Lawyers: What to Do (or NOT Do) in Internal & External Investigations

Transcription

1 Lawyers: What to Do (or NOT Do) in Internal & External Investigations Presented by: Kevin M. Wood, Esq. Strasburger & Price LLP 600 Congress Ave, Ste 1600 Austin, TX (512) Convent St, Ste 900 San Antonio, TX (210) AHLA Annual Meeting June 28, 2011

2 Who is the client? Organization/corporation Constituents of the organization Officers Directors Shareholders Employees Unrepresented persons Multiple-party representation What type of entity is the client? Publicly Traded Company Privately Held Company Institution Non-Profit College or University Religious Order Professional Entity

3 Reasons to Conduct an Internal Investigation Internal allegation of wrongdoing Compliance issues (e.g., hotline) Corporate monitor Government investigation Corporate integrity agreement Industry-wide concern Concern voiced by Board of Directors Scope of the Investigation What issues are being investigated? Do you have a reasonable time frame to complete the investigation? Do you have sufficient resources to conduct the investigation (especially in the given time frame)? Who is in charge of the investigation?

4 How to Avoid a Governmental Investigation Employee Reporting System Federal sentencing guidelines encourage the use of an anonymous or confidential reporting system Employees need to be well informed of the system, including: any limits on confidentiality an employee s obligation to report suspected wrongdoing the fact that the company will not retaliate against employees for using the system System should be designed to encourage reporting Better for employees to feel free to report than to feel they have no choice but to be whistleblowers

5 Compliance Plan The existence of an effective compliance plan has many benefits: Reduces the likelihood that the OIG or DOJ will undertake a criminal investigation/prosecution Reduces the culpability score in the event of successful prosecution Most importantly, helps to prevent, deter, and detect potential wrongdoing Risk Assessments The organization should periodically assess the effectiveness of its compliance plan With results of assessment, the organization can effectively prioritize and modify its actions and allocate its resources The focus of such prioritization should be the prevention and detection of improper conduct that is most likely to occur

6 Search Warrant Policy Writing a search warrant policy after the warrant has been executed is too late Policy should state that: Organization s lawyers will be notified immediately Management/compliance officials will be notified immediately Privileged documents should be protected Employees should be trained to ensure that no action can be construed as obstruction of justice Sample policy in attached materials Interview Policy Organization s policy should balance between: Organization s interest in appropriately advising employees about the issue of seeking counsel versus Organization s need to demonstrate to that it is cooperating with the investigation An effective policy should educate employees as to the voluntary nature of interviews and their legal rights, without mandating the employee s decision All effort must be taken to AVOID obstruction of justice (or even the appearance thereof) Sample policy in attached materials

7 Document Retention Policy Historic documents may help or hurt in litigation Balance must be found between: The need to memorialize important decisions, contracts, or events versus The limit of resources to keep every document ever created Many organizations have excellently written, but poorly implemented, document retention policies Now is the time to determine what has been maintained and whether it is time to retire those documents that have outlived their relevance Discontinue document destruction policy if an investigation begins Privileged Documents Failure to treat privileged documents as confidential may jeopardize the attorney-client privilege Ensure that privileged documents are appropriately labeled and segregated Consider having a separate server or drive for the legal department s documents to protect against inadvertent disclosures

8 Insurance Policies Be aware of types of coverage, coverage triggers, and coverage limitations (i.e., D&O, riders, etc.) Will business interruption insurance cover the loss of business that would occur in the event records are seized? Must an indictment be delivered before coverage for attorney s fees begins for employees? Business Interruption Plan Search warrants can interrupt a business as effectively as a flood or other force majeure Key is to have a plan to restore business operations as quickly as possible Offsite backup of critical IT systems can be critical if such an event occurs

9 Updated Contacts Locating the ideal attorney may take time, so take time now to find counsel before a search warrant executes, an investigation starts, or an allegation is made You (and the Organization) will want experienced counsel at your side immediately, including: Experienced healthcare regulatory counsel Criminal defense counsel, preferably with health care experience Take the time now to locate local attorneys who will have established relationships with local regulators or enforcement officials How to Respond to a Governmental Investigation

10 Call Your Attorney A healthcare organization s list of attorneys should include: Experienced healthcare regulatory counsel Experienced criminal defense counsel (healthcare, investigation, and substantial trial experience preferred) Monitor the Investigation Begin debriefing employees who were interviewed Interviews should be conducted at the direction of the Board and in coordination with counsel Important to have the right attorney conduct the debriefing interviews Interviews should be conducted to protect attorneyclient privilege Communications should be clear about: who the actual client is; and who counsel represents (most likely not the employee) Beware of dissembling or pre-texting

