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Governmental civil and criminal investigations of companies

Government Enforcement and White Collar Crime

Can They Do That? Representatives from a civil regulatory agency are using every carrot and stick at their disposal—serving subpoenas, seeking cooperation, enticing you with easy settlements and reduced fines. But they want information, and a lot of it. You think of your many well-meaning, but legally unsophisticated, employees who might get themselves unfairly tripped-up by an overzealous government agent looking for advancement.

Global Investigations and White Collar Crime

You consider the power of interpretation and how the most innocent documents or statements, with a little ingenuity, could be inferred to mean anything. Meanwhile, federal prosecutors sit back patiently, with confidence that comes from the ability to institute criminal charges.

Or perhaps a criminal investigation has not yet materialized, but it haunts you with every step you take.

As you consider whether to alleviate some of the burden of this multiple-front defense, you wonder: What are the risks? Will an effort to cooperate come back to haunt me? Are we just being squeezed? Can they really do this? The answers to these questions, of course, depend on a number of factors. In 1970, in the landmark decision in United States v.

Kordel, the Supreme Court invoked the public interest in consumer protection when it endorsed a parallel investigation into misbranding that involved the United States Attorney for the Eastern District of Michigan and the Division of Regulatory Management of the Food and Drug Administration.

Civil and Criminal Investigations

The public interest in protecting consumers throughout the Nation from misbranded drugs requires prompt action by the agency charged with responsibility for administration of the food and drug laws. But a rational decision whether to proceed criminally against those responsible for the governmental civil and criminal investigations of companies may have to await consideration of a fuller record than that before the agency at the time of the civil seizure of the offending products.

It would stultify enforcement of federal law to require a governmental agency such as the FDA invariably to choose either to forgo recommendation of a criminal prosecution once it seeks civil relief or to defer civil proceedings pending the ultimate outcome of a criminal trial. But even from the early days of Kordel, there were limits on what the government could legitimately do. Specifically, in Kordel, the Supreme Court set forth a series of circumstances that would not survive scrutiny: That said, recent case law provides some guidance as to when the government may have gone too far.

In so doing, where the court in Kordel expressed concerns with the public policy of consumer protection, the court in Scrushy made a pronouncement that invokes the public policy of individual constitutional rights. Calling upon the comments of the judge who oversaw a different portion of the HealthSouth litigation, the court asserted: While alleged corporate misconduct may inspire a court to act in what it sees as the interest of the public at large, blatant examples of government over-reaching may remind a court of what is at stake constitutionally.

Purported Parallel Investigations Gone Awry Once the government has commingled its criminal and civil efforts, further problems can develop. In one recent case, United States of America v. Harkening back to both the exceptions left open from Kordel and the constitutional policy considerations raised in Scrushy, the court dismissed the criminal indictment that stemmed from the investigation and in so doing announced: The strategy to conceal the criminal investigation from defendants was an abuse of the investigative process.

Moreover, the USAO intentionally shielded its intentions behind the guise of a civil prosecution, resorting to subterfuge to maintain the secrecy of its involvement.

Representation In Government Investigations

What It All Means While opportunities to vindicate improperly conducted parallel investigations remain remote possibilities, some important practice tips emerge from both the historic context of these kinds of investigations and recent district court decisions.

Importantly, how a company or individual interacts with the government in the context of potential or purported parallel investigations may determine whether or not potential government misconduct is even uncovered, let alone challenged. Those who find themselves facing something that looks like it might involve civil and criminal investigative activity should embrace three broad pieces of advice: If we learn anything at all from the Stringer decision, it is that an inquiry posed to the government as to their intentions and other potential investigative activity will either empower you with the truth or lay the groundwork to challenge improper activity.

The alternative can only prove highly problematic: Know all the players. If an alleged civil investigation is being influenced by governmental civil and criminal investigations of companies active or potential criminal investigation, that reality will be understandably difficult to uncover. Still, anything that can be established about not only who is openly engaged in the investigation, but who might be involved behind the scenes, will prove invaluable in both assessing potential risks and challenging the investigators on suspected wrongdoing.

You might investigate, for example, the background of those with whom you are interacting — did that person formerly work in another government agency where they might have established relationships with prosecutors? Many times, the civil discovery process will enable you to learn about the criminal investigation. If, for instance, you suspect that civil investigators might be sharing information with a criminal counterpart or vice versayou might consider serving formal discovery regarding that suspicion.

This puts the government in the position of either being forthcoming, or defending its unwillingness in court. The courage to press the investigators on legitimate questions regarding the investigation and a little intellectual curiosity about who is involved and their apparent motives will go a long way toward taking back a little leverage in a situation that can appear incredibly one-sided.