How Can Outside Counsel Sidestep Ethical Pitfalls in Internal Investigations of Antitrust Wrongdoing?

DOJ’s increased emphasis on holding individuals accountable for corporate wrongdoing adds a layer of scrutiny to the actions of outside counsel navigating representations of companies and boards in internal investigations. This is particularly true for outside counsel managing internal investigations into allegations of criminal antitrust misconduct for health care companies or their boards of directors, given DOJ’s heightened focus on the health care industry.

In particular, outside counsel may encounter a variety of ethical issues, including:

• Managing individual interests of employees and board members while balancing and fulfilling obligations to the client entity.
• Maintaining the integrity of an investigation, including when this means stepping aside.
• Dynamics in interacting with other counsel and represented individuals.

Foresight and planning for these potential ethical issues can help counsel react quickly and seamlessly to complicating factors as they arise during an internal investigation, notably the uncovering of evidence that could implicate the company’s general counsel or board of directors in the alleged wrongdoing.

In this article, we discuss the critical stages of internal investigations into potential antitrust violations and provide suggestions for outside counsel in managing potential legal, ethical and practical issues at each stage.

Background

In recent months, the Biden administration announced that it would prioritize prosecution of individuals who “commit and profit from corporate malfeasance.”[1] In October 2021, Deputy Attorney General Lisa Monaco issued a memorandum revising the DOJ’s corporate criminal enforcement policies, including by toughening standards on companies to provide information regarding culpable individuals in order to receive full cooperation credit.[2]

The so-called Monaco memorandum reinstates the requirement from the 2015 Yates memorandum that corporations provide DOJ all relevant facts relating to all individuals responsible for the misconduct at issue.[3] In so doing, DOJ renounces the Trump administration’s policy of permitting companies to gain cooperation credit for identifying only individuals substantially involved in the criminal conduct.[4]

While DOJ has renewed its focus on holding individuals accountable for corporate wrongdoing, the Antitrust Division has homed in on prosecuting antitrust crimes in the health care sector. Since 2016, the division has conducted a sprawling criminal investigation into price fixing in the generic drug industry, resulting in charges against seven pharmaceutical companies and four executives and netting corporate fines of $428 million.

More recently, the division has turned its attention toward criminally prosecuting alleged labor violations in the health care industry, including related to the Covid-19 pandemic. Over the past 16 months, the division has charged three health care companies and eight executives, alleging they conspired with competitors to fix employee wages or enter into agreements not to hire each other’s employees.[5] Finally, the Antitrust Division has charged and secured a $100 million fine from an oncology treatment center for conspiring to allocate radiation treatment for cancer patients in the U.S.[6]

Not an easy path for outside counsel

For outside counsel engaged to lead internal investigations, matters can become especially fraught with issues when the facts suggest the client’s internal legal or compliance personnel (who may have hired or directed the outside counsel) engaged in bad acts or permitted them to occur. Similarly, an investigation may raise potential exposure for individual members of a board of directors, which often bears oversight responsibility for the investigation.

Navigating investigations that may suggest wrongdoing by the general counsel or members of the company’s board of directors to whom outside counsel reports is particularly challenging. In these circumstances, clearly identifying and zealously representing the interests of the client entity (whether the company or the board) while effectively managing ethical issues raised by employees and board members is key to maintaining the integrity of the investigation.

Planning, establishing ground rules and lines of communication and adhering to them will help outside counsel avoid unnecessary complications. Here’s where to start:

Identify the client and establish clear reporting lines

• Clearly identify the client. In your engagement letter and throughout your discussions with company employees, be clear about who your client is and who it is not. It is essential to make clear to individuals with whom you interact that you represent only the company (or, as the case may be, the board of directors) as an entity and not any individual. Be careful not to treat your in-house contact as your client, rather than as your client’s representative. If there is separate outside counsel for the board of directors or a board committee, clearly communicate with that counsel regarding the delineation of responsibilities. If the board of directors is ultimately overseeing your investigation, clarify how this will be done, including reporting lines and the board’s involvement in investigation decisions. A clear understanding of your client will help if an executive or other employee seeks your legal advice for personal reasons or tries to assert that you cannot reveal statements they made to you because you had an obligation to him or her personally.
• Set expectations of independence. To preserve the integrity and value of your external presence, set expectations of independence and consistently adhere to and seek to secure the client’s adherence to those expectations. This can be done through a variety of ways, including the following:
  • Setting boundaries for involvement in the investigation. It may be advisable to limit the involvement of in-house personnel in data collection and review. Likewise, consider if in-house personnel should be present for interviews of their colleagues and others. The American Bar Association (ABA) model rules of professional conduct state that a lawyer shall “keep the client reasonably informed about the status of the matter.”[7] Significantly, the model rules provide that the client can dictate the objectives of an engagement, but the lawyer is responsible for the “means.”[8] The model rules do not require an attorney to include a client in the conduct of an investigation itself. It is important to understand the ethical rules that apply in the state or jurisdiction in which you are conducting your investigation.
  • Leading the direction of the investigation. If in-house personnel suggest a particular direction for the investigation, take it under advisement, but do not let it control your actions. The ABA model rules state that an attorney should “reasonably consult with the client about the means by which the client’s objectives are to be accomplished.”[9] but do not require an attorney to let the client lead the investigation. By owning the investigation, you as outside counsel will help preserve the investigation’s integrity in the event in-house personnel with whom you may have interacted are implicated in the investigation.
• Establish reporting lines. Establish at least two lines of potential reporting. In some scenarios, day-to-day reporting (the “solid line” reporting) may be with the general counsel. However, at the outset of the investigation, outside counsel should establish “dotted-line” reporting to another party, such as the company’s board of directors, a committee of the board, an independent director, the chair of the board’s audit committee or the chief compliance officer. Such reporting lines need not be formal and can oftentimes be informally established, but they are critical in ensuring proper corporate oversight of the investigation. Keep in mind that with allegations of recent wrongdoing, there may be widespread involvement by current company employees, management and board members.

