January 25, 2021

Coffee & Conversation - Criminal Enforcement Priorities in 2021

In this episode of Coffee & Conversation, Partners Jessica Magee, Richard Roper and Michael Stockham discuss their expectations for criminal enforcement priorities in 2021. Their conversation touches on healthcare, environmental and securities enforcement priorities in the U.S. Securities and Exchange Commission (SEC), U.S. Department of Justice (DOJ) and Biden Administration as a whole. They also explain best practices when interacting with federal agents, covering how individuals and companies should respond to initial contact from the government and when the Feds come knocking.


Jessica Magee: Good afternoon, everybody. Welcome to another episode of Coffee & Conversation with the White Collar, Securities and Government Enforcement Practice at Thompson & Knight coming to you on January 20, 2021. Great day in America, first woman in the White House. I'm sporting my pearls and my presidential mug, but also a big day in America because Michael Stockham and I are joined by our partner Richard Roper, a great American himself, former United States Attorney for the Northern District of Texas. And Richard, welcome, hello.

Richard Roper: Howdy.

Jessica Magee: How are you?

Richard Roper: Doing fine.

Jessica Magee: And as usual, I'm here today with my partner Michael Stockham. Michael joining me from home, it looks like, how are you?

Michael Stockham: Enjoying the cold, rainy weather. So it's kind of a nice winter bit.

Jessica Magee: A good January day. So today we're going to take a little time to talk about expectations, anticipated priorities and focus areas for white collar enforcement in the year and in time ahead. And also really some best practices, do's and don'ts, if and when you or your company are contacted by law enforcement, which is always a good topic to put a touch on just to remember best practices and things to keep front of mind. I can think of nobody better to lead us through this conversation than Richard. So with that, Richard, if you'll just kick us off, I'd like to start really with you giving us your bird's eye view on what the priorities and focus areas have been for white collar law enforcement activity, particularly at the federal level, and if you expect any changes, what you see in the days, months and year ahead.

Richard Roper: Well, I think one of the emphasis for white collar has been public corruption and, of course, healthcare fraud. I would think, depending on which area of the country you're in, healthcare fraud has been a huge priority of the Department of Justice, as well as public corruption and securities fraud. But you know, it's interesting, it kind of depends on the country about which one of those priorities is receiving the greatest emphasis. I would think, in the Biden Administration, it looks like from what we can tell about the appointees that are coming in, that the securities enforcement will be a high priority in both the Department of Justice and the SEC and as well as environmental cases, as the Obama Administration, early on especially, had a great emphasis on environmental cases. So I could see that as well as being a priority.

COVID-Related Fraud

Jessica Magee: So let's unpack that a little bit, and I want to go through each of those for a couple of minutes, but before we dove into those healthcare, environmental, securities, we're still very much living through the pandemic. I know on the SEC side, we're still seeing trading suspensions. There have been, there's been a fraud action filed. I know Justice has been very active in this area, ramping up investigations and filing actions. Do you expect, I assume you do, to see a continued focus around, I guess what I'll call, "COVID-related fraud" or "pandemic-related fraud" on the criminal side?

Richard Roper: I would say that there'll still be some more, some of the kind of more of the smaller cases that they'll bring against fraudsters. But apparently, from what I've heard in some of the cases I've been involved in, that the department has a wealth of investigations that are ongoing, and many of these involved LLCs that have made, received, the proceeds of the PPP loan. And there's an aggressive investigation, a task force set up in each region, that are addressing these cases, vetting them for prosecution. And I could see that continuing well into the next year and probably the year after that.

Jessica Magee: Michael, you know, we've all read that about the amount of lending that went out to small businesses and other companies through various federal programs and the expected audit or at least review of companies that received $2 million or more. That makes me think a lot about the work we do in terms of working with forensic accountants and looking at financial statements and disclosures about receipt of proceeds, use of capital, whether it's federal lending during a pandemic or otherwise. What do you think in terms of trends, expectations around scrutiny on financial statements, use of pandemic borrowings, things of that nature? I think that'll still be a priority in the year ahead. I just think we're going to see a real uptick on the accounting side because I think those cases have taken necessarily longer to build because they involve more complexity.

