White Collar Defense Update

The dirty details of this presently unfolding scandal do not require repetition on this page. Google will lead you to all that you want (and don't want) to know about these sordid details. However, you won't read much of the following advice in the mainstream media. So, here we go ...

1) Discuss business on corporate e-mail accounts only

The FBI's cyberstalking investigation led to a personal Gmail account, which the government accessed and ultimately resulted in the downfall of General Patraeus. A recent Google transparency report revealed that it has fully or partially complied with at least 90% of the U.S. government's nearly 8,000 requests for user data during the first half of 2012. http://www.google.com/transparencyreport/userdata requests/ The lesson learned is that it is much easier for the government to get e-mails from Gmail, then from your own IT department. This is information that (1) you do not control; (2) might not have notice that the government has requested access to; and (3) do not have say whether the communications are protected by some privilege or confidentiality clause. As a corporation, there are many things that you might want to keep quiet: trade secrets, potential business deals, future products, etc. As Google does not have your company's interests at heart, having employees discuss these developments through personal e-mail accounts could lead to their public disclosure. Further, you would receive no notice that the information has been sought out by the government. Therefore, reminding your employees to keep business e-mails on corporate e-mail accounts will prevent your company's private issues from going public.

2) Be careful who you are e-friends with

While investigating the cyberstalking complaint, the e-mails of the victim led to the discovery of potentially inappropriate e-mails of another senior general who was uninvolved in the original cyberstalking charge. Now that senior general is being investigated. The lesson learned here is that the government, while investigating someone else on a matter unrelated to you, could come to learn information that would place you or your corporation under surveillance or investigation. Therefore it is imperative that not only you keep your corporate and personal e-mails separate (see point 1), but also that you know the person who are sending the e-mails to. A joke in poor taste to someone under surveillance could result in you landing in hot water.

Continue reading after the jump.

Continue reading "Attennnnn-tion! 4 Important Lessons From the General Petraeus Scandal" »

Joseph M. Elles, Carter's Inc.'s former Vice President of Sales, is facing federal criminal charges alleging that he aided Carter's in misstating its income in various Securities and Exchange Commission filings. The case is United States v. Elles, No. 1:11-CR-445 (N.D. Ga). Elles has objected to the government's attempts to introduce into evidence statements that he made to attorneys conducting an internal investigation for Carter's. (See U.S. v. Elles Response in Opposition to Motion to Admit Defendant's Statements.pdf) The government contends that Elles admitted his guilt during the course of a seven hour interview with counsel that conducted the internal investigation. Elles disagrees, arguing that his statements are "a far cry from the elements necessary to prove guilt beyond a reasonable doubt as alleged."

Elles raises several arguments why his statements should not be admitted. First, he claims that his cooperation with the internal investigation was coerced because Carter's said it would withhold his severance payments if he did not participate. He also attacked counsel's motives, calling them "former SEC and AUSA attorneys [who] were working hand in glove with prosecutors." As proof of this collusion, Elles pointed out that Carter's immediately waived privilege and turned over his interview to the FBI and the United States Attorney's Office the day after the interview was conducted. Elles also argues that if the portion of the interview that the government seeks to introduce is allowed, that he should be allowed to introduce other portions of his interview (which was summarized by counsel in a 33 page memorandum) and to cross examine the attorneys who conducted the interview to explain the context of his statements and to demonstrate that, as Vice President of Sales, he was not responsible for deciding how "accounting issues" were to be reported on financial statements.

Mr. Elles' co-defendant, Carter's former President, Joseph Pacifica, has similarly objected to the admission of statements he made to counsel during Carter's internal investigation.

This case highlights a critical dynamic concerning internal corporate investigations. Corporate employees who cooperate in such investigations do so at their own peril. The corporation will ultimately decide whether to assert or to waive privilege. And where, as here, the corporation decides to waive privilege, an individual employee who is incriminated by information over which privilege is waived has little recourse or ability to stop the damage. Our rule, therefore, for corporate employees deciding whether to participate in an internal investigation is caveat speaker.

By analyzing syntax and linguistic patterns an expert can, on occasion, reach reasonable conclusions as to whether a particular individual authored a document. This can be a crucial matter in an internal investigation or in the defense of a crime. A lengthy recent article in The New Yorker Magazine (July 23, 2012, J. Hitt), entitled "Words on Trial", discusses the subject in an entertaining and informative way and would be helpful for the reader seeking more detail. Even if such analysis can't conclusively prove a specific person wrote a document or uttered a phrase it can be helpful in cutting down the number of suspects to a more easily investigated group.

