1. D E N V E R L A S V E G A S O R A N G E C O U N T Y P H O E N I X S A L T L A K E C I T Y T U C S O N Internal Investigations Richard Gordon rgordon@swlaw.com | 702.784.5210 Josh Woodard jwoodard@swlaw.com | 602.382.6281

2. ©2005 Snell & Wilmer L.L.P. 2 What Triggers An Investigation?  When you want to provide a fair process.  When you want to make “rightful” termination decisions.  When you want to avoid lawsuits.  Certain types of conduct/allegations will mandate an investigation.

3. ©2005 Snell & Wilmer L.L.P. 3 What Triggers An Investigation? (cont.)  Accidents  Potential Safety Violations  Environmental Issues  Regulatory Compliance  Equipment Failure  Property Damage

4. ©2005 Snell & Wilmer L.L.P. 4 What Triggers An Investigation? (cont.)  Employment-Related Issues (sexual harassment; discrimination; poor performance; misappropriation; drug or alcohol use/impairment)  Potential Criminal Activity

5. ©2005 Snell & Wilmer L.L.P. 5 Determining the Purpose of the Investigation  To Find the Truth?  To Justify a Decision?  To Create a Report?  To Create an Affirmative Defense?  Because Required?

6. ©2005 Snell & Wilmer L.L.P. 6 Who Should Investigate?  In-House Counsel  Management Personnel  Outside Counsel

7. ©2005 Snell & Wilmer L.L.P. 7 Who Should Investigate? (cont.)  Effective Investigators Have:  High Level of Personal Integrity  The Respect and Backing of Employees and Upper-Level Management  Interviewing Skills  Neutral Position  Objective Outlook  Ability to Ask the Tough Questions  Enough Sensitivity to Engender Confidence  Good Witness Skills if Legal Proceeding

8. ©2005 Snell & Wilmer L.L.P. 8 When Should Outside Counsel Be Contacted?  Sending the Right Message  Sending the Wrong Message  Attorney/Client Privilege Issues  Cost Constraints  Can the Investigator Also be a Litigation Attorney?

9. ©2005 Snell & Wilmer L.L.P. 9 Documenting and Communicating Results (cont.)  Obtaining Maximum Attorney Work Product Protection  Employee interviews should be conducted by an attorney with another member of the legal staff present as a witness.  The attorney’s notes of the interview will likely be protected by the mental impressions provision of the work product rule.

10. ©2005 Snell & Wilmer L.L.P. 10 Getting the Most Out of an Investigation  When to Investigate?  Case and statutory law mandate immediate action.  Failure to promptly investigate and take appropriate remedial action will be a significant factor in imposing liability.

11. ©2005 Snell & Wilmer L.L.P. 11 Getting the Most Out of an Investigation (cont.)  The Interview Process If the interview is not conducted by an attorney, the interviewer should be instructed to limit notes of the interview to the information provided by the interviewee and such other pertinent facts as the date and time of the interview and the identities of all persons present.

12. ©2005 Snell & Wilmer L.L.P. 12 Getting the Most Out of an Investigation (cont.)  Confidentiality  Do not promise confidentiality – you cannot deliver.  Conduct private interviews.  Respect confidential company information.  Keep an open mind and do not reach a conclusion until investigation is complete.

13. ©2005 Snell & Wilmer L.L.P. 13 Interview Process  The person who first raised the issue should be interviewed early.  Ask her or him to recite a detailed account of the facts.  If she or he fails to cooperate, the company is not relieved of its duty to investigate.

14. ©2005 Snell & Wilmer L.L.P. 14 Interview Process (cont.)  Never place the person who raised the issue in the first instance in a position that would appear intimidating or demeaning.  Never make statements to the effect that you doubt the person’s story.  Never require a person to put his/her issue in writing.

15. ©2005 Snell & Wilmer L.L.P. 15 Interview Process (cont.)  Witness Statements  Obtain written witness statements whenever possible.  Never put words in a witness’ mouth or try to coerce a witness to sign a statement.  Go over the statement carefully with the witness to make sure that it truly reflects the person’s recollections.