Michael Stockham: Yeah, I think you're going to see it sort of as a triad, if you will, of scrutiny. So accountants are going to come in, the auditing firm for the company will probably come in and scrub, especially as it relates to any PPP funds or anything that came down during the pandemic. They're also going to be scrubbing really hard, I think, on revenue recognition or anywhere that the company or the accounting function has the ability to use a lot of judgment around revenue recognition and other issues like that. You'll probably also see scrutiny on the banks. They're the middlemen on the beat on the PPP that are accepting the applications, helping perform the applications and, and processing the forgiveness, etc. And then you'll see a lot of pressure or scrutiny on employers, people that put up, put together the applications. I mean, I'm sure there are the outliers where people actually made up entire companies or lists of employees, etc. But I think they're also going to dove a little bit deeper into the accounting on all this. Looking at, just making sure every employer is there, every employee is there, the way that the funds were actually used and put on the balance sheet matches what the PPP allows for. So there will definitely be more accounting scrutiny or scrutiny from the government, both from outside with outside accountants looking in, but also I think your internal audit folks and others are going to have to be vigilant to make sure that all of those ducks are in a row when the government comes calling and looking through that audit.

Jessica Magee: So Richard, for a company that thinks OK, we received government funds during this time, we made certain certifications about the necessity of those funds, how they would be used. If they think they might have a problem, what might that look like in terms of a criminal investigation? I think our shared experience, you tend to see the same kinds of charges being worked up or the investigation sort of built toward the same outcome. What are we looking at? Things like false statements to the government? Are we going to see FCA cases? What do you think those would end up looking like in charged actions for companies that are like, oh gosh, maybe, maybe we have certifications or use of proceeds problems?

Richard Roper: Well, I think it's both a certification, which would be essentially a false claim against the government, which could implicate qui tam statutes, the False Claims Act and whistleblower statutes, as well as traditional bank fraud and also SBA fraud. There's provisions in the title that deals with Small Business Administration fraud. So I think you'll see that. What I've seen so far and the corporations I've represented, our firm has represented, is the issue will boil down to, remember this PPP program was kicked off without a lot of guidance. And I think as time goes on, the federal government has pushed out more guidance and more requirements. And essentially, they're moving the cheese. And so you may sign a certification thinking that you were well within your rights in obtaining a PPP loan, and then when you ask for forgiveness, they apply, which is essentially regulations that were put in place after you got the loan. And so you can't base a criminal prosecution, especially a criminal prosecution, on the fact that you didn't live up to some regulations that weren't in place. Already had a case where, fortunately, the U.S. Attorney's Office declined to prosecute based on the attempt by investigators to apply what turned out to be regulations that were put in place after the loan proceeds or were received by the client.

Healthcare and Environmental Enforcement Priorities

Jessica Magee: Well, it's a great point about moving the goalposts or moving the cheese, and it brings to mind something Michael and I and I know you are constantly talking with clients about, which is good governance, an ounce of prevention, documenting appropriately and judiciously your business judgment. Why a company made a decision, when it made a decision and what the relevant regulations were at the time. So that, for instance, in the matter you're discussing, you can quickly demonstrate to authorities, these were the rules of the game at the time and here's how we very demonstrably adhered to them, and get a quick closing. So it's a great reminder. So you talk a little bit about healthcare and environmental as priorities in the enforcement space. Talk to us a little bit about what you've seen in healthcare and what you expect coming up in terms of types of cases, areas of focus and whether you think that is really the result of a change in the administration or a trend you've seen building over time regardless?

Richard Roper: Well, I think they're aggressively going after doctors who invest in other entities and other opportunities they have to make money besides just the traditional practice of medicine. I think any doctor that invests in a laboratory, for example, or a compounding pharmacy or other investment opportunities, I think there's scrutiny by HHS, OIG and also the FBI, and also state attorney generals, on doctors essentially parlaying their medical losses in other areas to make money. Of course, there's nothing illegal with that. Of course, you have to overlay the Anti-Kickback Statute, which has been amended to have a lesser culpable mental state, and also you have money laundering and statutes that are being used by federal prosecutors, as well as some more provocative statutes. Not normally, you don't normally see in a white collar crime case, for instance, the Travel Act, which was originally designed as one of the tools along with RICO to deal with organized crime. And that has been applied really right next to the Hobbs Act is the Travel Act. And you see that applied to essentially federalize what are traditionally state crimes, for instance, commercial bribery, in the context of non-federal dollars that are used to pay for insurance, health insurance reimbursement. That has been a tool of the federal prosecutors. So I just see them continue to be aggressive. In environmental space, frankly, in the Trump Administration, you didn't see very aggressive criminal investigators with the EPA. In some states, their state and local counterparts, essentially there was very few, if any, real criminal enforcement. And I could see that changing under the Biden Administration, just as it was when Obama took office.

