How do you know where your company stands during an investigation?
First and foremost, cooperate with the investigation. Your counsel should be in contact with the prosecutors. Be responsive and timely, and ask questions. Make sure you ask what your status is in the investigation, as all companies and individuals fall into one of three categories: witness, subject or target.
A witness is not yet under suspicion but may have information of interest. A subject is someone whose conduct is within the scope of the investigation, but it is uncertain that any crime has been committed. A target is someone whom the prosecutor has substantial evidence linking him or her to the commission of a crime and who, in the judgment of the prosecutor, is a putative defendant. You do not want to be a target.
Make sure that the prosecutor is using these terms properly and have your counsel make sure that the prosecutors are properly relaying the status of the investigation. Some prosecutors are more willing to discuss the investigation than others. Some will provide nontarget or nonsubject letters to the individual upon request. This is often a request made before someone will submit to an interview, assuming that he or she is not a target of the investigation.
What else should be considered in an investigation?
If your firm has been notified of an investigation, often a subpoena for testimony, records or documents will be issued. Subpoenas have specified deadlines that need to be adhered to, or recipients run the risk of being held in contempt of court. A recipient, however, can sometimes receive an extension if he or she shows reasonable cause. This is just one reason why subpoena recipients need to be in constant contact with prosecutors.
Depending on the situation, and especially if the government is investigating misconduct or fraud by management or senior executives, consider prohibiting the trade of the company’s stock by the firm’s treasury and by those with knowledge of the investigation.
Also, firms should be aware of applicable state laws. Documents filed in court cases are open to the public in some states and firms should be very careful with communications — a document sent to a prosecutor might be filed in the court case and thus available in the public domain. Additionally, keep in mind that all forms of communication can be discoverable.
Should a company make a public statement if it is under investigation?
Some companies will want to send out a press release right away to show that they’re on top of things, but firm executives and board members should first weigh their options. Will coming out to the public impact the company’s value and/or stock? Are you sure that the investigation will lead to charges? Often, an investigation ends with minimal evidence and the case is closed before it can go to court, so do not speak too soon.
However, if you do decide to disclose the investigation, ensure everyone in the company knows exactly what to say. Don’t lie and don’t deny.
You never know who someone could be talking to — and with the Internet, information is easily leaked — so be sure that everyone says exactly what you want them to say and be sure it is the truth.
Theresa Mack is a senior manager at Cendrowski Corporate Advisors. Reach her at (866) 717-1607 or [email protected], or visit Cendrowski Corporate Advisors’ Web site at www.cca-advisors.com.
