Internal Investigations - McCarthy Tétrault · Internal Investigations Friday, January 30, 2009 Tab 1. Agenda Tab 2. Our Internal Investigations Practice Tab 3. Biographies: Presenters

Internal Investigations

Friday, January 30, 2009 — Vancouver

Table of Contents Internal Investigations

Friday, January 30, 2009

Tab 1. Agenda

Tab 2. Our Internal Investigations Practice

Tab 3. Biographies: Presenters Rich Balfour Cam Belsher Bob Cooper Donald Houston Nicholas Hughes

Randal Hughes Miranda Lam Warren Milman Michael Urbani Jill Yates

Tab 4. Practical Advice on Conducting a Successful Internal Investigation

Presentation

Tab 5. Public Company Compliance Reviews and Regulatory Investigations

Presentation

Tab 6.

Now What? Managing Environmental Incidents After the Fact

Presentation

Tab 7. Internal Investigations in Competition/Antitrust Matters

Presentation

Agenda

Internal Investigations

Friday, January 30, 2009

8:45 am Introduction Rich Balfour

8:50 am Practical Advice on Conducting a Successful Internal Investigation

Miranda Lam

Warren Milman

Cam Belsher

9:15 am Public Company Compliance Reviews and Regulatory Investigations

Bob Cooper

Michael Urbani

9:30 am Now What? Managing Environmental Incidents After the Fact

Nicholas Hughes

9:45 am Internal Investigations in Competition/Antitrust Matters

Donald Houston

Randal Hughes

Jill Yates

10:00 am Wrap up

- Questions and Answers -

Our Internal Investigations Practice

Our lawyers have extensive experience and expertise in conducting internal investigations for our clients. We have conducted investigations involving fraud, securities enforcement, market manipulation, insider trading, workplace fatalities, environmental violations, whistle-blower complaints, competition investigations and a broad range of regulatory matters.

When conducting investigations, we often advise our clients on corporate governance issues and compliance programs. We have the ability to call on other McCarthy Tétrault lawyers with experience in virtually every substantive area of law.

Members of our team have led, conducted or been involved in a number of internal investigations, including:

• Creation of special committee of a >$1B public company to investigate performance of related party transaction. This ultimately led to the initiation of multi-jurisdiction lawsuits against the acting CEO and several directors for misappropriation of a business opportunity. Ultimately settled for $30 million in restitution payments.

• An investigation to determine the merits of a CEO’s defence in a claim by a former employee in order to address the CEO’s indemnity claim and concurrent lawsuit against D & O insurer.

• An international investigation of misappropriation by former directors and officers of a public company through a series of inflated business acquisitions.

• Stock options back-dating review.

• An investigation and ultimately successful litigation on behalf of a special committee of a public company regarding the acquisition of mining properties under what appeared as a customary transaction but which was to further an underlying illegal scheme by the vendor.

• Advising a public client to terminate a proposed improvident transaction following a confidential investigation of improper payments and other arrangements with related parties.

• An investigation into a large-scale internal fraud at an international public corporation. The investigation and subsequent legal proceedings included coordinating teams of lawyers in three separate jurisdictions. The investigation led to the conviction of the principal actors in the fraud and a full recovery of the stolen money.

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• An investigation into allegations of insider trading by executives of a major public company. We worked with a special committee of the Board to investigate the allegations and provide governance advice on trading policy.

• A whistle-blower complaint into allegations of theft by a key employee of a public company.

• An investigation into allegations of money-laundering at a financial institution. The investigation began when our clients’ offices were raided by RCMP Commercial Crime officers. In addition to conducting a forensic investigation, we responded to concurrent investigations by federal and provincial regulators.

• An investigation into a workplace fatality in the forestry industry. The incident attracted significant media interest and led to a public inquest into the death. During the investigation, we reviewed our client’s occupational health and safety program and worked with our client to develop an industry-leading program for contractor supervision.

• An investigation into a fatal accident on the set of a film production. The investigation involved defending both regulatory and criminal prosecutions, as well as civil actions arising from the accident.