Jessica Magee: Michael, why, if a doctor happens to be listening to this or lawyer that works with a medical association, etc., why the heck should they be caring about an Anti-Kickback Statute? Why is this something that matters? Richard, chime in. I know we three have all worked on matters in this area, but for, for people that are physicians or work in these practices that are pursuing their own investment opportunities and other business opportunities, why do they need to have their head on a swivel? Why are they now worrying about anti-kickback statutes and money laundering statutes? Michael, what would you say about that?

Michael Stockham: Yeah, I think part of that is just a trend in business a little bit anyway. So most of these, most of the issues or investigations you see are when you have very complex or multi-layered business organizations or very complex service agreements or other things set up in order to perform these services. And you know, there are folks out there that will render opinions that will say that these particular structures are legal and they don't violate the anti-kickback statutes, and they'll put together very complex corporate structures or organizational structures. And I think that's a red flag to a lot of regulators because if it gets to be, the more complex it gets, I think the more skeptical they become that you're in business cleanly, for lack of a better word. So I think that's one of the issues to worry about on that. That's one of the, and doctors are looking. I think there's a lot of pressure. We all have friends that are doctors, we all have clients that are doctors, but I think the practice of medicine is becoming more difficult, more onerous. It's hard. It's got a lot of complexity in the documents they have to file, the forms they have to file, the restrictions that are on them. And I think that puts some downward pressure on the amount of money that they can make. It's no longer just set up your office on the corner as a doctor and live a nice, comfortable life, you have to push very hard to make a business. And there are a lot of people out there that want to set up these businesses that are complex that are getting the eye of the government.

Jessica Magee: Richard, do you agree or disagree?

Richard Roper: Well, when you say anytime you're dealing with reimbursement for federal dollars, that's Medicare, Medicaid, TRICARE or federal employee health insurance in some cases, federal workers comp. When you're dealing with that, there are special rules in place and you need to know them because if you're prosecuted, the government doesn't have to prove you knew what those rules are. You're really expected to know what the rules are. So you can't take a commission, for instance, for anyone, for working as a consultant in doling out in steering business to a doctor or to a lab or for screening purposes. You just can't take a commission unless you fit in with these specific enumerated safe harbors. It's almost, it can be in a situation that got you for some of these doctors, and they have to be very, very careful. People take commissions all the time, you know, insurance executives, salesmen, and you have to be very careful when you get some kind of benefit that deals with the referral of or of receiving money after a referral dealing with federal healthcare. You just have special rules, and they're very, very tough. And if you don't follow them, you could land up in prison.

Michael Stockham: Let me ask you this, Richard. What about organizations or groups, doctors, physicians, other providers that decide that if they just don't take any federal dollars, they don't take any, they don't take insurance essentially, or they don't take federal dollars and they're just taking private insurance? Is that going to save them from any scrutiny from the government or ever the U.S. Attorney or DOJ coming back and trying to get them through the Travel Act or other things?

Richard Roper: No, that's exactly right. You know, the first part of Medical Center case is a classic example of where they tried their best, though it failed, to not take federal dollars, that essentially they weren't going to take federal dollars. And really in their defense, they couldn't because they were a new physician-owned hospital and they changed the Stark Rules to prevent physician-owned hospitals from taking federal dollars. But nevertheless, there were issues in the governance. Frankly, they proved this at trial, that doctors were receiving essentially bribes, as the government terms, for steering business to Forest Park Medical Center. It wouldn't be a violation of the Anti-Kickback Statute if it didn't involve federal dollars. So what they did was they reached down to state commercial bribery statute, which usually exists under any kind of model penal code provision that all 50 states have it. And essentially they use the commercial bribery statute. A doctor, being a fiduciary, can't take a gratuity, a fiduciary, for steering business to one of his beneficiaries. And they took that statute, and normally it would just be a state crime. But under the Travel Act, that is one of the enumerated state offenses that if you engage in that business and for instance, moot money or have a telephone call or a fax or use email that invokes interstate commerce, then that commercial boundary statute is being launched into the federal court arena under the Travel Act. And Judge Fitzwater, in Forest Park, issued a very detailed order saying, Hey, that does apply, and it can be used to prosecute healthcare fraud. Now that case, it will be up on appeal and vigorously challenged by the defendants that were convicted in that case. But I think that's just going to be an example of clever, very aggressive federal prosecutors that are going to take advantage of every federal statutes, some, perhaps that weren't even designed to deal with what remedy they're trying to accomplish. And it's I think it's going to be the future of white collar crime enforcement.

