Playing Good Defense

U.S. DEPARTMENT OF JUSTICE OFFICIALS call it “real-time enforcement” — and that means waste companies and their officers can find themselves in trouble real quickly.

The federal government's Corporate Fraud Task Force is bent on responding quickly to allegations of wrongdoing, and that attitude translates into prompt and relatively speedy criminal investigations. Based on what they uncover, prosecutors will waste no time in convening and presenting testimony to a grand jury.

As a result, waste companies and corporate officers who discover they are targets in this blitzkrieg must respond quickly and effectively, combing company and, sometimes, personal files and records. The corporation and its officers, together with the company's general counsel and outside white collar criminal defense counsel, will have precious little time to assess the facts and then size up the nature of possible corporate and individual criminal liability.

A successful defense involves walking a fine line. Prosecutors demand and expect full cooperation from companies and individuals under investigation. Defense counsel, of course, will attempt to meet the government's expectations, but not at the expense of their clients' legal rights.

While under investigation, waste firms and executives must avoid any behavior or tactics that suggest a motive to delay or hinder the probe. Prosecutors will measure cooperation first and foremost by a company's voluntary disclosure of activities and conduct that may amount to criminal wrongdoing. Other indicators include whether the firm has expressly directed all employees to fully cooperate with prosecutors and whether the firm appears to be shielding workers who may be culpable. For example, if an employee is under scrutiny, the company should not provide, or even hint at providing, the worker with funds to cover his or her legal expenses.

Along the same lines, a company must stay clear of a joint defense agreement, which allows criminal defendants to share information and strategies in confidence. For example, a corporation under investigation could enter into a joint defense agreement with its employees in order to get the workers to divulge information about any alleged wrongdoing. However, a party to such an agreement who supplies the information can prevent another party from disclosing it, which can stymie a company's ability to cooperate with investigators.

In the end, the government's idea of what constitutes valuable cooperation depends on the circumstances. Several years ago, a company, having discovered that a federal probe of its accounting practices was underway, thought it was doing the right thing when it retained outside counsel to perform an internal investigation. When questioned by the lawyers, firm executives insisted that their accounting techniques were proper.

Based on its investigation, the government decided that the executives knowingly engaged in shady practices and then concocted deceitful explanations for the law firm.

The executives were indicted for obstructing justice for, among other things, providing false and misleading responses to the outside counsel, knowing that the sham would be passed along to enforcement officials.

A case of “damned if you do, damned if you don't?” Maybe. Nevertheless, it's quite clear that internal investigation disclosure and cooperation remain a company's best hope for minimizing and mitigating criminal liability.

Barry Shanoff
Legal Editor
Rockville, Md.