RESPONDING TO AN INVESTIGATION When NOT to panic! · • Privileged documents should, if permitted,...
Transcript of RESPONDING TO AN INVESTIGATION When NOT to panic! · • Privileged documents should, if permitted,...
Alexander L. De Zordo, lawyer
Anne Merminod, lawyer
RESPONDING TO AN INVESTIGATION
When NOT to panic!
2013 ACFE
Canadian Fraud Conference
September 10, 2013
Outline
• Who is investigating?
• What happens?
• Principal concerns
• Be prepared
• 10 key points for a dawn raid or search
• The “dos and don’ts” of an investigation
Current context in Quebec : The
Charbonneau Commission
• Public inquiry called in 2011 into corruption in management of
public construction contracts.
• Allegations of bid rigging, collusion, bribery, and influence
peddling involving politicians, construction bosses,
contractors and organized crime.
• Mayors of Montreal, Laval and Mascouche have resigned
and/or been arrested amid corruption allegations.
New Legislation
A. National Assembly adopted the integrity in Public
Contracts Act in December 2012 • Enterprises that want to bid or enter into public contracts must first obtain regulatory
authorization from Autorité des marchés financiers.
B. Corruption of Foreign Public Officials Act (CFPOA) in
February 2013 1. Increasing the maximum sentence of imprisonment applicable to the offence of
bribing a foreign public official from 5 years to 14 years (there is still no maximum fine
amount);
2. Eliminating the facilitation payments exception to that offence;
3. Creating a new offence relating to books and records and the bribing of a foreign
public official or the hiding of that bribery;
4. Establishing nationality jurisdiction that would apply to all of the offences under the
Act;
5. Making the CFPOA to not-for-profit organization.
Outside investigation or raid by:
• Competition Bureau
• Police authorities (RCMP, PPSC, APAC)
• Workplace safety investigators
• Revenue agencies (tax authorities)
• Environmental agencies
• Office of the Superintendent of Financial Institutions –
FINTRAC
• Industry-specific agencies/inspections
• Civil Anton Piller Orders or Injunctions
What happens
• Dawn raid
• Unannounced visit
• Numerous investigators, including law enforcement officers,
bailiffs, forensic accountants, forensic computer technicians,
lawyers, independent supervising solicitors, film crew, movers,
etc.
• Usually the object of the raid is revealed, but not always
• An Order or Warrant authorizing the intrusion will be served or
presented
• Business is interrupted, as is coming and goings of
management, staff and customers
Principal concerns
• Business interruption
• Giving up too much information (don’t forget, this is an
investigation)
• Who is being investigated?
• Damage to reputation
• Civil, penal, and criminal consequences relating to
• The investigation itself (impeding, interfering)
• The alleged breaches being investigated
Be prepared
• Have systems and procedures in place beforehand
• Form a crisis management team
• Appoint a search coordinator
• Educate first point of contact people
• Internal education
• Check lists for members of crisis team
Seek Independent Legal Counsel
• Seeking outside legal advice is essential.
• A corporation is a distinct legal person from its directors: both
can be the target of a civil or criminal investigation.
• Despite the separate personhood principle, the acts of an
officer can make an organization criminally liable.
Board : Liability and Indemnification
• Directors have a fiduciary duty towards the corporation, which
includes the duty of loyalty, and ultimately good faith.
• Seeking outside legal advice can help demonstrate good faith.
• An officer can be indemnified or have money advances from
the corporation, in order to cover legal fees, if he or she acted
in good faith and with lawful conduct.
Checklist
10-point basic checklist
1. First contacts
• Immediately contact the in-house legal counsel, external legal
counsel, the search coordinator and all other relevant persons.
• Arrange for an internal IT specialist if the authorities intend to
search electronic records.
• Allocate appropriate resources and sufficient time.
2. Identities
• Check the identity of the law enforcement authorities involved.
• Ask to see their identification documents and write down their
names, titles, agencies, etc.
• Ask under law and under which specific provisions they are
acting.
3. Documentation
• Obtain a copy of the search warrant or order, and have copies
made for the search coordinator and legal counsel.
• Check to ensure compliance with the terms set out therein,
including that the address of the building or place is the
address set out in the warrant and that, once the search
commences, it is confined to the documents or things specified
in the warrant (although note that there may be power to seize
other documents or things in certain circumstances).
3. Documentation (cont’d)
• If there is a discrepancy with the terms of the warrant or order,
seek the advice of legal counsel.
• In the event that legal counsel is not available, politely tell the
searchers of the discrepancy, make a written record of the
objection you made and the response of the search team, and
permit the search to proceed.
4. Communication
• Ask the authorities executing the warrant to wait to commence
the search until the search coordinator and legal counsel are
present.
• In case of refusal, the authorities should be advised that the
company is asserting privilege over all areas of the site where
privileged materials may reasonably expected to be located,
including the offices of in-house legal counsel, the legal
department, and other areas within the office where privileged
materials could be located.
4. Communication (cont’d)
• A further specific request should be made that all such
materials be “sealed” and not reviewed by the authorities until
legal counsel have been contacted and are present. The fact of
the request and any refusal by the authorities to comply with
this request should be carefully noted.
5. Protocol
• If possible, the search coordinator and legal counsel should
attempt to agree with the authorities on a protocol for the
search such as:
• The order of the search
• The timeframe
• Who will be present
• How documentation will be handled
• How to minimize business interruption
6. Shadowing
• Legal counsel should, if possible, accompany the authorities
and review all search documents to determine whether they are
relevant or privileged prior to the authorities reviewing them.
• Privileged documents should, if permitted, be sealed in a plain
envelope, identified on the envelope as subject to a claim for
privilege and kept separate from other documents. Any claim of
privilege which is denied should be objected to and noted.
7. Notes
• If possible, list and make copies of the search documents that
the authorities want to take with them.
• In any event, make sure that you have or receive a list of and
copies of these documents.
8. Verbal statements
• Be aware that authorities can and may record all statements
made by company employees during the course of the search
and nothing is “off the record”.
• Questions should be directed to the search coordinator or legal
counsel if possible.
• Employees should be instructed to advise authorities that a
designated company official will deal with questions related to
the conduct of the search.
9. Report
• If authorities produce a report of the search, the company
should try to obtain a copy.
• If asked to sign a report, check it beforehand for any factual
errors. In any case it is very important that the company makes
a detailed report of the entire search (which should contain a
detailed list of documents consulted, copied and seized).
10. Confidentiality
• Employees should be advised not to inform third parties that a
search has taken place.
• Media relations have to be managed in accordance to the terms
and conditions of the initial warrant or order.
The “dos and don’ts” of an investigation
DO:
• Remain calm
• Implement policies and procedures
• Limit the people involved and isolate the search; alert crisis
management team
• Call outside legal counsel
• Identify the object of the search and limit to the order or
warrant
• Limit the damages (business interruption, reputation, loss of
documentation, etc.)
• Follow the 10 basic points of an investigation
The “dos and don’ts” of an investigation
DON’T:
• Over react
• Panic, or decide to “handle internally”
• Get everyone involved
• “Look for the culprit”
• “Give up the culprit”
• Over cooperate
• Explain everything to the investigator
• Befriend the investigators on the belief that this will make things better
• Bribe the investigators
• Impede or interfere with the investigation
Question period
Alexander L. De Zordo, Partner [email protected]
Tel: (514) 954-3191
Anne Merminod, Associate [email protected]
Tel: (514) 954-2529