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Where There’s Money, There’s Enforcement! Be Prepared for Government Investigations in the Wake of COVID-19

The US government has spent an unprecedented amount of money fighting COVID-19 and its economic impact. For example, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides hundreds of billions of dollars in relief to companies spanning a wide range of industries. Not only is the government spending more money on crisis relief, but it is distributing it at an unprecedented pace.

Health and Human Services Secretary Alex Azar recently noted, "[O]ur goal in all of the decisions we're making is to get the money from the Provider Relief Fund out the door as quickly as possible…” While conditions on the ground have warranted massive and fast-paced spending, a corresponding increase in government oversight and investigations has already begun and will continue in the months and years ahead.  

Related: Would Your Company Be Liable if Someone Contracts COVID-19?

The CARES Act created three separate entities to oversee and investigate relief funds: a Special Inspector General for Pandemic Recovery (SIGPR); the Pandemic Response Accountability Committee (PRAC), comprised of Inspector Generals (IG) from multiple federal agencies; and a congressional oversight commission. Their efforts will be in addition to, rather than in lieu of, the efforts of traditional regulators like the US Securities and Exchange Commission (SEC), the Federal Bureau of Investigations (FBI), and the US Department of Justice (DOJ).  

In this environment, more companies than ever must be prepared to respond quickly and effectively to a government investigation. This includes companies that obtained money through the Small Business Administration’s Paycheck Protection Program (PPP) or Economic Injury Disaster Loan Program (EIDL), companies that made need-based certifications to obtain relief or will be making certifications to obtain loan forgiveness, and companies trying to navigate the SEC’s COVID-19 disclosure guidance. It also includes companies that took no government money but may have changed their business practices due to COVID-19 in ways that attract scrutiny from anti-trust and state regulators. 

Related: An Overview of the PREP Act’s Liability Immunity for Products Meant to Counter COVID-19 

Although some companies in highly regulated industries are familiar with government investigations, for the vast majority, they are a novel and terrifying prospect. And even for experienced companies, the intensity of a COVID-related investigation and the potential media spotlight may be unique. Below we discuss — from the perspectives of both government enforcement and in-house experience — some important considerations in responding to any government investigation.  

First steps 

Your first steps upon discovering an investigation are critical to shaping your ultimate response and obtaining the most favorable resolution. At a minimum, they should include:  

  • Determining the company’s status as a subject or target of the investigation, or a third-party source of information;  
  • Notifying the appropriate people; 
  • Conducting an internal investigation; and  
  • Taking measures to preserve evidence. 

Determining a company’s status begins with reaching out to the government. If your company is merely considered a source of information, the government will often say as much. If they equivocate or will not say, you must assume that your company is or could become a target.  

In any event, reaching out early on, taking a cooperative posture, and offering assistance promotes trust in you or your outside counsel. And making your employees available to be interviewed at an agreed upon time and place, for example, has the added benefit of affording you some real-time information about the scope and direction of the government’s investigation.  

Related: Preparing for Government Investigations — What to Do and What Not to Do 

While you are reaching out to the government, you should also notify the company’s leadership and current and former employees who may be contacted by agents. Employees should understand the confidential nature of the investigation and that the company is represented by counsel who are available to work with them, including on their response to agents.  

However, the distinction between counsel who represent the company and counsel who may be hired for an individual, and how the attorney-client privilege works for each, must be made clear. Further, all employees, including executives, should be instructed (verbally and through a written legal hold notice) to preserve potentially relevant evidence.  

The company’s investigation 

You will want to learn as much as possible, as quickly as possible, about the nature (e.g., administrative, civil, criminal, etc.), focus (e.g., the conduct at issue), scope (e.g., isolated in time and location or long-lasting and company-wide), and, origin (e.g., a whistle blower, data analysis, etc.) of the investigation. Conversations with the government are rarely productive in these areas, hence it almost always advisable to conduct an internal investigation.  

This requires interviewing employees and reviewing internal documents as well as some reverse engineering by people familiar with government enforcement work. For example, you can tell you a lot about the nature and focus of an investigation by determining what agency is involved. 

Some agencies only handle administrative and civil matters, whereas others also handle criminal investigations. Some agencies enforce a narrow set of statutes, while others have broad jurisdiction. Many of these agencies are outspoken about their enforcement priorities, which may also give context to their actions in your case. 

