Congressional Investigations: An Outlook on Republican-Led Oversight in the 118th Congress

In the 2022 midterm elections, Republicans are heavily favored to win control of the U.S. House of Representatives and are currently considered to have even odds of winning control of the U.S. Senate. Should the 118th Congress have one or both houses controlled by Republicans, there will be narrow opportunities for agreement with the Biden Administration on major legislation. Instead, congressional oversight and investigations are expected to be a major theme of the next two years.

History may suggest that a Republican-led house of Congress would devote its attention to the Biden Administration rather than the private sector and non-governmental actors, but this is not necessarily the case for the 118th Congress. The conventional practice of accommodation on congressional oversight by the executive branch has frayed over time, as has trust of the business sector by Republican voters. As a result, businesses in a range of sectors as well as tax-exempt entities and government contractors should expect intense congressional oversight in the coming Congress. For example, investigations aimed at examining the Biden Administration's initiatives in COVID-related and infrastructure legislation may involve collateral damage to private-sector entities benefiting from related programs. These matters should not be considered routine lobbying issues or white collar litigation – the risks they pose and the strategies necessary to counter them are entirely different.

This Holland & Knight alert outlines the challenge of receiving a congressional inquiry, the possible U.S. House of Representatives committee chairs and their likely oversight agenda, and the specific sectors and issues that Republicans are expected to examine in the near term.

The Challenge of Congressional Investigations

For even the most experienced and well-resourced companies, congressional investigations can be a harrowing experience. Even though Congress's power to investigate does not appear in the Constitution, courts have long held that Congress's investigative powers extend as broadly as its power to legislate. In reality, this has meant that a congressional committee can investigate virtually any matter the chair deems appropriate. Most congressional committees have a formidable arsenal through which to conduct investigations, including compulsory subpoenas for records, staff-led depositions or witness testimony in a public hearing. Each house of Congress can hold an entity in contempt for failure to comply with a subpoena and refer matters to the executive branch for criminal investigation. The vast majority of congressional investigations are conducted through voluntary document requests and negotiations, but the ability of Congress to compel compliance, if it so chooses, always looms in the background of any voluntary process.

Congressional investigations often take place publicly and can begin without warning with the public release of a voluntary document request creating headlines that can harm an individual's or company's reputation and other interests. Unlike civil litigation or executive branch investigations, there is no judge or neutral third-party arbiter to resolve disputes and no standard for launching an investigation. In most cases, the only recourse for disputes over the scope of an inquiry, requests to respect privileges or confidentiality or efforts to extend response deadlines is through negotiations with the committee staff conducting the investigation, and decisions on these matters are largely at their discretion. Congressional committees are, in essence, both prosecutor and judge.

Entities on the receiving end of a congressional inquiry often make one of a spectrum of mistakes in response. On one end of the spectrum is to treat the inquiry as a purely lobbying matter – as if having influence on Capitol Hill, close ties to the chair or staff, or having other political influence will resolve the inquiry. It rarely will. On the other end of the spectrum is treating the inquiry as if it is litigation or a law enforcement matter and to approach it as a bare knuckled brawl, seeking to quash subpoenas (not an available option) and the like. These tactics are more likely to intensify the inquiry than resolve it. Congressional investigations are a unique challenge that require a distinct skill set of negotiation and risk assessment, knowledge of House and Senate rules, skilled public relations efforts and relationships with the staff conducting the inquiry.

As a practical matter, most congressional investigations carry no legal penalty (barring perjury or contempt). However, brand damage, harm to stock prices and possible follow-up investigations by inspectors general and others can often result from a congressional inquiry.

Companies and individuals across a broad spectrum of the economy should prepare for this challenge now.

Congressional Investigations in the 118th Congress

Should Democrats retain the Senate, they are likely to continue their oversight focus on similar issues as in the 117th Congress: climate change, the oil and gas industry, drug prices and related issues. Rather than focusing on the likely Democratic oversight agenda, this alert will focus on the House Republican oversight agenda, which would also apply in the case of a Republican majority in the Senate.

House Republican oversight staff is actively working on an oversight agenda for the 118th Congress and expects to start sending oversight letters in the first weeks of the new Congress. A part of that oversight agenda will be the expected investigations of the Biden Administration and issues directly related to President Joe Biden, his family and administration officials. But because of lessons learned from the interactions between Congress and both the Obama and Trump Administrations, there is a growing awareness among congressional oversight staff that letters and document requests to the White House or federal agencies are unlikely to produce useful information. For that reason, there is a consensus among Republican oversight staff that the most politically effective oversight should focus on entities outside of government who have more limited means of resisting congressional investigations and greater incentive to respond to requests from congressional committees.

