New episode of our podcast, Speaking of Litigation: FBI! Open up! Is your organization prepared to handle a government investigation?
Guilty or not, having a preparedness plan in place for when a government agency comes knocking is just as important as conducting a company fire drill.
In this episode of Speaking of Litigation, Epstein Becker Green litigators Alkida Kacani, George Breen, and Eric Moran discuss a few of the most common (and invasive) legal maneuvers government investigators may take when approaching a company or its employees.
When dealing with civil investigative demands or even surprise search warrants, there are a plethora of dos and don'ts that each member of your regulated organization should be trained on.
Video: YouTube, Vimeo.
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Transcript
[00:00:00] Alkida Kacani: Today on Speaking of Litigation, we are discussing the do's and don'ts if you find yourself as being the subject or target of a government investigation and the government comes knocking on your door. Hello, everyone. I'm your host today, Alkida Kacani. I am a partner in Epstein Becker and Green’s litigation practice and I'm based out of our Newark office.
[00:00:22] Alkida Kacani: When the government knocks on your door, whether they show up at your workplace or at your home, it is critical to be prepared to handle the situation. Today, we're going to break down some scenarios in which government agents can approach your company or your employees for information.
[00:00:42] Alkida Kacani: We will discuss the do's and don'ts in these situations and the importance of training employees and executives on what to do in the face of an investigation. We will also discuss some best practices and risk mitigation strategies that can help ensure compliance, and avoid the cost and business disruption that can result from missteps in responding to an investigation.
[00:01:05] Alkida Kacani: But before we get any further, a request for you. If you like the information we are sharing today, please subscribe to the show. Speaking of Litigation is available on YouTube and wherever you get your podcasts. And now without any further delay, I would like to introduce two of my esteemed colleagues joining our discussion today, whom I've had the honor and privilege of working alongside.
[00:01:28] Alkida Kacani: First, I would like to welcome George Breen. George is an experienced litigator and partner in Epstein Becker and Green's Washington, D. C. office, and the Chair of our National Healthcare and Life Sciences Practice Steering Committee, as well as a member of our Board of Directors. Welcome, George.
[00:01:47] George Breen: Hi, Alkida.
[00:01:48] Alkida Kacani: We're also happy to have with us today, Eric Moran. Eric is a former federal prosecutor, an accomplished trial lawyer and partner in our New York and Princeton offices. He serves on the firm's National Litigation Steering Committee. Welcome Eric.
[00:02:04] Eric Moran: Hi Alkida.
[00:02:05] Alkida Kacani: So getting us started, as we have prefaced, today's discussion revolves around some of the ways a government investigator can approach a company or its employees.
[00:02:15] Alkida Kacani: That can include a company or its employees receiving legal process, such as a subpoena, or a civil investigative demand or CID. Or the government's approach could be much more direct, such as when an agent approaches an employee on the street, appears at the office unannounced to ask questions, or quite literally barges in with a warrant to search the premises.
[00:02:40] Alkida Kacani: Whatever the government's technique, the response needs to be handled appropriately to ensure compliance and manage potential exposure for both the company and their employees. So let's get right into the discussion. Setting the table a little bit further for our listeners, let's discuss how these investigations typically begin.
[00:03:01] Alkida Kacani: Eric, George, can you walk us through the early stages of a government investigation?
[00:03:06] George Breen: So Alkida, a government investigation can start in a myriad of ways. It can be as the result of an audit that an agency or one of its contractors conducts. The government is increasingly relying on its own data mining and bringing its own cases based on its own analysis of the data that it receives from health care providers across specialty, across geography, to look for outliers.
[00:03:32] George Breen: It can be as the result of a whistleblower who either goes to law enforcement directly or decides to file a qui tam complaint under the Federal False Claims Act, which the government then investigates according to the terms of the False Claims Act statute. But how it does that, and the level of aggressiveness that it pursues, really depends on the government.
[00:03:54] George Breen: And I will tell you that what we have seen, particularly post COVID, where the investigative activities were less, they couldn't be in person as much as they had previously, the government has almost redoubled its efforts to pursue entities, particularly in the health care and life sciences space. Just this week, the assistant chief of the Department of Justice's criminal division announced that they intended to substantially, his word, increase the number of prosecutors in the health care fraud division of that office.
[00:04:23] George Breen: So companies should know that there's an increasing amount of aggression and enforcement being pursued by the government. We are continually seeing, again particularly post COVID, joint civil and criminal investigations.
