Companies typically undertake internal investigations to ascertain their exposure to criminal or civil liability. Because a business can act only through its employees, that necessarily entails examining the conduct of its employees. In practice, this largely means reviewing documentary evidence and interviewing company employees.
15.2 Issues to bear in mind when representing an individual
15.2.1 Prospect of discontinued employment and disqualification
Often an individual’s chief concern when participating in an internal investigation is not the potential legal consequences, but the consequences to his or her reputation and career. For example, an individual might feel compelled to sit for an interview simply because refusing to do so could alienate superiors or draw suspicion from investigators and other employees. However, there is significant risk in making statements to corporate counsel whose mandate is to determine whether any misconduct occurred and, if so, who is responsible, as these statements are likely to be turned over to government investigators and prosecutors. Counsel to an individual must understand not only their client’s personal culpability and criminal exposure, but also the dynamics of the client’s employment situation, including both the non-legal personal factors and any legal obligations the client might have to co-operate. Equally important is understanding the circumstances in which a client who is a professional can be disqualified. In highly regulated industries where internal investigations are common, violations of codes of professional conduct may lead to professional consequences including permanent debarment.
15.2.2 The scope of representation
Counsel must understand the scope of the representation from the very start and have a mutual understanding with the client. For example, an individual who has received a personal subpoena to produce documents to an investigative agency will have a different set of needs and expectations from an individual who has been provided counsel by an employer because he or she is to be interviewed by law enforcement. The former may not know what a criminal investigation entails, what the significance of receiving a subpoena is, or what to expect in terms of time and disruption to daily life. In the latter scenario, management should provide some context about why the employee is to be interviewed and what the goal of the representation is. Moreover, where the company has retained counsel for the individual, counsel must determine how and under what terms to share information and coordinate decision-making with the company.
15.3 Witness, subject or target: whether individuals require counsel
The US Department of Justice (DOJ) classifies the people and entities involved in their investigations into three categories: (1) witnesses, who have information relevant to the investigation but no known involvement in any wrongdoing; (2) subjects, whose conduct is within the scope of the investigation; and (3) targets, about whom the government has evidence of criminality and whom it intends to charge. The vast majority of individuals and entities relevant to a federal criminal investigation are subjects, but a person’s status is always contingent on the information known to the government and subject to change depending on what the investigation reveals.
As a result, it is always prudent for individuals to have counsel. Although it is less imperative for witnesses than it is for subjects and targets, even innocent bystanders may find themselves in precarious legal circumstances if wrongdoers attempt to save themselves by deflecting blame onto others. For subjects and targets, the need for counsel is even more acute. In the wake of recent announcements from the DOJ emphasising the importance of companies providing detailed and specific evidence of individual wrongdoing – including by providing up to 45 per cent reductions in fines and other criminal penalties – individuals must tread extremely carefully.1 For any individual whose conduct is within the scope of a government or internal investigation, it is unwise to participate in the investigation without counsel.
15.3.1 Independence of counsel retained by employer to represent employee
It goes without saying that counsel’s first obligation is to the individual they represent. It is a dereliction of duty and a serious ethical violation for an attorney to place any other interest above those of the client.2 Nevertheless, individual counsel retained by an employer to represent an employee will often feel pressure to consider the interests of the company when representing the individual – especially when the company is paying counsel’s fees. In these circumstances, it is especially important to advocate zealously on the individual’s behalf and rebuff any undue pressure to deviate from the individual’s interest.
Many companies seek to reduce the cost of an internal investigation by instructing the company counsel to act for employees, as well. This carries with it the potential for thorny conflicts of interest that may arise if the company’s and the employee’s interests diverge. For example, suppose in the course of a voluntary interview with government investigators it becomes clear that the employee made false statements in the past about the conduct under investigation, and the employee seeks advice from the attorney who has accompanied him or her to the interview. Traditionally, providing legal advice under these circumstances could be sufficient to create an attorney–client relationship between counsel and the employee. But the company may wish to distance itself from the employee, who previously misrepresented facts relevant to a government investigation, and may even decide to provide information to aid in a prosecution of the employee.
As a result, counsel should always obtain an informed waiver of any conflicts of interest from both the company and the individual.3 One common practice is for counsel and clients to agree in advance how conflicts will be resolved if they arise by, for example, one party agreeing to find separate counsel if a conflict develops.
