The SEC shows up at your door asking for documents relating to options and securities granted for the past 10 years. Homeland Security Officers arrive at your plant asking to speak to several employees and asking for copies of employment records. State police, having confiscated laptop computers and CD-ROM files during a drug bust, show up at your door asking to compare database records since they suspect that identity theft or credit card fraud may be afoot. The Department of Justice wants to interview several of your employees, claiming some may have entered the United States on non-immigrant visas. Sound far-fetched? Probably not these days.
With the economy in turmoil, corporate officers on the defensive, immigration under attack, and money laundering, piracy, drugs, terrorism and Ponzi schemes making headlines almost every day, law enforcement and regulatory officials are under increasing scrutiny and increasing pressure to protect the public and get results. It doesn’t take much imagination to appreciate that during the course of a criminal investigation, the most compelling evidence often arises from third parties who aren’t even knowingly involved; airline, credit card, hotel, telephone, email and other records can often document the where, when and sometimes how of criminal activity.
From a civil law point of view, competitive pressures can lead to claims of economic espionage and theft of trade secrets, and antitrust issues can arise that will spawn litigation and the compelled disclosure of evidence. Indeed, any corporate executive or corporate lawyer who has ever been on the receiving end of a third party subpoena issued to them—innocent third parties—knows how burdensome and costly such requests for evidence can be, even if you aren’t a party to the lawsuit.
In a digital world, it is also far too easy to collect, maintain and copy vast amounts of information—information accessible with several keystrokes, available on easily transportable magnetic media. For corporations and their executives and managers, growing and often regular dilemmas must be confronted when law enforcement or regulators show up at the door and start asking questions or requesting information. Corporations have legal obligations involving compliance and cooperation with law enforcement and regulatory officials. But they also have responsibilities and legal obligations to their employees and their workplaces—and to their shareholders. If not done properly, cooperating with law enforcement and regulators can lead to lawsuits by employees, customers and, sometimes—if large amounts of time and money are expended because of improper or inadequate procedures—even shareholders.
Balancing the legal interests with legal compliance is often a delicate one, requiring both an ounce of prevention and sometimes a pound of cure. When law enforcement or regulatory authorities show up, panic often sets in and panic leads to fear. The common result is to give them everything or give them nothing. Neither makes sense. If you want help with constructing a policy; adopting procedures; categorizing what records to keep, discard, destroy, or make available; and how to respond—you’ll have to call us. It’s complicated when you either haven’t thought about it or aren’t sure how to react. But here are a few simple practical tips to help:
Have a Plan: By adopting policies, you don’t simply create insulation from liability; you also have an action plan that describes what to do and how. Clear policies minimize the opportunity for mistakes.
Give People Training & Responsibility: Whether a corporate lawyer, a senior HR person or a manager in the workplace, create points of contact who are responsible for interfacing and interacting with law enforcement and regulatory officials. Train these people in proper procedures and in their legal obligations (and their rights). Let employees know who is designated to interact and make sure they refer requests to those people right away.
Know Your Rights: Short of a national emergency or imminent danger to persons or property, law enforcement and regulatory officials know they are obliged to obtain a subpoena, court order, warrant or other legal authority. Just as you have an obligation to balance their need for information with respect for your and your employees’ rights, so do they. Don’t simply agree to overly broad or needlessly intrusive legal papers—some investigations are fishing expeditions. Nice, but not at your expense. If you are a third party, not directly involved, but a potential source of information, keep the fishing to a minimum. Remember, if you are neither a plaintiff nor a defendant, these are pure distractions that only serve to cost you time and money.
Cooperate Intelligently: If and when you must comply, do so unobtrusively and with care. Are you being asked to provide payroll or medical records or credit card data? Make sure the individuals charged with retrieving or preparing information are discrete and bound by confidentiality. Investigations aren’t equivalent to guilt. Make sure you don’t presumptively condemn an employee simply because they are being interviewed—neither individuals nor companies are guilty simply because they are being asked for information.
Be Consistent: Follow your policies. Always. Consistently. Doing otherwise can lead to charges of discrimination, lack of good faith and lawsuits for damage. Enforcing your policies and procedures will be more difficult if you don’t do so consistently. While you may need to change your policies over time to address new or different circumstances, circumstances shouldn’t cause you to disregard your current policies or procedures.
Want to know more? Want help? You can either wait until someone shows up at your door, or you can be prepared and minimize the panic and resulting costs, expenses and possible legal liability. The choice is yours. So is the call!