by Margaret W. Meyers, Rachel S. Mechanic, Daniel C. Zinman, David B. Massey, and Shari A. Brandt
This is Part II of a two-part post. For Part I, discussing recent enforcement actions related to employees’ use of personal devices, and the challenges employees’ use of personal devices pose for compliance with books and records and communication supervision rules, click here.
by Margaret W. Meyers, Rachel S. Mechanic, Daniel C. Zinman, David B. Massey, and Shari A. Brandt
With increasing frequency, securities and commodities regulators are focusing on employees’ use of personal mobile devices for business-related communications via applications that are not approved by employers or captured by employers’ archival systems. For good reason, regulators believe that many employees are less guarded when texting outside of their surveilled work platforms, particularly among workplace friends and colleagues at other firms, and that some employees may even be doing so to further questionable conduct and evade detection. Regulators and prosecutors brought waves of cases against financial firms based on messages gathered from persistent multiparty Bloomberg chat rooms, so much so that some big banks shut them down in late 2013. Text messages on unapproved mobile platforms may well serve as the next goldmine for enforcement staff and prosecutors.
by David B. Massey, James Q. Walker, Lee S. Richards III, Shari A. Brandt, Daniel C. Zinman, Arthur Greenspan, Rachel S. Mechanic, and Audrey L. Ingram
On May 2, in a widely-watched case, the U.S. District Court for the Southern District of New York found that the government “outsourced” a criminal LIBOR investigation to Deutsche Bank and its outside counsel, and thereby violated defendant Gavin Black’s Fifth Amendment rights when outside counsel interviewed the defendant under threat of termination from his employment. United States v. Connolly, 16 Cr. 370 (CM), Memorandum Decision and Order Denying Defendant Gavin Black’s Motion for Kastigar Relief, ECF Document 432, slip op. at 19, 29 (May 2, 2019). But because the DOJ did not use the defendant’s compelled statements at trial and the investigation was not otherwise tainted, the Court found no Kastigar violation and held that, even if there was, any error was harmless. Connolly, slip op. at 40-41, 43-44.
The Court’s exposition of the “outsourcing” issue has broad implications for internal investigations and corporate cooperation, but it need not end internal investigations or corporate cooperation as we know them. By observing some basic precautions as described below, Government enforcement lawyers and corporate defense counsel can avoid similar rulings in the future. At every stage of an internal investigation, companies should confirm and document that their major decisions are taken to satisfy their obligations to their shareholders to police and remediate their own activity, rather than to satisfy demands made by government lawyers. The Government, for its part, should avoid instructing companies on the particulars of their internal investigations and not wait for the results of those investigations before beginning their own. If both sides proceed in this way, internal investigations and corporate cooperation can continue substantially in the way that they have for two decades. Continue reading