Corporations and individuals cooperating in government investigations must be sharply focused on finding out the essential facts of the historical conduct at issue what happened and why it happened. This is not new. For its part, the government is also sharply focused on what happened and why. In the last few years, however, the interest of the U.S. Department of Justice, in particular, has expanded beyond just the what and why and it is now significantly involved in how companies actually conduct internal investigations. DOJ's involvement often takes the form of a "request" that the company take action or refrain from doing so, rather than a more forceful directive. But the message is no less clear comply with our requests or risk losing cooperation credit. The most notable types of such "requests" can be grouped into the following categories: deconfliction requests; questions about fees; and restrictions related to document dissemination and communication among counsel (which has implications for joint defense and common interest communications).
The government's increased involvement affects the process of the investigation and can potentially affect the outcome as well. As the new conservative administration transitions into full swing, it remains to be seen whether this trend will continue. In the meantime, counsel representing companies and individuals will need to carefully consider how investigations are conducted to avoid missteps that could cause harm to their clients.
The lead-up to the current environment could be traced to public statements made by officials in DOJ's Criminal Division. For example, in 2015, then-Assistant Attorney General Leslie Caldwell made a series of comments indicating the DOJ's intent to "pressure test"1 a company's internal investigation. Caldwell stated that "we will consider the adequacy of an internal investigation when we evaluate a company's claim of cooperation2 we evaluate the quality of the company's internal investigation3 [c]orporate accountability through a strong, tailored compliance program and thorough internal investigations should be the standard for your companies."4 Although Caldwell was quick to note that the Criminal Division would "not tell a company how it should conduct an investigation,"5 two years later, DOJ appears to be more focused than ever on how a company and its outside counsel conduct an investigation, and has taken specific steps to involve itself directly in that process. Further, with the release of the Yates Memo in Fall 2015, DOJ has expressly increased its emphasis on individual prosecution, both civil and criminal, and that pronouncement has directly affected how internal investigations are carried out.
A year after her comments regarding internal investigations, Caldwell was asked about an increase in deconfliction requests, in which DOJ asks companies and their counsel to refrain from interviewing employees until after the government has done so. Caldwell admitted that the issue was disputed, but said that in her view, such requests "should be rare," "should only be made for good strategic reasons," and should not be made "in a knee-jerk or reflexive way."6 Despite Caldwell's opinion, however, the white-collar bar has observed a significant increase in deconfliction requests within the last year, which coincides with the inclusion of deconfliction as part of the FCPA's one-year pilot program.7 Whether in the FCPA context or otherwise, companies under pressure to cooperate with the government are not likely to ignore these deconfliction requests given the potential harm should they get on the government's bad side.
But deconfliction can seriously impede the timeliness and efficiency of a company's internal investigation, which can have far-reaching implications. This is especially palpable when companies are under the gun to determine whether the facts developed in the investigation require changes in policy, supervisory structure, disclosure, personnel changes, or other remedial measures. Companies are frequently sued in civil lawsuits alleging that management failed to prevent some alleged misconduct, and deconfliction requests bear on the speed with which management can act in response to potential issues.
The "good strategic reasons" for DOJ's deconfliction requests are not always apparent. Historically, well-founded concerns of obstruction of justice (grounded in actual, not theoretical behavior) have justified DOJ's deconfliction requests. In many recent instances, however, the most that can be gleaned from the circumstances surrounding the request is that DOJ prefers to employ a "gotcha" scenario with witnesses, apparently in the belief that somehow witnesses who are interviewed first by company counsel will not subsequently provide truthful and accurate accounts to the government.
Another area where DOJ has renewed its involvement in internal investigations relates to legal fees. Although this area of focus was previously pursued and dramatically curtailed by a court challenge and subsequent DOJ policy change, apparently DOJ has not lost interest after all.
