You Receive a Subpoena: Now What?
Every company dreads a visit from an FBI agent with a grand jury subpoena or a search warrant. I have previously outlined (here) how a company should prepare in advance for a search warrant and what steps to take when the FBI arrives on your doorstep.
A grand jury subpoena should not be a “surprise” event in corporate life. Given the ever expanding list of federal crimes, the continued criminalization of otherwise regulatory or civil violations, and increasing numbers of prosecutors focused on corporate criminal activity, a company should have a plan in place for dealing with a grand jury subpoena.
The first – and most important – question for the company is determining its status in the investigation. This can range from a witness, a subject or a target. Of course, the status can change as the investigation develops. At the outset, the company needs to confirm its status. The grand jury subpoena will provide the information necessary to make an educated guess on that issue.
Many attorneys regularly misunderstand and improperly use the term “target.” As used by the Justice Department the term does not refer to someone the prosecutor “wants” or is “hoping” to indict; in fact, the term, as defined in the US Attorney’s Manual defines a “target” as a “putative” defendant, meaning that the government intends to indict the company or individual.
A “subject” of a grand jury investigation means that the company or individual’s conduct is under investigation; a “witness” is not under investigation but is only being required to testify or produce documents as a witness to a subject’s or target’s conduct.
With that background, the response to a grand jury subpoena as a “witness” is different than a “subject,” because a subject can easily turn into a target and is usually the beginning place for every major investigation.
Assuming that the company is a “subject” of the grand jury investigation, the company needs to move quickly and take a number of important steps[s before even getting to the overall strategic plan for responding to the grand jury investigation.
First, the company has to notify its emergency response team which has been identified for responding to important issues such as criminal investigations. This top crisis team should include the key management figures cutting across leadership, communications, compliance, finance, legal and information technology.
Second, the crisis team company should rely on identified action members of each function to carry out immediate steps to respond to the grand jury subpoena.
Third, the company needs to develop a basic understanding of the issues under investigation. This is relatively easy to do and requires the company to rely on some of the key senior management officials who have knowledge and are responsible for the activities under investigation. Within this scope of investigation, the company needs to identify key managers and employees.
Fourth, the company needs to notify the appropriate officers and employees to preserve relevant documents by issuing a hold notice, and to notify employees that government agents may attempt to speak to them. The notice about government contacts should be carefully drafted so that there is no misunderstanding about each employee’s rights and the role, if any, of company counsel.
Once these initial protective steps are taken, the company needs to take a deep breath and begin its internal review of the issues raised by the subpoena, the alternatives it has for conducting an initial assessment of its exposure or potential exposure, and overall strategy.
The company should have in place a protocol for initial assessments of risk and exposure. The more that is considered in advance the better the analysis and outcome. A company is in serious trouble if it has no protocol in place and tries to respond to the grand jury subpoena with a quick “seat of the pants” response like creating a special committee to supervise an internal investigation.
Ultimately, a company may decide to bring in outside counsel to conduct such an investigation but there are a number of issues which need to be examined internally before reaching that conclusion. Every company should have a plan in place to focus the initial inquiry so that major mistakes can be avoided.
I enjoyed reading Michael's piece that effectively sets forth several steps that ought appropriately to be followed whenever a company receives a grand jury subpoena duces tecum. But I would supplement his description of the terms' "target," "subject" and "witness." While his descriptions of these terms are technically correct, I would suggest some additional definition to the meaning of the term "subject" as it is generally used by prosecutors.
When a prosecutor describes a company or an individual as a "subject" of the investigation, the inference to be taken from that statement is that the prosecutor already has significant evidence that the "subject" has been engaged in wrongdoing. This may not always be true, as, for example, when an entire industry has come under suspicion as being engaged in cartel conduct and the company in question is small, fringe player. But it is true often enough to warrant extreme caution when that term is used and to assume the worst.
I would also take modest issue with the suggestion that a company even consider "going it alone" whenever a grand jury subpoena duces tecum has been directed at it, unless, perhaps, the records sought relate exclusively to another party, such as in the case of a subpoena to a bank for customer account records. In every other case, the potential seriousness of a grand jury subpoena demands that a company engage experienced counsel to deal with the government and to organize its response to the demand.