Presenting a live 90-minute webinar with interactive Q&A Investigations of High-Level Employees and Executives Navigating Complex Legal, Ethical and PR Issues in Internal and Government Investigations WEDNES DAY, MARCH 7, 2012 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: S t eve Kardell, Part ner, Clouse Dunn Khoshbin , Dallas, MODERATOR West on C. Loegering, Part ner, Jones Day , Dallas Emily R. S chulman, Part ner, Wilmer Cutler Pickering Hale and Dorr , Bost on Eric W. S it archuk, Part ner, Morgan Lewis & Bockius , Philadelphia The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Investigations of High-Level Employees and Executives Navigating Complex Legal, Ethical and PR Issues in Internal and Government Investigations Steve Kardell, Partner , Clouse Dunn Khoshbin, Dallas, MODERATOR Weston C. Loegering, Partner , Jones Day, Dallas Emily R. Schulman, Partner , Wilmer Cutler Pickering Hale and Dorr, Boston Eric W. Sitarchuk, Partner , Morgan Lewis & Bockius, Philadelphia March 7, 2012 5 DLI-6391412v2
Agenda I. Sources of Internal Investigations II. Aspects of Internal Investigations of Particular Relevance A. Right To Counsel and Upjohn B. Dodd Frank C. Privilege Issues D. Joint Defense Concerns E. Privacy III. Questions 6
I. Sources of Internal Investigations 7
Four Prime Sources of Investigations Civil Enforcement Alleged Executive Agencies Misconduct – Securities and Exchange Commission (“SEC”) Whistleblowers Criminal Investigations – Department of Justice and U.S. Attorneys Offices 8
Government Civil Investigations Foreign Corrupt Practices Act (“FCPA”) Aggressive investigations driven by global financial crisis False Claims Act – qui tam Expanding regulatory environment 9
Looking for Whistleblower plaintiffs 10
Executive Misconduct 11
Government Criminal Investigations Insider Trading FCPA Others 12
II. Five Key Topics A. Right To Counsel and Upjohn B. Dodd Frank C. Privilege Issues D. Joint Defense Concerns E. Privacy 13
A. Right to Counsel and Upjohn Indemnification Advancement of Costs Interviews 14
Indemnification Coverage of Reasonable Legal Fees/Expenses Triggering Event(s) – By reason of fact that person is/was corporate director, officer, employee agent – Party to pending or threatened action, suit or proceeding Criminal, civil, administrative, investigative Grand jury SEC investigation Internal investigation 15
Indemnification Permissive v. Mandatory – Statutory Rights State of incorporation Delaware law – Corporate Organizational Documents Charter, articles, by-laws – Employment Agreement 16
Indemnification Requirements for Obtaining Relief – Success on the merits or “otherwise” Settlements with/without prejudice; Settlements with/without admissions of liability – Acted in good faith – Conduct reasonably believed to be in corporation’s best interests 17
Advancement of Costs Permissive v. Mandatory Procedural Prerequisites – Undertaking Repayment if determined that not entitled to indemnification – Affirmation Conduct met requisite standard for indemnification – Authorization and Determination of Facts 18
Interviews Whether to Submit to Interview – Employee Obligations – Adverse Inferences – Counsel’s presence – Advance review of relevant documents – Making own record – Copy of interview memo, transcript Upjohn Warnings Obstruction of Justice 19
B. Dodd – Frank Act Whistleblower Provisions The Whistleblower’s Bounty: Eligibility Requirements New section 21F of the Securities Exchange Act of 1934, titled “Securities Whistleblower Incentives and Protection” The SEC will pay an award to one or more whistleblowers who: Voluntarily provide the SEC With original information About any possible (reasonable belief) violation of federal securities laws that has occurred, is ongoing, or is about to occur (facially plausible) That leads to the successful enforcement by the SEC in a federal court or administrative action or related action In which the SEC obtains monetary sanctions totaling more than $1M 20
Amount of Award At least 10% Collected by the Not more SEC or other than 30% specified authorities in a “Related Action” 21
Who Can Be a Whistleblower? Almost any individual may be eligible to receive a whistleblower bounty (e.g., employees, former employees, vendors, agents, contractors, clients, customers, and competitors) Even individuals involved in securities violations may be eligible whistleblowers The Dodd-Frank Act bars certain individuals from award eligibility: Officer/Director/Trustee/Partner; Anyone who has Compliance/Audit/Legal Responsibilities; Member of Investigation Firm; Public Accountant 22
Who Cannot Be a Whistleblower? Exceptions to the Exclusions HOWEVER, attorneys, officers, directors, auditors, or compliance personnel are eligible for whistleblower awards IF: they reasonably believe that disclosure to the SEC is necessary to prevent the company from engaging in conduct that is likely to cause substantial injury to the company or its investors; they reasonably believe that the company is engaging in conduct that will impede an investigation of the misconduct; at least 120 days have passed since the whistleblower made an internal report to the company OR 120 days have passed since they received the information at a time when the information was already known internally; or otherwise ethically permissible (for attorneys) 23
Not Original Information – Use of the Privilege The Commission will not consider information to be derived from independent knowledge or independent analysis in the following circumstances: If the whistleblower obtained the information through a communication that was subject to the attorney-client privilege Unless disclosure of the information would be permitted by an attorney under the SEC’s attorney conduct or state ethics rules, such as the crime fraud exception 24
Exception to Original Information – Confidential Information The Commission will not consider information to be derived from independent knowledge or independent analysis in the following circumstance: If it is obtained by a means or in a manner that is determined by a United States court to violate applicable federal or state criminal law Confidentiality agreements cannot preclude whistleblowing 25
Will Whistleblowers Go to Compliance…First? The Commission will consider that the whistleblower provided original information that led to successful enforcement if: The original information was reported through compliance program procedures before or at the same time it was reported to the Commission. The company later provided the results of an investigation initiated in whole or in part in response to the information the whistleblower reported. The whistleblower also submitted the same information to the Commission within 120 days of providing it to the company. 26
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