PREPARING FOR THE WORST: Recalls, Congressional Hearings, MDLs, etc.

Civil and Criminal Liability: The Blurring of the LinesApril 24, 2014Gary W. Davis, Esq.BOWMAN AND BROOKE LLPPrivileged and Confidential January 27-28, 2011Privileged and Confidential January 27-28, 2011THE NEW FACE OF LITIGATIONConsumerIndividual Plaintiff Cases (State)Individual Plaintiff Cases Fed MDLNon-consumerState Attorneys GeneralPublic RelationsSecurities LitigationIndependent InvestigationCongressRegulatory AgencyU.S. Justice DepartmentClass ActionCONSUMER CONFIDENCEISSUEPrivileged and Confidential January 27-28, 2011Multiple Arenas of Mass Tort LitigationIndividual CasesClass Action CasesCoordinated Cases- State Coordinated Cases- Federal Multi-District LitigationShift to Pattern Litigation

Themes:ONE:

If you make or do anything productive in this world today, you WILL be attacked from time to time, andGovernmental, in addition to civil, investigations are becoming more likelyPrivileged and Confidential January 27-28, 2011Themes:TWO:

Civil and Criminal Defenses are inextricably intertwinedCivil claims often precede and greatly affect criminal prosecutionsLegal standards are more similar than one would thinkSame facts and defenses determine outcome Privileged and Confidential January 27-28, 2011Can This Happen to Us?

U.S. Justice Dept: Toyota mislead consumers about safety problemsLargest penalty to date against an automakerSettlement "serves as a model for how we treat cases with similarly situated companies" ~U.S. Attorney General Eric HolderPrivileged and Confidential January 27-28, 2011

Can This Happen To Us?Senators slammed General Motors for "fraudulent and reprehensible concealment"

DOJ asked to require GM to intervene in pending civil actions to oppose any action by GM to deny responsibility for damages

Senators praised Attorney General Holder's decision to initiate a criminal investigation and urged him to do morePrivileged and Confidential January 27-28, 2011

Can This Happen To Us?Charged with violating the federal Pipeline Safety Act

NTSB blamed PG&E for "baffling" mistakes, a "litany of failures," and lax oversight.San Bruno, 2014

Privileged and Confidential January 27-28, 2011

Can This Happen To Us?East Harlem explosion highlights risk of natural gas lines

NTSB is probing whether a faulty gas main played a role

Companies are trying to decide what to do with aging, cast iron natural gas mains many which date back to World War II.

Many cities with cast iron mains have "unaccounted for" gas.

Privileged and Confidential January 27-28, 2011Can This Happen To Us?Applies to less publicized matters as wellPrivileged and Confidential January 27-28, 2011

How Bad Can it Be?U.S. Department of Justice

Federal Grand Jury Subpoena

FBIPrivileged and Confidential January 27-28, 2011How Bad Can it Be?Congressional Testimony

Privileged and Confidential January 27-28, 2011How Bad Can it Be?

Privileged and Confidential January 27-28, 2011Government Inquiries: What Congress and Regulators Will DoBroad Discovery

Demand Answers in Unreasonable Time

Ignore Any Notion of Privilege

Privileged and Confidential January 27-28, 2011Example: Discovery from the Legislative BranchCongress January 28, 2010 Letter to Toyota

Privileged and Confidential January 27-28, 2011Demand Answers Immediately

Privileged and Confidential January 27-28, 2011

Fines For Not RespondingDaily fine for not providing enough information or "fully cooperating"Privileged and Confidential January 27-28, 2011

Ignore Any Notion of PrivilegePrivileged and Confidential January 27-28, 2011What Legal Standards Can ApplyCriminal standards are not so high

Or they are so subjective that they can be relatively easily alleged when desired

Privileged and Confidential January 27-28, 2011What Legal Standards Can ApplyWire FraudTampering with Governmental RecordsNegligenceSecurities FraudPipeline Safety ActForeign Corrupt Practices Act

Privileged and Confidential January 27-28, 2011What Legal Standards Can Apply: NegligenceNegligence

acting or failing to act in an objectively reasonable fashion

Gross Negligence: (negligence +)

the actor was aware of the risk but did not care (subjective), and his indifferent conduct posed an extreme degree of risk (objective)

