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Key Considerations In US Government Investigations – White Collar Crime, Anti-Corruption & Fraud



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In summary

Guiding a client through a US government investigation requires
advising on a myriad of complex strategic decisions. This article
outlines certain critical considerations for companies and their
counsel as they navigate criminal, civil and regulatory
investigations, whether being led by the Department of Justice or
an agency such as the Securities and Exchange Commission, the
Commodity Futures Trading Commission or the Office of Foreign
Assets Control.

Discussion points

  • At the outset of a US government investigation, counsel should
    evaluate how the investigation began and how far it has progressed
    to assess how best to respond.

  • Careful consideration must be given to undertaking an internal
    investigation if the company has not already done so.

  • Cooperation (including self-reporting any new violations)
    carries significant benefits and risks, and must be tailored to the
    specific agency’s expectations.

  • Care must be taken to engage with the government and respond to
    requests without waiving the attorney-client privilege or other
    applicable privileges.

  • Parallel investigations by multiple federal, state or foreign
    agencies carry unique challenges and require careful
    coordination.

Referenced in this article

  • US Department of Justice, Justice Manual, Principles of Federal
    Prosecution of Business Organizations

  • US Securities and Exchange Commission, Enforcement Manual

  • US Commodity Futures Trading Commission, Enforcement
    Manual

  • US Department of Treasury, Office of Foreign Assets Control,
    Enforcement Guidelines

  • Memorandum from DOJ Deputy Attorney General Lisa O Monaco,
    ‘Corporate Crime Advisory Group and Initial Revisions to
    Corporate Criminal Enforcement Policies’

In the early stages of a US government investigation, a company
will often face daunting decisions that can have an outsize impact
on the course of the investigation for months or years to come. As
discussed below, some of the important considerations are: (1)
evaluating how the investigation began and how far it has
progressed; (2) preserving potential evidence and other data; (3)
deciding whether to launch an internal investigation; and (4)
engaging with the investigating agency while protecting the
attorney-client privilege.

How did the investigation begin?

US government investigations may be initiated in many different
ways. Understanding how the investigation began can provide insight
into how far it has progressed, which is a key factor to consider
in deciding how best to respond.

Whistleblowers

The US legal system contains a variety of state and federal
mechanisms that incentivise and shield individuals who come forward
to report potential misconduct. In recent decades, the DOJ
increasingly has used the False Claims Act (FCA)1 to
prosecute a broad range of false monetary claims submitted to the
government, often relying on whistleblowers who are incentivised to
bring lawsuits on behalf of the US government.2

The Securities and Exchange Commission (SEC), Commodity Futures
Trading Commission (CFTC) and Treasury Department also have
effective whistleblower programmes. Under the Sarbanes-Oxley Act of
20023 and Dodd-Frank Act of 2010,4
individuals may report voluntarily to the SEC ‘original
information’ about potential violations of US securities laws.
In fiscal year 2021, the SEC received a record-breaking number of
whistleblower tips – more than 12,200 – from
individuals in 99 foreign countries.5 The CFTC operates
a virtually identical whistleblower programme under section 23 of
the Commodity Exchange Act,6 which allows individuals to
report potential violations of US commodities laws to the CFTC. The
Treasury Department’s whistleblower programme has been
significantly bolstered by the recent passage of laws. On 1 January
2021, the Anti-Money Laundering Act of 2020 took effect, enhancing
the Treasury

Department’s whistleblower award programme to encourage
reporting on financial institutions’ violations of the Bank
Secrecy Act. And in March 2022, the Treasury Department established
a new whistleblower programme pursuant to the Kleptocracy Asset
Recovery Rewards Act. The Kleptocracy Asset Recovery Rewards
Program offers up to US$5 million to whistleblowers who provide
information that leads to the seizure, restraint, forfeiture or
repatriation of assets linked to foreign government
corruption.7

Government officials report that whistleblowers continue to
provide immense value to investigators. As insiders or individuals
with knowledge of the workings of the target company,
whistleblowers often have the ability to influence
investigators’ view of otherwise ambiguous conduct,
particularly early on in a government investigation.