Maintain control and confidentiality

While the scope and scale of an internal investigation may vary depending on the company and the allegations involved, it is important at the outset for outside counsel to work with the company to preserve the data of all relevant employees. From there, outside counsel, acting at the company’s direction, likely will conduct a targeted document collection and identify potential witnesses for introductory interviews. As you do so, consider the following:

• Third-party management of forensic data collection. Unless the company is required by law to disclose collection or analysis of data-to-data holders, consider whether you can collect data without informing the individual employees whose data you would like to collect. It may be best to use a third-party vendor to collect data from the company (rather than relying on the company to collect and transmit the data to you). Doing so will make it more difficult for employees at the company to tamper with the data and will also make it more difficult for those who may be potentially involved in the alleged wrongdoing to see the data that you have collected.
• Confidentiality in interviews. Consider maintaining utmost confidentiality surrounding interviews. In addition to asking interviewees not to discuss their interviews with others to the extent possible, work to ensure that the very fact of each interview is confidential. This confidentiality will help interviewees not feel or be pressured to withhold information or mislead the investigation. It is best if anyone who may be implicated in the investigation, regardless of his or her position (and including management), not know who your interviewees are. You may want to conduct interviews off site if there are no appropriately private places at the client’s office for the interviews. If the client is located in a country with widespread fears of surveillance, consider bringing sensitive employees out of the country. Additionally, consider whether having in-house personnel present in interviews may chill discussion.

Act with integrity if evidence implicates the general counsel

A situation may arise in which you suspect that the general counsel may have been involved in the wrongdoing. If this occurs, you must report this information up your established “dotted line.”[10]

Ideally, you have conducted the investigation in a way that maintains its integrity, even if the general counsel, to whom you have been reporting, is potentially implicated. However, it is important to evaluate whether, at this stage, you need to step out of the investigation as outside counsel if the integrity of your investigation has been compromised. To help make this decision, consider:

• Was the general counsel substantively engaged in the investigation-scoping?
• Did the general counsel direct any portion of the investigation?
• Is it possible that the general counsel otherwise influenced the investigation, such as by directing or intimidating interviewees or interfering with data collection or analysis?
• Have you personally developed a loyalty to the general counsel that may influence your ability to be objective in the investigation?

If you determine that you can stay in the investigation, report up to your “dotted line” a strategy for completing the investigation (and reporting on its findings) without the involvement of the implicated parties. Your revised strategy may include:

• Establishing a new reporting structure for the investigation.
• Analyzing parts of the investigation in which the general counsel may have been involved to determine if any information needs to be re-examined.
• Assisting the company in procuring individual counsel for the general counsel.
• Re-scoping parts of the investigation in light of these allegations in order to ensure that you are adequately investigating all relevant information.

A twist on the scenario: representing the company’s board of directors

A twist on the above-described scenario may occur if the company’s board of directors, rather than the general counsel, engages you as outside counsel to advise it in connection with the company’s internal investigation, which another outside counsel is leading on a day-to-day basis.

In such a situation, complications can arise when, for example, the company’s internal investigation reveals that members of the board may have been aware of the alleged criminal antitrust conduct or even have authorized it. A board member may even go so far as to approach you as outside counsel, requesting legal advice as to his or her potential liability.

As counsel for the board as a whole, you should carefully consider the following when a board member’s conduct may be implicated, particularly when a board member seeks your legal advice as to his or her potential personal exposure:

