ACC In House Counsel
ConferenceJanuary 29, 2020
Investigating Allegations of Misconduct:
A Guide to Government and Internal Investigations
Randall Lee, Partner
Daniel Grooms, Partner
Copyright© Cooley LLP, 3175 Hanover Street, Palo Alto, CA 94304. The content of this packet is an introduction to Cooley LLP’s capabilities and is not
intended, by itself, to provide legal advice or create an attorney-client relationship. Prior results do not guarantee future outcome.
• Former Regional Director of the
Pacific Region of the Securities
and Exchange Commission
(SEC)
• Former Deputy Chief of the
Major Frauds Section at the US
Attorney’s Office for the Central
District of California
• Former Chief of the Criminal
Division at the U.S. Attorney’s
Office for the Eastern District of
Virginia
• Former Associate Deputy
Attorney General
Presenters
ACC In House Counsel Conference
Daniel GroomsRandall Lee
Lisa Hatton Harrington
• Special Counsel, Cooley LLP
• Former General Counsel and
Former ACC Southern
California Board Member
Moderator
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What’s This All About?
Issues That May Warrant Investigation
• Accounting and financial reporting
• Theft and embezzlement
• Payments to foreign officials (FCPA)
• Insider trading
• “Me too” issues/employment law
• Price-fixing
• Privacy and data security breaches
• And many others . . .
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How Do These Issues Reach Your Desk?
• Government inquiries or subpoenas:
• Department of Justice (civil and criminal)
• Securities and Exchange Commission
• State and federal regulatory agencies
• Whistleblowers
• Internal audit/compliance/hot line
• Press inquiries/news articles/short sellers
• Hacking
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Now What?
• Look into the issue – do not ignore it!
• Why?
• Learn the facts and scope the issue before the outside investigator
investigates you
• Risks in the age of the whistleblower
• Not operating reactively and under a time crunch (i.e. managing
away from a crisis rather than engaging in crisis management)
• Proactively address potential liability, disclosure obligations, PR
concerns
• Demonstrate cooperation and build goodwill with the governmentACC In House Counsel Conference 8
Key Objectives of an Investigation
• Determine whether any employees violated the law
• Determine whether any employees violated company policy
• Identify how widely known the misconduct was, and whether
management sanctioned the misconduct
• Determine whether the misconduct was the result of deficient policies
or whether policies were circumvented
• Determine whether any remedial actions are warranted (e.g.,
personnel actions, new policies and procedures)
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The Costs of Failure
• Legal ramifications
• Fines
• Punitive damages
• Civil and criminal prosecution
• Business ramifications
• Competitors gain advantage
• Loss of business
• Unfavorable public perception ACC In House Counsel Conference 10
Key Decisions To Be Made
• Who should oversee the investigation
• E.g., management/GC, board, board committee
• Who should conduct the investigation
• E.g., in-house counsel, regular outside counsel, independent counsel
• Scope
• Kick the tires vs. boil the ocean (and everything in between)
• What is thorough and credible
• Privilege considerations
• Whether to self-report to the governmentACC In House Counsel Conference 11
Key Internal Constituencies
• Key constituencies to consider:
• Audit committee
• Board and C-suite
• Auditors
• Insurance carrier
• Human resources department
• Parent company and/or subsidiaries
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If The Government Calls: With Whom Are You Dealing
Possible Governmental Authorities
• Department of Justice (Civil and Criminal)
• Securities and Exchange Commission
• State and federal regulatory agencies
• State attorneys general
• Other relevant regulatory entities
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Know Who You Are to Them
• Target: legal term in criminal investigations
• Subject: legal term in criminal investigations
• Third party/witness: solely possess information or evidence
• Wild card: not every agency uses the above terms
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What Do They Want and How Will They Get It?
What Do They Want?
• Information?
• Public attention?
• Cooperation?
• Punishment?
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How Will They Get It?
• Civil Investigative Demands or Subpoenas
• Search warrants
• Voluntary interviews
• Compelled testimony
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What’s New in Government Investigations
Electronically Stored Information
• Increased focus on electronically stored information (ESI) – documents, files,
emails, texts, messages, cloud storage, social media, etc.
• Proliferation of ESI = more information to investigate
• Increased awareness and understanding of ESI and how it is stored
• Prosecutors love social media, texts, search histories – can give real time
picture of what happened and when, or what somebody was thinking
• Particularly relevant where intent is at issue
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• What is a company’s
responsibility to preserve and
provide information from
employee personal devices and
accounts?
• What has the government
asked for?
• What are the company’s
policies governing use of
personal devices for work?
Personal Devices & Accounts
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Cloud Storage
• Why investigators love the cloud
• If your business uses an external cloud storage provider:
• Understand your exposure and what could happen
• Cloud storage providers:
• Understand your obligations and rights
• Impact of CLOUD Act and US/UK Data Sharing Agreement
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Tactical Considerations in Government Investigations
The Critical Choice
• Whether and how extensively to cooperate
• Highly dependent on facts and circumstances
• Weigh the costs, benefits (whether self-reporting or in response to inquiry)
• Risks
• Waiver of privilege
• Expensive and distracting, can increase exposure
• Benefits
• Formal tangible benefits
• Intangible benefits, although hard to quantify
• Shapes investigators’ views of the facts and the company
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Contact information
Randall Lee: (310) 883-6485
Daniel Grooms:(202) 776-2042
Lisa Hatton Harrington:(310) 883-6471
Questions?