Flexibility and Vigilance: Effectively Manage Government and Internal Investigations During COVID-19

Introduction

As a direct result of the COVID-19 pandemic, employees of many companies and government agencies are working remotely. This, however, has not necessarily resulted in a slowdown in either internal or government investigations. Nor should it provide a false sense of security to companies and other entities engaged in investigations prior to the outbreak of the coronavirus. Indeed, this is not a time for corporations to let down their guard in the conduct of investigations.

Since the outbreak, most U.S. enforcement agencies and regulators have been clear that corporate investigations will continue during the COVID-19 crisis, and that the government will continue to commence new investigations. Because most entities are operating remotely, they should be prepared, as the government is, to leverage technology as a substitute for typical in-person investigation-related activities. Importantly, while modern technology makes remote investigations manageable, there are key best-practice considerations that will assist companies and other entities in preserving the independence, confidentiality, and integrity of such inquiries.

Investigative Agency Responses to COVID-19

The COVID-19 crisis has certainly had a unique impact on individual U.S. enforcement agencies and regulators. For example, some federal investigative agencies, such as the Federal Bureau of Investigation (FBI), while operating primarily within a remote platform, are functioning more or less normally. Other agencies are deprioritizing investigations that do not relate to the current health crisis, as employees and other resources are understandably redirected at an unprecedented level. Further, agencies led by more explicitly political actors, such as state attorney general offices, are more likely to shift their near-term focus to matters related to COVID-19. The same is true for agencies that include healthcare issues as part of their regular investigative portfolio.

Even for many investigations that are proceeding, the pace has diminished, or will likely soon slow, given the practical issues related to remote work and the increasing number of court closures. As a result of these new realities, several enforcement agencies and regulators have announced changes in the way they are handling investigations in the throes of COVID-19. 

The U.S. Department of Justice (DOJ), the nation’s most prominent collection of federal enforcement agencies, recently asked Congress for certain temporary emergency powers during the pandemic, including the ability to delay court proceedings, toll statutes of limitations, and expand the use of videoconferencing. The full extent to which Congress is receptive to such requests remains to be seen, but this highlights the realities facing many agencies. The DOJ is also prioritizing the investigation of misconduct allegations related to the COVID-19 outbreak, including, but not limited to, allegations of fraud, price gouging, and hoarding of critical supplies.

For its part, the Securities and Exchange Commission (SEC) has extended various filing deadlines, but is encouraging companies to be proactive and consider the need for COVID-19-related disclosures within the context of federal securities laws and the SEC’s principles-based disclosure system. The SEC emphasized that it is only with exposure to these types of disclosure that investors can make informed decisions. The SEC also reminded the public of the importance of refraining from engaging in trading prior to the dissemination of material, non-public information.

The Federal Trade Commission’s (FTC) Bureau of Competition has also announced that it is conducting a matter-by-matter review of its investigations and litigation efforts to consider modifications of statutory or agreed timing. The FTC advised that its investigators will be reaching out to parties to discuss these modifications and also encouraged parties and their counsel to proactively reach out to FTC staff to discuss these issues. Like the DOJ, the FTC is also likely to prioritize investigations involving deceit and fraud related to the COVID-19 pandemic.

The Financial Crimes Enforcement Network (FinCEN) has requested that financial institutions impacted by COVID-19 contact it and other regulators “as soon as practicable” with any concerns about their ability to timely file requisite Bank Secrecy Act (BSA) reports. Financial institutions are encouraged to keep FinCEN and their functional regulators informed as circumstances change. As with the DOJ and FTC, FinCEN is actively monitoring potential illicit activities connected to COVID-19, including imposter scams, investment scams, product scams, and insider trading.

The Consumer Financial Protection Bureau (CFPB) has likewise advised that it will work with affected financial institutions in scheduling examinations and other supervisory activities to minimize disruption and burden. And as the COVID-19 situation continues to develop, additional agencies will likely announce modifications to their operations.

Strategies for Conducting Remote Internal and Government Investigations

Attorney-Client Privilege and Work Product

A telephone or video interview provides corporations and other entities with far less control over who is present during (or listening to) an interview. Without appropriate security (and related encrypted) measures, such interviews create serious concerns with respect to “waiver” of confidentiality, the attorney-client privilege, and work product. 

As a general rule, the attorney-client privilege is waived if a third-party is present during the communication. Though an interviewer may not ultimately be able to control what the interviewee does, he or she should explain at the outset of any investigation interview the importance of confidentiality and set forth clear and unambiguous instructions with respect to the potential ramifications of the presence of third parties, such as family members or cohabitants, present in the same room as an interviewee. To ensure maximum security, use one of many secure and encrypted audio/video software options.

The prevalence of smart speakers and digital personal assistants using artificial intelligence (AI) technology may also have privilege implications. There have been documented instances in which these devices have been “listening” to conversations -– unbeknownst to the participants. Accordingly, interviewers should be sure to remind interviewees to disable and unplug any such devices prior to an interview.

Document Collection and Review

Document collection efforts have also been noticeably impacted by the COVID-19 pandemic. While most electronic data can be collected remotely, in many investigations, whether internal or government-driven, there will be instances where it is necessary to collect physical documents. As a threshold matter, therefore, companies must be aware of government-mandated travel restrictions or other directives before engaging in a physical collection. And depending on the severity of the restrictions, which are frequently updated, physical collection of documents may simply not be possible at the current time. However, to the extent a physical collection can (and must) occur, normal best-practice principles apply, with certain additional considerations to heed.