• An investigation into a gaseous discharge that injured workers at a neighbouring facility. The investigation involved assessing civil and regulatory exposure and future regulatory compliance issues.

• An investigation into a large spill of deleterious substances into water frequented by fish. The investigation involved assessing both civil and regulatory exposure.

• An investigation into an off-site explosion caused by Lithium entering the regular waste stream. This investigation was focussed on assessing exposure to criminal liability.

• Numerous internal investigations in competition matters. Among them, internal investigations related to domestic Competition Bureau investigations/proceedings in chocolate confectionary products, gasoline products and carbonless paper sheets; and international cartel investigations, involving coordination with counsel in multiple jurisdictions, in air cargo, rubber chemicals and related products, hydrogen peroxide, carbon products, food and feed additives, automotive products and building products.

• A special committee investigation into the conduct of a director of a large non-profit organization which included advice on board governance.

McCarthy Tétrault delivers customized legal services that help our clients achieve their business goals. We are committed to developing the right solutions and strategies to achieve successful outcomes in a highly responsive, efficient, and financially-disciplined manner.

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Practical Advice on Conducting a Successful Internal Investigation

Miranda Lam, Warren Milman, Cam Belsher

1Keys To Conducting a Successful Internal Investigation

1. Have a Plan2. Ensure the Investigation is Independent3. Preserve Evidence4. Maintain Confidentiality5. Protect Privilege6. Consider Your Employees7. Consider Insurance Issues8. Consider Disclosure Obligations

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1. Have a Plan

When is an investigation needed?

Possibilities include:

• an adverse external event • when litigation or prosecution is being contemplated • when regulatory investigation is expected or underway • a whistleblower allegation or media report • human rights complaints • when internal policies require investigation to be

initiated

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1. Have a PlanWhat are the goals of the investigation?

Possibilities include:

• to establish the facts and report them to the relevant body • to assess likely risks to the company • to permit the company to take appropriate action (redress,

future prevention) • to meet disclosure obligations and comply with internal control

policies • to establish exculpatory facts and other defences (to claims or

regulatory proceedings (e.g., due diligence)) • to satisfy requirements of insurance policy • to satisfy internal and external audiences (e.g. demonstrating

that the company has a compliance culture)

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1. Have a Plan

Scope of the investigation

• What are the potential sources of information –internal and external?

• What documents need to be gathered?

• What is the timing, format and scope of interviews?

• Are independent consultants required? (forensic accountants? electronic document recovery?)

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1. Have a Plan

Set a Timetable

Factors to consider include:

• the time estimated to be required to complete proper investigation

• when results are needed (e.g. deadlines imposed by regulators or civil proceedings)

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1. Have a Plan

Memorializing the Results

Consider:

• whether the report should be in writing

• to whom it should be presented

• whether there should be interim reports

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1. Have a Plan

Consequences of a Poor Plan

A poorly-planned investigation may:

• lead to a failure in understanding the problem or appropriate solutions (see Re: YBM Magnex)

• create an impression of a cover-up or lack of serious response

• expose participants to liability (See Correia v. CanacKitchens)

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2. Ensure Independence

Who will oversee the investigation?

An investigation should be overseen by the board of directors (generally via a special committee) when allegations:

• relate to conduct of senior management • call into question the integrity of the company’s financial

reporting • pose a significant threat to company or its reputation

Otherwise, an investigation should normally be overseen by in-house counsel.

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2. Ensure IndependenceWho will conduct the investigation?

Depends on the nature of the allegations and degree of risk to the company. Most investigations should be conducted by legal counsel.

• Choice of legal counsel (in-house, regular external, or special) will depend on:

• importance of maintaining privilege • prior involvement with underlying issues • nature (closeness) of relationship to management

or persons potentially implicated • need for special expertise • availability of time and resources • likelihood of securing witness cooperation

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• Less serious matters may be investigated by HR department, security department, privacy office, etc.

