Although it may seem unimaginable that

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1 White Collar Criminal Defense Alert April 2001 What to Do When the Government Knocks on Your Door By R. Scott Thompson, Esq. and Stefanie P. Tavaglione, Esq. Although it may seem unimaginable that your company would ever be the subject of a government investigation, it could happen. In fact, Federal and local law enforcement and regulatory agencies are constantly investigating corporations and it is likely that at some point over the lifetime of your business, you will be the subject of, or otherwise involved in, a government investigation. Would you know what to do in this situation? The following information is intended to familiarize you with some of the issues you would face if you became the subject of a government investigation, and to assist you in preparing an investigation management plan. Stage One: Preparing for the Worst When employees learn that a government investigation is under way, a certain amount of chaos inevitably ensues. By creating an investigation management plan ahead of time, some of the panic and confusion can be minimized. Portions of this plan can be included in your company s standard internal policy manual and distributed to all employees. It would be prudent for you to designate key personnel to administer the plan and give an oral presentation annually in conjunction with other training. G When the investigation of the company becomes publicly known, employees should be apprised of the fact that an investigation has commenced. The message should be clear, concise, and designed to avoid unnecessary alarm, but should also convey the gravity of the situation. Keeping employees informed helps to minimize speculation and allows you to plan your response with more freedom. You must keep in mind that well-intentioned, lawful statements to employees concerning an investigation may later be misinterpreted as an attempt to obstruct justice. Alerts to employees, created with counsel ahead of time, provide the best message with minimal risk of obstruction charges against the company. It would be wise to create a written record of the message delivered to employees this will provide protection in the event that there is ever a question as to what the employees were told. Additionally, if possible, the company s counsel should conduct meetings with employees, rather than company managers or directors. This will provide maximum protection and lessen the chance that employees will perceive the meeting as coercive rather than an effort to protect the company s legal rights. This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. 65 Livingston Avenue Roseland, New Jersey L Telephone Fax

2 Stage Two: The Government Agents Show Up Once the government agents are convinced that there is reason to proceed with the investigation, they may come to your company s place of business to gather information. It is therefore important that your employees be prepared ahead of time and that they are familiar with your company s investigation management plan. First, the plan must address a method where all visitors are received and asked to wait at a central reception desk until they have presented proper credentials and the purpose of their visit has been established. Next, your plan should advise employees to notify senior management immediately if they are approached by government agents at your place of business. The plan also Employees should understand that they are not obligated to voluntarily speak with government agents, and that they cannot be penalized for refusing to do so. should include the name of a criminal attorney who can be consulted immediately in an emergency situation. Beyond legal counsel, you must designate an investigation manager and a team who can be called together quickly if an investigation commences. The investigation manager will be responsible for dealing directly with the agents. Furthermore, the plan should include a method for employees to report to the investigation manager all contacts by law enforcement or regulatory personnel. Stage Three: Government Agents Interview Employees If the agents investigation takes them to your company s place of business, it is likely that they will want to conduct interviews. Your employees must be made aware that government agents may drop in unexpectedly requesting to interview company employees. Or, as is more often the case, they may visit your employees at their homes. These surprise interviews provide the government with enormous psychological advantages because the employee will feel pressure to cooperate with the agents. Additionally, many employees will not understand, due to the informal nature of the interview, that the information they provide can be used against either the company or the employee in criminal proceedings. You can attempt to request that the agents arrange all interviews through company counsel; however, it is not likely that this request will be honored. It is therefore important that, before investigation begins, employees be made aware of their rights. Employees should understand that they are not obligated to voluntarily speak with government agents, and that they cannot be penalized for refusing to do so. Employees are completely within their rights to politely refuse to answer questions. You should advise the employees of the advantages to refusing to answer questions. First, it gives the employee time to reflect on the facts surrounding the investigation, and avoids the pressure of an immediate interview. Most importantly, refusing to answer gives the employee

3 time to consult with an attorney. If, after consulting with an attorney, the employee chooses to consent to the interview, the employee may then request to have the lawyer present during the interview. Employees should understand that it is in their interest to have a third party present during any interview so that a record of the interview can be made on behalf of the employee or the company. hoping that the former employee might feel less loyal to the company and will be more cooperative with the investigation than current employees. First, you should address this issue with your current employees as part of your investigation management plan, making them aware of the fact that they could be contacted after their current employment ends. You should encourage them to contact the company if this situation ever arises. You must remember, however, that the decision whether or not to speak with the agents always rests with the employee. The company must not ask the employees not to speak with the agents such conduct could be considered obstruction of...company counsel should...speak with each interviewed employee immediately after the interview to determine what information was given to the agents. justice. You may request that employees inform the company if and when they are approached by an agent. Likewise, you may request to have company counsel (or counsel to represent the employee specifically) present during the interviews (being careful to explain to the employees that the attorneys represent the company, and not the employee, if that is the case). If this request is not granted, company counsel should, at the very least, speak with each interviewed employee immediately after the interview to determine what information was given to the agents. Finally, do not forget about former employees. Government agents often begin an investigation of a company by questioning former employees, If you learn that an investigation has commenced, you should attempt to contact all former employees believed to possess important information regarding the company. You should make an effort to conduct meetings with these former employees in person, and, as with current employees, it may be best for company counsel to conduct the meetings. During these meetings, former employees should be referred to separate legal counsel, thus relieving the company of any possible conflict. The former employee should also be advised that it would be sensible for them to request to have their counsel present during any government interviews. Corporate counsel must be clear, however, in explaining that the decision of whether or not to cooperate with the government rests entirely with the individual. If the former employee agrees to cooperate with the government agents and consents to an interview, he or she should be asked to meet with corporate counsel after the interview to discuss the substance of the questions asked and information offered during the interview.

