Investigations
When responding to a government investigation or enforcement action, a whistleblower report, or some other indication of misconduct, companies should understand the ground rules to avoid tripping landmines.
Federal Search Warrants and Raids
When federal agents arrive at your business with a search warrant, the next few hours are critical.
What to do
The moment federal agents arrive, your actions can significantly impact the investigation's outcome. Stay calm and polite, but be firm about your rights. Ask to see the warrant immediately and request a copy. Call your attorney before saying anything beyond confirming your identity. Designate one person to interact with agents while others focus on contacting counsel and protecting privileged materials. Document everything—take notes of which agents are present, what they say, and what they're searching. If possible, have employees photograph areas before and after the search.
Key Rights
You have more rights than you might realize during a federal search. Agents can only search locations specifically listed in the warrant—if it says "office files," they can't search personal phones without permission. You're entitled to observe the search, though agents may restrict your movement for safety; if they refuse to allow observation, make a record of that. Attorney-client privileged documents require special handling; you or your counsel should object to agents taking such materials, and make a record of that objection.
Employee Interviews
It is important to tell the agents immediately if the company is represented by counsel. The company's counsel should find out the contact information for the prosecutor assigned to the investigation, and inform him or her that the counsel represents the company and all employees to the full extent of the applicable bar rules. This will restrict the prosecutor's ability to direct agents to interview company employees before they have had a chance to speak with counsel.
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Employees should be informed that the company has counsel, and that they have a right to speak with that counsel or another attorney before answering any questions from agents.
Common Mistakes
The pressure of a federal raid leads many to make critical errors. Never attempt to destroy, hide, or delete anything once agents arrive, nor physically interfere with the search—this is obstruction of justice, a separate federal crime. Avoid making voluntary statements or trying to "explain" situations without counsel. Don't consent to searches beyond the warrant's scope; politely state you don't consent to any search outside the warrant. Many executives mistakenly believe cooperation means answering all questions immediately, but you can cooperate fully while still protecting your rights.
Grand Jury Subpoenas and Investigations
A grand jury subpoena is a court order requiring you to provide documents or testimony in a federal criminal investigation. These are serious matters requiring immediate attention.
Types of Subpoenas
Document subpoenas (subpoena duces tecum) require you to produce specific records by a certain date. These often seek emails, financial records, contracts, and communications. The description might be broad ("all documents relating to...") or specific ("the May 2023 contract with..."). Testimony subpoenas (subpoena ad testificandum) require personal appearance before the grand jury. Some subpoenas require both documents and testimony. Each type has different strategic considerations and response requirements.
Your Status
Just because a company or individual has received a grand jury subpoena does not necessarily mean that he, she, or it is suspected of committing a crime, or is under investigation. It only means that investigators think that company or person may have evidence relevant to an investigation. The government does not need probable cause, or even reasonable suspicion, to serve a grand jury subpoena on someone.
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Federal prosecutors classify people in investigations into three categories, though they rarely tell you which applies. A "witness" has relevant information but isn't suspected of wrongdoing—you're simply helping the investigation. A "subject" is someone whose conduct falls within the investigation's scope—you're not currently accused but are being evaluated. A "target" is someone prosecutors believe committed a crime—charges are likely unless circumstances change. Your status may affect strategy decisions, including whether to testify, assert Fifth Amendment rights, or seek immunity.
Important Rights
While grand jury proceedings are secret and prosecutors run the show, you retain crucial rights. If you are asked to testify before a grand jury, you can have an attorney advise you, though they must wait outside the grand jury room—you can leave to consult them anytime. An individual can assert Fifth Amendment rights against self-incrimination for any question that might implicate him or her in criminal activity, although a corporation has no such rights. If a subpoena is unreasonably broad, burdensome, or seeks privileged materials, you can file a motion to quash or modify it. You're also entitled to know the general subject matter of the investigation.
Response Timeline
Federal subpoenas typically provide 2-4 weeks to respond, but this timeline is often negotiable. Your counsel should contact the prosecutor immediately to discuss timing, scope, and logistics. Extensions are routinely granted, based on the volume of documents, need to review for privilege, or scheduling conflicts. It is also common to produce documents to the government in stages, over time. But simply ignoring deadlines without communication can result in contempt of court charges. Even if you plan to assert Fifth Amendment rights or challenge the subpoena, you must respond by the deadline or seek an extension.