• Key role of in-house counsel in all scenarios:• ensuring legal issues are considered • familiarity with business • obtaining cooperation of employees

• liaison with board or senior management

2. Ensure Independence

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3. Preserve Evidence

• Suspend routine corporate document destruction policies for potentially relevant documents

• Notify employees to preserve potentially relevant electronic and paper records, or other evidence

• Consider denying or limiting access of specific employees to particular items

• Gather paper records, emails and electronic records from relevant employees and from their servers/hard drives

• Obtain professional advice on data preservation and recovery, as necessary

• Document what was done to preserve evidence

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4. Maintain Confidentiality

Maintaining confidentiality is critical:

• to ensure effectiveness of investigation and especially interviews • to avoid compromising investigation’s independence • to assist in maintaining privilege claim

Ensure initial plan deals with relationship between oversight, instruction and access to information.Consider what public statements will be made about existence of investigation, intended process and eventual results.

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5. Protect Privilege

Maintaining privilege over the results of an investigation is desirable because it minimizes the risk that those results will be used against the company, and at the same time:

• encourages full and frank disclosure of relevant facts • allows an accurate understanding of what happened so that

corrective action can be taken • permits a judgement to be made about appropriate

disclosure (and associated waiver of privilege) when full facts are known

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Privilege protects against the compelled disclosure of communications with counsel for the purpose of obtaining legal advice (solicitor/client privilege) or information obtained for pending or anticipated litigation (litigation privilege).

Protecting privilege is consistent with the objective of getting all the relevant facts and advising management so that appropriate action can be taken.

Use of external counsel will enhance the company’s ability to protect privilege because it avoids doubt about whether in-house counsel was acting in a legal or business capacity (see Silver v. Imax Corp.). Also some jurisdictions may not extend privilege to in-house counsel.

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To protect privilege:

• the investigation must be conducted by a lawyer, and all parties assisting should report to legal counsel

• where outside counsel is engaged, retainer letter must state purpose for investigation which gives rise to privilege

• confidentiality must be maintained – employees and investigators should be instructed accordingly

• documents should be marked “Privileged and Confidential”

• third party consultants should be retained by counsel with suitable written retainers

• all reporting should be done by counsel

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5. Protect PrivilegeImplied waiver of privilege may occur when:

• report is disclosed to regulator • confidentiality is not maintained • company relies on legal advice as defence to

proceeding • results are disclosed to parties with related interest

without a joint defence agreement

Waiver may be necessary:• to obtain favourable outcome from regulator or

merely to persuade regulator that company is being cooperative

• to restore public confidence • to demonstrate due diligence or reasonable conduct

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6. Consider Your Employees

• Certain employees are likely to be key witnesses or the subject of allegations under investigation.

• An interview is appropriate whenever an employer reasonably believes that it may yield relevant and necessary information.

• Prior to arranging a meeting with the employee, gather and review all relevant documents so the interviewer enters the meeting with an understanding of the incident in question.

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• Be aware of relevant provisions of policies, collective agreements, directives from Human Rights Commission and Privacy Commission, etc. regarding company’s ability to:

• search employee’s work space • monitor email and computer use by employee • monitor telephone use by employee • use video surveillance • monitor security pass use • interview employees

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• If any of the potential witnesses may be involved in a criminal prosecution, interviewers should ensure that witness meetings or statements do not undermine criminal charges.

• Advise employee being interviewed that outside counsel acts for company and not employee.

• Consider suggesting and/or paying for independent counsel where employee’s interests conflict with company’s.

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• Interviewer should explain:• their role • the purpose of interview • any relevant company policies

• Discuss confidentiality requirements (e.g., employee is not to discuss with others what is discussed in interview).

• Warn that while confidentiality will be respected, it is not guaranteed.

• Don’t tell interviewee what other employees have said.

• Consider privacy rights.

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During the interview, be sure to: • Use pre-planned, open-ended questions to allow a full

understanding of the facts. Use follow-up questions if needed

• Make sure to get complete information, including details relating to the incident, date, time, place, location, similar occurrences, witnesses, etc

• Record all statements and answers• Repeat back facts to ensure accuracy and clarify any

discrepancies • Advise the employee to keep records of any relevant

events and to advise the company accordingly

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At the end of the interview:

• Ask the employee a “scoop” question, such as,

“Is there anything we haven’t talked about that we should know about?”

