Responding to Investigations by Regulators Kelly Bowers Hector Gonzalez Michael Quinn Thomas Zaccaro...

Responding to Investigations by Regulators

Kelly Bowers Hector Gonzalez Michael Quinn Thomas Zaccaro May 9, 2008

Responding to Investigations by Regulators

• The Current Regulatory Environment & Important Regulator Initiatives

• Steps To Take In Response To Government Investigations

• Key Issues in Internal Investigations

• What To Do When Responding To Subpoenas & Issues Unique To Multi-Agency Investigations

The Current Regulatory Environment & Important Regulator Initiatives

• Regulators investigating/bringing action in connection with subprime issues

• Joint enforcement initiatives

• Scope of resources dedicated to subprime issues

• Who is being investigated?

• What conduct/practices are being investigated?

Who Is Being Investigated?

• Mortgage lenders

• Mortgage brokers

• Real estate brokers

• Investors

• Borrowers

• Closing attorneys

• Appraisers

• Securitizers

• Credit rating agencies

What Conduct/Practices Are Being Investigated?

• Lender product design

• Lender product marketing

• Underwriting

• Marketing fraud

• Origination fraud

• Reliance on unsupervised brokers

• Compensating brokers’ misconduct

Steps To Take In Response To Government Investigations

• The current enforcement climate demands cooperation

• Potential pitfalls of cooperation

The Current Enforcement Climate Demands Cooperation

• Statements On Cooperation

• The Securities and Exchange Commission

• New York Stock Exchange

• National Association of Securities Dealers

• United States Sentencing Commission

The Current Enforcement Climate Demands Cooperation

• Waiving Attorney-Client Privilege

• The Thompson Memorandum

• The McNulty Memorandum

Potential Pitfalls of Cooperation

• Considerations when waiving privileges

• Deputizing corporate counsel to conduct internal investigations

• Payment of attorneys’ fees

• Deferred prosecution agreements

• Selection of counsel

• Determining scope of investigation

• Joint defense agreements

• Implications of an amended Rule 408 for settlement offers made in the context of civil negotiations

Key Issues in Internal Investigations

• When should an internal investigation be conducted?

• Who should conduct the internal investigation?

• Who should control the investigation?

• Should in-house counsel be involved in conducting the internal investigation?

• How should an internal investigation be organized and initiated? How should privileges be maintained?

Key Issues in Internal Investigations (cont’d)

• Should notice of the internal investigation be given to employees?

• How should documents and other materials be preserved?

• How important are e-mails?

• When and how should interviews be conducted?

• Should interviews be recorded?

• Can an employee have a lawyer present at an interview?

Key Issues in Internal Investigations (cont’d)

• Should a company pay for lawyer for an employee?

• Should employees be offered the opportunity to submit a “white paper” or similar materials?

• Should a written report be prepared?

• Should the company or employees be allowed to review the report before it is finalized?

What To Do When Responding To Subpoenas & Issues Unique To Multi-Agency Investigations

• Issues unique to multi-agency investigations

• The appropriate response to investigators

• Practical tips for responding to document subpoenas

The Appropriate Response To Investigators

• Public and private responses

• Interacting with investigators

• Assemble legal team

• Do not abandon or forego any valid legal defenses