Securities and SEC Enforcement Priorities

Jessica Magee: It's a great reminder that companies and individuals, while they need to be very focused on the rules and regulations that exist and how they've been applied cannot get comfortable that is going to remain state of play. It's always the case, especially when you see potentially an uptick or sort of a reinvigorated enforcement environment that there will be fresh takes at applying old statutes, new and creative and innovative ways to do that. We three talk a lot about the intersection of the SEC and DOJ or state securities regulators and criminal law enforcement agencies who regularly share information, work in parallel, as is their right, and often responsibility, to bring cases together. Certainly when I was at the SEC, we worked hard to figure out ways to, to apply statutes appropriately and judiciously but in facts that maybe were unique or new. We see DOJ doing that. So, Richard, I think it's a great reminder that we're going to see more of that and that people need to be aware and working with the right people to help them spot those issues before they intersect with them. Also on the topic of securities enforcement, you talked about this at the top of our conversation. I agree. I'm expecting to see a continued increasing trend in criminal financial fraud cases. Last year on the SEC civil side, insider trading cases made up, I want to say around maybe a little less a little more than, 10 percent of their overall cases. That's always going to be bread and butter. I think insider trading cases are going to be regularly referred to, to criminal law enforcement as well. But I do expect to see more sophisticated financial fraud referrals, especially in a potentially more aggressive enforcement environment. Do you agree or disagree with that?

Richard Roper: No, I agree. And taking up on a point you made earlier, every successful initiative I ever was involved in as a federal prosecutor, I'd say nine times out of 10, involve cooperation among, among federal agencies. And I think you're going to see that in spades in the future. You're going to see more parallel enforcement actions brought. You'll see more cooperation among the federal agencies, the CFTC, the SEC and the state securities boards, for instance. And I think I think they've got it, and they understand the piling on effect that will help them accomplish what they want to do with corporations. And so I think that is something that any GC needs to keep in mind, that they could be facing a case where federal agencies, along with their state and local counterparts, are piling on. And you have this kind of multi-pronged pincer movement by these agencies going after corporations.

Jessica Magee: And individuals. You know, I think everyone's been looking for individual liability accountability, and that's certainly going to continue. It's important for people that haven't experienced these things before to understand that state and federal agencies and regulators have easy means for real-time information sharing, really but for grand jury proceedings. It's the matter of a pretty simple access request, and agencies can be in a dynamic information-sharing state pretty quickly to help divide and conquer and build multi-pronged, multi-agency cases. And for an individual or company that may be dealing with an SEC. investigation, for instance, there may be an ongoing criminal investigation that they don't know is occurring. Information being fed to the criminal law enforcement agency or agencies and no real obligation to inform the investigator of that. So it's important to know that in a world where we're talking about icebergs, what you see may only be a small portion of what's really going on under the waterline and having a good crew on the ship to steward around is important.

Richard Roper: Let me give you an example of that, what I've seen in almost every federal investigation. Under 2703(a) of Title 18, federal law enforcement agents can obtain search warrants to obtain emails and other electronic data from an internet service provider, and they do that in secret without the holder of the account even knowing that they're getting that information. And I see that happening in almost every federal investigation, that they routinely, instead of issuing a grand jury subpoena or investigative demand, that they know a doctor who uses Gmail, for instance, or iCloud to preserve his electronic data and emails. And so they'll just drop a search warrant to obtain their emails and look through those emails. It raises a lot of issues. For instance, many entities communicate regularly with their attorney, and there's an issue of what kind of filter do the agents have to ensure that attorney-client privileged communications are not reviewed by the investigative team that obtains. And of course, since you don't know about it, you can't weigh in like you could traditionally do when a grand jury subpoena was issued. So it is literally a new playing field.

Best Practices for Companies and Individuals when Dealing with Federal Agents

Jessica Magee: Well, and for a financial institution, the privileged point is a scary one. Financial institutions, entities that have BSA know your customer AML requirements that might make suspicious activity reporting, there's just a whole area of, of communications that might be snagged under a warrant that should not be viewed or reviewed. Agencies have taint teams and filter processes, etc., and I know that they take those responsibilities very seriously, but it is a very scary place and it requires people that have not only worked in that area but know people and know how the staffs of the agencies are going to really flex their investigative muscles, whether it's through ECPA, Electronic Communications Privacy Act requests, warrants to providers, etc., so good reminders. And I think Michael, a good and scary time to segue into OK, what happens when we go from theoretical to actual and you, an individual, or you, a company employee, find yourself on the other side of a contact from criminal law enforcement? So, Michael, let's talk a little bit about best practices. Give us some opening thoughts and just sort of rules of thumb. If people don't remember anything beyond what you say in the next couple of minutes, what should they be keeping in mind if they get a touch from criminal law enforcement?

