Governmental scrutiny that starts with civil liability and threatens to become more serious makes coordinating the corporate response very difficult.
Professor Peter Henning writes in the New York Times that the expansion of civil charges dramatically complicates things for executives, directors, and their counsel.
This can make the standard “we are cooperation with the governmental investigation” almost impossible. Two points from Professor Henning.
First, for a target:
There are significant potential risks for someone asserting the privilege against self-incrimination during a corporate criminal investigation. An employee who takes the Fifth Amendment and refuses to cooperate risks losing his job because the employer may try to curry favor with the government by showing that it is unwilling to tolerate those who will not provide assistance.
Then, the issue of D&O coverage for an employee refusing to testify:
[a] … companyâ€™s directors and officers liability insurance policy may preclude an employee from being reimbursed for the costs of retaining a lawyer during an investigation, making it prohibitively expensive to defend oneself.
The business press sometimes equates criminal inquiries with a likelihood that charges may be forthcoming. Lawyers know that this is not the case, that investigations take time, and criminal charges are rare and difficult to prove.
In-house counsel also know that that the time lag between inquiry and resolution, and the public and financial concerns that it raises, is perhaps the most significant risk of all.