16. ©2005 Snell & Wilmer L.L.P. 16 Interview Process (cont.)  Defer interviewing any alleged wrongdoer until you have gathered a good deal of evidence.  Avoid telling any alleged wrongdoer of the identity of the person(s) who is(are) the source of the information or evidence.  Avoid being confrontational or accusatory.  Do not make any statements to the effect that an individual is believed to have engaged in misconduct.  Ask open-ended questions.  Avoid leading questions.

17. ©2005 Snell & Wilmer L.L.P. 17 Interview Process (cont.)  Ask any alleged wrongdoer for names of persons who may be witnesses or who can provide information.  Review company’s personnel policy to make any action is consistent with written policies or past practice.

18. ©2005 Snell & Wilmer L.L.P. 18 Interview Process (cont.)  Must pay all persons for time worked during an investigation (i.e., interviews, gathering documents, etc. …)  Interview every witness who may have information.  Do not threaten or intimidate witnesses.  Do not say anything which could be construed as a threat of retaliation against a witness.

19. ©2005 Snell & Wilmer L.L.P. 19 Interview Process (cont.)  Do not offer anything of value depending on the nature of the witness’ testimony.  Employees who offer evidence of certain types of wrongful acts (i.e., safety violations, discrimination or harassment) are protected against retaliation.  Do not tolerate retaliation in any form.

20. ©2005 Snell & Wilmer L.L.P. 20 Documenting and Communicating Results  Any impressions, conclusions or recommendations of the interviewer should be written in a separate memorandum addressed to the attorney supervising the investigation, prominently bearing the caption “ATTORNEY-CLIENT PRIVILEGED MATERIAL.”

21. ©2005 Snell & Wilmer L.L.P. 21 Documenting and Communicating Results (cont.)  Who Should Be Informed of Results?  Document Retention Personnel  Affected Employees  Supervisors  Event Investigative Committee  Board of Directors  Regulators  Media

22. ©2005 Snell & Wilmer L.L.P. 22 After the Investigation  Evaluate What Should Happen Next  Internal Reporting Obligations  External Reporting Obligations

23. ©2005 Snell & Wilmer L.L.P. 23 After the Investigation (cont.)  Presenting only facts or reaching a conclusion?  Determine if company policies/laws have been violated.  Determine whether similar previous conduct has occurred.

24. ©2005 Snell & Wilmer L.L.P. 24 After the Investigation (cont.) The results of the investigation should not be discussed with anyone except upper management or others who have a need to be informed.

25. ©2005 Snell & Wilmer L.L.P. 25 After the Investigation (cont.)  Employer Actions  Training  Counseling  Verbal Warning  Written Warning  Transfer  Demotion  Decision-Making Leave  Termination

26. ©2005 Snell & Wilmer L.L.P. 26 Document Preservation and Retention  When and What to Document -  The General Rules  The Company’s Guidelines

27. ©2005 Snell & Wilmer L.L.P. 27 Documentation Preservation and Retention (cont.)  Duty Before Notice of a Problem –  The General Rules  An organization should have reasonable policies for managing its information and records.  An organization’s information and records management policies and procedures should be realistic, practical and tailored to the circumstances of the organization.  An organization need not retain all electronic information ever generated or received.

28. ©2005 Snell & Wilmer L.L.P. 28 Documentation Preservation and Retention (cont.)  An organization’s policies and procedures must mandate the suspension of ordinary destruction practices and procedures as necessary to comply with preservation obligations related to actual or reasonably anticipated litigation, governmental investigation or audit.

29. ©2005 Snell & Wilmer L.L.P. 29 Documentation Preservation and Retention (cont.)  An organization should consider including procedures that address the creation, identification, retention, retrieval and ultimate disposition or destruction of information and records.

