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US Law Week
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Mitigating Risks in Private Investigations
April 7, 2022
Michael Ramos and Warren Feldman, partners at global investigations firm Nardello & Co., discuss the situations where private investigators may be useful to attorneys conducting probes into allegations of corporate misconduct. They emphasize that private investigators must use ethical and legal methods to gather evidence so that it is admissible in court, and that attorneys can be held responsible for illegal conduct by investigators, such as pretexting.
U.S. Attorney General Merrick Garland’s recent remarks underscored the Justice Department’s commitment to bolster its enforcement against corporate malfeasance. Garland’s speech emphasized the DOJ’s enhanced focus on holding individuals, and not just corporations, accountable for corporate wrongdoing.
In 2021 alone, the DOJ charged 5,521 individuals with white collar offenses, a 10% year-over-year increase.
Garland’s emphasis on white-collar enforcement and individual accountability was echoed by Assistant Attorney General Kenneth Polite Jr.’s remarks about the department’s heightened standards for a company to receive full cooperation credit.
Polite noted that when allegations of corporate wrongdoing arise, “to receive any credit for cooperation, a corporation must notify the department of all relevant, non-privileged facts and evidence about the misconduct and all the individuals involved. Our policies plainly serve our goal of securing evidence of individual wrongdoing because of the high priority that we place upon holding individual wrongdoers accountable.”
The upshot of the DOJ’s renewed emphasis on white-collar enforcement and individual accountability is that in order to obtain the most favourable outcome, it will be crucial for companies to uncover all of the facts related to the alleged misconduct at issue, including the involvement of individuals at all levels of the company.
Unless a company is able to demonstrate a thorough investigation and full disclosure of the facts regarding involved individuals, deferred prosecution agreements, non-prosecution agreements, and other desirable resolutions for companies may well be off the table.
Accordingly, the company and its counsel will need to undertake a credible, thorough investigation which probes the roles of individuals. Counsel can find it useful to engage private investigators to assist in the fact investigation.
The Role of Private Investigators
Investigators are skilled in open-source research, locating witnesses and physical evidence, asset tracing, and identifying sources with relevant information about events and key participants.
For example, in Foreign Corrupt Practices Act matters, investigators—experts in pulling together information from a variety of public records—can identify evidence of ownership interests by employees or government officials, or their family members, in entities that may serve as conduits for improper payments.
Outside investigators can also be a resource in developing information from “human sources.” This can include speaking with industry sources who may provide insight into the matter at hand.
While counsel usually conducts interviews of current employees themselves, turning to outside investigators for external interviews (e.g., former employees, litigation adversaries and other third parties) is helpful, given people’s reluctance to speak with lawyers out of concern of their own self-interest. It also limits the risk that counsel will become a fact witness.
Investigative Work Must Be Ethical, Admissible
Whether the evidence developed by investigators will be used as part of the company’s cooperation, or in preparing its defence, it is important that the investigative work be done ethically and legally so that the information is usable and admissible.
When the company is responding to allegations in a courtroom, it is crucial that the evidence can be presented without worry it was procured through illicit or unethical means. Otherwise, the court may hold the company and its counsel responsible.
A private investigator will likely be viewed as an agent of the company’s lawyers and any unethical or illegal conduct by the investigators can be imputed to counsel. Under the ABA’s Rules of Professional Conduct, lawyers are responsible for the conduct of non-lawyers they retain.
Thus, when retaining and supervising an investigator, counsel needs to invest time and effort to safeguard against any impropriety. For example, in today’s technological world, recording a conversation is as easy as pressing a button on a smart phone. But the law regarding making such recordings must be followed.
Another potential land mine for attorneys when engaging investigators is the use of pretexting—impersonating or creating the impression that you are someone else typically in an effort to obtain information. Under federal law, it is a felony to obtain a customer’s financial information by making false statements, and you cannot use the identification of another person without authorization. (See 15 U.S.C. §§ 6821, 6823 and 18 U.S.C. § 1028, 1028A.)
Pretexting is also a critical consideration when an investigator (or counsel) makes contact with individuals through social media and other internet tools. For example, counsel (and their investigators) cannot use impersonation or deceit when “friending” someone via social media in an effort to obtain access to non-public areas of that person’s social media account.
Conduct by counsel and their agents involving dishonesty, fraud, deceit, or misrepresentation is generally prohibited and would compromise the integrity of the investigation. (See Model Rule of Professional Conduct 8.4.) Moreover, aside from exposing counsel to potential discipline, it may expose companies to the common law tort for invasion of privacy and significant reputational damage. An investigator who ignores these ethical guardrails will be undercutting the company’s goal of obtaining full credit for its cooperation.
An unethical investigation is a failed investigation. Reputable investigators will be familiar with the relevant laws and ethical rules across jurisdictions and will conduct their investigations accordingly.
Investigators should be well versed in public record research, data privacy laws, and the avenues in which to obtain information through legitimate means.
Conducting an investigation unethically or illegally will only result in more problems for the corporate clients and less favourable outcomes with regulators or in courtrooms.
(This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners)
Author Information:
Michael Ramos is a partner and chief risk and compliance officer for Nardello & Co. where he manages litigation support investigations across multiple jurisdictions involving fraud, defence against RICO actions, and criminal defence matters. Prior to joining the firm, he was an assistant U.S. attorney in the Eastern District of New York.
Warren Feldman is a partner and chief legal officer of Nardello & Co. Prior to joining the firm, he spent more than 30 years defending corporations, other entities, and individuals in all phases of white-collar criminal litigation, including investigations, trials, appeals, and regulatory enforcement matters.
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