Investigation Timeline
Federal criminal investigations can last months, and often years, depending on the complexity of the subject matter. During that time, there may be long stretches in which it appears that nothing is happening, and there is no new information about the government's activity or the direction of the investigation. Typically, the government does not tell witnesses, subjects, or targets when it has decided to close an investigation without charges, although sometimes counsel can obtain an informal assurance.
Civil Enforcement and Regulatory Investigations
Government agencies also investigate businesses through civil enforcement actions. While these aren't criminal cases, they can result in significant penalties, business restrictions, and sometimes lead to criminal referrals.
Common Types
SEC investigations typically focus on securities fraud, insider trading, accounting irregularities, or disclosure failures. They often begin with informal inquiries before escalating to formal orders of investigation. FTC investigations examine consumer protection violations, unfair business practices, antitrust issues, and privacy breaches. State Attorneys General investigate consumer fraud, false advertising, charitable organizations, and violations of state regulations. Each agency has different procedures, powers, and potential remedies, requiring tailored response strategies.
How They Start
Regulatory investigations often begin quietly with an informal phone call or letter asking for voluntary cooperation and information. These informal inquiries might seem routine but require careful handling—anything you provide can be used later. Formal investigation notices indicate the agency has authorized official proceedings with subpoena power. Civil Investigative Demands (CIDs) are formal requests for documents, written responses, or testimony. Unlike criminal subpoenas, CIDs often include detailed questions requiring written responses under oath.
Key Differences from Criminal Cases
Civil investigations operate under different rules than criminal cases. The government needs only to prove violations by "preponderance of evidence" (more likely than not) rather than "beyond reasonable doubt." These investigations can proceed simultaneously with criminal investigations, creating complex strategic decisions. Information shared in civil cases can be used criminally, so coordination between civil and criminal counsel is essential. While an individual can invoke the Fifth Amendment in refusing to provide testimony or documents, that decision could have adverse consequences for any civil or administrative case that the agency pursues.
Potential Outcomes
Many regulatory investigations close with no action after the agency reviews information and finds no violations or decides not to pursue matters. Consent orders or settlements are common—you agree to pay penalties, change practices, or accept monitoring without admitting wrongdoing. Agencies can file civil lawsuits seeking injunctions, penalties, and disgorgement of profits. Most concerning, agencies can refer matters for criminal prosecution if they discover evidence of criminal conduct during civil investigations.
Qui Tam Lawsuits
Certain federal and state laws allow private citizens to sue on behalf of the government for fraud, through "qui tam" actions, in return for a portion of any recovery. These cases begin under seal, meaning you might not know about them immediately.
How They Work
Whistleblowers may file lawsuits under the federal False Claims Act alleging fraud against the government. These cases are filed "under seal"—secretly—in federal court, and you won't receive notice initially. The government has at least 60 days (often extended to years) to investigate the allegations. During this time, the whistleblower cannot disclose the case's existence. After investigation, the government decides whether to intervene and take over the case. If the government declines, the whistleblower can still proceed privately with their own attorneys.
Why This Matters
False Claims Act cases are uniquely dangerous because they seek triple the government's damages plus penalties of up to tens of thousands of dollars per false claim. A few hundred false bills can result in millions in penalties. Whistleblowers receive 15-30% of any recovery, creating powerful financial incentives. Even if the government declines to intervene, private whistleblowers win significant recoveries. The seal period prevents early defense preparation, giving the government and whistleblower a significant advantage.
State Qui Tam Actions
Some states, such as California, have their own versions of the False Claims Act, which also allow whistleblowers to bring cases on behalf of the state.
Common Sources
Current employees with inside knowledge often become whistleblowers, especially after being passed over for promotion or facing termination. Former employees who left unhappily frequently review past practices and find issues. Competitors sometimes use whistleblower suits as a business weapon. Consultants, contractors, and vendors with access to billing systems and practices can identify potential violations. Understanding these sources helps companies identify risks and improve compliance
Defense Considerations
Early investigation is critical once you learn about a sealed case—understanding the allegations helps shape defense strategy. Employee relations require delicate handling; retaliation against suspected whistleblowers violates federal law and creates additional liability. Strong compliance programs and documentation can defeat claims by showing good faith efforts to follow rules. The public disclosure bar and first-to-file rule provide potential defenses if the fraud was already publicly known or another whistleblower filed first.