[00:04:46] George Breen: We are seeing coordination across agencies. We are seeing coordination across states. So with that background, companies need to understand that there is likely to be in their future, just reality, an enforcement activity. If there is any message we can send to people from this podcast, it is, be proactive, not reactive.
[00:05:14] George Breen: Having someone being approached by a federal agent and not knowing how to handle that situation is not going to be in the best interest of that person or your company. If you have people out there right now who would not know what to do if they were approached by an agent, they need to be trained. You need to be thinking about, are my employees appropriately ready for this?
[00:05:43] George Breen: If they're not, there literally needs to be a fire drill on training in your organization.
[00:05:49] Eric Moran: I couldn't agree more with George, particularly on the source of investigations. They're coming from employees. They're coming from market competitors. Complaints are coming from lawsuits. And increasingly complaints are coming from inside agencies, which are using data analytics to identify market participants that they see as behaving in a suspicious manner.
[00:06:18] Eric Moran: And the government, once they cross that threshold of determining there should be an investigation, they have many tools at their disposal to investigate corporate conduct. How it manifests for our clients? They will see anything from a federal grand jury subpoena to administrative subpoenas.
[00:06:43] Eric Moran: It's probable that if a crime has been committed or agents believe that a crime has been committed, they could obtain a search warrant, and they could knock on a client's door and show up with a warrant to conduct a search. And increasingly, we are seeing the use of civil investigative demands. We've always seen them, but today we see them in both criminal and civil investigations.
[00:07:08] Eric Moran: And when you get one as a company, the company will not know whether the conduct that's under investigation is some kind of civil investigation, an administrative foot fault, or a full blown piece of criminal conduct. And they won't know until that CID is analyzed and experienced counsel engages to understand what the nature of the investigation is.
[00:07:40] Eric Moran: Unlike a grand jury subpoena, a CID, which we're most commonly seeing, can be used in any kind of case. A civil investigation, an administrative inquiry, or a criminal investigation.
[00:07:53] Alkida Kacani: So, George, Eric, given the various scenarios, how can companies prepare themselves and their employees for this kind of encounter with the government?
[00:08:02] Eric Moran: Yeah. As George had alluded to earlier, companies need to think ahead. Responding to government inquiries should be part of a company's overall regulatory compliance program. And as part of that program, we advise our clients to give thought about what to do and to train their employees what to do if the government comes knocking, however they come knocking.
[00:08:28] Eric Moran: There are straightforward policies that companies can and should have in place and trainings that can inform their employees what to do when they find themselves in that intensely stressful and unnatural situation where they're confronted by-, with questions from someone who has a badge.
[00:08:51] Eric Moran: These policies would give employees permission not to answer, as is their right, and instead to appropriately route any questions like that to the right person within the organization. Now, that's not about hiding the ball, that's about compliance. These policies will ensure that a company's response to any regulatory inquiry is complete and it's accurate.
[00:09:21] Eric Moran: And trainings, and policies like this will go a long way to avoid the kind of missteps we often see when someone gives an off the cuff answer when they're not sure or don't see all corners of the organization. And that kind of misinformation provided in response to a formal inquiry or request for an interview, that could mire a company down in a lengthy and expensive problem that could have been avoided in the first place by a sound compliance.
[00:09:50] George Breen: I think Eric's right. What I would say about it is OIG has just this month published revised guidance for companies and their compliance programs, which I really encourage people who watch this podcast to go to the OIG website and to download it, because compliance really is such a key to the ability to make sure that your employees are appropriately ready in the event of a government reach out.
[00:10:20] George Breen: And what the areas are that they may be asked about if, in fact, that happens. The compliance program only is going to work if it's specific to your organization. Having a program that effectively would be applicable to any organization, not yours specifically, really is more of a problem than having no compliance program at all.
[00:10:46] George Breen: You want to make sure, and if you read this guidance it’ll talk about having it be very tailored to your specific situation, the size of your organization, numbers of employees you have, etc. One of the critical elements of that is to make sure your folks are prepared in the event they have a government contact, because people by their very nature want to be helpful.
[00:11:14] George Breen: They want to be able to answer questions that are asked of them. People don't understand the legal ramifications of those questions. They may not understand what their rights and responsibilities are, that they have the right not to speak, that they have the right to consult with counsel, that they have the right to talk to corporate counsel, they have the right to talk to their company.