Michael Stockham: Yeah, absolutely. I think the first thing to keep in mind is to keep your head. Don't immediately freak out or start, well actually, start talking. You need to sort of think about where you are. It's not unusual for a federal agent to approach you outside of a building or your house or something else and start asking to visit or talk, and you need to remember that you don't have an obligation to do that at that time, that you can refuse to do it at that time and maybe offer to talk later once you've consulted with counsel. So the first thing is to kind of keep your head. I want to pivot off of one thing you said earlier about the iceberg underneath. As soon as any sort of government investigation or resolution of such an investigation is going to come public, especially if you're a publicly traded company, you also sort of have to keep the other leg of the stool in mind of plaintiffs' firms trying to calm that litany of press releases that comes down through all the financial website showing that certain plaintiffs firms are investigating you because of misconduct. And so one of the things you want to do as far as a government touch is make sure those people that might be touched actually understand some of the basic steps, but also, for good governance, the company wants to be looking at where is it looking forward if something comes down the pipe that is an action or something comes down the pipe that hits the stock price and suddenly you have a number of plaintiffs' firms working very hard to try to get a securities class action or other action up and running or even a false claims action. We're going to run into, especially in the healthcare arena, I think, a significant number of whistleblowers. I think we'll find a lot of whistleblowers in the PPP arena looking to, some people would say help the government, some people would say cash in, but they're going to be looking under the False Claims Act and creating a lot of activity there for the government, and a company, private or public, wants to be able to look and see if it's set up to defend against that. D&O insurance is one place to do that. Make sure you've got your whistleblower hotline set up in the right way so that certain calls that come into the hotline get escalated to the right people immediately so that the company can respond. So some of it is planning, especially on the civil side, once the government starts turning around. And then to toss it back to Richard here, let's do a real world situation. So I walk out of my house, I walk out of my house this morning and somehow there's a federal investigator outside on the way to my truck, and he wants to start asking me a bunch of questions about something. And he might have a document in his hand that looks kind of official from a court or somebody else. What's my first response, and what should I do in that situation?

Richard Roper: Well, I think if it's a search warrant, you're going to have to move out of the way and let them go in and not try to obstruct them. If it is a search warrant, you have a right to call your lawyer. You don't have to talk to anyone. I recommend that clients don't submit to an interview right at that point, especially on a white collar crime case, because the agent may have been looking at the case for literally years and is familiar with all the documents. He could ask, he or she could ask you questions that may go back two or three years that involve documents that you might have not even thought about for two or three years. And if you sit down and submit to an interview without being able to review documents, then you're less likely to give a correct answer. And of course, any time you sit down with a federal agent, especially a law enforcement agent, you practically are under oath. There's a statute called making a false statement to a federal agency during the course of the investigation, and so essentially, everything you say is like committing perjury. And so if you forget something, that could be considered not a honest mistake but rather an intentional lie. So if you decline and then you go in later on with counsel if you do choose to give an interview, you would have the benefit of being able to review material, look at it and then have a lawyer there to assist you. So that's usually what I recommend. I will say this, if they're searching for documents, one thing you need to keep in mind, of course, not obstruct the folks, the agents that are searching, but also you need to ensure, you need to think, where are all my attorney communications with my, that I've had during the course of many years? And those agents may have a right to seize those documents. They really have no business looking at those documents. So you need to identify for the agents where the attorney-client privileged material is located and make sure you put those agents on notice that you are claiming the privilege and that you insist that they not review those documents. I think that's very important.

Jessica Magee: So, Richard, assume that they that authorities show up at your premises. We'll talk about companies in a moment. But an individual, there's a search warrant being executed and agents see that you've got some computers and some phones and maybe some external hard drives or whatever, and they want you to log in and, and go through whatever password encryption, two factor, so that they can see it at that point. Is there anything that the person can do to slow that down, to stop that from happening and the agents just unplug it and take everything with them? What do you think is best practice there when it comes to password-protected devices and information?