Criminal Negligence: (negligence +)the actor should have been aware of the risk (subjective), and his failure to recognize the risk was very unreasonable (objective)

Privileged and Confidential January 27-28, 2011What Legal Standards Can Apply: Tampering with Governmental Records

A person commits an offense if he:

Knowingly makes a false entry in a government record

Makes, presents or uses any record, document or thing with knowledge of its falsity and with intent that it be taken as a genuine government record;

Intentionally destroys, conceals, removes or otherwise impairs the verity, legibility, or availability of a governmental recordPrivileged and Confidential January 27-28, 2011What Legal Standards Can Apply: Pipeline Safety ActNational Gas Pipeline Safety Act

Criminal penalties include fines and up to 5 years imprisonment

Owners/operators of pipeline facilities shall:Comply with safety standardsFollow a plan for inspection and maintenanceAllow access to records and entry for inspectionConduct a risk analysis and implement an integrity program

Privileged and Confidential January 27-28, 2011What Legal Standards Can Apply: Foreign Corrupt Practices ActIt is a federal criminal offenseFor any U.S. domestic concernDirectly or indirectlyTo make a "corrupt payment or gift"To any "foreign governmental official"To obtain or retain any business advantage

Privileged and Confidential January 27-28, 2011What Legal Standards Can Apply?Not "Perfection" - insteadReasonableness andKnowingly & willfullyPrivileged and Confidential January 27-28, 2011What Can We Do to Reduce the Likelihood of Charges?1. Philosophy

2. Know the laws

Privileged and Confidential January 27-28, 2011What Can We Do to Reduce the Likelihood of Charges?3. Compliance PolicyHave a written compliance policyShows you "know" and you "care"With reasonable procedures in placeEvidence you take it seriousFull-time compliance people?Training continually

Privileged and Confidential January 27-28, 2011

"We have a simple rule: We do not pay bribes"

"Prevent corruption within our company"

Signed by company president

Privileged and Confidential January 27-28, 2011What Can We Do to Reduce the Likelihood of Charges?4. System to monitor complaintsCLOSE THE LOOP!Document the closing of the loop5. Pay close, quick attention to "Notable Events"High publicityGovernmental investigationCivil suits

Privileged and Confidential January 27-28, 2011What Should We Do if Charges Are Made or Anticipated?1. Assemble your "knights"

Privileged and Confidential January 27-28, 2011What Should We Do if Charges Are Made or Anticipated?2. The "Truth" Find it!AccuratelyFastDocuments and witnessesObjective vs. subjective

Privileged and Confidential January 27-28, 2011What Should We Do if Charges Are Made or Anticipated?3. GoalsClearly define & refineWhere are you going?

Privileged and Confidential January 27-28, 2011What Should We Do if Charges Are Made or Anticipated?4. Credibility Maintain it!If you speak, speak 100% accurately with objective factsCooperate and communicate well with government investigatorsNTSB, Fire department, Police, DA, DOJGive objective factsVoluntary production better than subpoena

Privileged and Confidential January 27-28, 2011What Should We Do if Charges Are Made or Anticipated?5. Prepare to tell your story accurately and wiselyPress?What can you say at what points?Company spokesperson vs. PR?Post claim, sometimes lawyer safest

Testimony? Employee/corporate representative depositions/interviews!Most difficult, important thingFBI interviews?Congressional testimony

Privileged and Confidential January 27-28, 2011What Should We Do if Charges Are Made or Anticipated?6. BELIEVEIn the basic goodness of your business and its "Philosophy" and the good effort to fulfill it

7. DEFEND YOURSELF!

"Be careful what you put behind you because you may be putting it in front of you."Privileged and Confidential January 27-28, 2011

Privileged and Confidential January 27-28, 2011Questions?Gary W. Davis, Esq.BOWMAN AND BROOKE LLP2901 Via FortunaSuite 500Austin, Texasgary.davis@bowmanandbrooke.comDirect: 512-874-3866Privileged and Confidential January 27-28, 2011