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Saturday, December 4, 2010

Employees In Danger of Prosecution; Bar Raised on Cooperation With Investigations

Getting fired might not be the worst your employer can do to you.

Getting set up to take the blame for a business crime might be.

That might become more likely as the implicit message from some government prosecutors at a recent New York City Bar Association symposium raises the bar on what wayward businesses must do to gain credit for "cooperation" and avoid prosecution.
The word "cooperation" is in quotes, because its meaning in this context is different from the Webster's Dictionary definition. 

Prosecutors and regulatory lawyers use the term "cooperation" to describe the response they want from targets of their investigations.  "Cooperation" does not mean, in their context, mere help or assistance as defined by the provider.  The government means that cooperation is it getting what it wants, when it wants, without asking, without delay.  The government's revised interpretation: Be forthcoming with your documents (so we don't need to subpoena you or raid your offices if we're afraid you'll destroy evidence) and tell us who among your staff is guilty.

This point was underscored by former federal prosecutor and current Assistant District Attorney (in Manhattan) Daniel Alonso at a New York City Bar Association symposium on the investigation and prosecution of business entities.  Alonso explained to the audience of lawyers (with a few journalists attending) that "cooperation" meant providing investigators with access to documents. (In fairness, neither Alonso nor the other panelists used the foregoing explanation.  The audience was comprised of lawyers who learn from experience to read between the lines. 

A policy of non-interference, that is, compliance with subpoenas and not mounting any resistance, may no longer be considered meaningful cooperation and may affect whether business entities are granted favorable consideration for non-prosecution agreements or deferred prosecution agreements.  (Note: Both agreements suggest corporate conduct which could be considered or argued to be criminal, but which the government is willing to forbear, or decline to take any enforcement or prosecution action on the condition that the business entity comply with the terms of the agreement.)

There are implications for lots of business executives, managers and employees who are anywhere in the vicinity of suspected wrongdoing, no matter how innocent they are and whether they even know or suspect something is wrong.  Representation of a business entity is separate from representation of its executives.  This means that the business entity has a powerful incentive to say and do things to curry favor with prosecutors and regulators (like the Securities and Exchange Commission, Federal Trade Commission, Environmental Protection Agency, and their state counterparts), so that the entity is considered to be "cooperating."

This means that the entity -- and its lawyers -- will "throw under the bus" certain individuals to gain that cooperation consideration.  Think of this as a form of pagan ritual sacrifice to appease the angry gods. 

Who gets thrown under the bus?  I think these people fall into two categories.

The first category are the people who are truly guilty of something.  Note that where the trail of available evidence already suggests wrongdoing, the individual wrongdoers likely will be targeted directly (the entity may not be considered the wrongdoer).  

The second category consists of other people within the business, or who serve as outside advisors (like attorneys and accountants).  People in this category are likely to be innocent or only tangentially involved in an activity that raises government inquiries.  However, these people are just as likely to be offered up as "designated defendants" or "patsies."  Warning -- this could be you.

There are several reasons for this.  First, it is a strategic move.  Every ounce of energy spent pursuing a case against certain scapegoated individuals is an ounce of energy less spent on someone else.  The "someone else" could be the real wrongdoer, who may also be the decisionmaker in the corporation who is interfacing with and instructing the corporation's lawyers.  Blaming others can be an effective diversion, meant to delay, elude, evade and exhaust the government's investigators.

Second, this strategy can feed on the fact that the government is full of young, ambitious lawyers who need to make a name for themselves, because that may be the only way they see to ever advance in their careers.  Going after a "C-level" executive or another professional with a career credential is a way to attract attention.  Corporate employees should be aware that merely having a particular title can expose you to government investigation -- without the slightest evidence of your involvement with or intent to commit any wrongdoing.  (Note: If the business decides to make you the sacrifical lamb, its embellishments, exaggerations or outright lies about you may be accepted as gospel and thus considered the evidence with which to open a file on you.)  Therefore, tapping into a rich vein of ambition can be a really effective -- and dastardly -- means to throw investigators off the trail of the real wrongdoers -- while also putting innocent bystanders in jeopardy.

For these reasons, anyone working as an employee or outside lawyer, accountant or vendor to any type of business entity which is under investigation should be alert and cautious.  Particularly vulnerable are the innocent.  This is because the guilty have "information" they can presumably share to get "credit" and "make a deal" -- this means perhaps avoiding jail time for having done the crime! 

If you are an innocent employee and your company gets raided one day, realize that you are at risk of being blamed.  The fact that the claim may be entirely -- and provably -- false may not necessarily prevent you from being accused, harassed, investigated -- even charged civilly or criminally.  The government does not always fact-check its sources, and some outrageously false claims do "get through." 

As dastardly and as immoral as it may be, sometimes criminals lie to the government and get away with it. (That's why they're criminals -- they're bad, immoral people. Expect nothing more.)  If they are your co-workers or bosses, you could be in real trouble.

In such a case, you should seek legal help.  Ideally, you would have a team of lawyers, including investigative lawyers with the patience and understanding to piece together what has happened, refute false claims and uncover other wrongdoing that can undermine or destroy the credibility of anyone lying about you to save their skin. 

Seeking legal representation in such cases may not be needless paranoia, but rather a necessary act of self-preservation.

Eric Dixon is a New York lawyer.  Mr. Dixon has been involved in complex internal investigations and performed investigative legal work on sensitive matters in the past.  He is available for comment or consultation at 917-696-2442 and by e-mail at

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