WHY IS THE GOVERNMENT KNOCKING ON MY DOOR? By Jason R. Mau

01-Aug-2016

WHY IS THE GOVERNMENT KNOCKING ON MY DOOR?

What to do when Uncle Sam shows up requesting information

 

By Jason R. Mau

 

            Your computer just flashed an email notification and you notice your staff has flagged it as High Importance and the subject line reads “FW: PLEASE READ RIGHT AWAY!!!”  This, of course, grabs your attention and you turn to your email inbox to see what all the fuss is about.  Turns out staff monitoring the general inbox linked on your company’s website just came across a message from a government agency informally asking for the contact information of someone most knowledgeable with an employee’s (or former employee’s) position and day-to-day responsibilities.  You quickly look through the email string and from what you can glean, a response is due within a couple of days.  Are you prepared for what comes next?

Investigations Can Come in All Sizes

            Unfortunately, scenes similar to the one depicted above are becoming all the more frequent as federal agencies show increasing interest in using their investigative powers to ensure regulatory compliance and to follow up on employee and industry complaints.  The regulations directing federal agencies are filled with provisions authorizing a wide range of these powers.  Regrettably, not every agency investigation starts with a simple informal email.  Depending on the agency, or the reasons for agency participation, the initial contact may be an agency letter related to an employee discrimination complaint or whistleblower complaint, or it could be an OSHA compliance inspector showing up unannounced to a worksite.  However, no matter the method or the specific governmental agency showing up on your doorstep or in your inbox, know that there are steps you can take now to make the visit go more smoothly for the company.  Granted, every investigation is unique in its aim and expectations, yet there is significant overlap in how you can respond.  The reality is that no matter the level of inquiry, the response, especially if not handled properly, could require your company to expend substantial resources, cause unnecessary concern for the board and employees, and even distract you from your ongoing day-to-day operations. 

            The level of disruption may be hard to project upfront as the origin of this initial agency contact may not be readily apparent.  The contact could be related to a specific complaint filed by an employee or whistleblower, or a general complaint shared on a hotline.  It could also be the result of a referral from another agency or because of an investigation of a competitor.  Of course, it could also be part of a compliance audit or in response to recent accidents.  Paying close attention to the method and focus of the initial contact could provide clues to determine whether a targeted search is being made or if the government is just there to figuratively kick the tires. 

            While this column focuses on the investigations mainly conducted in relation to civil matters, i.e., employment or worksite safety issues, there is the real possibility that a government agency could be knocking on your door in relation to a criminal investigation; however, some of the tips below can also be of general help to avoid worse consequences than those initially contemplated by the agency.  Generally, a spirit of informed cooperation is the best approach, but knowing the process and your rights will help your company navigate this intimidating experience.

             

The Blueprints for an Appropriate Response

            If your company has already considered the prospect of being at the center of a government investigation, it may have already provided you with the tools to help minimize the impact on your daily operations.  Ideally, you would like to keep the interaction to a simple record-gathering episode.  However, a misstep or refusal to assist may lead to a more focused investigation.  You do not want the investigators to find reasons to involve other regulators or unearth unnecessary information that only leads to further liability or aids unrelated private civil litigation.  Worse yet, raised scrutiny may bring unwanted attention that leads to a fine, a court order granting some declaratory relief, reputational damage, loss of clients, or even questions from outside lenders or investors.  Yet, if the company has already put a policy in place, these unwarranted complications may be easily avoided.

            A well prepared written policy related to compliance and government investigations will put your company in the best position to make a proficient response.  The policy should help set the tone, informing all employees that the company will cooperate with authorized government investigations.  If the employees are aware that they are not to alter or conceal documents investigators may request, and they are not to mislead any government officials, this will be essential in avoiding the above-warned unwarranted consequences.  The policy should also establish protocol for responding to that initial contact.  Maybe the message in your inbox is the first part of that protocol—immediately notifying an appropriate supervisor.  Hopefully, the message includes information that identifies the name of the investigator, the investigator’s agency affiliation, and even the reason for the contact.  If not, this information will be most helpful in preparing your preliminary response to the government.  The policy should also inform you of the appropriate supervisor that will consent to, or oversee, a search or document collection.  This step should also include information on whether you are to notify general counsel (if applicable), outside counsel, or even an insurer who will make arrangements for legal representation if your insurance policies so allow.  The presence of counsel is always recommended to be present during an investigation.

            In addition, the general policy should let employees know that they have individual rights when the agency representatives are present and wish to interview specific employees.  These rights include letting the employee decide whether or not to speak, and whether to have counsel present if they do speak.  The employee also has a right to condition speaking with the investigator at a convenient time and place. 

Counsel Involvement in the Initial Response

            While many companies may rely on an experienced compliance officer, the involvement of counsel at the outset is recommended and will help minimize the impact of any potential governmental investigation.  Given the high stakes involved, fees for legal counsel are a wise investment compared to the potential ramifications that could result from an investigation.  With counsel involved, the company will be prepared to channel the appropriate company resources and protect the company’s interests.  Counsel can immediately review the terms and implications of the agency’s initial contact, and can engage supervisory governmental agents with substantive dialogue.  Counsel may even be able to identify the underlying reasons for the investigation if not readily announced by the government. 