While Republicans have historically been less likely to conduct oversight of the private sector than the administration, it appears as though those days are over. With limited exceptions, potential incoming Republican chairs are looking to conduct oversight and launch investigations on a litany of private sector entities, including but not limited to matters involving so-called "woke capitalism" (public companies taking political positions allegedly counter to shareholder interest); environmental, social and governance (ESG) requirements on public companies from the federal government and large investment institutions; Chinese involvement in American research and business; spending under recent legislation; and the Biden Administration's responses to the COVID-19 pandemic.

To understand the potential risk, it is important to know the congressional leaders who will likely lead oversight efforts in the next Congress.

Likely Oversight Leaders in the U.S. House of Representatives

While there are a few committees with contested leadership for Republicans, the likely oversight agenda of each committee is fairly well known. Oversight targets will, of course, evolve in reaction to events, but the following items are likely topics of day-one investigations.

The Changing Nature of Republican Oversight and Probable Subjects of Investigations

It is no secret that Republicans, with the expectation of winning the House of Representatives and possibly the Senate, are planning a robust agenda of oversight and investigations. In past Congresses, when Republicans hold one or both houses and the president is a Democrat, oversight has tended to focus on the administration. Plenty of oversight activity will be focused on the Biden Administration, but the business sector, tax exempt sector and others should also expect a greater degree of congressional scrutiny.

The following private-sector matters are highly likely to be the subject of congressional oversight in the 118th Congress should either house be controlled by Republicans.

Recipients of Federal Aid

Republicans in Congress should be expected to conduct rigorous oversight of major recipients of federal aid under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), American Rescue Plan Act of 2021, Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA). This oversight will include representations made in loan applications and the use of federal funds under programs authorized by recent legislation. 

"Woke Capitalism"

A Republican house of Congress should be expected to closely examine pressure from major investment entities related to perceived liberal policies as well as social and political policies that are thought to be counter to shareholder interest. These will include corporate policies related to diversity, equity and inclusion (DEI) as well as requirements related to ESG concerns. The targets of these inquiries are likely to be wide-ranging across the entertainment, investment, technology and retail industries.

China-Related Inquiries

It is difficult to overstate the degree to which the People's Republic of China (PRC) will be a primary focus of oversight in the 118th Congress. Any PRC-owned entities or U.S. companies with supply chains originating in China are very likely to come under scrutiny related to the influence of the Chinese Communist Party in domestic affairs. A major part of the expected oversight will include the U.S. supply chain, influence of the Chinese government and risks to both U.S. intellectual property (IP) and individual privacy.

"Greentech" and Recipients of Energy-Related Funding

The Biden Administration and Congress have allocated billions of dollars to the greentech sector, including hydrogen and battery technology. These funds are expected to come under close scrutiny as Republicans in Congress search for the next Solyndra-like scandal.

"Big Tech"

It is also difficult to overstate the animosity Republican voters have toward social media platforms. This is likely to result in intense oversight of social media platforms and their policies related to data privacy, the promotion or demotion of posts and political stances overall. Big Tech is also likely to be scrutinized for its relations to the PRC as well as antitrust issues.

Tax-Exempt Entities

Republican oversight staff is highly likely to conduct oversight staff of tax-exempt entities, especially as they pertain to Chinese influence of major tax-exempt entities in the U.S.

Colleges and Universities

Large private endowments continue to be a likely area of congressional oversight. Considering the general distrust among many Republicans of elite institutions, the perceived political bias of their leadership and the significant federal funding of higher education, this will be a likely topic of intense oversight in the 118th Congress. Likely oversight matters will include rising tuition and administrator compensation, endowment investments and disinvestments (such as efforts to disinvest from Israel or Taiwan), Chinese influence on college campuses, university speech codes and political bias, and related matters.

What's Next?

Although the specific targets of congressional oversight in the 118th Congress remain unknown, there are steps potential targets of a congressional inquiry can take to minimize the risk of congressional scrutiny. Before congressional inquiries begin, it is critical to both establish communication hygiene and take stock of potential risks, as well as develop a response plan and team that will coordinate response. These matters should not be considered routine lobbying issues or white collar litigation – the risks they pose and the strategies necessary to counter them are entirely different.

Holland & Knight's Congressional Investigations Team is well positioned to handle all aspects of a congressional investigation and related matters. The Chambers-ranked Congressional Investigations Team, along with the firm's Political Law Team, are integrated and consists of professionals who have led congressional investigations as committee chairpersons, key congressional investigations staff, political law experts, white-collar litigators and public policy professionals. 

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.