Related: 7 Elements of a Sound Investigation 

The people interviewed, questions asked, documents sought, and processes served can also say a lot about what the government is doing. An agent’s questions about a recent change in accounting methods may speak volumes about the government’s focus to someone familiar with securities and financial fraud investigations.  

Very specific document requests are highly suggestive of a whistle-blower. The type of process used — such as an administrative subpoena, civil investigative demand (CID), or grand jury subpoena — may not rule out a criminal investigation but can confirm that one exists. A thorough internal investigation may also identify problems that the government is not yet looking at. 

This allows you to take remedial measures and self-report in a way that significantly bolsters your credibility and assists in resolving the matter at hand. In short, an effective internal investigation is vital to informing a company’s next steps and ultimate response. 

Representation issues 

At the risk of stating the obvious, company conduct is the conduct of its employees, officers, and agents. Therefore, you must continuously consider whether there is a need to obtain separate counsel for someone involved in the investigation.  

Related: Listen to What DOJ is Telling You: Principles of Federal Prosecution of Business Organizations  

Furthermore, companies must consider a corporate counsel’s notification obligations to corporate constituents with adverse interests and the DOJ’s requirement that a company identify the individuals involved in misconduct to obtain cooperation credit. Counsel experienced in government investigations will be most suited to ferreting out this important information, to the extent it is not apparent from the results of an internal investigation. 

Pushing back  

Government lawyers and investigators often have no industry experience and do not know your business and the obligations associated with running it. This can create myriad challenges to reaching a favorable resolution, including unintentional ones such as the scope of requests for information.  

While it is easy for the government to take a broad approach to requesting information, an arbitrary decision to seek five years of information instead of three can significantly increase a company’s costs and headaches. 

Related: May the Force Majeure Be with You 

You don’t have to accept the initial terms of these requests on their face. In fact, reaching out to narrow the scope of a request provides another opportunity to build rapport with the government and educate them about your business. And the government will likely appreciate not receiving a glut of irrelevant documents.  

Final thoughts  

Be proactive. After completing an internal investigation, consider making a presentation to the government, rather than waiting for them to complete their investigation. In False Claims Act investigations common in the healthcare industry, CIDs are often premised on nothing more than a whistleblower complaint and/or a few interviews with prior employees. 

A thorough internal investigation, coupled with an early and effective presentation, may allow you to shape the government’s perception of its own case — and your company — before it has crystalized. 

On the other hand, making yourself small and hoping you don’t hear back from the government after your CID or subpoena response is often a missed opportunity. This is especially the case when an investigation has multiple targets — some of whom may be feeding the government inaccurate or incomplete information about your company to serve their own ends.  

Related: 7 Steps for Coronavirus Litigation Preparedness

Finally, the importance of establishing and maintaining credibility cannot be overstated. The government almost always has an advantage in information, resources, and penalties it can bring to bear. In this context, hiring “scorched earth” outside counsel who may be effective in commercial litigation can be counter-productive and draw out a damaging and expensive matter.  

Threats of litigation and saber rattling almost never work with government attorneys, many of whom took their jobs to maximize their courtroom experience. What scares government attorneys is learning relevant facts that they didn’t previously know or placing known facts into a more accurate context. But these potentially game-changing conversations are only likely to happen when the government trusts you and is willing to listen.

For more advice and information on the coronavirus pandemic, visit the ACC COVID-19 Resource Center.

About the Authors

Marc BonoraMarc Bonora serves as vice president, associate general and chief litigation Counsel for Envision Healthcare Corporation, one of the United States' largest facility-based care provider groups and ambulatory surgery center operators. He is helping guide the organization’s response to the COVID-19 pandemic as its 11,000 emergency clinicians on the front lines are caring for patients and containing the spread of the virus. Bonora has practiced law for 20 years and earned his J.D. from New York University.

Henry LeventisHenry Leventis is a litigation partner at Bone McAllester Norton, PLLC. He helps clients across a number of industries with government audits and investigations, internal investigations and white-collar criminal defense. He also teaches as an adjunct professor of law at Belmont University. Leventis previously spent ten years with the Justice Department, most recently supervising affirmative civil enforcement and criminal prosecutions as the White-Collar Chief and Director of Litigation for the United States Attorney’s Office in Nashville. [email protected]

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