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Paul Coggins, U.S. attorney for the Northern District of Texas, was the keynote speaker at the quarterly meeting of the Texas General Counsel Forum held in Dallas in September. His presentation was titled “Keeping Your CEO Out of Prison.” Coggins said the most important impression is the first impression, and that counts for dealings with government investigators and government prosecutors. He reported that most criminal investigations begin with a tip from an insider. Therefore, the government investigators or prosecutors are likely to have an initial perception of the individuals and corporations being investigated that is colored by the whistleblower’s viewpoint. The first reaction by those being investigated can thus have a strong impression, either confirming or rebutting the initial perceptions of the government investigators or prosecutors. According to Coggins, these first impressions can color the entire investigation or prosecution. Coggins shared a number of examples where those being investigated compounded their problems by their initial reactions. For example, one individual who was being investigated for the tax treatment of a real estate deal decided to have a meeting with his insiders to discuss how the deal should be described to the Internal Revenue Service. One of the individuals attending the meeting was working with the IRS and secretly videotaped the meeting. The individual who was being investigated unknowingly looked at the camera during the meeting and said, “If the government ever got wind of this, I’d have to go to federal prison.” Similarly, another individual being investigated for personal use of public funds called a co-worker to encourage her silence. Again, unbeknownst to the person being investigated, the conversation was being recorded. There, the soon-to-be-indicted defendant said, “You can’t possibly tell these people what happened; if you do, I’m going to federal prison.” Clearly, these individuals made the government’s case much stronger by the way in which they reacted to the government’s investigation. On the other hand, Coggins shared a more positive example involving an individual who was paying kickbacks. This individual chose to make a quick and full disclosure to government investigators. He explained that he had resisted paying kickbacks, but that he was unable to compete in the marketplace because his competitors all routinely paid the kickbacks. Therefore, he admitted to having made the mistake of deciding to play the game too. The government exercised its discretion to seek a civil fine only and did not charge this individual criminally. However, the government then targeted others involved in the kickbacks who had not made early and full disclosures to the government investigators. Coggins emphasized that if someone has a criminal problem, he does not want to rely on amateurs. People who aren’t used to dealing with criminal matters may think they are helping the company by their reaction while inadvertently putting the company in a hole they can’t dig themselves out of. For example, an unknowing person may choose to delete computer records, destroy documents or try to refresh someone’s memory in a heavy-handed way, thinking he is helping solve the problem. However, these actions often make the problem worse and help seal an indictment or conviction. Further, although there is no right to discovery from the government prior to a criminal indictment, Coggins explained that government lawyers will often share information informally with counsel they consider competent and ethical. Good counsel can sometimes glean a lot of information from the government and start making a case early that perhaps the government has taken the wrong track. Good counsel will also know when to approach the government. Coggins shared that a company can really injure its credibility if it tries to make its case too early. If a corporation or its representatives come to the government at a time when they don’t know the whole story, they may make strong assertions that the government knows to be untrue. This can undercut the credibility of the corporation and its representatives and affect the entire investigation. Coggins offered that in some circumstances a company that is being investigated can request that the investigators back off for a short period to allow the corporation to investigate the situation and then report its findings to the government. If the government investigators have confidence in the corporate representatives and counsel, this can give the corporation an opportunity to do the right thing and minimize its criminal exposure. Having a real compliance program in your company can also be a determining factor in how the corporation comes through on a criminal investigation. Coggins said that the strength of a company’s compliance program may determine whether the government decides to prosecute the company or its officials. A strong compliance program can help the company discover potential crimes before the government does; as a result, the government may deal with the company quickly and decisively as a good corporate citizen. The strength of a company’s compliance program is also an explicit factor in the sentencing guidelines for a corporation. COMPLIANCE PROGRAMS Coggins stressed that a corporate compliance program must have a code of conduct for employees and suppliers, and should require the employees and the suppliers to sign that code of conduct. He said the compliance program should also take into account typical conflict situations a company may face and the correct response for each. Coggins felt a compliance program should set out clear lines of what is prohibited and what the penalty will be for violating each prohibited activity. He suggested that the compliance program include background checks and training on ethics. The message he suggested for company employees is that they shouldn’t push the envelope. In measuring the success of a compliance program, investigators and prosecutors will likely ask whether the corporation did everything possible to open the lines of communication in the company so that if someone had a concern, he could come forward and speak about it. Coggins also recommended that corporations have an ethics adviser, an open-door policy and a hotline or some other way for employees to make anonymous calls or tips if they think something is wrong. He also suggested that internal and external audits are important parts of a compliance program. Finally, Coggins stressed that if companies don’t follow through with sanctions when the code of conduct is violated, then the code is worthless. Coggins suggested that corporate counsel should prepare for a crisis in advance of the crisis. For example, when corporate counsel read about a company that is being investigated, they should think about what they would do if faced with a similar problem at their company. According to Coggins, companies should hire highly competent counsel, determine the facts as soon as possible and consider making a voluntary disclosure to the government. According to Coggins, the way in which a company prepares for and reacts to a criminal investigation can greatly impact the outcome of the investigation. If the government sees a corporation as one that believes in playing by the rules and disclosing problems, it’s more likely to receive favorable treatment. On the other hand, if a corporation is viewed as one that cuts corners and pushes the envelope, then the government investigation will likely be more difficult. The government’s strategy throughout its investigation is likely to turn on its reading of a company’s corporate culture.

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