It is permissible to talk to your employees and it is important to talk to your employees. The best way to do so, however, is through your outside counsel. The outside counsel should, at a minimum, inform the employees that there is an ongoing investigation, that they may be contacted by federal and/or state agents (both law enforcement and regulatory investigators); that they have a right not to talk to them; that they are equally free, at their election,
to speak with them (and can ask that their own lawyer be present an the interview and can ask that the company’s lawyer also be present); that if they choose to speak with the federal and/or state agents, their answers to any questions must be full, complete and truthful; that they may consult with a lawyer prior to speaking to the agents and may state that their lawyer will be in touch with the agent. It is also perfectly legal (and important from the investigative aspect) to tell employees that the company may ask that it be informed of any such contacts.
When it is company policy to do so, the notice to employees should also state that the company will provide a lawyer, at its own expense, for employees. This will bring the so-called Thompson Memorandum into play. On January 20, 2003, the Department of Justice released the Memorandum from Deputy Attorney General Larry D. Thompson to Heads of Department Components and United States Attorneys Re: Principles of Federal Prosecution of Business Organizations (available at: http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/crm00161.htm)
The Thomson Memorandum provided in part:
Another factor to be weighed by the prosecutor is whether the corporation appears to be protecting its culpable employees and agents. Thus, while cases will differ depending on the circumstances, a corporation’s promise of support to culpable employees and agents . . . through the advancing of attorneys fees . . . may be considered by the prosecutor in weighing the extent and value of a corporation's cooperation.
A footnote adds this gloss: “Some states require corporations to pay the legal fees of officers under investigation prior to a formal determination of their guilt. Obviously, a corporation's compliance with governing law should not be considered a failure to cooperate.” The upshot of the Thompson Memorandum was that corporations felt, rightly or wrongly, that the Department of Justice was viewing the payment of attorneys’ fees for certain employees as non-cooperation. Such was the case with the accounting firm, KPMG which refused to pay its employees’ legal fees. KPMG’s rational was grounded in its attempts to be viewed as cooperative under the Thompson Memorandum. While KPMG had a history of payment of its employees’ attorneys’ fees, after meeting with government prosecutors, KPMG broke from its prior practice. It capped fees, conditioned payment of fees on cooperation with the government, and cut off the payment of attorneys’ fees upon indictment of the employee even though KPMG never conducted an internal investigation to determine if anyone had engaged in wrongdoing. In a scathing opinion, the United States District Court Judge Lewis A. Kaplan took the government and KPMG to task and struck a huge blow to the Thompson Memorandum. United States v. Stein et al., 2006 WL 1735260, (S.D.N.Y. June 26, 2006).
More later.
In the meantime, if you have any questions, please call or e-mail at walter.james@jamespllc.com
WDJiii
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