30. ©2005 Snell & Wilmer L.L.P. 30 Documentation Preservation and Retention (cont.)  Document Retention -  The General Rule A party facing civil litigation, government investigation (regulatory, civil and/or criminal), prosecution or other such legal proceeding has an obligation to preserve evidence that may be relevant to that proceeding.

31. ©2005 Snell & Wilmer L.L.P. 31 Documentation Preservation and Retention (cont.)  The E-Discovery Rule The duty to preserve relevant evidence applies not only to paper documents, but also to reasonably accessible electronic documents and data.

32. ©2005 Snell & Wilmer L.L.P. 32 Documentation Preservation and Retention (cont.)  Consider whether lawsuits concerning similar issues have been filed, the frequency of such issues being raised, and the magnitude of the issues raised; and  Consider whether document retention was handled in “bad faith” – if the organization knew or should have known that the document would become material at some point in the future, then the documents should have been preserved. Lewy v. Remington Arms, 836 F.2d 1104 (8th Cir. 1988)

33. ©2005 Snell & Wilmer L.L.P. 33 Documentation Preservation and Retention (cont.)  Notice of a Problem When: The facts and circumstances reasonably would lead to the conclusion that an investigation or litigation is imminent or should otherwise be expected. Zubulake v. UBS Warburg, 2004 U.S. Dist. LEXIS 13574 (S.D.N.Y.): In employment discrimination case, when plaintiff’s supervisors became reasonably aware of the possibility of litigation, rather than when EOC complaint was filed several months later…

34. ©2005 Snell & Wilmer L.L.P. 34 Documentation Preservation and Retention (cont.)  Reasonableness Factors Consider the facts and circumstances surrounding the relevant documents (e.g., a three-year retention period may be sufficient for standard documents such as appointment notes or telephone messages, but may not be sufficient for records of customer complaints);

35. ©2005 Snell & Wilmer L.L.P. 35 Documentation Preservation and Retention (cont.)  Result: A duty to preserve potential evidence.

36. ©2005 Snell & Wilmer L.L.P. 36 Providing Notice to Employees  Satisfying Duty Upon Notice  The General Rule:  Suspend the normal course of records destruction, including the normal procedures for disposing of electronically-stored information.  Issue a preservation order: a communication that commences the suspension. (May also be known as a “litigation hold,” “legal hold,” “suspension order,” “freeze notice” or “hold order.”)  Company’s Guidelines

37. ©2005 Snell & Wilmer L.L.P. 37 Providing Notice to Employees (cont.)  Preservation Orders  When is a preservation order required?  Who is responsible for communicating the legal preservation order?  Who is responsible for implementation?  Who determines that the need for a preservation order no longer exists?

38. ©2005 Snell & Wilmer L.L.P. 38 Providing Notice to Employees (cont.)  Cost of Non-Compliance  MOSIA Techs. v. Samsung Elecs.,  Samsung did not issue preservation order upon notice of the litigation, resulting in destruction of relevant, responsive e-mail.  Court imposed $566,839 in sanctions and gave an adverse jury instruction.

39. ©2005 Snell & Wilmer L.L.P. 39 Providing Notice to Employees (cont.)  United States v. Philip Morris USA, Inc.,  Eleven corporate officers failed to comply with a court order to preserve documents and Philip Morris’ own document retention policy.  Court ordered that Philip Morris pay $2.75 million in sanctions and barred any individual who did not comply with the company’s policy from testifying at trial.

40. ©2005 Snell & Wilmer L.L.P. 40 Providing Notice to Employees (cont.)  Perelman v. Morgan Stanley,  Failure to produce tapes considered “bad faith.”  Plaintiff was awarded $604.3 million in compensatory damages.  Plaintiff was awarded $850 million in punitive damages.

41. ©2005 Snell & Wilmer L.L.P. 41 Instilling the Company’s Core Values in Front-Line Employees  Establishing the Core Values – are they more than words on a page?  Communicating the Core Values  How You Proceed with the Investigation is Telling  How You Respond to the Results of the Investigation is Telling

42. ©2005 Snell & Wilmer L.L.P. 42 Questions and Answers