You have just received notice of a grand jury subpoena duces tecum from the Department of Justice Antitrust Division in connection with a price-fixing investigation. Indeed, the likelihood of doing so may be on the rise. In 2008, the Division had 137 pending grand jury investigations, filed 54 criminal cases and charged 59 individuals and 25 corporations. The Division currently has nearly 150 open cartel investigations. In 2009, the Division collected over $1 billion in criminal fines. And the Obama administration has made clear that it intends to continue pursuing price-fixing conspiracies. What should you do if your company receives a subpoena? Below are 10 practical steps.
1. Inform the company’s key decision-makers
Receiving a grand jury subpoena is a critical event. The company’s key decision-makers should be informed immediately. This is an appropriate time to present a brief overview of the Sherman Act, the DOJ’s authority and the nature, scope and purpose of a criminal investigation.
2. Ensure that no relevant evidence is destroyed
You must take immediate steps to preserve relevant evidence, including both paper and electronic documents, to avoid even the appearance of an unwillingness to cooperate with the investigation, or worse, the obstruction of justice. Therefore, the company and its lawyers should circulate a memorandum or e-mail to the effect that a subpoena has been, or will be, received and that documents relating to prices, price levels, price terms, competitor contacts, etc., should not be destroyed. The memorandum should indicate that document-retention policies that would otherwise call for the destruction of these documents should be suspended. Although at the very outset of an investigation you may not necessarily know all the appropriate recipients of such a memorandum, you can likely identify the more obvious ones (e.g., decision-makers who had any authority relating to pricing, as well as their assistants). As you learn more, there may be good reason to circulate such a memorandum more widely.
3. Retain outside antitrust counsel
Although in-house counsel are often adequately equipped to deal with many aspects of a criminal investigation, outside counsel with experience in antitrust investigations will also likely be required. The general counsel’s office is part of the same corporate management that may be under suspicion by government attorneys. Not only do inhouse counsel face potential personal and professional conflicts if colleagues are implicated, but the numerous demands of the investigation, especially in its critical early stages, can often overwhelm in-house counsel.
4. Consider contacting the DOJ
It is important to contact DOJ to establish an atmosphere of cooperation. You may also learn something about the DOJ’s focus and true interests, especially in negotiating the scope of the subpoena. You will probably want to try to narrow the usually overbroad subpoena or, at least, identify areas of higher priority that can be addressed first. For example, the DOJ may be willing to allow the company to search its headquarters files first and produce them. Then, if the DOJ wants additional documents, but not before, the company would search its offsite locations or branch offices. You should not make any statements to the DOJ about the burden of compliance or the locations, existence or nonexistence of files unless you are absolutely sure that they are accurate.
5. Determine the company’s status and consider the leniency program
Knowing whether your company is a subject or a target of the investigation has important ramifications. You may want to ask whether the company is the subject or a target. Often, the DOJ does not make this determination until late in the investigation, so the fact that a company is classified as a subject may convey a misleading sense of security. Another way to probe the issue is by asking permission for the company’s counsel also to represent individual employees. If the DOJ objects, there is likely a serious issue.
The Antitrust Division has a corporate leniency program, which essentially insulates from criminal liability the first company (and its officers) in a cartel that provides information to the government. Leniency also may eliminate treble-damages exposure in certain civil contexts. The leniency program puts a premium on learning the facts quickly to maximize the company’s possibility to obtain leniency if there has been wrongdoing. You do not want to guess about whether leniency is available. The Antitrust Division is always fishing until they “get” someone, but you can ask: “As we conduct our own investigation, and without suggesting any guilt, should we be considering a leniency application?” If the answer is yes, it is possible to place a “marker” with the DOJ to preserve the company’s position for a limited time while conducting the investigation.
6. Ascertain the key players
Identifying the key players will affect the scope of the file search and determine, at least initially, the universe of information available. Every company has a different organization, but the group must include everyone with pricing authority or input, as well as their assistants and secretaries. The group is likely to include former employees if the investigation relates to events that happened more than a few years ago.
7. Determine the scope of file searches
Once the key players are identified, it becomes possible to identify existing files that must be searched. These files will almost always include pricing files, competitor contact files and significant customer files. Market analyses and reports also will be relevant. But do not overlook other areas of possible interest–including trade association files, telephone logs and travel expense/reimbursement files–which are often the focus of a government investigation.
8. Prepare a memorandum for corporate employees
The existence of an investigation is likely to prompt discussions between and among corporate employees. In addition, the company probably would prefer to designate one or several people to communicate with the DOJ. However, the company and individuals must be scrupulous to avoid even the appearance of interfering with a criminal investigation, witness intimidation or obstruction of justice, which can be prosecuted as separate offenses under 18 U.S.C. §§ 1503, 1505 and 1512(b). In addition, employees’ interests may or may not be totally aligned with that of the company, and they may have Fifth Amendment rights not to testify. Although every company is different, one way to balance these competing interests is to circulate a memorandum from counsel to the effect that an investigation has begun, that counsel is representing the corporation, that individuals may wish to consult their own counsel, that individuals have the right to discuss the case with the government but also have the right to have counsel present if they choose, and that if counsel is indicated, the company will pay the fees. Employees should also be requested to inform corporate counsel of any discussions or contacts with the government.
9. Interview key personnel
You should interview the company’s key personnel, making sure that employees are aware that counsel is representing the corporation, and that the communications are protected by the corporate privilege. But if separate counsel for employees is advisable, you may want to advise the affected employees that the company will provide counsel for them. The interviews should focus on competitor contacts, knowledge of competitors’ pricing and the company’s prices and pricing practices.
10. Determine if competitors or former employees should be contacted
You may want to contact competitors to learn about the government’s investigation, competitors’ negotiations with the government over subpoena scope, etc. Careful consideration should be given to the use of a joint defense agreement to maximize preservation of the attorney-client and other privileges. Former employees also may have valuable information regarding the period of time in question. In fact, it may be essential to talk with them. But care must be taken to ensure that they are aware whom counsel represents. Company executives should refrain from discussing the investigation with others, and particularly with their counterparts at competitors.
Coping with a grand jury antitrust investigation can be a daunting task. But with careful and meticulous preparation and organization, it does not have to be overwhelming.