It is also important where counsel acts for more than one client to preserve the attorney–client privilege. In such a situation, counsel should encourage the clients to agree to conduct a joint defence that will enable the clients to share privileged information between one another without waiving the privilege as to others.
15.3.2 Representing more than one individual: conflicts and maintaining privilege
Similarly, it is not uncommon for lawyers to represent more than one individual in connection with a single investigation. As with employer-employee dual representation, counsel must determine that the individuals’ interests are not directly adverse, and the lawyer can effectively discharge the distinct obligations owed to each client, as well as any third party.4
15.3.3 Joint representation
In certain circumstances, an individual may desire to retain multiple lawyers or law firms. For example, a target of an investigation that involves a large quantity of documents and evidence may retain two firms to shoulder the load of reviewing and digesting the evidence. Whatever the reason, it is imperative that both the client and counsel have a clear understanding of roles and responsibilities. Above all, open and active communication among the lawyers and between the lawyers and the client is vital to joint representation.
15.4 Privilege against self-incrimination
The Fifth Amendment to the US Constitution protects an individual from compelled, testimonial self-incrimination. In its most common form, that means a person can refuse to make statements to law enforcement, to a grand jury, or in court, if answering the question would tend to incriminate him or her.
Although the Fifth Amendment by its terms only applies to the government – that is, individuals are protected against government-compelled (both civil and criminal) testimonial self-incrimination – courts, on occasion, have attributed a private employer’s conduct to the government and thereby turned private conduct into a constitutional violation.5 We are unaware of any decision holding that a person’s Fifth Amendment rights were violated in the course of a corporate interview,6 but the Yates Memorandum may provide more opportunities for courts to consider these arguments.
Nevertheless, on a practical level, an individual who asserts the Fifth Amendment in an internal investigation may face non-legal consequences of the sort discussed above. What is more, individuals who choose to remain silent may risk violating an employment agreement and thereby jeopardising their ability to have their legal costs indemnified by their employer. However, individuals who choose to provide incriminating information must understand that any information will likely be provided to law enforcement, especially in the wake of the Yates Memorandum and the Pilot Program. (See also Chapter 10 on co-operating with authorities.)
15.5 Interview by counsel representing the company
15.5.1 Purpose and scope of interview
Prior to sitting for an interview with company counsel, the employee and counsel should seek to understand the purpose and scope of the interview. For example, they should determine whether the company views the employee as a subject or a target, to use the DOJ terminology, or simply a witness. It is also important to understand how the company intends to use the information learned from the interview. For example, the employee should be aware if the company is actively co-operating with law enforcement and intends to disclose information (including privileged information) learned in the interview to governmental authorities. This is particularly important in the wake of the Yates Memorandum, and individual counsel should be sure to ask company counsel what the individual’s status is.
15.5.2 Access to documents, location and conduct of interview
Often corporate counsel will have broader access to documents than the employee and his or her counsel, putting the employee at a disadvantage. Moreover, counsel for the company is often hesitant to provide employees with the documents that will be discussed in the interview beforehand. Nevertheless, the employee should ask the company for a copy of documents about which the company’s counsel intends to enquire so that the employee can identify any potential risk areas and prepare for them.
If an employee has separately retained counsel, that counsel should attend the interview to ensure the employee’s interests are protected. The interview should be conducted in a neutral location, such as the company’s offices. In addition, to the extent possible, counsel for the employee should try to limit the number of company representatives present at the interview to ensure the employee is not overwhelmed or unreasonably outnumbered at the interview.
15.6 Interview by law enforcement
15.6.1 Whether to make the individual available to law enforcement
220.127.116.11 Legal or contractual requirement
Certain government agencies, including the Securities and Exchange Commission, may compel individuals’ participation in interviews.7 However, not every government request for a witness interview carries the full weight of the requesting entity’s power to compel co-operation. Counsel may consider probing the government’s willingness to take legal action to compel an individual to sit for an interview. If the government is merely ‘fishing’, investigators are unlikely to move to compel a witness to appear for an interview.
