February/March 2009 / Cover Story
Handling Government Investigations in the Current Financial Crisis
Companies are facing increased government scrutiny of books and records, investment practices and financial disclosures, the author says, and must “take measures to protect themselves, their executives and their shareholders from the potentially devastating consequences of these investigations.”
Prudent companies should assume an investigation has already begun. Having in place effective, independent and well-staffed compliance systems is essential. Their purview should not be limited to areas currently known to be of interest. Companies should assume the integrity of their compliance systems will be examined in the course of an investigation.
The first step in response to an official inquiry is enlisting experienced counsel. All potentially responsive data should be preserved. Strategic decisions, including whether an internal investigation is warranted, whether or how to cooperate and how to handle public relations, should be addressed immediately. Particular attention should be paid to issues relating to voluntary disclosure and attorney-client privilege. In serious matters, an offer of restitution and a willingness to fix the problem may head off prosecution.
“Looking ahead,” the author says, “consider the discovery of compliance deficiencies as an opportunity to improve the compliance program and head off future problems.”
