Wednesday, August 10, 2005

What If You Lie in an Internal Investigation?

Internal corporate investigations are all the rage these days as companies seek to demonstrate their level of cooperation as part of an effort to forestall criminal charges.  Corporations almost routinely turn over the results of their investigations to prosecutors and civil regulatory authorities, and the reports usually contain statements -- many of them personally incriminating -- from employees about their knowledge and participation in transactions under scrutiny.  What if an employee lies to the internal investigators in an effort to obstruct that investigation?  Paul McGreal has two interesting posts on the Corporate Compliance Prof blog (here and here) discussing the issue in the context of the indictment of former officers of Computer Associates, including an obstruction of justice charge against former CEO Sanjay Kumar based on his statements during the investigation that includes the following information in the indictment:

58. On or about October 6, 2003, January 14, 2004, January 22, 2004, and April 6, 2004, the defendant SANJAY KUMAR was interviewed by attorneys from the Audit Committee’s Law Firm. During these interviews, KUMAR did not disclose, but instead falsely denied and otherwise concealed, the existence of the 35-day month practice. For example, KUMAR falsely stated that he had never monitored end-of-quarter contracting activity to determine whether CA would meet analyst earnings estimates. KUMAR admitted that he occasionally encouraged salespeople to close deals after the end of quarters, but stated falsely that these efforts were unrelated to revenue recognition.

59. The defendant SANJAY KUMAR well knew and believed, at the time of the October 6, 2003, January 14, 2004, January 22, 2004, and April 6, 2004 interviews, that certain of the statements he made during the interviews were false and that he otherwise concealed during the interviews information which he knew to be material to the Government Investigations. KUMAR further well knew, and in fact intended, that his false statements and concealment of material information would have the effect of obstructing and impeding the Government Investigations.

Paul points out that "as the Martha Stewart case illustrated, obstruction of justice can be prosecuted even though no other crime has been committed. And this theory makes internal investigation counsel a material witness to the crime. Let’s just say that that ups the ante quite a bit for in-house compliance attorneys who routinely conduct such interviews."  Talk about corporate counsel being deputized to carry out the government's investigatory mission.  (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/08/what_if_you_lie.html

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