• Emphasize your obligations to the board. Just as when you represent a company, maintaining clarity on your client relationship is key. When representing a board, it is particularly important that individual board members understand that you are not their personal attorney and that issues they raise individually may be relevant to the board as a whole.[11] If a board member approaches you to discuss their own potential liability, you should remind the board member that because you represent the board (not the board member personally), you cannot agree to keep their secrets. In fact, you may need to report your conversation to the whole company board. You also cannot offer advice as to the board member’s personal liability. ABA Model Rule 1.13 requires that you obtain permission from the board before you agree to represent one of its constituents because doing so may well create a conflict with your representation of the board. If you find yourself in such a conflict, the implicated board member may be able to prevent you from disclosing his secrets and you may thus have to withdraw from your representation of the board — forcing it to find new counsel because of your failure to draw clear lines.
• Advise on process. Although you cannot advise an individual on a particular personal issue, it may be helpful to advise both the individual and the board as a whole on the best practice steps for the board to take in order to address the issue. Advising on process can help all members of a board, without you representing any particular individual or creating a conflict in your representation.
• Have a plan for referral to individual counsel. The only advice that you can give a board member who asks you for legal advice is to suggest that the board member consult a lawyer.[12] However, you are not obligated to direct every employee with a conflict with the board to retain a personal attorney. When advising an individual to seek personal representation, it is useful to have the names of reputable attorneys with relevant experience to recommend. Also, you should familiarize yourself with the company’s indemnification policy, as questions about whether the company or the board will pay for such representation often arise. You should also make sure that you are aware of the company’s policies that may mandate an employee’s cooperation, on pain of discipline if the employee refuses — which may be in tension with the advice of the individual’s attorney. If a board member or an employee retains counsel, keep in mind your obligations in communicating with represented parties, which may require you to speak to the attorney rather than the individual.[13]
• Be mindful of your obligations to U.S. agencies and opposing parties. It is in your client’s interest to be as transparent as possible with all parties regarding your — and its — disclosure obligations. If your client, in this case the board, decides that it does not want to disclose information that you believe needs to be disclosed, you may face additional ethical issues. With DOJ, your ethical obligation of “candor toward the tribunal” may create a conflict between your client’s instructions and your ethical obligations.[14] Similarly, you cannot make material misstatements of law or fact to the DOJ, despite your client’s inclinations.[15] This can be avoided by ensuring that the individuals from whom you take direction understands the value of candor and the necessity for it.
• Recognize board member duties. Ensure that board members are aware of their duties of care and loyalty. Communicate to the board that each member should exercise reasonable care in their responsibilities on the board and that they should be faithful to the company.
• Engage with company counsel. Establish and maintain lines of communication with investigative counsel. As in all matters, having complete and up-to-date information on the status of the investigation is needed to enable you to best represent your client, in this case the board, and assist it in fulfilling its obligations to the company.

Miller & Chevalier attorneys Lauren E. Briggerman, Alexandra S. Prime, Ann Sultan and Kathryn Cameron Atkinson co-authored this article.

Kathryn Cameron Atkinson is Chair of Miller & Chevalier. She advises clients globally on compliance and investigations involving the FCPA, economic sanctions, and anti-money laundering laws. Kathryn has twice been appointed as an independent compliance monitor pursuant to FCPA resolutions and assists clients across a variety of industry sectors to develop, improve and test their corporate governance, compliance programs and related internal controls.

Lauren Briggerman is a Member of the Litigation Department with Miller & Chevalier and focuses her practice on white collar defense in criminal and civil matters. She represents corporations and executives in government investigations and criminal litigation, including in the areas of criminal antitrust, money laundering, bank fraud, and government contracts fraud. She is Vice Chair of the American Bar Association’s Antitrust Law Section’s Compliance & Ethics Committee, as well as a founding member of the Women’s Antitrust Forum.

Ann Sultan is a Member of the International Department and is also lead for the Europe-Caucasus-Asia practice at Miller & Chevalier. Ann guides companies, boards, and executives through complex internal and government investigations and helps companies create sustainable risk-based corporate compliance programs to support anti- discrimination, harassment, corruption, and money laundering objectives.

Alexandra S. Prime is an Associate in the Litigation Department at Miller & Chevalier and focuses her practice on government contracts counseling and litigation, complex civil litigation, and internal investigations.

References

[1] Deputy Attorney General Lisa O. Monaco, Department of Justice, Keynote Address at the ABA’s 36th National Institute on White Collar Crime (Oct. 28, 2021) (transcript available at https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute).

[2] Memorandum from Deputy Attorney General Lisa Monaco, “Corporate Crime Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies” (Oct. 28, 2021).

[3] Id.

[4] Id.

[5] See, e.g., Press Release No. 21-14, Health Care Company Indicted for Labor Market Collusion (Jan. 7, 2021), https://www.justice.gov/opa/pr/health-care-company-indicted-labor-market-collusion; Press Release No. 21-658, DaVita Inc. and Former CEO Indicted in Ongoing Investigation of Labor Market Collusion in Health Care Industry (Jul. 15, 2021), https://www.justice.gov/opa/pr/davita-inc-and-former-ceo-indicted-ongoing-investigation-labor-market-collusion-health-care.

[6] See Press Release No. 202-414, Leading Cancer Treatment Center Admits to Antitrust Crime and Agrees to Pay $100 Million Criminal Penalty (Apr. 30, 2020), https://<www.justice.gov/opa/pr/leading-cancer-treatment-center-admits-antitrust-crime-and-agrees-pay-100-million-criminal.

[7] MODEL RULES OF PRO. CONDUCT r. 1.4(a)(3) (AM. BAR ASS’N 2017).

[8] See id. at r. 1.2 and cmt. 2.

[9] Id. at r. 1.4(a)(2).

[10] See id. at r. 1.13.

[11] See id.

[12] Id. at r. 1.13 and cmt. 10.

[13] Id. at r. 4.2.

[14] See id. at r. 3.3.

[15] See id. at r. 3.4.