            The reasons for the investigation may also require counsel to commence a parallel internal investigation to collect materials that may help exonerate the company should any potential claims be behind the governmental contact.  (You can almost be certain that the government’s priority will not be searching for exculpatory evidence.)  An effective internal investigation provides several benefits and requires further considerations that are not discussed herein, but include picking an appropriate investigator, creating a budget, overseeing its effectiveness, and judging the level of independence required.  In addition, the involvement of counsel will help protect any confidential or proprietary information and can help protect any waiver of privilege.  Further, counsel will be able to monitor governmental interviews of employees and explain the employee’s general rights in talking to investigators. 

           

Document and Data Preservation

 

            One of the most important functions, in which legal counsel can play an essential part, is preservation of information.  Preservation becomes very critical in most investigations.  If information is lost, it is very difficult and costly to overcome a perception (and maybe even presumption) of agency officials that the information was relevant.  Furthermore, you do not want lost information to be the reason for the government to expand its investigation more broadly. 

            Generally, the first step legal counsel will take in these situations is preparing a litigation hold letter to instruct all employees and directors that have potential control of any relevant information to ensure that the information (whether stored physically or electronically) is not destroyed, even inadvertently through general retention policies or data software settings.  This will require your company to identify all custodians of the information and all locations where the information may be stored.  Be aware that most information is stored electronically these days, and some relevant information may be stored in some more non-traditional forms, such as texts or voicemails.  Coordinating with your company’s IT personnel may be of most help here, as they can oversee the settings in any archival software, copy relevant email folders or hard drives, and address data storage capacity issues.  Depending on your in-house storage capacity, the IT department may need to arrange with third-party vendors to help manage the preservation.  No matter the process that is required, be advised that there may be some privacy concerns that need to be addressed if personal information is involved. 

            Once the information is preserved, the task of producing responsive materials must be undertaken.  A good rule of thumb is to handle this phase similar to the pre-trial discovery phase of civil litigation, as federal investigators are typically given the same authority to request and obtain relevant information.  Thus, your company should have a team in place to ensure that collection and review of the materials is done effectively and efficiently.  Ideally, this task should be delegated to legal counsel to ensure that confidentiality is protected and that the materials comply with the government’s requests.  Counsel will also be able to help develop strategy and protect the internal discussions relevant to the response. 

            In addition, it is very important to understand exactly what information or data is being turned over to the government.  The last thing you want is the government telling you what it found in the information you produced; you should know the content before turning it over.  This may require significant review time.  Also, you do not want to take this stage lightly; make sure that decisions related to the production were not influenced by feelings of inconvenience or by frustrations, or that corners were cut to meet deadlines.  Of course, there may be legitimate determinations related to what should be disclosed in response and the extent of the response, however there is no one-size-fits-all approach to these decisions.  It will depend on the specific requests, the focus of the investigation, your company’s internal practices, and many external or collateral considerations (i.e., auditors, suppliers, public, insurance carriers, media, other agencies).  In the end, asking permission for extra time to respond or for a clarification on what is actually being asked of the company is a better option than being subject to additional scrutiny if the produced information is not responsive.

Working With, Not Against the Government

            Finally, a component of an agency investigation that can often be overlooked is the personal relationship with the investigators themselves.  There are no prohibitions to interacting with these onsite officials and their supervisors.  Early relationships can have a significant impact, especially if the investigation becomes more long-term than your company expected.  In fact, you should never assume that the initial contact will be the only contact.  The government officials will generally be willing to consider your concerns related to any burdens you can articulate, but do not expect them to be in a collaborative mood if relations are rocky from the start.  And further to the point of collaboration, if you are able to articulate why you may need more time or explanation for certain requests, you may find that the agency will share more information to explain the requests, which may again help you determine what the agency’s specific focus is for the investigation. 

            Certainly, you are not going to become best friends with the investigators, but then again, no one wants to just roll over for the government agents conducting the investigation.  Accordingly, there needs to be a delicate balance in relations with the agents.  Thus, it is very important that your company’s legal counsel or representative is chosen wisely as most of the communication will be conducted through one person or office.  Most people that have gone through the process will recommend that early engagement often is the best way to reduce the compliance burdens.  There will come times when pushback is advisable for practical concerns, especially if any requests for information are unreasonable or oppressive, but it is in the best interest of the company that any objections should be communicated appropriately.  Also, depending on the specific circumstances, cooperation with the onsite agents does not mean that your company is foregoing any determination on whether to defend against such actions or look to make a deal to settle any alleged disputes.  You are not required to make these decisions upfront and you can make those determinations independent of the interactions with the agents; but by all means use any information gathered from the agents to inform these decisions.

           

Conclusion

            Generally none of us wish to actually be in a situation where a government investigation or follow-up inquiry is necessary.  But the reality is that any company may be subject to the unwelcome sight of a government investigator at its front door.  Being properly prepared for such situations will go a long way in mitigating any stresses or liability that may come along with such an investigation.  The last thing your company wants to do is underestimate the seriousness of an investigation.  By following the tips above, you will be prepared to make an informed decision on the next steps when that forwarded email with red flags and multiple exclamation points hits your inbox.