About a decade ago, in one high-profile investigation, DOJ informed a company that it viewed the payment of legal fees for employees as rewarding "misconduct," and if there was any discretion in that payment, the company would be placed "under a microscope." As result of the conversation, the company limited fees; required employee cooperation including a limitation on use of the Fifth Amendment; threatened cessation of payment upon individual charges; and referred employees to attorneys who "understood cooperation [as] the best way to go."8 Amidst a successful challenge to this practice in United States v. Stein,9 DOJ revised its policy in the 2006 McNulty Memorandum, which prohibited consideration of the payment of employees' legal fees except in extremely rare cases. Recently, however, multiple accounts have surfaced of DOJ inquiring into a company's payment of employees' counsel fees and related indemnification issues. These questions can have a chilling effect on the essential involvement of counsel in internal investigations. Again, disturbingly, DOJ appears to view the involvement of lawyers as somehow negatively affecting the results of an investigation.
Corporate counsel have also faced increasing requests to restrict the documents and materials available to individual witnesses and their counsel, as well as other information shared with counsel for individual employees. The sharing of information was once left to the discretion of counsel for the company and counsel for individuals, who governed themselves using the guidepost of avoiding witness spoliation. The government's restriction on sharing documents and information often strikes at the heart of counsel's overall investigative approach: when conducting an internal investigation, counsel must balance the rewards of full cooperation credit with the need for full and efficient fact development. Particularly when dealing with documents and electronic communications that are often ten years old, or documents where the custodian was a sender or recipient, there does not appear to be a legitimate need for keeping those materials from individual witnesses. In this area, like deconfliction requests, it appears that the government prefers the "gotcha" approach to conducting an investigation.
The effects of DOJ's tactics can be particularly pronounced for joint defense and common interest communications among counsel. Historically, these communications have been a common and efficient means for company counsel and counsel for individuals to share information while still maintaining the protections of the attorney-client and work product privileges. But DOJ's increasing restrictions on the sharing of information and documents interfere with and potentially diminish the value of joint defense and common interest agreements. Again, the "gotcha" approach appears to be motivating these requests, and again, there does not appear to be a legitimate justification for this intrusion.
The recent trend of DOJ involvement in companies' internal investigations has been increasing in extremity and frequency. On the bright side, the tactics do appear to be restricted to the DOJ, as other regulators like the SEC and CFTC have not consistently pursued these tactics. Time will only tell whether DOJ's aggressively restrictive tactics will continue under the new administration's leadership. In the meantime, counsel for corporations and individuals will need to continue to strike a delicate balance between complying with DOJ's requests while still striving to develop the factual record in order to serve their clients' best interests.
Endnotes:
1. Leslie R. Caldwell, Assistant Attorney Gen., U.S. Dep't of Justice, Remarks at New York University Law School's Program on Corporate Compliance and Enforcement (April 17, 2015).
2. Id.
3. Leslie R. Caldwell Assistant Attorney Gen., U.S. Department of Justice, Remarks at the Compliance Week Conference (May 19, 2015).
4. Id.
5. Id.
6. Roger Hamilton-Martin, "Leslie Caldwell: 'deconfliction' requests should be rare," GLOBAL INVESTIGATIONS REVIEW (April 28, 2016).
7. As part of the program, released on April 5, 2016, the Justice Department listed requirements for full cooperation one of which was "where requested, de-confliction of an internal investigation with the government investigation." Later, upon request for clarification, a DOJ spokesperson confirmed that "de-confliction" meant a company should ensure it did not interview certain people before the DOJ does in particular circumstances. See U.S. Department of Justice National Security Division, "Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations" (Oct. 2, 2016); see also Adam Dobrik, "DOJ clears ambiguity in FCPA pilot programme," GLOBAL INVESTIGATIONS REVIEW (April 14, 2016).
8. United States v. Stein, 435 F. Supp. 2d 330, 340-344 (S.D.N.Y. 2006).
9. Id. aff'd 541 F.3d 130 (2d Cir. 2008).
