Generally, one of nine factors considered by federal prosecutors in “Principles of Federal Prosecution of Business Organizations” Generally, one of nine factors considered by federal prosecutors in “Principles of Federal Prosecution of Business Organizations”

Cooperation Forms of Cooperation 1) Waiver of the attorney-client privilege 2) No advance legal fees or indemnity to employees 3) Full and complete disclosure of facts (from internal investigation) 4) Records of interviews

Refusal to Cooperate May Result In:  Aggressive investigation methods  Numerous grand jury subpoenas  Possible search warrants  Regulatory reprisals

Plea Bargaining Prosecutors seek the most serious, readily provable charges Prosecutors seek the most serious, readily provable charges Financial audits Financial audits Employee interviews Employee interviews Corporate Plea in Exchange for Non- Prosecution of Individual Employees and Officers Corporate Plea in Exchange for Non- Prosecution of Individual Employees and Officers

Special Considerations Plea must be entered by a corporate representative Plea must be entered by a corporate representative Requires a resolution of the board of directors Requires a resolution of the board of directors Debarment Considerations Debarment Considerations Regulatory Consequences Regulatory Consequences

Deferred & Non-Prosecution Agreements Alternatives to Prosecution Alternatives to Prosecution May Include Civil or Regulatory Enforcement May Include Civil or Regulatory Enforcement Two Important Considerations: Two Important Considerations: Timely Cooperation Timely Cooperation Is It In The Public Interest? Is It In The Public Interest? Outside Monitors Often Required Outside Monitors Often Required

Other Considerations Sentencing Guidelines Has the company self-reported, cooperated and accepted responsibility? Has the company self-reported, cooperated and accepted responsibility? Has the company tolerated criminal activity? Has the company tolerated criminal activity? Are effective compliance and ethics programs in place? Are effective compliance and ethics programs in place? Analysis of pecuniary gain to company or loss to victims Analysis of pecuniary gain to company or loss to victims

Association of Corporate Counsel Houston Chapter June 8, 2010 Meeting James A. Hurd Kenneth Polite