4 Stage Four: The Search Warrant During the course of their investigation, government agents may produce a search warrant. A search warrant is a legal tool used by the government to obtain evidence. According to the Federal Rules of Criminal Procedure, a warrant must be based upon "probable cause" this means that there must be reason to believe that the search is likely to uncover evidence of a crime. A search warrant issued by a judge or magistrate authorizes immediate access to the premises. When presented with a search warrant, you should call company counsel immediately. Although you may request that the search be delayed until counsel arrives, in all likelihood such a request would be denied. Make a copy of the search warrant to provide to the company s attorney. The company s investigation manager should review the search warrant carefully, keeping in mind that the agents are only permitted to seize what is listed on the warrant and may search only in those areas listed on the warrant. If the government agents, however, insist on searching in an area, or for items, not specified in the warrant, do not try to stop them. Keep a record of this fact and let company counsel use this information at a later time to challenge the legality of the search and seizure of items. If the search has commenced without the company s counsel present, the investigation manager should attempt to identify the Agent in Charge, each participating agent and the agencies involved in the search. This information should be provided to the company s attorneys. The investigation manager should also inquire into and determine the procedures that the agents intend to follow in conducting their search and discuss these procedures with the agents. The investigation manager should make clear to the agents and employees that all inquiries arising during the search should be directed to him/her. Additionally, if asked, the investigation manager should refuse to sign a consent form and should make it known to the government agents that the company is not consenting to the search. A consent to the search may make it difficult to later challenge the legality of the search. All employees, except the investigation manager and the investigation management team, should be sent home (although you may also need employees with technical expertise to protect the company information systems in the event that the search includes computer records). Let the employees know when to return and where to A consent to the search may make it difficult to later challenge the legality of the search. report. Keep a list of contact numbers in case you need to reach particular employees. Next, the investigation manager should monitor the agents and keep a detailed list of the areas searched and the items seized, noting whether the agents confine their search to the areas described in the warrant. You may need to assign other employees to assist in this task if the agents are searching different locations simultaneously. The agents are authorized to

5 search and seize everything detailed in the search warrant. Although assertion of a privilege, such as the attorney-client privilege, will probably not stop the search and seizure of materials, you should nonetheless request exclusion of documents that reflect potentially privileged communications with your counsel and make sure there is a record of your objection. Request that privileged materials be kept in separate boxes so that the company s lawyer will have an opportunity to review them and take appropriate action to protect those privileged documents from disclosure. (Consider keeping privileged documents separate as a normal business practice to make protection of these documents easier, in the event that an investigation ensues.) The investigation manager should also request an opportunity to copy any documents and to make back-up copies of all computer files seized. This may be critical, not only for the continued operation of the business, but also to maintain an accurate record of the documents and materials seized. (Although the government agents are required to provide a receipt of the materials seized, the receipt is often general and of little help). If this request is refused, the prosecutor or, if necessary, the magistrate or judge issuing the search warrant should be contacted and informed that obtaining such copies and information is necessary to enable the company to continue doing business. by the agents. All notes taken by the investigation manager and documents collected from the agents should be given to the company s counsel as soon as possible. Conclusion The information provided in this Alert is certainly not meant to be exhaustive on the issues and procedures involved in a government investigation. It is meant to make you aware of the need to educate your employees and to implement an easily accessible investigation management plan so that the investigation will go as smoothly as possible: that is, with the least interruption to the operation of the business, and the most protection of the company s and the employees rights. As is so often the case, it is far easier, and safer, to put a plan in place to deal with a criminal investigation ahead of time. All too often, attempts to maintain control of a situation after an investigation has begun are misperceived as interference with the investigation, which is an outcome to be avoided at all costs. For more information on this issue or any other criminal defense matter, please contact R. Scott Thompson, Chair of Lowenstein Sandler s White Collar Criminal Defense Practice Group, or Stefanie P. Tavaglione a member of the Group, at At the end of the search, the investigation manager should request a debriefing from the agents. Finally, the investigation manager should review for accuracy the receipt of items prepared