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7. Consider Insurance Issues

• Consider policies to determine:

• whether the insured has an obligation to notify the insurer • whether coverage exists for legal or other costs of the

investigation (may depend on whether a claim has been asserted)

• whether disclosure is required upon renewal

• Report to insurer on a basis that maintains

confidentiality and privilege.

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8. Consider Disclosure Obligations

• The company may be required to report findings to regulatory authority.

• It may be in the company’s interest to proactively report to regulator.

• If a reporting issuer, the company may have an obligation to issue press releases, or make disclosure in routine public filing or in public offerings.

VancouverP.O. Box 10424, Pacific CentreSuite 1300 777 Dunsmuir Street Vancouver BC V7Y 1K2Tel: 604-643-7100 Fax: 604-643-7900

CalgarySuite 3300 421 – 7th Avenue SWCalgary AB T2P 4K9Tel: 403-260-3500 Fax: 403-260-3501

TorontoBox 48, Suite 5300 Toronto Dominion Bank TowerToronto ON M5K 1E6Tel: 416-362-1812 Fax: 416-868-0673

OttawaThe ChambersSuite 1400 40 Elgin StreetOttawa ON K1P 5K6Tel: 613-238-2000 Fax: 613-563-9386

MontréalSuite 25001000 De La Gauchetière Street WestMontréal QC H3B 0A2Tel: 514-397-4100 Fax: 514-875-6246

QuébecLe Complexe St-Amable1150, rue de Claire-Fontaine, 7e étageQuébec QC G1R 5G4Tel: 418-521-3000 Fax: 418-521-3099

United Kingdom & Europe5 Old Bailey, 2nd FloorLondon, England EC4M 7BATel: +44 (0)20 7489 5700 Fax: +44 (0)20 7489 5777

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Public Company Compliance Reviews and Regulatory Investigations

Bob Cooper and Michael Urbani

2Events Leading to Public CompanyInternal Investigations

Regulatory Enquiries:• Securities commissions routinely ask for information about

public company obligations to make continuous disclosure filings

• TSX also makes enquiries about press releases and compliance with other listed company obligations

Enquiries initiated by Company:• Whistle blowing complaints • Investigation prompted by effective operation of internal

controls• Investigation prompted by regulatory enforcement priorities

Both processes give rise to internal investigations that entail issues and considerations already canvassed.

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Principles Behind Continuous Disclosure Reviews

• Risk Based Analysis:• CSA ongoing continuous disclosure reviews1

• review each active reporting issuer at least once every 4 years • reviews can be full (entire disclosure record for past twelve to

fifteen months + most recent annual and interim financial statements2) or limited (concerned with specific disclosure document)

• issue-oriented reviews (across issuers)• current market conditions• revenue recognition• executive compensation• hedge accounting• environmental reporting

1 See for example, CSA Staff Notice 51-312 Harmonized Continuous Disclosure Review Program; CSA Staff Notice 51-326 Continuous Disclosure Review Program Activities for Fiscal 2008; CSA Staff Notice 51-328 Continuous Disclosure Considerations Related to Current Market Conditions; and, OSC Staff Notice 11-719 A Risk Based Approach for More Effective Regulations.

2 Two-year financial statement review if Ontario is prime (OSC Staff Notice 51-703 sets out OSC review mechanics).

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What the Regulators are Interested In

Select Problem Areas – Financial Statements3

• Revenue Recognition• Stock-Based Compensation• Financial Instruments• Goodwill Impairment Losses• Interim Financial Statements• Restructuring Costs• Enterprises in the Development Stage• Related Party Transactions

3 See CSA Staff Notice 51-326 Continuous Disclosure Review Program Activities for Fiscal 2008; and Ian Palm, “CSA-Continuous Disclosure Reviews – Select Problem Areas,” McCarthy Tétrault LLP client seminar (revised to April 02, 2007).