[00:11:35] George Breen: All things, as Eric said, not intended to obstruct or obfuscate, but instead to be able to be fully prepared in the event that happens to you. That is why having an effective compliance program becomes so critical because this kind of training is exactly what ought to be occurring in your compliance process.
[00:11:59] Alkida Kacani: What I'm hearing is in addition to having a compliance program that includes training on how to handle a government inquiry, and having robust policies that address these scenarios. George, Eric, what is your advice to an in-house counsel that has just learned that the company has been served with a CID asking for many categories of documents and information. What are the next steps?
[00:12:26] George Breen: It's going to sound so colloquial coming from the mouth of an outside lawyer, but hiring experienced counsel is critical as part of that process. And there are reasons for that. First, you never want to put in-house counsel in the direct path of the government lawyer, because whatever that in-house counsel says will be taken as statements from an agent of the company.
[00:12:56] George Breen: The lines between legal advice and business advice become so blurred nowadays, that you really want to be able to exercise some degree of caution with respect to who is having that contact and who was making that initial inquiry to the respective agency that may have issued the CID, the subpoena, or other form of process.
[00:13:22] George Breen: The other reality is that you want to be able to have someone who understands what the potential issues involved are. Is this a civil matter? Is it a criminal matter? The way you respond is going to be different, and you have to make sure that you respond in a fashion that's consistent with what it is you're being asked to do, to provide, to produce, etc.
[00:13:47] George Breen: Counsel who have handled those matters before can assist you with that. The other reality is that the management of the investigation, how things proceed, what gets produced, what the timing is, are there limitations that you can seek to have imposed? Government counsel understand that experienced defense counsel know how this process works, how to be able to get the government the information that the government is entitled to, but in a fashion that doesn't require the company to shut operations down or stop operating for the purposes of responding.
[00:14:31] George Breen: Government lawyers anticipate that companies will hire experienced counsel to be able to manage that process. It sends the message that the company is trying to do the right thing to respond and to respond appropriately. So I really do think that initial outreach, how you manage it from receipt, makes a difference.
[00:14:56] Eric Moran: I agree, Alkida. As you know, it's our experience that many, if not most, particularly in the health care space of these investigations that we encounter, are indeed joint criminal and civil investigations. The government is keeping their options open. After an experienced counsel analyzes, receives the CID, reads its questions, analyzes it, who sent it, what division or department it came from, who is the agent, an experienced lawyer can divine oftentimes what is the nature of this investigation.
[00:15:30] Eric Moran:. Then that lawyer will coordinate with the client to, in a way that will minimize as much as possible any business interruption, but to learn and understand what's on the government's mind. And after gathering that preliminary information, there's a critical step of reaching out to the government themselves.
[00:16:00] Eric Moran: And just to echo the wise advice Mr. Breen gave, have someone else do it. If you're an in-house counsel, call an outside lawyer if for nothing else than just to make this phone call. If it's a criminal investigation, whether the company or its employees are what is known as a Subject, what is known as a Target, or what is sometimes referred to as a mere witness in the investigation, all of that information will go into our advice as to the appropriate response.
[00:16:28] Eric Moran: The information from a conversation like that, with the prosecutor, if assigned, who originated the legal process, may help direct the company's internal inquiry that it must make or should make. It may inform whether the company takes some immediate remedial action.
[00:16:58] Eric Moran: And it can even help determine whether the company should conduct an interview of its employees. And then get them separate independent counsel due to some conflict of interest. All of these things are important considerations and need to happen upon receiving the legal process.
[00:17:17] Alkida Kacani: I couldn’t agree more. I mean, it sounds like the most important step to take here is to speak to your attorney before making any sudden movements and contact with the government.
[00:17:24] Eric Moran: It's not only a self-serving statement but it really is sound advice. I so often get the call after someone has submitted to an interview or spoken with the government.
[00:17:39] Eric Moran: And at that point, it may be a very different ball game in terms of what advice I must give. Whereas if we can be the first contact point on behalf of a client it can oftentimes streamline the process, lessen business interruption, and at times it can be to a client's great advantage.
[00:18:00] Alkida Kacani: So, we've talked a bit about the seriousness of a CID and that it's important to engage counsel quickly in responding to an investigation. Eric, how else might the government approach a company?
