Responding to corporate criminal investigations / Kirby D. Behre, Morgan J. Miller.
2013
KF9351 .B44 2013 (Map It)
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Details
Author
Title
Responding to corporate criminal investigations / Kirby D. Behre, Morgan J. Miller.
Published
Arlington, VA : Bloomberg BNA, 2013.
Call Number
KF9351 .B44 2013
ISBN
9781617460067 (alk. paper)
1617460060 (alk. paper)
1617460060 (alk. paper)
Description
xxiii, 542 pages ; 26 cm
System Control No.
(OCoLC)798437920
Bibliography, etc. Note
Includes bibliographical references and index.
Record Appears in
Added Author
Table of Contents
Acknowledgements
v
Preface
vii
Summary Table of Contents
ix
ch. 1
Corporate Criminal Investigations---An Overview
1
I.
Corporate Criminal Liability
2
II.
The Responsible Corporate Officer Doctrine
2
III.
Managing Documents in Government Investigations
5
IV.
The Attorney-Client Privilege
6
V.
Grand Jury Subpoenas
8
VI.
Search Warrants
10
VII.
Conducting an Internal Investigation
11
VIII.
Corporate Plea Agreements
14
IX.
Deferred Prosecution and Non-Prosecution Agreements
17
X.
Corporate Monitors
19
XI.
Corporate Indemnification and Advancement
23
ch. 2
The Responsible Corporate Officer Doctrine
27
I.
Origins of the Responsible Corporate Officer Doctrine
28
A.
The Food, Drug, and Cosmetic Act
28
B.
United States v. Dotterweich
29
1.
Dotterweich's Potential for Unfair Harm
30
2.
Questions After Dotterweich
32
C.
United States v. Park
32
1.
Park Upholds the Responsible Corporate Officer Doctrine
34
2.
Strict Liability or Something More: Inconsistencies Within the Park Decision
35
3.
An Affirmative Defense to the Responsible Corporate Officer Doctrine
36
D.
Criticism and Concern About Park and Dotterweich
37
II.
FDCA Cases After Park
38
A.
United States v. Y. Hata & Co.
38
B.
United States v. Starr
39
C.
United States v. Acri Wholesale Grocery Co.
40
D.
United States v. Gel Spice Co.
40
E.
United States v. New England Grocers
41
F.
United States v. Torigian Laboratories
42
III.
Recent FDCA Cases and Developments
44
A.
Changes in the FDA's Internal Guidance
44
B.
Civil Exclusion Program
46
C.
United States v. Purdue Frederick Co.
48
D.
ChemNutra Inc.
50
E.
Synthes, Inc.
51
1.
Synthes' Unprecedented Settlement
52
2.
The Responsible Corporate Officer Doctrine in the Synthes Case
52
a.
Industry Concerns Manifest in Synthes
53
b.
Prosecutors' Responses to Synthes Executives' Arguments
54
3.
Implications of the Synthes Case
55
F.
Forest Laboratories
56
G.
KV Pharmaceutical
58
IV.
The Public Welfare Doctrine in Environmental Law
59
A.
The Evolution of Mens Rea in Environmental Cases
59
1.
Mens Rea in Public Welfare Statutes
60
2.
United States v. International Minerals & Chemical Corp.
60
B.
The Public Welfare Doctrine in Environmental Cases
61
1.
United States v. Hanousek
62
2.
United States v. Hanousek: Certiorari Denied
62
V.
Inclusion of the Responsible Corporate Officer Doctrine in Environmental Cases and Statutes
63
A.
The Clean Water Act
63
B.
The Clean Air Act
64
C.
Initial Responsible Corporate Officer Doctrine Cases in Environmental Law
65
1.
United States v. Johnson & Towers, Inc.
65
2.
United States v. MacDonald & Watson Waste Oil Co.
68
D.
Recent Environmental Cases and Developments
69
1.
United States v. Iverson
70
2.
United States v. Hong
71
3.
People v. Roscoe
72
ch. 3
Best Practices for Managing Documents in Government Investigations
75
I.
Introduction
76
II.