11 AVOID Obstruction REMEMBER The cover-up is worse than the crime More convictions arise from obstruction than from the underlying allegations General counsel and employees should focus on preservation of evidence, including Stopping the destruction of relevant documents under existing retention policies Reviewing and electronic back-up processes Assessing what has been (or is being) reported to the authorities Find the Relevant Policies This includes policies for: Search Warrant Subpoena Civil Investigative Demand These policies should already be in place The relevant policy should be short and simple and should educate employees of their obligations Remember that the investigator may ask to see the policy as well as any communications to employees about it

12 Notify Employees & Third Parties After debriefing initial witnesses, the organization will have a good idea as to the nature and scope of the investigation In all but rare cases, notification should be made to employees, possibly including a statement that the organization will cooperate Initial notice to employees should: Publish or republish the Company s interview and search policies Instruct all employees to preserve evidence Inform employees of their obligations, but avoid even the appearance of obstruction with respect to their responses Notify Employees & Third Parties After initial notice is made to employees, notice should be made to key stakeholders Timing of notices will vary based on the specific circumstances The organization will need to speak with one voice and be ready to respond to press inquiries immediately Depending on the circumstances, the organization may need consultants: Consultants should be retained by outside counsel, not the organization Retention of consultant should be done to maintain privilege and confidentiality

13 Fight or Cooperate? While a preliminary decision must be made, the process will evolve as the facts and applicable law develop during the investigation The initial decision, though, will materially affect subsequent decisions Most organizations find themselves compelled to cooperate due to a number of factors: Incentives for cooperation under federal sentencing guidelines DOJ policy on the prosecution of business entities Collateral consequences of an indictment or conviction Conduct an Internal Investigation? Some investigation will be needed to determine facts, potential exposure, possible legal defenses, and resolution alternatives One end of this spectrum involves limitation by the defense team only to develop defense evidence The other end involves engaging separate counsel and forensic experts to conduct a formal investigation that will result in a formal report Often, in-house counsel must balance the need for information with the potential risk of a written report: Who gets the report? How will the report remain protected? Will privilege be waived?

14 Offer Lawyer for Employee Witnesses Natural reaction is to tell employees to agree to an interview and that there is no need for a lawyer This fails to recognize the posture of the investigation as well as the stress the interview process imposes on employees One option is to retain an attorney to be available for employees; however: Attorney should have specific experience serving in this type of role Attorney should also be well-versed in the pitfalls of joint representation to ensure appropriate and ethical representation FOR EXAMPLE Organization s lawyer must make sure employees understand that she does not represent them It must be clear who the lawyer represents Work the Case and Meet with the Prosecutor Primary objective should be to persuade the prosecutor to decline prosecution of the organization and its officers and employees This requires counsel to work the case proactively to determine weaknesses in the underlying case and to develop defense evidence If prosecution appears unavoidable, then the lesser goal will be to minimize the charges brought and penalties imposed through: Cooperation Demonstration of accepting responsibility

15 Keep a Focus on Running the Business Executives must maintain focus on running the business, or defense of the case becomes moot Executives will want to take an active role in setting defense strategy, but should limit the executives involved to the smallest number practicable: Subcommittee of the Board; Audit committee; or Select officers (i.e., CEO, COO, etc.) Continued focus on running the business must be an ongoing priority Continued operations must be accomplished within the parameters of the compliance plan

16 Additional Resources Responding to Government Investigations, William Michael, Jr., Mark D. Larsen, ACCA InfoPAK, Sept Internal Investigations, William Michael, Jr., Mark D. Larsen, ACCA InfoPAK, Sept John K. Villa, Corporate Counsel Guidelines, Chapter 5 (Overseeing Corporate Criminal Investigations & Litigation), West & Association of Corporate Counsel. The Disturbing Changes in the Federal Sentencing Guidelines: Easier on Prosecutors, Tougher on Companies, ACC Docket 23, no. 59 (May 2005): Principles of Federal Prosecution of Business Organizations, memo from Deputy Attorney General Paul J. McNulty to Heads of Department Components, United States Attorneys, Dec. 12, 2006, United States Sentencing Commission, Guidelines Manual, Chapter Eight Sentencing of Organizations (Nov. 2004): Mark A. Srere, JD, Donna K. Thiel, JD & Aretha D. Davis, JD, See for Yourself: A Health Care Provider s Guide to Conducting Internal Investigations & Audits (2003).

17 Lawyers: What to Do (or NOT Do) in Internal & External Investigations Presented by: Kevin M. Wood, Esq. Strasburger & Price LLP 600 Congress Ave, Ste 1600 Austin, TX (512) Convent St, Ste 900 San Antonio, TX (210) AHLA Annual Meeting June 28, 2011