By Peter C. Anderson, JD, CCEP
[Excerpted from “Taking a Broader View of Compliance Risks and Enforcement Readiness: Tips on Maintaining Good Regulatory Relationships, and Preparing for Grand Jury Subpoenas and Search Warrants,” which is published in SCCE’s The Complete Compliance and Ethics Manual – 2016]
Despite a company’s best effort to maintain good relations with regulators, as well as an effective corporate compliance program, criminal investigations are not uncommon. Despite the large number of criminal investigations and prosecutions, most companies never suspect that could receive criminal subpoenas or be subjected to intrusive search warrants. A common refrain heard from clients is that: “I never thought it could happen to us. We are a good company.” Sound familiar?
This high level of denial is based upon an incorrect and dangerous assumption that the government only investigates companies that are owned or operated by “bad people” who commit “traditional” or “real” crimes. However, with increasing frequency, the government is using these tools as part of a strategy to investigate all types of potential crimes.
Although many commentators believe that planning for criminal investigative responses should be restricted to the company’s law department, this approach is short-sighted. The in-house compliance team can add tremendous value in both training and response. The purpose of the following section is to provide a general overview of one of the most common criminal investigative tools in the white-collar arena: grand jury subpoenas. The goal is to help compliance professionals to better understand the unique aspects of these investigative tools, and to offer practical tips so that they will be better equipped to assist the lawyers in dealing with all three critical phases: before, during and after they are served or executed.
What is a Criminal Subpoena?
In addition to “rumors,” or internal threats from whistle-blowers or employees, or escalating friction with regulators, one of the clearest initial signs the criminal enforcement waters are “heating up” is the receipt of a grand jury subpoena. The Federal Rules of Criminal Procedure allow the prosecutor to seek a subpoena (which is a formal order from the grand jury) that requires the “target” company to produce any responsive documents, as well as other physical evidence.[1] This governmental investigative tool is incredibly powerful, and gives the prosecutor the authority to obtain any non-privileged evidence located within the United States, so long as the request is not “unduly burdensome.” Perhaps most importantly, there are significant penalties for those who fail to comply. Accordingly, companies should create subpoena response plans and provide necessary training to incorporate the following practical suggestions:
Tip 1: Plan in advance.
Grand jury subpoenas are extremely important, and companies must take them seriously to assure compliance. In particular, since subpoenas are time-sensitive, and require a timely response, company personnel who are most likely to be served with these important legal documents need to be aware of what they are, and how they are to be given priority attention by being immediately sent to a particular in-house counsel.
Tip 2: Carefully review the subpoena
After the subpoena has been served, the clock starts ticking. Accordingly, in-house counsel need to set up a response plan (often with compliance team members)—based upon exactly what is being sought. In particular, the initial items to review include:
- The deadline for the document production.
- The types of documents being sought, including the date range and key definitions.
- Any ambiguities in the description of these documents that need to be addressed in a follow-up call with the prosecutor. Such ambiguities are inevitable since the government drafters are generally not familiar with how the documents are maintained within your company.
- The cost, timing and/or feasibility for the requested production.
- Potential ground for challenging the scope or unreasonableness of the subpoena (which is a rare occurrence).
- Determining which key personnel within the company should be involved in the control group that will be involved in the subpoena response process.
In addition to reviewing the subpoena for the logistics and timing of the production, a careful review will also often reveal the nature of the misconduct that is being investigated. Accordingly, this review will reveal clues for the company’s team on how to design the likely internal investigation.
Tip 3: Immediately impose a litigation hold for responsive documents
Once your team understands the scope of the documents that are being sought, it is critical for the company to set up a “litigation hold” to prevent any inadvertent (or intentional) destruction of any relevant or responsive documents. Taking and documenting this step is important for a number of strategic reasons, which include: a) establishing “good-will” with the prosecutor, which may lead to more flexibility in the scope and timing of the production; as well as: b) reducing or avoiding any risk of future accusations of obstruction of justice.
Tip 4: Reach out and communicate to prosecutor
After you review the subpoena, and have an idea of the scope and logistics of the document request, it is wise for company counsel to call the prosecutor assigned to the case (which is often specifically noted in the subpoena). During this initial call, company counsel can address the following issues or questions:
- General introductions and company’s intention to comply.
- Steps taken by the company to implement a “litigation hold.”
- The current status of the company or any key employees in the government’s investigation. In particular, company counsel needs to determine who falls within the following three categories: “Witness, Subject or Target.”
- The ambiguities and need for clarifications in the scope of the request.
- Any logistical difficulties that will make the process more delayed or unreasonably expensive—with some alternative requests/suggestions to avoid these problems.
- The possibility of an extension of the production deadline, including the ability to produce on a “rolling” basis with differing deadlines.
- Any additional background information about the investigation that the prosecutor might be willing to share in order to assist the company to address any ongoing violations and/or to locate the most relevant documents or individuals with knowledge. One important follow-up to this initial conversation is the need to memorialize in writing to the prosecutor any narrowing or changes that he/she agreed to make during the call.
Tip 5: Develop and implement a grand jury document response plan
After these preliminary steps have been taken, it is time to dive in and do the hard part—which involves determining:
- What documents are being requested?
- Where those responsive documents may be located (in both physical and electronic form)? On-site and/or off-site?
- Who is going to be responsible for this process?
- Who else within the company may have knowledge of these issues and documents?
- When do they have to be gathered, reviewed and produced?
- Are any documents privileged or confidential, and therefore need to be segregated and entered into a privilege log?
- How do we keep track of where the documents were located?
- How should the documents (or copies) be labeled when they are produced?
While the government will be most interested in receiving the responsive documents, it is also imperative to document the process or steps that were followed in the document review and gathering process, including: who was on the team, where did they look, where were particular documents found, etc.
Tip 6: Make your initial production robust and instructive.
One final tip is to make sure your initial production of documents is thorough and complete, and is sent with a detailed cover letter that outlines the process that was followed and a guide to understanding what is being produced. These steps help to send the right message to the prosecutor and investigators that the company took this process seriously and gave it the attention that it deserved.
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For more information on The Complete Compliance and Ethics Manual – 2016, see http://www.corporatecompliance.org/Products/ProductInfo.aspx?productcd=MANUAL2016.
[1] While grand jury subpoenas can also require and compel sworn testimony before the grand jury, this article will only focus on the issues relating to securing and producing documents.