Some employees have provisions of their employment contracts that require co-operation with law enforcement. As a result, in addition to non-legal consequences with a person’s employer, he or she may risk violating the contract and losing indemnification for attorneys’ fees.8 A person with reason to fear co-operating with law enforcement may do well to negotiate a resignation on favourable terms prior to refusing to co-operate. However, corporate efforts to stifle or otherwise minimise whistleblowing can be problematic.9 (See also Chapter 19 on whistleblowers.)
18.104.22.168 Whether the authority considers the individual to be a target
Meeting with government investigators or prosecutors is an especially delicate question when one’s client is a target. Although an individual who believes he or she is innocent may enthusiastically seek to meet with the government to demonstrate innocence, the risk of a person’s statements being taken out of context and viewed in a negative light often will be too great.
Counsel seeking to understand whether a client is a target should look to interactions with the government, counsel for the company, and the client. Where counsel has been in contact with a prosecutor or other law enforcement about the investigation, he or she should consider asking whether the client is a target. Although a prosecutor is not required to respond, the United States Attorneys’ Manual encourages prosecutors to notify targets ‘a reasonable time before seeking an indictment’, except when notification could jeopardise the investigation.10 However, not every agency will be quite as forthcoming, and some agencies, such as the SEC, typically do not respond to the inquiry at all.
22.214.171.124 Relevant evidence prior to interview
It is unlikely that government investigators will share the full array of evidence and information at their disposal. However, counsel may be able to get a rough sense from (1) any documents the employee has produced to a grand jury or other investigators; (2) documents or questions that arose in a prior internal investigation; (3) other individuals who have been interviewed; (4) to the extent counsel is aware, recipients of grand jury subpoenas and what they were asked to produce; and (5) in high-profile cases, media reports on leaks from within the government, to name a few.
126.96.36.199 Offer of proffer agreement or other grant of immunity
Individuals who have knowledge of wrongdoing and exposure of their own may be able to trade their information for immunity or reduced charges.11 The decision to co-operate with investigators by providing information can be very difficult, and it is imperative that a client who agrees to do so is able to follow through. A person who violates the co-operation agreement by deciding not to testify against former colleagues, making false statements to investigators, or continuing to engage in criminal conduct, will not only lose the benefit of immunity or any other agreement with the government, but typically investigators will use all of the information provided against him or her or refuse to advocate for leniency at sentencing. That is because under most co-operation agreements with prosecuting authorities, individuals’ protection against having their statements used against them is voided if they violate the agreement. As a result, although a government offer of immunity in exchange for information may be attractive, counsel must be certain that the client will be able to meet the obligations under the agreement.
188.8.131.52 Anticipated use of information and admissibility in other proceedings
Related to the considerations of proffer agreements and immunity, this factor may weigh in favour of declining to make one’s client available for interview if the government intends widespread use of the interview content, and if the government is unable to assure that the interview substance and transcript, if any, will be treated confidentially. However, counsel should be aware that notes and recordings of the interview will likely be procurable under Freedom of Information Act requests. An individual’s statements, even if not made under oath, can be used in many ways in subsequent proceedings and may even be introduced as evidence.
184.108.40.206 Parties attending the interview, including company counsel
Counsel should never permit the client to meet with law enforcement alone. Moreover, counsel should inquire about who else will be present during an interview. The presence of company counsel may be welcome, if the employee is on good terms with his company and is not expected to make damaging statements about his employer. However, if the witness is expected to implicate high-level management, the presence of company counsel taking instructions from the same high-level management would be counterproductive.
15.6.2 Access to documents or information prior to interview
As discussed above, government investigators will rarely share evidence prior to an interview. Nevertheless, counsel should learn as much as possible by reviewing documents in the client’s possession or available from the client’s employer; counsel may also consider seeking the permission of the prosecutor to allow the company to provide the employee with access to, at a minimum, relevant emails produced to the government by the company.
15.7 Preparing for interview
Preparation for an interview should include substantive discussion of the relevant facts and a critique of how the client presents to investigators – what a person says is just as important as how he or she says it. Similarly, counsel must consider the audience and the setting – an interview in a conference room with prosecutors and investigators is very different from testimony before a grand jury under examination by a prosecutor (and without counsel present). Counsel should also consider the extent to which the client should review documents, diaries and other evidence to refresh his or her recollection. On the one hand, it can help counsel assess the client’s veracity and depth of recollection and provide an opportunity to practise avoiding pitfalls and dealing with problematic evidence. On the other hand, it may be in the client’s interest to be able to state honestly that he or she does not recall, rather than attempt to minimise or rationalise past misconduct. These decisions are always driven by the facts of particular cases.