The field of forensic linguistics received considerable attention in 1996 when it was partially responsible for solving the Unabomber case. Within a few days of publishing the Unabomber's Manifesto the FBI received tips from over a dozen people, including the Unabomber's brother, that the mode of expression, vocabulary and syntax of that document was similar to Ted Kaczynski's utterances. The Manifesto made repeated use of the terms "chimerical" "anomic" and "cool headed logicians" as well as the phrase "you can't eat your cake and have it too." People personally familiar with Ted Kaczynski immediately recognized these phrases as catchwords of his and the focus of the far ranging investigation was immediately and very effectively tightened to just him.

Historically, forensic linguistics has been used in a common sense way. In the Old Testament, at Judges12:6 an early use is made of forensic linguistics. In that passage it is recounted that after a melee between a tribe of Israel (the Gileadites) and their enemies (the Ephramites) a number of Ephramites attempted to pass as victorious Gileadites and make their escape from the battlefield. The Gileadites were able to unmask the posing Ephramites by forcing them to pronounce the Hebrew word "shibboleth". Ephramites apparently pronounced the first syllable "sib" unlike the proper Hebrew pronunciation of "shib". To quote the text, "If he say 'shibboleth' then they seized him and slaughtered him at the fords of the Jordan". Also historically in the Lindbergh Kidnapping case the prosecution made much of misspellings in the ransom note which matched errors made by the defendant Bruno Hauptmann in other contexts. The text of the kidnapping note to Colonel Lindbergh included, "We warn you for making anything public or for notify the Polise the child is in gut care." Hauptmann had misspelled "police" and used the German "gut" for good in other contexts.

This post continues after the jump.

Continue reading "Forensic Linguistics: An Area to Keep In Mind In Investigations and Litigation" »

The Penn State scandal was, in many ways, the perfect storm that any organization dreads. What could organization counsel have done differently as the scandal unfolded? In this installment we focus on avoiding conflicts early, knowing who your client is, and making sure others in the organization know too.

The Freeh report alleged that the University's general counsel, Cynthia Baldwin, advised the Board of Trustees against conducting an internal investigation and accompanied the two University administrators who were indicted for failing to report what they knew about Jerry Sandusky's conduct, Vice President Gary Schultz and Athletic Director Tim Curley, to the grand jury. The report also alleges that both Schultz and Curley believed that Baldwin represented them personally during their grand jury testimony, and that Baldwin failed to clarify that she represented only the University.

Counsel for any organization has a legal and ethical duty to make clear to "constituents" of the organization--directors, officers, employees, members, shareholders--that he or she represents only the organization, and not the constituent, when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the constituent. In Pennsylvania, this duty is set forth at Rule 1.13 of the Rules of Professional Conduct. Organization counsel needs to make this distinction clear to all constituents early in the investigation.

If you think about it, most people in the situation that Schultz and Curley found themselves in would assume that the organization's counsel represented both the organization and them--unlike lawyers, most are not familiar with how conflicts of interest in such situations may arise, and don't think these things through. It is incumbent upon organization counsel to explain this distinction.

This post continues after the jump.

Continue reading "Lessons Learned from Penn State--Part II: Avoid Potential Conflicts Early, Know Who Your Client Is, and Make Sure Others Know It Too" »

The former General Counsel of Penn State University, Cynthia Baldwin, has recently become the subject of intense criticism based upon the now public findings of the 267-page report prepared by former FBI Director Louis Freeh. In his report, Mr. Freeh described Ms. Baldwin's representation of the University as "seriously deficient." Mr. Freeh and other critics have cited the following examples of Ms. Baldwin's allegedly deficient performance:

(1) Two members of Penn State's Board of Trustees believed that Ms. Baldwin personally represented each of them when she accompanied them to testify before the criminal grand jury and failed to clarify that she only represented the University. (The grand jury ultimately returned an indictment of both of those Board members.)

(2) Ms. Baldwin failed to retain experienced criminal counsel to represent the University in the criminal investigation and advised the Board of Trustees against conducting an internal investigation.

(3) Ms. Baldwin failed to adequately communicate to the Board the nature and extent of the Attorney General's criminal investigation and the potential civil liability that could result from the criminal allegations.

The headline grabbing Penn State scandal provides an excellent opportunity to remind organizations and their in-house counsel of the importance of recognizing the tremendous risks associated with criminal investigations and how to best mitigate those risks. In-house counsel can avoid catastrophic damage to their organizations by remaining cognizant of a few basic principles when handling such criminal investigations.

This post is the first installment of a three-part series that will outline best practices for in-house counsel faced with criminal investigations that relate in any way to the organization's officers, directors or the organization as a whole. Check the blog next week for the second installment in the series, which will address the potential conflicts of interest that can arise between organizations and board members in criminal investigations and how in-house counsel can avoid such conflicts.