August 2005
Volume 1, Number 4
Table of Contents

Criminal Law for the Business Practitioner
By Hugh Ray

There is an old saying “you may beat the rap but you won’t beat the ride.” The Supreme Court’s recent decision in favor of Andersen proves that the legal aspects are sometimes secondary. Corporations live and die by their reputation. Sometimes a client needs a good criminal defense attorney. Sometimes it needs a damage control team. Sometimes nothing helps. What do you do, what can you do, when 60 minutes and the FBI show up at your client’s door? Somehow “no comment” just won’t cut it. Your client wants your advice, but realize that there is no cookie-cutter solution to the corporate criminal investigation.

First, meet with the board where you explain who you represent. Do you represent the individual or the corporation? You only represent one. To represent both is a prefabricated conflict of interest. It is likewise unethical to “wink” at representing the corporation but to have the individual’s interests at heart.

Many criminal defense attorneys then play a game of “what if” with the board members to find out what evidence is likely to be found by the prosecution. (“What if they find cash sent to a foreign official? What purpose would that money have had?” “What if they find a thank-you note? Who would that note have been written to?”) While a common practice for some, this “game” looks unethical to the layman. It also underestimates the intelligence of the board. While a defense attorney may have to spell out criminal elements and defenses to an indigent defendant, a savvy corporate board usually knows more. It is dangerous to play the “what if” game in today’s corporate culture. The first one who answers a “what if” may be fired and blamed for all the corporation’s wrongs. Your duty would be to report the answer to the board. Thus, an educated professional is unlikely to play such a game.

Instead, consider investigating your client. Interview the board but take their explanations with a grain of salt. Be careful to remind them that you are not their lawyer. Ask the board to appoint an outside responsible person to act for the corporation in this matter. Recommend the board members get individual representation from another lawyer. Know your client and don’t trust that the board will act for the client’s interests. The Company comes first -- not the members of the board who (as luck will have it) has a convenient explanation for this “misunderstanding”.

Second, realize that the corporate privilege and confidentiality rules don’t work like they do for individuals. For instance, in a subsequent bankruptcy, the Chapter 7 Trustee can waive the corporate privilege. If the company is sold – the new company will own the privilege. One of the board members can publish a tell-all book. The confidentiality rules can be changed or abrogated by the legislature. Under the new Model Rules, the scope of permissible disclosures has expanded to include protection of the pecuniary interests of others. In most states, permissible disclosures are still limited to situations where the attorney’s services have been used to commit a crime or fraud.

Thus, whether you document every conversation or not, your actions may be second-guessed later. Be consistent. If you document conversations, document them all. If you don’t document conversations, never do. In either case, be ready to justify your actions later, and do not share your personal notes – not even with client representatives.

Third, try a measured response to an inquiry. How was the company approached? If two agents have politely asked the corporate CEO to interview employees and look at records for some as-yet-undisclosed crime, over-reaction can be very damaging. Avoid “stonewalling” or rudeness or supposition and hyperbole. Do not hire a rabble-rouser to allege baseless claims of bias or send a frightening memo to employees. You have an ethical obligation not to try cases in the media. Be truthful and polite. When both you and the government know more, have the government consider civil or administrative remedies that may be more appropriate.

However if, by comparison, a chopper full of commandos raids the corporate office in a stunning (albeit questionably necessary) show of force, then damage control is appropriate. But the same general rules apply -- be polite and be truthful. Your client may send the standard memo: “We are cooperating fully with the investigation and instruct you to do likewise. However, to protect you and the company from serious charges based on mis-communications, counsel must be present for all interviews and production of materials.” The company should consider hiring respectable public relations personnel who specialize in damage control. Again consider employing independent board members, oversight and internal investigation committees, taking steps to avoid a bunker mentality, and even (gasp) apologizing.

Fourth, ask yourself: “What is the goal of the investigation?” Is it a big rap or a little one? Is fighting a technical violation over foreign corrupt practices worth years of court battles and lost reputation? Is someone making political hay? Consider whether you can ethically recommend a plea or take other action that allows the client and management to take their lumps and quickly move on.

Finally, compare Martha Stewart and Arthur Andersen. Both were convicted of the same offense – destroying records to obstruct justice. Both made a sincere and public apology. It worked for Ms. Stewart, but not for Andersen.


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