Lawyers: What to Do (or NOT Do) in Internal & External Investigations

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Lawyers: What to Do

(or

NOT

Do) in Internal &

External Investigations

Presented by:

Kevin M. Wood, Esq. Strasburger & Price LLP

600 Congress Ave, Ste 1600 Austin, TX 78701-2974 (512) 499-3664 300 Convent St, Ste 900 San Antonio, TX 78205-3715 (210) 250-6073 kevin.wood@strasburger.com

AHLA Annual Meeting June 28, 2011

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Who is the client?

Organization/corporation

Constituents of the organization

Officers

Directors

Shareholders

Employees

Unrepresented persons

Multiple-party representation

What type of entity is the

client?

Publicly Traded Company

Privately Held Company

Institution

Non-Profit

College or University

Religious Order

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Reasons to Conduct an

Internal Investigation

Internal allegation of wrongdoing

Compliance issues (e.g., hotline)

Corporate monitor

Government investigation

Corporate integrity agreement

Industry-wide concern

Concern voiced by Board of Directors

Scope of the Investigation

What issues are being investigated?

Do you have a reasonable time frame to

complete the investigation?

Do you have sufficient resources to

conduct the investigation (especially in

the given time frame)?

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How to

Avoid a Governmental

Investigation

Employee Reporting System

Federal sentencing guidelines encourage the use of an anonymous or confidential reporting system Employees need to be well informed of the system,

including:

any limits on confidentiality

an employee’s obligation to report suspected wrongdoing the fact that the company will not retaliate against

employees for using the system

System should be designed to encourage reporting Better for employees to feel free to report than to

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Compliance Plan

The existence of an effective compliance plan has many benefits:

Reduces the likelihood that the OIG or DOJ will undertake a criminal investigation/prosecution

Reduces the culpability score in the event of successful prosecution

Most importantly, helps to prevent, deter, and detect potential wrongdoing

Risk Assessments

The organization should periodically assess the effectiveness of its compliance plan

With results of assessment, the organization can effectively prioritize and modify its actions and allocate its resources

The focus of such prioritization should be the

prevention and detection of improper conduct that is most likely to occur

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Search Warrant Policy

Writing a search warrant policy after the warrant has been executed is too late

Policy should state that:

Organization’s lawyers will be notified immediately Management/compliance officials will be notified

immediately

Privileged documents should be protected

Employees should be trained to ensure that no action can be construed as obstruction of justice

Sample policy in attached materials

Interview Policy

Organization’s policy should balance between:

Organization’s interest in appropriately advising employees about the issue of seeking counsel

versus

Organization’s need to demonstrate to that it is cooperating with the investigation

An effective policy should educate employees as to the voluntary nature of interviews and their legal rights, without mandating the employee’s decision All effort must be taken to AVOID obstruction of

justice (or even the appearance thereof)

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Document Retention Policy

Historic documents may help or hurt in litigation Balance must be found between:

The need to memorialize important decisions, contracts, or events

versus

The limit of resources to keep every document ever created

Many organizations have excellently written, but

poorly implemented, document retention policies

Now is the time to determine what has been maintained and whether it is time to retire those documents that have outlived their relevance Discontinue document destruction policy if an

investigation begins

Privileged Documents

Failure to treat privileged documents as confidential may jeopardize the attorney-client privilege

Ensure that privileged documents are appropriately labeled and segregated

Consider having a separate server or drive for the legal department’s documents to protect against inadvertent disclosures

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Insurance Policies

Be aware of types of coverage, coverage triggers, and coverage limitations (i.e., D&O, riders, etc.) Will business interruption insurance cover the loss

of business that would occur in the event records are seized?

Must an indictment be delivered before coverage for attorney’s fees begins for employees?

Business Interruption Plan

Search warrants can interrupt a business as effectively as a flood or other force majeure

Key is to have a plan to restore business operations as quickly as possible

Offsite backup of critical IT systems can be critical if such an event occurs

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Updated Contacts

Locating the ideal attorney may take time, so take time now to find counsel before a search warrant executes, an investigation starts, or an allegation is made

You (and the Organization) will want experienced counsel at your side immediately, including:

Experienced healthcare regulatory counsel

Criminal defense counsel, preferably with health care experience

Take the time now to locate local attorneys who will have established relationships with local regulators or enforcement officials

How to Respond to a

Governmental

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Call Your Attorney

A healthcare organization’s list of attorneys

should include:

Experienced healthcare regulatory counsel Experienced criminal defense counsel

(healthcare, investigation, and substantial trial experience preferred)

Monitor the Investigation

Begin debriefing employees who were interviewed Interviews should be conducted at the direction of

the Board and in coordination with counsel Important to have the right attorney conduct the

debriefing interviews

Interviews should be conducted to protect attorney-client privilege

Communications should be clear about: who the actual client is; and

who counsel represents (most likely not the employee) Beware of dissembling or pre-texting

