The voluntary cooperation of current and former employees of the company is critically important to the success of an internal investigation. In an ideal world, all relevant current and former employees would cooperate fully with counsel conducting an internal investigation, submitting to interviews and providing all necessary documents. In the real world, however, counsel frequently encounter potential witnesses who are reluctant to cooperate. This reluctance may arise when the witness’ conduct or the conduct of his or her close friends or associates is the focus of the investigation, and/or if the witness may face civil or criminal liability.
This article first discusses the kinds of cooperation and assistance that outside counsel may want to seek from current and former employees during an internal investigation. It focuses next on corporate cooperation agreements in particular as a means by which company counsel can encourage a greater degree of cooperation and assistance from key employees. It describes potential terms to include in such an agreement and reasons to execute such an agreement. Finally, it discusses the related issue of encouraging cooperation and assistance in an investigation by former employees.
Counsel conducting internal investigations lack subpoena power, and rely instead upon the voluntary cooperation of witnesses at every stage of their investigation. Employee witnesses typically help counsel identify relevant documents and sources of information and help compile or identify them for attorney review. Although the documentary evidence often is a good source of information, the knowledge and recollections of witnesses usually hold the key to properly interpreting the documentary evidence and/or understanding what happened. Thus, in virtually every investigation, counsel will interview witnesses. Witness cooperation also is critical if and when regulators or investigative agencies commence their own investigations into the same conduct, which may either follow the company’s own investigation or proceed simultaneously. During government investigations, relevant employees will continue to assist counsel in responding to government requests for specific kinds of information and documents. The government will almost certainly request to speak with certain employees. From the perspective of the corporation, it would be ideal if those witnesses share their recollections with the corporation’s attorneys in advance of such interviews.
One way to encourage current employees to cooperate with outside counsel during an internal investigation and respond to subsequent government inquiries is a corporate cooperation agreement. Broadly speaking, in these agreements, the employee or other witness agrees to cooperate in exchange for a release of liability by the corporation. Even if the corporation may not have a claim against the witness, the peace of mind a witness can obtain from the agreement nonetheless could be a powerful incentive for him or her to cooperate.
Though the language of a corporate cooperation agreement will vary from situation to situation, practitioners should keep a few basic principles in mind when drafting such an agreement. At the outset, the agreement should clearly spell out the kinds of disclosure, cooperation, and assistance that will be required of the employee. The agreement should require the employee or other witness to disclose all information about the conduct relevant to the investigation, including information about illegal conduct or employee conduct contrary to company policies.
The agreement also should require that the witness cooperate with the internal investigation by answering questions, submitting to interviews (perhaps multiple times), locating and identifying relevant documents and complying with other reasonable requests that counsel may have during the course of the investigation. Finally, the agreement should require that the employee or witness cooperate in any future litigation or government inquiries that may arise. The agreement should define the topic areas within the scope of the agreement’s disclosure, cooperation, and assistance provisions broadly to ensure that it covers potential areas of future, related inquiry.
A corporate cooperation agreement should include confidentiality provisions barring the employee from disclosing the existence of the agreement, its terms, or any information provided to the company pursuant to the agreement by the employee. These provisions allow the corporation to control the sharing of information provided by the witness, and the agreement should state that any violation of the provision constitutes a material breach of the agreement. These provisions should contain appropriate carve-outs for disclosures by the employee to his or her attorney, in actions to enforce the terms of the agreement, or otherwise as required by law (in particular, when such information is requested of the employee by a government agency).
If appropriate, counsel should also consider including restitution provisions in the agreement that require the employee to pay the company for damage caused by his or her conduct. Restitution provisions should take into account the employee’s position (whether a senior executive or a low-level employee) as well as his or her finances and ability to pay in determining the size and schedule of payments.
In exchange for these covenants by the employee, the company typically agrees not to sue the employee or witness (or, potentially, any of his family members or any entities owned by the employee as well), or to seek restitution or reimbursement beyond what is required in the agreement, related to conduct by the employee prior to the effective date of the agreement that is disclosed pursuant to the agreement. The company may also ask for similar releases by the employee of any claims he or she may have against the company.
What the company cannot promise, however, is that the government will not bring its own civil or criminal charges against the employee for that same conduct. The company also cannot, and should not, promise that it will not later bring the employee’s conduct to the attention of the government, either if the company wants to cooperate with an ongoing investigation or if it determines that self-reporting is legally required or strategically wise. For these reasons, the company should ensure that the employee understands the agreement and may even suggest that the employee consult his or her own counsel before signing.