Corporate Criminal Investigations
When federal prosecutors investigate your company for potential criminal conduct, both the organization and individuals may face exposure.
Warning Signs
A target letter from a U.S. Attorney's Office or DOJ division clearly indicates you're under criminal investigation and prosecutors believe you committed crimes. When employees receive grand jury subpoenas, especially multiple employees, it signals an active investigation. The execution of search warrants shows the investigation has advanced significantly. Even informal contact from FBI agents or federal investigators requires immediate legal consultation—casual conversations can become evidence.
Critical Decisions
Whether to cooperate with the government is the most important strategic decision, affecting potential charges, penalties, and individual exposure. Cooperation might earn leniency but requires admitting wrongdoing and potentially sacrificing individuals. Employees may need separate counsel when their interests diverge from the company's—paying for separate lawyers shows good faith but can complicate defense. Deciding how to handle ongoing business operations during an investigation affects employee morale, customer relationships, and legal strategy.
Cooperation Considerations
Cooperation can result in declination letters, deferred prosecution agreements, or reduced charges, potentially saving the company from conviction. However, cooperation requires complete disclosure of all wrongdoing, even issues prosecutors don't know about. The company cannot protect culpable individuals—cooperation means providing evidence against employees who broke the law. Any false statements or omissions during cooperation destroy credibility and often result in harsher treatment than non-cooperation.
Potential Resolutions
Declination means prosecutors close the investigation without charges, sometimes with requirements for compliance improvements or disgorgement. Deferred Prosecution Agreements (DPAs) involve charges being filed but held in abeyance while the company completes probation-like requirements. Non-Prosecution Agreements (NPAs) avoid charges entirely in exchange for admissions, penalties, and compliance reforms. Criminal charges lead to trial or guilty pleas, with potential penalties including fines, probation, and monitors.
DOJ Guidelines
DOJ maintains official guidelines to guide prosecutors in deciding whether or not to charge a company, and what other resolutions might be appropriate. Although the specific factors have changed from one administration to the next, the guidelines typically consider the quality of the company's compliance program, the extent of its cooperation, the efforts it has taken to remediate any violations, and whether senior managers were involved in the misconduct, among other things. Both government and defense counsel will typically refer to these guidelines when negotiating resolution.
Internal Investigations
When misconduct allegations arise, companies often need to investigate internally. Done properly, these investigations can prevent government action or demonstrate cooperation.
When to Investigate
Whistleblower complaints, whether internal or external, require prompt investigation to understand allegations and prevent retaliation claims. Regulatory inquiries or subpoenas often necessitate internal investigation to understand facts before responding. Discovery of suspicious activity through audits, compliance reviews, or employee reports triggers investigation obligations. Routine audit findings suggesting systematic problems require deeper investigation to understand scope and causes.
Key Components
Document preservation requires immediate "litigation hold" notices to prevent destruction of relevant materials, including emails, files, and electronic data. Witness interviews must be carefully conducted with appropriate warnings about privilege and voluntary participation. Forensic analysis of electronic data, financial records, and communications often reveals the true scope of issues. Written findings documenting the investigation process, findings, and remedial measures demonstrate good faith and thoroughness.
Important Protections
Attorney-client privilege protects investigation materials if properly structured with legal counsel directing the investigation for legal advice purposes. Work product protection shields investigation materials prepared in anticipation of litigation from discovery. However, these protections require careful structuring—business consultants conducting investigations for business purposes don't receive protection. Voluntary disclosure to the government usually waives privilege, so consider protection implications before sharing results.
Common Outcomes
Investigations often reveal policy gaps requiring new procedures, enhanced controls, or better training programs. Employee discipline ranging from training to termination may be necessary for those who violated policies or laws. Voluntary disclosure to government agencies can earn credit and reduce penalties if violations are discovered, although the decision regarding whether to disclose is complex, requiring careful consideration. Enhanced compliance programs addressing root causes help prevent recurrence and demonstrate commitment to lawful operations.
Critical Mistakes
Destroying documents after problems surface can be viewed as obstruction of justice, turning a civil matter into criminal charges. Inadequate investigation scope that misses related issues leads to surprises and credibility problems later. Retaliation against whistleblowers, even subtle actions like changed assignments, creates separate legal violations. Premature conclusions before gathering all facts can miss important evidence and lead to wrong decisions. Taking too long to investigate allows problems to continue and undermines claims of good faith remediation.