Essentials of a Prudent Document Policy
77
III.
Necessity of a Comprehensive Document Policy
78
A.
Obstruction of Justice
79
B.
Ethical Rules and Requirements
81
C.
Best Practices
82
IV.
Document Storage, Retention, and Deletion
82
A.
What Constitutes a "Document"
83
B.
Storing Documents in the Regular Course of Business
85
C.
Retaining and Deleting Documents in the Regular Course of Business
85
V.
Litigation Hold Notices
86
A.
Who: Devising a Recipient List
87
1.
Creating Lists of Recipients and Document Custodians
87
a.
Custodians
88
b.
Information Technology Personnel
88
c.
E-mail and Document Distribution Groups
88
2.
When All Is Better Than Some
89
B.
What: Essential Elements of a Litigation Hold
89
1.
The Litigation Hold May Tell a Story So Recipients Understand Their Obligations
89
2.
The Litigation Hold Should State Clearly the Data and Documents to Be Preserved
90
3.
All Evidence That May Be Relevant Should Be Provided, Not Just Electronic Data or Hard Copy Documents
93
4.
Litigation Hold Notices as Dynamic Documents
94
5.
Best Practices
94
C.
When: Litigation Hold Notice Timing
94
1.
Companies Under Investigation May Coordinate Litigation Holds With Other Internal Investigation Procedures
95
2.
Companies Must Balance Promptness With Thoroughness in Issuing Litigation Holds
95
3.
Companies Should Issue Follow-Up Communications
95
D.
How: Litigation Hold Transmittal, Tracking, and Responses
96
1.
Making a Statement With Litigation Hold Notices
96
2.
Maintaining Oversight: Companies Should Use Read Receipts, Voting Buttons, and Special Litigation Hold E-Mail Accounts
96
VI.
Document Review and Production
96
A.
Narrowing the Scope of the Subpoena
97
1.
Negotiating With the Government
97
2.
Accessible Versus Not Reasonably Accessible
99
B.
Document Collection
101
1.
Engaging E-Discovery Vendors
101
2.
Interviewing Employees
101
C.
Searching and Reviewing Documents
102
1.
Methods of Searching
102
2.
Identifying Duplicates and Exceptions
103
3.
Document Review
103
a.
Privileged Documents
104
b.
Clawback Agreements
104
c.
Federal Rule of Evidence 502
105
4.
Early Case Assessment and Internal Investigations
106
D.
Document Production
106
1.
Form of Production
106
2.
U.S. Department of Justice Guidelines for Production
107
3.
The Government's Duty to Produce
108
ch. 4
Application of the Attorney-Client Privilege to Corporate Representation
109
I.
Introduction
110
II.
Basic Principles
112
A.
General Formulations of the Privilege
112
B.
Distinguishing the Attorney-Client Privilege From the Attorney Work-Product Doctrine
113
C.
Choice of Law: What Law Governs the Attorney-Client Privilege?
114
D.
Fee Arrangements and the Existence of an Attorney-Client Relationship
115
E.
Communications With Non-Attorneys and Attorneys Barred in Other Jurisdictions
115
F.
Communications With Foreign Attorneys or Legal Agents
116
G.
Attorney-Client Privilege and Electronic Communications
118
III.
Key Elements of the Attorney-Client Privilege
118
A.
The Overarching Requirement of Confidentiality
118
B.
The Control Group Test
119
C.
Upjohn and the Scope of Employment Test
121
1.
Communications at the Direction of Management or Counsel
122
2.
Whether Information Sought From Employees Is Also Available From Corporate Officers
123
3.
Whether the Matter Falls Within the Scope of Employment
123
4.
The Purpose of the Communication and the Employee's Awareness of It
124
5.
Attempts-to Preserve Confidentiality
125
6.
Purpose of the Communication: Legal Versus Business Advice
130
IV.
Exceptions to the Privilege
134
A.
Waiver by Disclosure
134
B.
Standing to Waive
137
C.
Waiver by Crime or Fraud
140
1.
Elements of the Crime-Fraud Exception
141
2.
Zolin and the Requirements for an in Camera Inspection
141
V.
