Seven Things A Prosecutor Probably Won't Tell You (I Know. I Used To Be One)
from
May/June 2006
by Robert R. Calo
Of course, you have to cooperate if a prosecutor starts
asking questions about your company. For one thing, many federal and
local investigations are no more than that and don’t necessarily lead
to prosecution. Allegations by anonymous whistleblowers, for example,
may turn out to be groundless, but they always have to be looked into.
Still, as soon as a board learns of a prosecutor’s attention, it should
hire outside counsel to give an objective assessment of the problem.
Remember, prosecutors aren’t obligated to tell you much, if anything,
about the investigation—or, in fact, whether an investigation is even
being conducted. Here are some of the things they may not be saying:
“Subpoenas are on their way.”
Often the first indication that an investigation has been launched is a
subpoena, which demands records but provides little information as to
why—including whether your company is the target or a witness. Have
outside counsel press the prosecutor on this point. Produce what you’re
asked for, but do it quietly. The fewer employees who know what’s
happening, the more likely you’ll be able to avoid disruption and
publicity.
“Surprise! I may send grand-jury subpoenas to your customers or vendors too.”
A prosecutor can contact virtually anyone during the investigation,
including those you do business with. Try to prevent this by explaining
to the prosecutor that since the investigation is ongoing and the
company has not been charged with anything, such action would injure
the company’s reputation. While you’re buying time with the prosecutor,
contact your customers and vendors, tell them about the investigation,
and ask that they cooperate—and keep it confidential.
“I may send in an armed posse with a search warrant.”
Law-enforcement agencies and prosecutors now employ a policy of
real-time enforcement. One method is to dispatch armed agents to grab
all documents in an early-morning raid on your corporate facilities.
This will cause havoc and draw adverse publicity, a scenario
corporations should try to avoid at all costs. If you know of an
impending investigation, assure the prosecutor that a search warrant is
unnecessary.
“Other agencies may also be investigating your company.”
Frequently more than one federal or state agency looks into the same
allegations. A prosecutor is under no obligation to volunteer this, but
he has to tell you if you ask. So ask. A successful defense against one
set of allegations by one agency could make a company more vulnerable
to allegations by another. A prosecutor might conclude that an
accounting transaction was not criminal, for example, but the
Securities and Exchange Commission might find wrongdoing.
“You don’t have to waive the attorney-client privilege.”
Prosecutors often demand a blanket waiver at the start of an
investigation. Don’t go for this. Your counsel should craft a plan of
cooperation and disclosure that satisfies the government and lets the
company keep its privileged legal communications.
“Not
only do I want to settle the criminal action, I want the company to
undertake a costly modification of its entire corporate compliance
structure.”
A federal prosecutor frequently wants a
company to establish a new compliance system, either as part of a
settlement or as a condition for not charging the company with
wrongdoing. Beat him to the punch with a revised (and probably less
expensive) program of your own.
“Even if I don’t bring charges, I may make it tough for you to defend yourself against civil suits.”
Sometimes the government ends an investigation with the offer of a
“deferred prosecution agreement.” This means that the government files
charges against the company, but if the company fulfills all the
conditions of the agreement, such as full cooperation and payment of a
fine, the government dismisses the charges. The company must fight to
make sure the agreement does not limit its ability to defend itself
against the civil suits that inevitably follow government
investigations.
Robert Calo, a partner in the Portland, Oregon, office of Lane Powell PC and a member of the firm’s white-collar and regulatory compliance group, was a federal prosecutor in Los Angeles and Philadelphia.