Richard Roper: Well, you need to look first off, you need to look and see what did the search warrant says. Is there some kind of requirement that the judge placed to divulge what the passcode or is? Sometimes they try to do that. And you need, first off, you need to look at the document and see what it requires. Many times agents, really as kind of a courtesy, I think, to the businesses, they try to image. They don't take custody of the document, especially of file servers. How are you going to take custody of a file server. So what they do is they image it on site, and that may take 12 hours or so, depending on how big it is. They can image all the devices and also cell phones in certain situations. But it depends on what the warrant says. And of course, you don't have to consent. It is a warrant. You have to get out of the way and let them do it. But by and large, you don't have to divulge your passcode. Now, do you want to do that? That's an excellent question that you should discuss with your attorney, whether you want to go on and cooperate and give the passcode. Maybe you want to. Maybe you don't. But that's another reason you need to be in contact with counsel to help guide you through and discuss with you what your alternatives are and what you should do so.

Jessica Magee: So in that very moment, I've just had a knock at the door. Agents are in my premises. My lawyer is not with me. It's just a random day of the week. Can I ask to see a copy of the warrant? Must they show it to me to give me an opportunity to read in that moment?

Richard Roper: Yeah, normally agents are good about giving the location, the owner of the location, copies of the warrant. That's pretty much standard operating procedure. What they won't give you, because it's usually placed under seal, is the affidavit they give that they took to the judge that convinced the judge that there is probable cause for the search. So they're not going to give you that, by and large. I would say the difference between, say, 1987 when I started as a federal prosecutor and today is that almost all search warrants are routinely sealed, which wasn't the case years ago. And so they're sealed. What else they have to give you when they leave, they have to give you the inventory of what was seized, which is a very important document, and you should make sure you ask for that if they don't give you that.

Jessica Magee: So they've just knocked on my door. I'm being diplomatic. I know that I don't have to voluntarily speak to them, but I need not to obstruct them or interfere. I shouldn't go around hiding things or shredding things, but I should ask for a copy of the warrant, certainly the inventory when they leave. Is it appropriate, so long as I'm being diplomatic, that I say, you know, I really do need to get on the phone to my lawyer, no, I'm not comfortable logging into my computer until I speak to my lawyer or my lawyer's on his or her way. That's a completely appropriate and strongly encouraged step, correct?

Richard Roper: Yeah. You, you don't have to. Of course, a lot of folks, especially that have not had a lot of contact with law enforcement, they want to cooperate. Part of being an American, they want to help out law enforcement, cooperate, and you certainly can do that. But there's always a place and time, and there's no requirement that you do certain things. You have obviously, you have a privilege against self-incrimination. And many times folks will say, "Well, you know, do I really need a lawyer? If I get a lawyer, will people think I'm guilty of, the agents will think I'm guilty of something?" No, that's not the case. I think many people ask to have lawyers present before questioning. And some people think, "Well, you know, I'll just answer a few questions, and it will placate them and they'll leave me alone." Because it's a very concerning situation to have a federal agent, armed federal agent out asking questions or trying to dig up information. And so you think, "Well, maybe I can just placate them," but that normally doesn't happen. These guys are trained investigators. They've gone to school to learn how to ask questions and dig down and find out, and many times the interviews will last for hours. So, I always recommend that you don't resist that temptation. And there can always be a time after you've had a chance to talk to your lawyers to fully cooperate with the investigators.

Jessica Magee: I don't think anyone ever was worse off from taking a moment, taking a breath, thinking. Whether you're an individual planning for the future thinking or just tucking this away in case it ever happens, or a company, to me, it's process, process, process. And really turning to the company side, if you're a line employee ,an executive, what have you, and you receive a subpoena, a warrant, someone from law enforcement shows up at the office with a receiver and court orders, it really is a time to fall back on muscle memory and process, which means having a procedure, knowing what that procedure is and following that procedure. And that starts now. I mean, that's something that companies need to be doing all the time in terms of understanding what is our document management system, what are our preservation requirements, what aren't they? Who do we deliver a document to if we receive a warrant or a subpoena? Who do we have to escalate information to? Who is our counsel, etc.? Michael, what would you add to that, really in terms of making sure you have a good process in place for when a day like that comes? I mean, the fact of the matter is most companies, especially public companies of a certain size, at some point are going to deal with some inquiry from some regulator or law enforcement, whether it's municipal, state, federal, what have you. What would you add in terms of making sure on the front end at least to be thoughtful about processes and planning so that you are as intentional as possible in that moment that can be panic-inducing, really?