Applicability of the Attorney-Client Privilege Between and Among Corporate Entities
144
VI.
Production of Privileged Material to the Government
146
A.
The Doctrine of Selective Waiver
146
B.
Federal White-Collar Investigations and the Culture of Waiver
148
1.
The First Uses of Waiver Requests in Federal Investigations
148
2.
The Thompson Memorandum and Routine Waiver Requests
150
3.
The McNulty Memorandum and a Retreat From Routine Waiver Requests
154
4.
The Filip Guidelines: Toward an Era of Protection?
157
VII.
Remedies for Violations of the Privilege
159
VIII.
Conclusion
160
ch. 5
Grand Jury Subpoenas
163
I.
Introduction
165
II.
The Role of the Grand Jury
165
III.
Grand Juries' Broad Subpoena Powers
165
A.
Federal Prosecutors Determine Which Subpoenas to Issue
166
B.
Evidentiary Rules Generally Do Not Apply
166
C.
Evidentiary Policies of the U.S. Department of Justice
167
1.
USAM Section 9-11.231 Motions to Dismiss Due to Illegally Obtained Evidence
167
2.
USAM Section 9-11.232 Use of Hearsay in a Grand Jury Proceeding
167
3.
USAM Section 9-11.233 Presentation of Exculpatory Evidence
167
IV.
Standard for Issuance of a Grand Jury Subpoena
168
V.
Challenging the Enforceability of Subpoenas
168
A.
Subpoena Recipient's Motion to Quash or Modify
168
B.
Standard of Review: Presumption of Regularity
169
C.
Bases for Objecting to Subpoenas
169
1.
Unreasonableness
169
2.
Relevance
170
3.
Particularity
171
4.
Period of Time
173
5.
Improper Purpose
173
6.
Fifth Amendment Violations
174
7.
Prosecutorial Misconduct
175
8.
Objections Based on Privilege
178
a.
Attorney-Client Privilege
178
b.
Attorney Work Product
178
c.
Marital Privilege
179
d.
Familial Privilege
179
e.
Doctor-Patient Privilege
179
f.
Clergy Privilege
179
g.
Accountant Privilege
180
D.
Appeal of District Court's Ruling on a Challenge
180
E.
Narrowing and Clarifying Subpoenas
181
VI.
Grand Jury Secrecy Requirements
182
A.
Who Is and Is Not Bound By Rule 6(e)'s Secrecy Requirements?
182
1.
Grand Jurors
182
2.
Government Attorneys
183
3.
Witnesses
183
B.
Materials Covered by Secrecy Requirements
184
C.
Lifting of Secrecy Requirements
184
VII.
Complying With a Subpoena Duces Tecum
184
VIII.
Grand Jury Subpoenas for Testimony: Special Issues
185
A.
U.S. Department of Justice Provisions Regarding the Issuance of Subpoenas Ad Testificandum in Grand Jury Investigations
186
1.
USAM Section 9-11.150: Subpoenaing Targets of the Investigation
186
2.
USAM Section 9-11.151: Advice of "Rights" of Grand Jury Witnesses
186
3.
USAM Section 9-11.152: Requests by Subjects and Targets to Testify Before the Grand Jury
187
4.
USAM Section 9-11.153: Notification of Targets
188
5.
USAM Section 9-11.154: Advance Assertions of an Intention to Claim the Fifth Amendment Privilege Against Compulsory Self-Incrimination
188
B.
Immunity
188
1.
Formal Immunity
189
a.
Use Immunity: 18 U.S.C. Sections 6002-6005
189
b.
Prosecution of Immunized Witnesses: Kastigar Hearings
189
2.
Proffer or "Queen for a Day" Agreements/Informal Proffer Sessions in Lieu of Grand Jury Appearances
190
a.
Strategy: Deciding Whether to Proffer
190
b.
Rules 11(e)(6) and 410
191
3.
Informal Immunity Agreements
191
4.
Department of Justice Provisions Regarding Informal Immunity
191
a.
USAM Section 9-27.600: Entering into Non-Prosecution Agreements in Return for Cooperation
192
b.