[00:18:11] Eric Moran: Well, Alkida, they could just walk in the door, frankly. State or federal law enforcement agents can go to a judge to get a search warrant, if probable cause exists that a crime has been committed. They can conduct examinations of records, even without a warrant in some cases, if the regulations allow, in a regulated business.
[00:18:35] Eric Moran: Or agents can just stop by and ask to have a chat. They call that a knock-and-talk. Through training, companies should be prepared for this. And understand that an encounter with a state or federal law enforcement agent is an unusual thing for any employee. One never knows how one will act. And this is why training is so important.
[00:19:06] Eric Moran: George and I represent people and companies responding to these sometimes-difficult situations. And I can tell you it is always better for us to get the call before an employee has that conversation and submits to the interview, rather than after.
[00:19:25] Alkida Kacani: So, if an agent arrives at a client's office with a search warrant that allows them to walk in and search the premises, are there some do's and don'ts to practice in that circumstance?
[00:19:37] Eric Moran: Let's start here. If it is a search warrant, then the agents have the absolute right to search the premises described in the search warrant. Employees under that circumstance should be trained, and they should understand that they should not attempt to prohibit the search or otherwise impede it. That would really fall into the don't category.
[00:20:02] Eric Moran: If agents are legally on site and they have the documentation to prove it, employees should know to step aside and let them do their job.
[00:20:11] George Breen: You know, my advice would be understanding the pressure of the situation and the uncomfortable nature of it. Don't panic. It's not anything anyone would ever wish happen to them, but these individuals have a job to do.
[00:20:30] George Breen: Reacting in a panicked fashion never serves anyone's interests. It's why you hope that companies let employees know these are things, given the nature of our business, which could happen regardless of what the genesis was of them coming through the door. But what employees can't be subject to is panic, which means they have to be prepared for the potential.
[00:20:58] George Breen: Otherwise, you're in a situation where you lose all control over how this matter is going to proceed. So it's really, it's a simple message, but really it is one that people have to understand. This is the way this works with respect to these regulated industries, and you have to be able to take it in a calm, mannered, and tethered approach.
[00:21:26] Eric Moran: We talked a little about the don’ts. Let's talk about the do’s. If a search warrant unfolds at a client site, an onsite manager should do a couple of very important things. Request agents’ identification and record, write down the name and contact information of that agent, first and foremost. The onsite manager should request to see a copy of whatever legal process that the agents show up with.
[00:22:00] Eric Moran: If it is a search warrant, they should read the warrant, obtain a copy of it, and read it. And the very next thing that they should do is contact in-house counsel, or if they're, that person's not available for whatever reason, contact a designated outside counsel to inform and get advice about what to do, letting them know that the agents are present on the premises and what the circumstances are.
[00:22:29] Alkida Kacani: And George, do employees have any rights in these circumstances?
[00:22:32] George Breen: So, they do have rights. They have the right not to be interviewed. They have the right to decide not to speak to the agent. They have the right to have a lawyer present when they have that interview, if they elect to proceed with it. They have the right to speak to company counsel if they would like to do that.
[00:22:50] George Breen: So they don't have the obligation simply to respond because of the nature of the situation. What I would say is that oftentimes, it's something we've seen in our practice, that what might start out as criminal ends up being civil. Because what the government ultimately finds is not something that it sees criminality in, but it does see the potential for some level of civil relief.
[00:23:18] George Breen: So what happens on-site, and having a plan in place, really becomes the first step in terms of your investigative plan. So, the on-site manager or designated person should be there to be able to identify who was on site at the time? Were people asked for interviews or asked questions? Who those people were?
[00:23:47] George Breen: What was specifically taken? What particular offices, machines, etc.? There'll be an inventory produced at the conclusion of the warrant to be able to have you identify what it was that the agents took out. Often those are not as expansive in terms of description as they may otherwise be. But you're going to want to be able to have someone who can record where they went, who they spoke to, what they did, what their responses were.
[00:24:18] George Breen: Because that becomes an important part of having to help the company defend itself, whether that matter ultimately pursued… be pursued on the criminal side or the civil side. People need to understand that you are now part of, this investigation has started, the defense of your company has now just started.
[00:24:41] George Breen: It's been thrust upon you, which means going back to our training theme, people need to know they need to be prepared for this and what to do under the circumstance.
[00:24:51] Eric Moran: Those are great, great points. And in fact, they absolutely, what an agent does on-site during a search, may well inform the internal investigation by a client or their strategy going forward, to be sure.