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What the Regulators are Interested In (cont’d)

Select Problem Areas – MD&A4

• Liquidity and Capital Resources• Quantitative Analysis of Results of Operations• Disclosure of Adoption of New Accounting Policies• Related Party Transactions• Trends, Risks and Effect of Current Market Conditions• Projects Under Development• Restructuring Costs

4 Ibid.

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What the Regulators are Interested In (cont’d)

Select Problem Areas – Others5

• Executive Compensation Disclosure• Insider Reporting Requirements• BARs• Material Contract Disclosure• Options Backdating• Environmental Disclosure (OSC focus in 2008)• CEO and CFO Certification• Industry Specific Disclosure Requirements e.g. oil and

gas, mining

5 Ibid.

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Reason for Compliance Reviews

Red flags that may lead to Compliance Review:

• unusual trading by insiders before press releases • manipulative trading by insiders • use of unusual accounting policies • disagreements with auditors • complaints from public • referral from another section of BCSC or other securities

commissions • media reports

8Statutory Sources of Power to Conduct Compliance Reviews and Investigations in British Columbia6

• s. 141:• power to order production of information or records• applies to registrants, reporting issuers, directors and officers of

reporting issuers (including IR persons who may not be officers)

• s. 141.2 (registrants) and 141.3 (issuers):• power to review “the business and conduct” of a reporting issuer or a

registrant for determining compliance with Act, regulations, regulatory instruments

• likely source of power for continuous disclosure reviews• power to levy fees or prescribe charges for costs of the review

• s. 142, 143, 144:• BCSC’s investigation authority• power to enter premises• power to summon witnesses

6 Also see ss. 19, 20, 20.1 of the Ontario Securities Act, R.S.O. 1990, C.S.5; ss. 58(1), 60(1), 60.1, 60.2 of the Alberta Securities Act, R.S.A. 2000, C.S-4; ss. 151.1 and 158 of the Quebec Securities Act R.S.Q., c.V-1.1.

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Process of Investigations

Potential stages of regulatory review:• case assessment/surveillance • investigations • handling by Litigation

• Regulatory investigation usually commenced by letter simply asking for information – sometimes accompanied by requests under s. 141, 141.2 (registrants) or 141.3 (issuers) of the Securities Act(British Columbia).

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Process of Investigations (con’t)

First Steps:• determine who is involved or has knowledge• compile relevant documents, including email, internal memos,

minutes, correspondence, board presentations and background papers

• prepare chronology

• Important issues:• How are facts verified?• Can the investigation be conducted by the public company with

active involvement of all affected parties?• Can or should the public company determine whether there has been

a violation of law?• Can the public company impose discipline itself?• How much influence can the public company exert over timing and

outcomes?• Application of “credit for co-operation” policies

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Voluntary and Involuntary Disclosure

• Frequently requests from regulators are made on an informal basis.

• Requests for voluntary production of documents may involve private third party information.

• Testimony given voluntarily may be used in subsequent proceedings.

• What precautions should be considered before responding voluntarily?

• When to insist that production/interview take place under compulsion pursuant to a s. 142 order?

• For what purpose is the order/request being made?

• What protection does a s. 142 order provide in subsequent proceedings?

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Outcome of Regulatory Investigations

• Responses should be put together with care and shown to people with knowledge of facts to ensure accuracy.

• Depending on how it develops, may have to refile or change disclosure practices (19% of CD reviews in 2008 led to refilings; 36% led to prospective changes to disclosure).8

• Can lead to enforcement proceedings (5%).8

• Can sometimes lead to disclosure of investigation if continuous disclosure review leads to commencement of a formal investigation.

8 See CSA Staff Notice 51-326 Continuous Disclosure Review Program Activities for Fiscal 2008.

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Events Leading to Investigations of Registrants

• Periodic risk-based compliance audits or issue-oriented reviews by regulators from supervising audit jurisdiction (CSA, IIROC or MFDA).9

• Investigations by market surveillance officials of IIROC• Internal investigations initiated as a result of registrant’s

internal compliance procedures. See UMIR s. 7.1.

9 See for example, OSC Staff Notice 33-731 2008 Compliance Team Annual Report; CSA Staff Notice 81-316 Hedge Funds; OSC Staff Notice 81-709 Continuous Disclosure Review of Investment Funds (2008), and; IIROC, MFDA and OSC Public Consultation on Product Suitability –December 17, 2008.

