The human stories unfold not always in the limelight of fame and fortune, they do unfold also in the confines of a business where people interact with one another where they strive day in day out to make something of their business. There are the stories of success, of fall, and redemption. It is the fall they we hear in the pages of Justice Department and we whisper hush hush to one another “did you hear about so and so.” That page is the last step of a nightmare that unfolds within a business when someone commits an alleged act or crime that violates a rule of law. It is ugly and sad and ruinous for many people’s lives. Certainly, it demises the reputation of the company and at times it forces it to close doors.
The company usually learns that it is subject to an investigation when served with a search warrant or grand jury subpoena. A search warrant is issued, usually, by a federal or state judge upon a finding of probable cause that a crime is committed. A grand jury subpoena is usually issued as part of an investigation where a grand jury will ask persons either to appear and produce documents or both. This is no court room drama, only the reality of hundreds and thousands of companies face each year. The root of this reality are investigations on white collar crimes or other violations that require law enforcement intervention.
There are these events that most companies think it will never happen to them. Some of us still recall the fall of Enron and Anderson and other companies that made headline news, some of us have forgotten about them. The past is turned to dust and so many businesses especially small and midsize ones, not excluding the larger businesses either, go about their day unprepared how to act when law enforcement agents knock on their door serving a search warrant.
In recent years enforcement actions against companies have increased. Despite this fact, I will not be amiss to say that many businesses have no process in place to prepare for these days, many in-house counsel may not have experience how to respond to a search warrant. As a result, many businesses and their employees will find themselves in a state to shock if, and when, law enforcement agents knock on their doors. Some of you reading this may say “It will not happen to me?!” I hope that it doesn’t. Yet, think again. How prepared are you to handle the sight of law enforcement agents showing up at your doorsteps, serving a search warrant, or knocking in your house at odd hours of the day or night? How prepared are your employees if confronted with the agents?
Let us now consider a few steps you can do to prepare even if it’s the slight chance, perhaps a 0.00001 percent chance, you may face a situation where you are served with a search warrant. It is your obligation to be prepared and know how to respond. Before I continue to the steps, remember that prevention of mishaps includes ethics, compliance and internal controls; these steps therefore should be implemented with and not outside of these elements and be part of your ongoing training.
Create procedures to address being served with a search warrant – In likeness of other procedures in place to address various issues so too you must have in place procedures to handle a search warrant. These procedures will guide your first responders, and prepare everyone involved to handle the process.
Identify outside counsel – whether you have in house counsel or not, it is important to identify outside counsel that will assist your company when it is served with a search warrant. In such an event you must contact the counsel immediately so counsel can be present when a search warrant is served. Counsel will also train and instruct employees how to respond if, and when contacted by law enforcement agents. More important counsel will review the search warrant to ensure what’s being searched is covered by the warrant and other matters related to the issue and execution of a search warrant. Counsel also will serve as a liaison between agents and company. These functions can also be performed by trained and knowledgeable, about these matters, in house counsel.
Train employees – having law enforcement showing up at your door is a nerve wrecking experience and people will act generally based on instinct or merely panic and not know how to act. You will Train employees for these events. Teach them to learn to remain calm under pressure. They need to know their rights, when to answer and when not to answer. Never instruct your employees to be disingenuous or divert from the truth. Don’t dig yourself into a bigger hole. Instruct your employees not to panic, to be cooperative, and not to resist; this is not a time for bravado. Critical in cooperation is the understanding that employees should not answers questions that go beyond what is necessary.
Collect and document the reason for the investigation and the names of the government agents – you must discover what is the purpose for the investigation, who is the prosecuting attorney, what agency or department is investigating, who’s the lead investigator or lead government agent, and the names of agents conducting the search.
Review and analyze the warrant – If counsel is unavailable, or in-house counsel should, review the warrant, is it search only or also seizure – search includes searching for information seizure includes the seizure of property - the scope of the warrant and look for defects in the warrant. Note, the agents should not search any areas or premises not included in the warrant.
Keep copies of important documents outside of your premises – When enforcement agents seize documents, they will take originals and you will not have access to those documents, nor will they provide copies. So, it’s important to keep a copy of updated business records off site. At best you’ll continue operations without additional disruptions.
Privileged information – mark them as such so they will not be searched or seized with other documents.
Maintain and get an inventory of all items seized – You have a right to request and maintain the inventory of the items seized and provided to the government.
Press release and communication with media – news spreads quickly. Draft ahead of time a press release to use and update when such events happens. You need to be prepared, the last task you want to deal with in a mess is being unprepared to handle communications with the public or the media.
DO NOT destroy documents – You don’t want an Enron situation. Should the company be target of an investigation then send an internal communication to all employees to retain and preserve documents.
In conclusion, while enforcement actions against companies are not a routine matter their occurrence has increased. Preparation is never to be underestimated. Get in the habit of prevention by creating a robust compliance program and create procedures in place to help your company and your employees know what they need to know to handle situations where law enforcement agents appear and serve a search warrant.
(*) The title is an expert from Bob Marley’s song “Bad Boys”.
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