USAM Section 9-27.620: Considerations to Be Weighed
193
c.
USAM Section 9-27.630: Limiting the Scope of Commitment
194
C.
Sanctions for Noncompliance With a Subpoena Ad Testificandum
194
1.
Contempt of Court
194
a.
Civil Contempt
194
b.
Criminal Contempt
195
2.
Obstruction of Justice
195
3.
Perjury
196
ch. 6
Search Warrants
197
I.
Introduction
198
II.
The Fourth Amendment
198
A.
What Is a Search and What Is a Seizure?
198
1.
Searches: Katz v. United States and Smith v. Maryland
199
2.
Seizures: United States v. Jacobsen
201
B.
When Is a Search or Seizure Reasonable?
202
III.
Search Warrants
202
A.
Rule 41 Requirements
202
B.
Probable Cause: Illinois v. Gates
203
C.
Particularity
204
1.
Particularity Regarding "the Place to Be Searched"
205
2.
Particularity Regarding "the Persons or Things to Be Seized"
206
a.
Particularity in the Context of Complex Corporate Investigations
207
b.
"Permeated With Fraud" Exception to the Particularity Requirement
208
IV.
Responding to a Search Warrant
210
A.
Execution of a Warrant
211
B.
Preparing for a Search
211
1.
Designate a Single Contact Person
212
2.
Preparing Employees
212
C.
During the Search
213
1.
Examine the Warrant and Credentials
213
2.
Contact Counsel
213
3.
Protect Privileged Documents and Take Notes
213
D.
What Not to Do During the Search
214
V.
Warrantless Searches
215
A.
Consent
215
B.
Exigent Circumstances
218
C.
Plain View
220
1.
The Fourth Circuit: United States v. Williams
220
2.
The Ninth Circuit: United States v. Comprehensive Drug Testing (Balco)
221
3.
Other Circuits
222
ch. 7
Conducting an Internal Investigation
223
I.
Introduction
224
II.
Determining Whether to Investigate
225
A.
Advantages of Conducting an Internal Investigation
226
1.
Promoting a Good Relationship With a Related Government Investigation
226
2.
Maintaining Control Over the Investigation
226
3.
Managing Public Relations
227
4.
Reducing the Likelihood or Scope of a Government Investigation
227
B.
Disadvantages of Conducting an Internal Investigation
227
C.
Public Company Considerations
228
1.
Fiduciary Obligations
228
2.
Sarbanes-Oxley Requirements
228
3.
Shareholder Derivative Suits
229
D.
Disclosure of a Government or Internal Investigation
229
E.
Compliance With a Company's Code of Conduct
230
III.
Commencing an Investigation
231
A.
Who Should Conduct the Investigation
231
B.
The Role of In-House Counsel
233
C.
Interviewing Employees
233
D.
Protecting the Workforce During an Investigation
235
E.
Hiring and Use of Other Experts
236
F.
The Investigation Plan
236
1.
Phase One: Evidence Preservation and Collection
236
2.
Phase Two: Corporate Knowledge and Learning the Facts
237
3.
Phase Three: Analysis and Conclusions
238
G.
Special Considerations Faced by Special Litigation Committees
238
IV.
Completing the Investigation
240
A.
Reporting Findings to the Client
240
B.
Privilege Waiver Issues
241
C.
Self-Reporting and Avoiding Prosecution
242
1.
DOJ Cooperation Considerations
243
2.
SEC Cooperation Considerations
244
a.
Corporate Cooperation
244
b.
Individual Cooperation
245
c.
Cooperation Tools
246
3.
Parallel Investigations
247
D.
Remedial Action
248
ch. 8
Corporate Plea Agreements
249
I.
Introduction
250
A.
Plea Agreements Under Rule 11
250
B.
Effect of U.S. Sentencing Guidelines on Plea Agreements
251
C.
Department of Justice Policy on Plea Agreements
252
II.
Process for Entering Into a Plea Agreement
253
III.
Standard Provisions of Plea Agreements
255
A.
Introductory Statement of the Plea
256
B.
Factual Basis for the Plea
256
C.