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AVOID Obstruction

REMEMBER—“The cover-up is worse than the crime”

More convictions arise from obstruction than from the underlying allegations

General counsel and employees should focus on preservation of evidence, including

Stopping the destruction of relevant documents under existing retention policies

Reviewing email and electronic back-up processes Assessing what has been (or is being) reported to the

authorities

Find the Relevant Policies

This includes policies for:

Search Warrant Subpoena

Civil Investigative Demand

These policies should already be in place

The relevant policy should be short and simple and should educate employees of their obligations Remember that the investigator may ask to see the

policy as well as any communications to employees about it

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Notify Employees & Third

Parties

After debriefing initial witnesses, the organization will have a good idea as to the nature and scope of the investigation

In all but rare cases, notification should be made to employees, possibly including a statement that the organization will cooperate

Initial notice to employees should:

Publish or republish the Company’s interview and search policies

Instruct all employees to preserve evidence

Inform employees of their obligations, but avoid even the appearance of obstruction with respect to their responses

Notify Employees & Third

Parties

After initial notice is made to employees, notice should be made to key stakeholders

Timing of notices will vary based on the specific circumstances

The organization will need to speak with “one voice” and be ready to respond to press inquiries

immediately

Depending on the circumstances, the organization may need consultants:

Consultants should be retained by outside counsel, not the organization

Retention of consultant should be done to maintain privilege and confidentiality

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Fight or Cooperate?

While a preliminary decision must be made, the process will evolve as the facts and applicable law develop during the investigation

The initial decision, though, will materially affect subsequent decisions

Most organizations find themselves compelled to cooperate due to a number of factors:

Incentives for cooperation under federal sentencing guidelines

DOJ policy on the prosecution of business entities Collateral consequences of an indictment or conviction

Conduct an Internal

Investigation?

Some investigation will be needed to determine facts, potential exposure, possible legal defenses, and resolution alternatives

One end of this spectrum involves limitation by the defense team only to develop defense evidence The other end involves engaging separate counsel

and forensic experts to conduct a formal investigation that will result in a formal report

Often, in-house counsel must balance the need for information with the potential risk of a written report:

Who gets the report?

How will the report remain protected? Will privilege be waived?

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Offer Lawyer for Employee

Witnesses

Natural reaction is to tell employees to agree to an interview and that there is no need for a lawyer This fails to recognize the posture of the

investigation as well as the stress the interview process imposes on employees

One option is to retain an attorney to be available for employees; however:

Attorney should have specific experience serving in this type of role

Attorney should also be well-versed in the pitfalls of joint representation to ensure appropriate and ethical

representation

FOR EXAMPLE—Organization’s lawyer must make sure employees understand that she does not represent them

It must be clear who the lawyer represents

Work the Case and Meet

with the Prosecutor

Primary objective should be to persuade the prosecutor to decline prosecution of the organization and its officers and employees

This requires counsel to work the case proactively to determine weaknesses in the underlying case and to develop defense evidence

If prosecution appears unavoidable, then the lesser goal will be to minimize the charges brought and penalties imposed through:

Cooperation

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Keep a Focus on Running

the Business

Executives must maintain focus on running the business, or defense of the case becomes moot Executives will want to take an active role in setting

defense strategy, but should limit the executives involved to the smallest number practicable:

Subcommittee of the Board; Audit committee; or

Select officers (i.e., CEO, COO, etc.)

Continued focus on running the business must be an ongoing priority

Continued operations must be accomplished within the parameters of the compliance plan

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Additional Resources

“Responding to Government Investigations,” William Michael, Jr., Mark D.

Larsen, ACCA InfoPAK, Sept. 2004.

“Internal Investigations,” William Michael, Jr., Mark D. Larsen, ACCA InfoPAK,

Sept. 2004.

John K. Villa, Corporate Counsel Guidelines, Chapter 5 (Overseeing

Corporate Criminal Investigations & Litigation), West & Association of Corporate Counsel.

“The Disturbing Changes in the Federal Sentencing Guidelines: Easier on

Prosecutors, Tougher on Companies,” ACC Docket 23, no. 59 (May 2005): 116-125.

Principles of Federal Prosecution of Business Organizations, memo from

Deputy Attorney General Paul J. McNulty to Heads of Department Components, United States Attorneys, Dec. 12, 2006,

http://www.usdoj.gov/dag/speeches/2006/mcnulty_memo.pdf.

United States Sentencing Commission, Guidelines Manual, Chapter Eight –

Sentencing of Organizations (Nov. 2004): www.ussc.gov/guidelin.htm.

Mark A. Srere, JD, Donna K. Thiel, JD & Aretha D. Davis, JD, See for

Yourself: A Health Care Provider’s Guide to Conducting Internal Investigations & Audits (2003).

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