[00:25:06] Eric Moran: Let me leave you with two additional points about what to do and what not to do if there's a search warrant. Let's start with what not to do. After reading the search warrant and identifying what exactly are the premises to be searched, if someone comes to you and asks you to search, asks the employee to search a space, area, floor, room, garage, shed, anything not described in the warrant, do not consent. Do not consent.
[00:25:47] Eric Moran: If an employee is confronted with a request to search an area that's not described in the warrant and they simply say yes, then the company has given permission for the government to search that space, in fact, without a warrant. And they're allowed to do it. So, hearkening back to the importance of training, employees should know that instead of consenting to a request like that, they should call in-house counsel or designated outside counsel.
[00:26:23] Eric Moran: In the end, the answer might be, yes, we do consent, but that is a careful decision that should be made with the involvement of a lawyer. And it also shows the importance of training. The last point. On their way out the door, the designated manager on site where a search is undertaken, should ask for a list of things that were taken.
[00:26:50] Eric Moran: Under the rules, agents that are executing a search warrant will have to compile what's known as an inventory, and they should leave that behind. And that also goes back to George's point. Experienced lawyers can look at that, understand what was taken, maybe get some indication about what's on the government's mind and what they're interested in.
[00:27:12] Eric Moran: And this too may inform the internal investigation plan and the defense plan going forward. But I think those are some great do's and don'ts for what happens when someone shows up at your site.
[00:27:24] Alkida Kacani: So, we’ve discussed some great tips here to keep in mind should you find yourself with a government investigation. And I believe the core message here is that it is critical to be prepared to handle the situation, to be proactive rather than reactive to avoid any missteps.
[00:27:42] Alkida Kacani: So, in wrapping up our discussion today, George, Eric, are there any other thoughts for listeners who might find themselves to be the subject or even a target of a government investigation that you would like to share?
[00:27:54] Eric Moran: My first response to that is, we were talking about a government enforcement action, and that is not something that any in-house counsel or employee wants to see themselves involved in, but it's a reality of the business of many of our clients, particularly regulated businesses, particularly in the health care space. And thinking about readiness for a search warrant or a civil investigative demand, these are not bad words.
[00:28:26] Eric Moran: They are a reality of the regulatory environment. And I would just say that folding that in and trying to see around that corner, folding it into your compliance protocol, is what the most prepared companies are doing. Someone might consider, well, we don't operate that way.
[00:28:53] Eric Moran: And that would never happen to us. But I would say it's a mistake to proceed that way, particularly in a regulated business. What we've been discussing, I think I can sum up to say, an ounce of prevention can avoid pounds of cost and business interruption in the future from the mishandling of a government inquiry.
[00:29:18] George Breen: Here's the practicality of some of this, Alkida. As much as people would like to have these matters conclude quickly, they often don't. You need to have a long term end game strategy. That only really works if you have a plan in place before the parade of horribles we've spoken about ever happens in the first instance.
[00:29:45] George Breen: People have to be prepared for a series of things to take place during the course of the investigation. They can become very timely. They can be very sensitive in terms of the areas that they are inquiring into. They can put significant pressures, both on people on a personal basis and the company on a professional basis.
[00:30:08] George Breen: So you have to be able to go forward with the notion that you have a long term, end game strategy here to be able to deal with these issues. It's simply the unfortunate result of being involved in these regulated industries. But there are steps, and hopefully people take away from this podcast specific steps they should take to put themselves in the best possible position to be able to deal with it.
[00:30:34] Alkida Kacani: I couldn't agree more. Being proactive will serve you well in these scenarios. George, Eric, let me thank you for joining me today and for your informative discussion. I found it very helpful. And thank you to everyone for listening to us today.
[00:30:51] Alkida Kacani: We hope you enjoyed it. If you like what you heard today, you can subscribe to the audio version of our podcast on all streaming platforms, and you can find the video version on YouTube or at ebglaw.com. Thank you.
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About the Speaking of Litigation Podcast
No business likes litigation. Lawsuits and trials can be stressful, unpredictable, and often confounding—even for battle-scarred business leaders. But they’re something almost every business must confront. The Speaking of Litigation podcast pulls back the curtain for an inside look at the various stages of litigation and the key strategic issues businesses face along the way. Knowledge is power, and this show empowers executives and in-house counsel to make better decisions before, during, and after disputes.
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