The most effective way for companies to mitigate whistleblower
risks is to create and foster a compliance culture that encourages
internal reporting and addresses complaints with as much
transparency as possible. A robust compliance programme, coupled
with easily accessible whistleblower and anti-retaliation policies,
will provide comfort to employees by making it clear that improper
conduct will not be tolerated and reassuring employees that their
complaints will be handled sensitively and seriously. Companies
should also establish an ethics policy that requires personnel to
comply with all applicable legal duties and sets forth specific
requirements in areas more prone to violations. Companies should
ensure these programmes are implemented through robust and regular
training, and provide routine surveys and checks to ensure the
programme is meeting its desired goals.

Where a government investigation has been launched based on a
whistleblower report, the target company is already at a
significant disadvantage. The government is likely in possession of
sensitive and potentially damaging information, including key
documents or even recordings of meetings. Government investigators
typically will not disclose to the company that the government has
received a whistleblower report. In such circumstances, it would be
prudent to undertake an internal investigation. However, special
care must be taken to avoid even the appearance of retaliatory
conduct. An investigation can be critical in developing additional
facts and providing context to counterbalance the prevailing
government narrative.

Subpoena or other formal request

Companies often learn of a government investigation for the
first time when they receive a formal written notice demanding the
disclosure of documents and information. In criminal
investigations, the DOJ typically issues these demands in the form
of a grand jury subpoena. A corporation has no Fifth Amendment
privilege against self-incrimination8 and therefore
cannot refuse to produce records, even if it is the target of the
investigation.

Many federal agencies are also statutorily authorised to issue
administrative subpoenas compelling document production and
testimony.9 These subpoenas are similar to grand jury
subpoenas, except they are issued in an agency’s name. Another
investigative tool is the Civil Investigative Demand (CID), a
compulsory procedure used to obtain documents, answers to
interrogatories and oral testimony. CIDs are often used by the
Federal Trade Commission and the DOJ’s Antitrust and Civil
Divisions.

Upon receipt of a subpoena or CID, a reasonable first step is
often to begin a dialogue with the government agency. While it is
not always necessary to retain outside counsel to handle this
outreach, it may be wise to do so, especially if it is clear from
the demands that the government is focused on a sensitive subject
area or critical part of the business.

Key questions to try to answer are: What is the focus of the
government’s investigation? Is the investigation targeting the
company or some other entity or person? How far along is the
investigation? Answers to these questions will inform counsel’s
advice about what approach to take. Every situation is unique, but
common approaches include negotiating with the government to narrow
the subpoena, offering to provide a live presentation on the facts
in lieu of a subpoena response in the first instance, or – if
the demand seems unduly burdensome or baseless – trying to
persuade the government to drop the demand, or pursuing a challenge
in court. Depending on the circumstances, counsel may also advise
the company to undertake an internal investigation to get to the
bottom of what the government is investigating.

Awareness of government investigations in the same industry

Government agencies often focus their enforcement efforts on
particular industries where many firms engage in similar practices
that prosecutors or regulators believe to be problematic. Thus,
when news breaks of a government investigation or corporate
resolution in a particular industry, it can be a potent warning
sign to other industry participants that they may soon be under
investigation too, if they are not already.

Footnotes

1 31 U.S.C. § 3729 et seq.

2 See, eg, U.S. Dep’t of Justice, ‘Justice
Department’s False Claims Act Settlements and Judgments Exceed
$5.6 Billion in Fiscal Year 2021’ (Feb. 1, 2022), available at
https://www.justice.gov/opa/pr/
justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year
.
(discussing FCA recoveries in fiscal year 2021).

3 15 U.S.C. § 7201 et seq.

4 12 U.S.C. § 5301 et seq.

5 U.S. Securities and Exchange Comm’n, ‘2020
Annual Report to Congress – Whistleblower Program’ (Nov.
16, 2021), available at https://www.sec.gov/files/2021_OW_AR_508.pdf.

6 7 U.S.C. § 1 et seq.

7 U.S. Dep’t of Treasury, ‘Kleptocracy Asset
Recovery Rewards Program’, https://home.treasury.
gov/about/offices/terrorism-and-financial-intelligence/terrorist-financing-and-financial-crimes/
kleptocracy-asset-recovery-rewards-program
(last visited 27
June 2022).

8 See Curcio v. United States, 354 U.S. 118, 122
(1957).

9 See, eg, 15 U.S.C. § 78dd-2(d)(2) (DOJ); 15 U.S.C
§ 77s(c) (SEC); 7 U.S.C. § 9(5)–(6)
(CFTC).

To read the full article click
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Originally Published by GIR Americas Investigations
Review

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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