Legal Basis for the Plea
257
D.
Parties' Promises in the Plea Agreement
257
1.
Defendant's Agreement
257
2.
Government's Agreement
258
E.
Assistance and Advice of Counsel
258
F.
Role of the Court
259
1.
Agreements Binding on the Court
259
2.
Agreements Not Binding on the Court
260
3.
Court Departures
260
a.
Substantial Assistance to Authorities
261
b.
Inability to Pay
262
c.
Corporate Compliance Program
262
G.
Role of the Probation Office
264
H.
Recommended Sentence
265
1.
Restitution
266
2.
Fine Range
267
3.
Notice to Victims
269
4.
Probation
269
5.
Special Assessments
272
6.
Costs of Prosecution
272
7.
Forfeiture
273
I.
Waivers
273
1.
Waiver of Constitutional Rights
273
2.
Waiver of the Right to Appeal Sentence
273
3.
Waiver of Brady Material
274
IV.
Enforcement of the Plea Agreement
275
A.
Time of Payment
275
B.
Closely Held Organizations
275
C.
Breach of Plea Agreement and Remedies
276
ch. 9
Corporate Monitors
279
I.
Introduction
280
II.
The Use of Corporate Monitors
280
A.
The Origins of Corporate Monitorship
281
1.
Special Masters
281
2.
Securities and Exchange Commission Enforcement Actions: Receiverships
282
3.
Department of Justice Enforcement Actions: The Racketeer Influenced and Corrupt Organizations Act and the Organizational Sentencing Guidelines
282
B.
The First Corporate Monitors: Prudential Securities
283
C.
The Prevalence of Corporate Monitors: 2003 and Beyond
284
III.
Purpose of Corporate Monitors
285
IV.
The Process of Appointing Corporate Monitors
285
A.
The Selection Process
285
B.
Department of Justice Guidance on the Selection Process
286
V.
Characteristics of a Corporate Monitor
287
A.
Prior Work Experience
287
B.
Competence
287
C.
Independence
288
VI.
Scope of the Monitor's Authority
289
A.
Department of Justice Guidance on the Scope of the Monitor's Authority
289
1.
Monitoring Compliance With the Agreement
290
2.
Communicating With Parties and Recommending Changes
290
3.
Reporting Previously Undisclosed or New Misconduct
291
B.
The Scope of the Monitor's Authority in Practice
292
C.
Department of Justice Reaction to Criticism of the Scope of Monitor Authority
294
D.
Duration of the Monitorship
295
VII.
Criticism of Corporate Monitorships
295
A.
Cost
296
B.
Accountability
298
C.
When a Monitor Is Needed
298
ch. 10
Deferred Prosecution and Non-Prosecution Agreements
299
I.
Introduction
300
A.
Overview
300
B.
Procedure for Resolving Cases Through Deferred and Non-Prosecution Agreements
301
C.
Court Authority
302
D.
Criminal Accountability
302
II.
Choosing the Type of Agreement
304
A.
Key Differences Between Deferred and Non-Prosecution Agreements
304
B.
Factors Under Consideration
305
III.
Terms of Agreements
307
A.
Admission of Facts and Acknowledgment of Conduct
307
B.
Cooperation by the Corporation
307
C.
Duration
308
D.
Penalties
309
1.
Monetary Payments
309
2.
Extraordinary Restitution
309
E.
Rehabilitation, Business Reforms, and Compliance Programs
310
F.
Breach
310
IV.
Benefits of Deferred and Non-Prosecution Agreements
311
A.
Benefits to the Government
311
B.
Benefits to the Company or Individual
312
V.
Recent Increases in the Use of Deferred and Non-Prosecution Agreements
314
A.
Use of Deferred and Non-Prosecution Agreements in FCPA Cases
314
B.
Increased Role of the Securities and Exchange Commission
315
VI.
Criticisms of the Use of Deferred and Non-Prosecution Agreements
316
A.
Prosecutorial Imbalance
316
B.
The Need for Greater Judicial Oversight
317
C.
Unpredictability
318
ch. 11
Corporate Indemnification and Advancement Policies---Insurance
321
I.