Why might a company want to execute a corporate cooperation agreement with employees who are reluctant to cooperate fully with an internal investigation? These agreements provide employees with significant protections related to their own exposure in exchange for the employee disclosing what he or she knows and assisting with the investigation. The result is more complete fact-finding. Also, assuming the agreement does not limit the company’s ability to cooperate with the government by disclosing relevant facts, the government is likely to view such agreements favorably if it ultimately investigates and has to decide whether to charge the corporate entity.1
Further, an agreement that includes restitution provisions permits the company to recoup damages from an employee quickly, rather than through costly litigation or a lengthy government investigation of and settlement with the employee. Controversy may arise, however, if the agreement becomes public; shareholders may view such agreements as releasing legitimate claims that should have been more aggressively pursued by the company. Counsel will be able to counter these arguments by pointing to restitution payments that have already been made by the employee to the company as part of the agreement.
If the witness is a current employee, another option for obtaining cooperation would be to make it a condition of continued employment. This option, of course, may not be available in some situations, such as when the employee has a contract and there are no clear grounds for firing, or if the employee is a whistleblower subject to statutory protections. Even if firing the employee is an available option, exercising it could lead to collateral employment litigation with the employee, who may attribute the firing to an alternate motive.
And, of course, there is always the possibility that the employee may possess damaging information that he or she could use to the detriment of the company or share with a rival or regulator. Generally speaking, the explicit threat of firing an employee carries greater risk than bargaining with the employee.
Terminating an employee who is central to the conduct that counsel is investigating is a drastic measure and one that may have significant consequences. Not only does it mean that counsel is now certain to have difficulty gaining information from the employee, but it may also turn that employee into a government whistleblower when he or she would not have been so inclined previously. In determining whether to execute a corporate cooperation agreement, counsel should balance the desire to punish wrongdoing by its employees with the need to conduct a credible, thorough internal investigation. Counsel also should balance the need for additional cooperation from the employee with the possibility that firing the employee for outright misconduct may be in the company’s best interests, especially when viewed by government agencies that are investigating or likely to investigate.
Obtaining the cooperation of former employees or third parties presents a slightly different, but related, set of issues. Because the company does not employ these individuals, company counsel has less leverage with which to encourage additional cooperation. As a result, counsel must consider whether additional cooperation beyond that which they are already providing is truly necessary to the investigation. Discussions with non-employees about an internal investigation increase the risks of that investigation becoming public, as these individuals may not be bound by the company’s non-disclosure policies.
Corporate cooperation agreements may be a productive option for obtaining cooperation from non-employees, especially former employees. In the case of non-employees, in addition to the other provisions discussed above, such an agreement typically includes a provision for compensation to the non-employee for his or her assistance with the investigation.
In the case of former employees, counsel should not enter into a cooperation agreement without first checking to see if there is a pre-existing severance agreement requiring the former employee to cooperate with the company. Severance agreements may condition certain benefits to the employee that are contingent upon reasonable cooperation for a period of time with investigations by the company. If such an agreement is applicable, counsel may be able to convince a former employee that it is in his or her best interest to cooperate rather than face potential litigation or arbitration over the terms of a severance agreement.
Securing the cooperation of reluctant witnesses is a perennial problem in internal investigations. When appropriate, counsel can try to use the agreement by the company not to pursue potential claims to persuade a reluctant witness to come forward and provide assistance. Such an agreement may also allow the company to obtain restitution from the employee for his or her misconduct. This strategy has certain risks and may not always work (e.g., in cases where the employee has substantial criminal exposure), but counsel should consider using such agreements to enhance the comprehensiveness of an internal investigation.
Michael B. Mukasey, the former U.S. attorney general and former chief judge of the Southern District of New York, is a partner in the litigation department at Debevoise & Plimpton. Helen V. Cantwell is a partner in the firm’s litigation department and was an assistant U.S. attorney in the Southern District. Philip A. Fortino and Lee A. Greenwood, associates at the firm, assisted in the preparation of this article.
1. See U.S. Dept. of Justice, U.S. Attorneys’ Manual, Principles of Federal Prosecution of Business Organizations §§9-28.720, 9-28.730 (2008).