Michael Stockham: Absolutely. So some of it is training, of course, making sure that you understand and tell the people that might be the most likely to receive that kind of information or a search warrant or a subpoena or something like that how to respond. I think it's, I think it's human nature to try to be helpful, and so I was, I agree with Richard wholeheartedly that the number one impulse most people have, just regular old civilians that are walking down the street when law enforcement comes up and starts asking questions, is to try to be helpful. And I think that's compounded even more the further up the management chain you go because those individuals are used to having all the answers. That's what their whole job is, is to have the answers and make decisions. And so the impulse to, let's go in or let's talk, and if they only knew, if the government only knew the true facts, then this wouldn't be a problem and they'd just go away. And I think Richard's 100 percent right. They're there for a reason. They have a narrative that they think they've built off of a specific amount of evidence. Either the subpoena came in that way because they think they have something. If it's a search warrant and they're on the premises, then they really think that something is going on. And so, just having a casual conversation is not going to dissuade those individuals from what they're doing and just turn it around. So you really need to sort of deal with it as the crisis situation it is. A lot of people do tabletop exercises for cybersecurity. What happens if we have a breach? Where do the communications go? How does it work? Who's going to be in contact? Do we have an email blast list of the most important people so that everybody's involved? And I don't think that's a bad idea for if the government shows up with a search warrant, because there's, as much as nobody wants it to happen, it's a pretty chaotic moment when a dozen or two dozen or, I've been someplace where four or five dozen, federal agents come through the front door at one moment and start shutting everything down and asking for documents and holding out copies of the warrant. And it scares a lot of regular, everyday folks, and trying to communicate to them how best to deal with it is key. For example, real world situation, and I can throw this back to Richard, you have three dozen officers come into an office building, into an office suite, and the very first thing they do is give the search warrant to the general counsel, but they take all of the employees, dozen employees, and put them in a conference room all by themselves, with no contact to the general counsel, no contact to outside counsel. And then at, then basically explain that they're going to interview them one by one before they can leave the room. What is a general counsel who is essentially the only sentry on the wall at that point, how do they behave? What's the best, what is a strong way to behave one, to protect those employees, the company, and two, not run afoul of that obstruction of justice line?

Richard Roper: It's a tough situation to be in. Normally, what you do is try to prepare beforehand to educate your employees about what they can and can't do if they were approached by law enforcement to talk. The best way is that to be in place before the, the agents show up. They can't really, they, they can't detain unless it relates to a specific item in the search warrant - in other words, if the search warrant authorized the seizure of phones, cell phones on site. But, just approaches somebody and tell them, you know, they can't leave, really would be a violation of law unless they have a reason to detain them. And you can ask them that, "Am I being detained?" And if they say no, then I'm free to leave then, and you can leave. Again, the reason you may do, and I usually recommend that you don't submit an interview, not in an effort to obstruct the case, but rather to try to find out what the agents are asking about and giving us an opportunity that maybe we can produce evidence that answers their questions and there won't be a need for the interview. That sometimes. But you just have to keep in mind that sitting for an interview with federal agents, they're going, they usually don't record those interviews unless they're arresting somebody and it's a custodial interrogation situation. So they won't usually record the interview. So essentially, it's going to be you and two agents, one taking notes. And then three years later, you didn't take notes, you didn't record it, and the agents have generated an FBI 302 that essentially has their version of what you said during the course of this interview. That can be a problem. Essentially, your word, two years later, versus a federal agent's documented, memorialize, memorialization of that meeting. And look, I've seen, either as a federal prosecutor or as a defense attorney, I've seen 302 interviews or other memoranda of interviews that didn't exactly recite truthfully everything that was said. Now, it could have been an honest mistake, or the agents could have been hearing what they want to hear. But the reality of it is I've seen memoranda of interviews, FBI 302, that don't faithfully recount what happened during the course of the interview

