Tuesday, December 28, 2004
In an article in today's Wall Street Journal titled, "Allied Capital is Focus of Probe," reporter David Armstrong reports that the "Corp. said the U.S. Attorney for the District of Columbia is conducting a criminal investigation of the company." The article discusses the effect on the company of this investigation (or perhaps disclosure of this investigation) - that being the stock is down.
The article notes that, "[t]he company said it received letters on Dec. 22 from the U.S. Attorney requesting the preservation and production of information related to Allied and one of its subsidiaries, Business Loan Express." The reason for this letter is to put a company on notice of an impending investigation so that documents are not destroyed. Notices like this can also serve as a basis for meeting an element of an obstruction of justice charge (knowledge of a pending judicial proceeding), should a company not comply with the government request not to destroy documents. The benefit of sending such a notice is that most companies are not likely to violate the law when they are advised that they are under investigation. Cases of obstruction are problematic when the company claims they did not know they were under investigation and yet documents may have been destroyed, especially when destroyed as part of a routine document retention policy. A notice such as the one sent by the government in this case avoids these types of problems.