Many employees  are now working remotely, and companies are having to furlough or release employees. Accordingly, custodians may not be readily available to answer questions that could arise during the document collection process. It is therefore vital for companies to be organized and conduct custodian interviews as soon as an investigation commences to determine where relevant information is stored or maintained. Also, remember to obtain passwords and any other information concerning access to files at the outset. Further, communicate openly and regularly with the information technology department to get directory maps for available electronic databases.

Interviews

Remote investigations during COVID-19 may require that witness interviews be conducted telephonically or by video conference. Unlike an in-person interview, both the witness and the interviewer may be tempted to record an interview held by telephone or video. Recording a conversation without the knowledge or consent of other parties can have serious consequences.

While some states allow an individual to record a conversation with the consent of only one party, other states require the consent of all involved parties. Therefore, prior to recording any conversation, companies conducting investigations must be certain they are aware of state and federal laws relating to recordings. For in-person interviews, both parties are in the same physical location; however, for remote interviews, the parties will be in different jurisdictions. Companies should thus be sure they understand the recording laws of each jurisdiction prior to an interview. Failure to comply with these laws can result in the imposition of civil and/or criminal penalties.

Regardless of the jurisdiction, an interviewer should notify the individuals being interviewed at the outset whether the interview will be recorded. Similarly, an interviewer should ask the interviewee if he or she is recording the interview. Even if the interviewee denies that he or she is recording, the interviewer should nonetheless state that the company does not consent to recording. 

Audio or video recordings of interviews may also create discovery issues in future litigation. While written notes of witness interviews are typically considered attorney work product and therefore generally not discoverable, recordings of interviews may not be subject to the same protections. In sum, companies should therefore cautiously consider whether a recording is advisable. As noted above, such recordings can, in certain circumstances, create considerable legal risk for entities, including with respect to state and federal wiretap laws.

Another crucial consideration for virtual witness interviews is to ensure that appropriate security is in place to prevent third parties from intentionally or inadvertently gaining access to the conference line or video. For example, the increased use of certain group video platforms that have become popular has highlighted security vulnerabilities as hackers and other malefactors have hacked or compromised meetings. Accordingly, incorporate all possible security measures for virtual investigation interviews, including password protections and tested encryption.

Reporting

In light of the pandemic, companies conducting internal or government-initiated investigations may need to report findings (to the board or a government investigative body, for example) virtually via telephone or video conference. As with witness interviews and other key investigation steps, all attendees should be reminded of the importance of privilege, work product, and confidentiality (as appropriate) and be provided with instructions about taking notes or disclosing findings to outside individuals. Further, any reports or materials shown or provided to attendees should be conspicuously branded as “Privileged and Confidential,” as necessary. For companies with active compliance programs, spotlighting the vigor of those programs should be built into the reporting process as a potential mitigation measure with respect to penalties.

Investigation Resolution

Investigation settlement negotiations have also been impacted by the economic effects of COVID-19. Many companies, for instance, will struggle (even more so than normally) with whether to disclose potential wrongdoing to the government (and ultimately agree to a penalty or fine) when their financial health is increasingly uncertain. A company that is concerned about its ability to pay a fine or penalty should proactively raise the issue with prosecutors or regulators so the government is operating with all necessary facts relating to the entity’s current financial health. This simple communication will help both parties facilitate a fair and reasonable resolution.

Best Practices for Conducting Investigations in the Throes of COVID-19

While the COVID-19 pandemic has inarguably impacted the conduct of both internal corporate and government-initiated investigations, these matters will continue to move forward, albeit in a modified format, with an enhanced use of modern technology, and, in some cases, relaxed timelines. Companies and other entities facing the daunting prospect of a current or future investigation in the midst of the pandemic are therefore encouraged to hew closely to the best practices discussed above in order to protect the efficiency, effectiveness, independence, and integrity of the investigation, including all of the following:

1. Develop, maintain, and regularly update your internal investigation policy and associated procedures. Your investigation policy should set clear protocols for conducting investigations and account for unforeseen circumstances, such as a national emergency.
2. Craft a thoughtful and comprehensive investigation plan at the outset of the inquiry. The plan should include a tailored scope, realistic timelines, and due consideration of the current crisis.
3. Maintain attorney-client privilege and work product protections by employing the secure and encrypted technology necessary to carry out investigative steps.
4. Contemplate availability of resources to customize an investigation, particularly as those resources may be depleted during COVID-19. As the DOJ has said, it is not productive to “look under every rock and pebble” or “aimlessly boil the ocean.”
5. Conduct document collection and interviews in a manner that integrates the added protections needed during a pandemic, including consideration of travel restrictions and adherence to security and legal requirements for virtual interactions.
6. In a government investigation, maintain consistent communication with investigators and/or regulators, particularly in the midst of COVID-19, as this helps demonstrate cooperation – and may pay dividends during negotiations.
7. Similarly – and particularly as settlement discussions appear more likely – proactively alert investigators of developments related to COVID-19 that will impede or hinder the company’s ability to meet deadlines or possible financial obligations.
8. Likewise, for any type of corporate investigation, update internal leadership and the board regularly, highlighting how the outcome may affect company resources and finances as the pandemic unfolds and, ultimately, resolves – prepare stakeholders.
9. Do not assume that, due to the pandemic, you can put “pencils down” with respect to an internal or government investigation and focus solely on other concerns. The government expects functioning entities to continue to investigate possible illegalities, irrespective of COVID-19 – albeit with potentially-relaxed timelines.
10. Involve outside legal counsel in the process. These are difficult times and investigations, even outside the confines of a pandemic, are extremely daunting.