15.8 Notes and recordings of the interview
Counsel should inquire whether the interview will be transcribed or memorialised in any way, and if so, whether counsel, client or both will be able to review and correct errors in the transcript. Counsel must be aware, of course, that the opportunity to correct the record will imply assent to non-corrected portions of the record. Although criminal investigators will rarely share interview notes and memoranda with an individual until shortly before trial, individuals who have testified before a grand jury have a right to review their testimony, and some civil investigators may provide individuals an opportunity to review their statements. For example, at the conclusion of testimony before the SEC, the witness has the right to inspect the transcript of the testimony, and although the SEC typically will permit the witness to obtain a copy of the transcript, it is not required to do so.
- Memorandum from Sally Q. Yates, Deputy Att’y Gen., U.S. Dep’t of Justice, to Assistant Att’ys Gen. and U.S. Att’ys (9 September 2015), available at https://www.justice.gov/dag/file/769036/download (the Yates Memorandum); Andrew Weissmann, U.S. Dep’t of Justice, The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance (5 April 2016) (announcing a ‘pilot program’ primarily intended ‘to promote greater accountability for individuals and companies that engage in corporate crime by motivating companies to voluntarily self disclose FCPA-related misconduct’), available at https://www.justice.gov/opa/file/838386/download (the Pilot Program).
- See Model Rules of Pro’l Conduct R. 1.3 cmt. 1, 1.7, 1.13; 5.4(c).
- See Model Rules of Pro’l Conduct R. 1.13(g).
- Model Rules of Pro’l Conduct R. 1.7(a).
- In United States v. Stein, 440 F. Supp. 2d 315 (S.D.N.Y. 2006), the court found that the accounting firm KPMG had changed its practice with respect to paying employees’ legal fees so that employees would not receive indemnification for the fees unless they co-operated with the government. Id. at 322. The court attributed this conduct to the government and found that it violated the employees’ constitutional rights.
- The Second Circuit Court of Appeals recently rejected such a claim in a civil employment dispute in Gilman v. Marsh & McLennan Cos., --- F.3d. ----, No. 15-603-cv (2d Cir. 16 June 2016). In Gilman, the company fired two employees who refused to sit for interviews with corporate counsel as part of an internal investigation. The court held this could not be attributed to the government – and thereby become state action amounting to a constitutional violation – because, although the government’s investigation motivated the company to fire the non-compliant employees, the government was not the ‘but for’ cause: ‘The interests of prudent directors alone would justify or compel such a measure.’ Id.
- See, e.g., 15 U.S.C. § 78u (providing the SEC power to compel disclosure and testimony in the course of an agency investigations); see also Okla. Press Pub. Co. v. Walling, 327 U.S. 186 (1946) (enforcing subpoena from the Federal Trade Commission); United States v. Powell, 379 U.S. 48, 57-58 (1964) (enforcing IRS subpoena).
- But see Stein, discussed above at footnote 6, which held that, under the circumstances of that case, revoking attorney fees for those employees who refused to co-operate with the government violated the employees’ constitutional rights.
- For example, in 2015 the SEC charged military and industrial contractor KBR, Inc. with violating the whistleblower protection rule enacted under the Dodd-Frank Wall Street Reform and Consumer Protection Act. See In the Matter of KBR, Inc., Admin. Proc. 3-16466, available at https://www.sec.gov/litigation/admin/2015/34-74619.pdf.
- U.S. Att’ys’ Manual § 9-11.153.
- There are three varieties of immunity under US law: (1) ‘use’ immunity, in which the government may still prosecute the individual, and although it cannot not use the person’s statements against him at trial, it may use evidence discovered through investigation based on the statements; (2) ‘use and derivative use’ immunity, in which the government may still prosecute but cannot use the person’s statements or any evidence identified as a result of the statements; and (3) ‘transactional’ immunity, in which the government may not prosecute the person for any crime related to the conduct that is the subject of the agreement.