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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

ACC In House Counsel Conference 4


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 . . .


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


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)


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



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


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

15ACC In House Counsel Conference


What Do They Want and How Will They Get It?

What Do They Want?

• Information?

• Public attention?

• Cooperation?

• Punishment?


How Will They Get It?

• Civil Investigative Demands or Subpoenas

• Search warrants

• Voluntary interviews

• Compelled testimony



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


• 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


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



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


Contact information

Randall Lee: (310) 883-6485

[email protected]

Daniel Grooms:(202) 776-2042

[email protected]

Lisa Hatton Harrington:(310) 883-6471

[email protected]

Questions?

acc in house counsel conference › sites › default › files › 2020-01...jan 29, 2020 ·...

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