Corporate Indemnification
322
A.
Introduction
322
B.
Statutory Law
323
1.
Permissive Indemnification
324
2.
Mandatory Indemnification
324
C.
Indemnification Pursuant to Organizational Documents
325
D.
Indemnification Pursuant to Contracts
325
E.
Other Requirements for Indemnification
326
F.
Retaining Separate Counsel
327
G.
Advancement of Fees
328
1.
Purpose of Advancement
328
2.
Extent of the Obligation
329
a.
When the Right to Advancement Vests
329
b.
When the Right to Advancement Expires
330
H.
Fifth and Sixth Amendment Rights to Indemnification and Advancement
332
II.
Directors and Officers' Insurance Coverage
334
A.
Introduction
334
B.
Types of Coverage
334
1.
Side A Coverage: Directors and Officers Liability (Direct Coverage)
335
2.
Side B Coverage: Corporate Reimbursement
336
3.
Side C Coverage: Entity Liability
336
C.
Key Insurance Provisions Relating to Coverage
337
1.
Insuring Agreement
337
2.
Limits of Liability
337
3.
Definitions
338
a.
Who Is an "Insured"?
338
b.
What Constitutes a "Wrongful Act"?
339
c.
What Constitutes "Loss"?
339
4.
Exclusions
340
a.
Conduct Exclusions
340
i.
Dishonesty
340
ii.
Personal Profit
341
b.
Claimant Exclusions
341
i.
Insured Versus Insured Exclusions
341
ii.
Regulatory Exclusions
342
c.
Other Insurance Exclusions
343
i.
Prior Knowledge Exclusions
343
ii.
Prior Acts Exclusions
343
iii.
Prior and Pending Litigation Exclusions
344
iv.
Matters Covered by Other Types of Insurance
344
5.
Co-Insurance
344
6.
Severability
344
a.
Severability of Application
345
b.
Severability of Conduct
345
7.
Extended Reporting Period (Tail Coverage)
345
D.
Trigger of Coverage and Notice
346
1.
Notice of Claim
347
2.
Notice of Circumstances
347
E.
Reservation of Rights by Insurer
348
F.
Allocation
348
1.
Allocation Clauses
349
2.
Allocation Agreements Among Insureds
349
3.
Allocation by Judicial Adjudication
349
G.
Rescission
350
H.
Undertaking Agreements and Repayment
350
I.
Bankruptcy
351
Appendices Print and Electronic
353
Appendix A
U.S. Attorney's Manual Chapter 9-28.000---Principles of Federal Prosecution of Business Organizations
355
Appendix B
U.S. Department of Justice Policy on Charging and Sentencing, Eric H. Holder, Jr., Attorney General, May 19, 2010
372
Appendix C
Model Annotated Corporate Plea Agreement, July 13, 2009
375
Appendix D
Jury Instruction on Corporate Criminal Liability
401
Appendix E
Sample Monitorship Agreement with Attachments A-D
402
Appendix F
Sample "Queen for a Day" Agreement
418
Appendix G
Sample Joint Defense Agreement Regarding Civil Litigation
419
Appendix H
Sample Confidentiality Agreement
425
Appendix I
Sample Undertaking Agreement
426
Appendix J
U.S. Department of Justice, Memorandum on the Principles of Federal Prosecution of Business Organizations, Paul J. McNulty, Deputy Attorney General
427
Appendix K
U.S. Department of Justice, Memorandum on the Principles of Federal Prosecution of Business Organizations, Larry D. Thompson, Deputy Attorney General, January 20, 2003
448
Appendix L
U.S. Sentencing Guidelines Manual, Chapter 8---Sentencing of Organizations, November 1, 2011
460
Electronic
Appendix M
Biomet, Inc. Deferred Prosecution Agreement, March 26, 2012
Appendix N
Marubeni Corp. Deferred Prosecution Agreement with Attachments A-D, January 16, 2012
Appendix O
Pfizer H.C.P. Corp. Deferred Prosecution Agreement with Attachments A-C, August 6, 2012
Table of Cases
505
Index
519
About the Authors
541