14Registrants are continuously involved in Internal Investigations of one kind or another

• Registrants respond to many regulatory information requests without knowing whether a formal investigation or enforcement proceeding will be started.

• IIROC will advise when an investigation has formally started but securities regulators can often be vague about the stage an investigation has reached.

• Written correspondence and record production is a highly important part of registrant regulatory investigations. Typical information provided to regulators takes the form of:• written responses to questions or information requests letters or e-mails that

regulators send • production of tape recordings of telephone calls • production of instant message transcripts for specific periods • production of extensive e-mail records • oral testimony through witness interviews

• IIROC imposes affirmative obligations to police for and report instances of non-compliance.

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15Recurring Issues in Internal Investigation by Issuers and Registrants (cont’d)

• OSC has policy respecting “credit for cooperation”, which rewards voluntary notification of securities regulators and the taking of unilateral corrective action.

• BCSC does not, but same principles apply in practice. • Meeting deadlines imposed in information requests

• do requests for more time bespeak a poor compliance capacity or absence of “compliance culture” ?

• how flexible are regulators if there are repeated requests for extension over time ?

• How is the accuracy of a “letter of response” verified• what is extent of consultation and how many senior people should

know about and sign off on queries ?• how much independent verification should compliance people do of

their own people’s answers ?• how carefully do records have to be reviewed when the productions

are extremely voluminous ?

16Recurring Issues in Internal Investigation by Issuers and Registrants (cont’d)

• Using letters from regulators as a basis for pro-actively taking corrective action or changing compliance procedures:• if regulatory correspondence shows a specific regulatory concern

about issuer or registrant, conduct or a particular employee, what are the pros and cons of changing conduct or disciplining employees before an investigation is over?

• Is it possible to ask regulators precisely what would fix their concerns or what specifically they are looking for when an investigation has been going on for a long time?

• Is there a point when the duration, cost or invasiveness of an investigation justifies discussions with regulators about over-reaching by investigators?

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17Recurring Issues in Internal Investigations by Issuers and Registrants (cont’d)

• Investigations that appear to ignore industry practices or industry standards and implicitly impose a higher standard than what the industry follows.

• Handling conflicting interests (e.g. the firm interest versus the interests of the employee respondents) in a situation where alleged misconduct by employees is the basis of “failure to supervise” proceedings against the firm.

• If an internal investigation report concludes there has been wrongdoing, should the whole report be forwarded to regulators?








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Nicholas R. Hughes

Now What?Managing Environmental Incidents After the Fact

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The First 24 Hours – Crisis Management

• Responding to Incident• ensuring employee and public safety• protecting the environment• securing facility

• Mandatory reporting obligations

• Information gathering and dissemination processes

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The first 24 hours - cont.

• Engage counsel• In-house• external counsel

• Have counsel initiate internal investigation

• Identify point person for all external communications

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The next 24 months

• Inspections and Investigations by regulators

• Search warrants

• Demands by regulators for improvements • process/facility improvements• permit improvements

• Charges/lawsuits

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Sources of Liability

• Civil liability • personal injury• damage to property• natural resource damages claims

• Regulatory liability/quasi criminal liability• unauthorized discharge/spill• failing to report/providing false information • failing to adequately respond to discharge/spill

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Due Diligence

• Due diligence is a defence to most regulatory and quasi criminal charges

• Due diligence established where: • the accused took all reasonable steps to

avoid the event; or • the accused reasonably believed in a

mistaken set of facts which, if true would render the act or omission innocent.

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Purposes for Internal Investigations

• Identify the cause(s) of incident and fix the problem

• Secure available evidence to assist company in defending itself in litigation arising out of the incident

• Stay ahead of the regulators

• Develop plan on how to address expected demands from regulators for improvements

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Role/Value of Counsel

• Why involve counsel?• ensure compliance with post incident

responsibilities and obligations;• institute and oversee internal investigations and

protect and maintain the confidentiality of post incident documents:

•Privilege•Privilege•Privilege

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Privilege Cont.

