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

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. Initial Response: Protecting Privilege
If outside counsel is engaged, counsel should retain hired consultants
Copy outside counsel with relevant internal s/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

12. 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)

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

14. 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

15. 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

16. 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

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

18. 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.”

19. 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

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

21. 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 is the safest – consider combination

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

23. 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

24. 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

25. 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

26. 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

27. 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

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

29. Questions?

30. Contact Information
Bart Daniel
(843)
Nelson Mullins Charleston/Columbia, SC
Rob Lindholm
(704)
Nelson Mullins
Charlotte, NC
David Rice Wells Fargo
Charlotte, NC