Jessica Magee: Well, and it shouldn't be lost on a person that an interview with one or well, usually two or so agents, is likely to be one of the most, if not the most, crucial conversations a person may have in their lifetime. It is not something to be undertaken lightly or without reflection or preparation, if at all possible. And to your earlier point, Richard, agents are trained and retrained and trained again on many, many techniques for approaching interviews and for their mannerisms and their methods of inquiry in interviews. And so, creating an atmosphere where a person feels like it's going to be awkward and uncomfortable. They will seem disrespectful or rude if they don't sit down and just have a casual conversation. Let me buy you a Coke. Let's just sit down in the break room. That is not a casual conversation. You are being invited and welcomed into what feels like a casual conversation by a trained expert. And it really, like marriage, should not be undertaken lightly. And so to me, if nobody takes anything away from this conversation, but one point it is the seriousness and gravity with which a person and a company should regard the actual intersection with criminal law enforcement and preparation and process on the front end. Creating some plan and muscle memory and then trying your best to stick to it with trusted advisers on the back end really is the best recipe for the highest likelihood of success. For those watching today and who follow us on LinkedIn and otherwise, we'll continue this conversation in sort of a desk reference form, a cheat sheet, if you will, of what to do and what not to do in these instances. Nobody expects perfect memory or recall, and certainly we've only begun to scratch the surface today. But as we wrap up and conclude our hour, Michael, what would you say are your biggest takeaways? For me it's preparation and pause, really recognize that when the rubber meets the road in situations like this, you are well-served to just take a moment. It's not rude, it's not inappropriate to ask for counsel, to reach your counsel and be deliberate about what will be the most crucial conversations of your career or more. Michael, what are your big takeaways?

Key Takeaways

Michael Stockham: Well, I agree wholeheartedly with the preparation. I mean, if you think about this in advance, especially if you know, if you have an inkling that the government is nosing around somewhere, you can go so far as to, if you're general counsel of a firm, figure out through your normal counsel who would be a good say, pool counsel, for the employees. So if that search warrant does come through the front door and everybody does get piled into a conference room, you already have a name on speed dial of a person that is going to be that these people are represented by if they want to be represented. That's a dire situation, when you know the government's already sort of potentially looking at you, but the idea of being prepared is key. And then I think another huge idea that needs to be thought of is leadership. A lot of this preparation gets pushed from the top down. It's the folks in the top, at the top, the executive level, the ownership level, the general counsel level, that need to be thinking three or four steps ahead of where the company is in light of the business they do, the regulations under which they live and laws. And then also, we're in a changing era right now with a new administration coming in, and people should be reflecting, are we going to find increased scrutiny? Are we going to find an increased pressure? Is it a real potential that these type of white collar issues are going to be coming down the pike? And if that's true, then you need to have a plan, especially if your general counsel or deputy general counsel on this is your area. If the government comes through the door with a search warrant, the first poll is going to be to you. And it would be nice to have a bullet point list of, "This is how we're going to handle it," one, two, three, four, to catch your breath and demonstrate that you've got the situation under control.

Jessica Magee: Well, I think the reminder to leadership to do an enterprise risk assessment right now or, don't let that slip. Look at your org right now, think about the priorities that we are identifying as coming down the pike from criminal law enforcement and others, and, and look at your or realistically and openly to think, where might we have risk? Where might we be subject for government to look? And what do we do if they take a close look? Richard, I want you to finish us off here. I've said, take a beat. Try to have a plan. Try to stick to a plan. Take a breath if you find yourself on the other end of a touch from the federal government. Michael agrees with that. He wants process in place. He wants leadership to be ready and self-aware. What would you say are parting words, big takeaways for companies and individuals after everything we've talked about?

Richard Roper: Well, it's you can't plan once they show up, you know, it's deer in the headlights. So I think it would get with your lawyer and come up with a plan and be prepared. The old Boy Scout motto, "Be prepared," comes into play for all, anyone, individuals and corporations, and I think that's the best takeaway, is be ready and be prepared. And in this day and age, with these more aggressive priorities, it will continue. We haven't talked about some of the other priorities of the administration. We can leave that for another day, but there will be more enforcement, and all corporations and individuals need to be ready for it in the white collar area.

Jessica Magee: Well, I said it once today, I'll it again, I can think of no one better suited than you, Richard, to, to talk with us and with others about what you see coming down the pike from law enforcement and also how to think about it and how to be ready for it. You lived it and breathed it both in government service as the lead law enforcement officer in the Northern District of Texas and for many years now as a partner here at Thompson & Knight. And it's just been such a treat to have you join us today, wish we could just walk down the hall and sit in each other's offices and talk about this, but it's a nice substitute. And for those of you watching today, we three and our colleagues in the White Collar Securities and Government Enforcement Group at Thompson & Knight live and breathe these things. We love them, we know them, we've dealt with them on all sides: in government, outside of government and advising individuals, boards and everyone in between. And it is our pleasure to talk with you all about these topics today. We'll be continuing the conversation as we go forward, and as ever, our contact information will be available at the end of this talk and at tklaw.com. We invite you to reach out to us anytime with questions or anything you just want to bat around. And until our next Coffee & Conversation, I'll say thank you to Richard Roper and Michael Stockham, and I hope everyone has a great rest of their week. Bye bye.

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