• Litigation privilege over internal investigation documents

• See HMTQ v. CN, 2008 BCSC 1677

• Solicitor client privilege • Legal advice privilege

• Statutory privilege• submissions to transportation safety board• Apology Act (BC)

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The first 24 hours revisited

• If you have not got an incident response plan, develop one

• Retain counsel ASAP to address reporting requirements and to institute internal investigation of the incident

• Develop external communications protocol/media relations program

• Draw upon the expertise and experience of others to get the company through this trying time

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1

Internal Investigations in Competition/Antitrust Matters

Donald Houston, Randal Hughes, Jill Yates

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Competition Act Risks

• Price fixing, bid-rigging, market or customer allocation, supply restrictions or other coordination with competitors.

• Criminal offence – up to $10 million fine per count and/or imprisonment.

• Civil Actions – Plaintiffs can sue to recover loss or damage suffered as a result of conduct contrary to criminal provisions of the Competition Act. These actions are increasingly brought as class actions.

• Unilateral conduct may also raise issues.

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How Was the Conduct Detected?

• Company compliance program/internal audit• An employee report (Whistleblowers protected –

s. 66.1 Competition Act)• Contact from the Competition Bureau• Search Warrant• Subpoenas (s. 11 Orders)• Enforcement activity in another jurisdiction

4Internal Investigations in the Context of Leniency Programs

• Need to evaluate/act quickly – Get the facts first. • Immunity Program - May seek Immunity if “first-in” in

one or more jurisdictions. • Leniency Program – early cooperation may result in

more favourable resolution.• “Immunity Plus” – disclose offence related to a second

product – immunity for second product, leniency for first product.

• Information provided to Competition Bureau is kept confidential, but there are limits.

• Potential disclosure obligations under securities laws –tension with requirement of confidentiality under Bureau’s Immunity Program.

• Civil/class action exposure remains.

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Get the Facts – Without Creating Evidence

• Use counsel to conduct internal investigations.

• Benefits of using outside counsel –• Specialized competition expertise• Experience interviewing witnesses and document

review in competition investigations

• Investigations with international implications: In-house counsel communications may not be protected by privilege outside North America.

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Get the Facts – Without Creating Evidence

• Don’t record or videotape interviews (counsel notes only).

• Tell employees that the investigation is highly confidential internally and externally.

• DO tell employees that counsel represents the company’s interests – not the employee’s.

• If a government investigation is likely or ongoing -• inform employees that phones may be tapped (office, cell and

home) or that people they meet may be wearing a wire• instruct employees not to remove/delete/destroy electronic or

paper documents.• DO NOT tell employees that they cannot speak to the

authorities but DO advise that they have the right to remain silent and to request the assistance of counsel.

• DO tell employees that you want to know if they have been/are contacted by the authorities.

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Individual vs. Company Interests

• If senior management is implicated in investigation or if obstruction activity is detected, implicated individuals cannot be involved in decision-making with respect to investigation.

• Set up a special committee immune from influence and shield information about conduct of investigation from implicated individuals.

• Individual counsel may be required if interests diverge from company (e.g. employee obstructs investigation, continues conduct, or does not cooperate fully, “rogue employee”).

• Employee may also require individual counsel if “target” of inquiry.

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International Cases

• Conduct has implications outside Canada. (e.g. allegations of “global conspiracy”)• Products sold in/from Canada• Foreign directives to Canadian management

• Authorities do coordinate their investigations. • Must have an early coordinated approach among

counsel in all jurisdictions for multi-jurisdictional investigation.

• Decision to cooperate (or not) in one jurisdiction will have implications in others.

• Immunity may not be available in all jurisdictions.• Implications of sharing fruits of the investigation in

different jurisdictions … different discovery and privilege rules may apply. (e.g. U.S. vs. Canada)

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Documents

Internal Investigations - McCarthy Tétrault · Internal Investigations Friday, January 30, 2009 Tab 1. Agenda Tab 2. Our Internal Investigations Practice Tab 3. Biographies: Presenters