New DOJ Policy Could Put In-House Counsel in a Tough Ethics Spot

January 31, 2023

By Sara Kropf

DOJ’s new corporate cooperation policy includes a provision that places in-house counsel in an awkward—and potentially unethical—position. This new policy formalizes Deputy Attorney General Lisa Monaco’s policy announcement last year.

The new policy throws all sorts of carrots at companies that self-disclose wrongdoing and cooperate fully with DOJ. By my unscientific study, big law firms have now sent approximately 584 client updates about the new policy, so I won’t rehash the basics here.

One provision, however, caught my eye. While it sounds innocuous, the practical realities make this demand by DOJ deeply troubling.

The new policy lists what “is required” for a company to receive credit for “full cooperation.” These are not voluntary efforts nor is it a “totality of the circumstances” evaluation. These are requirements. One requirement is that the company cooperate by:

Subject to the individuals’ Fifth Amendment rights, making company officers and employees who possess relevant information available for interviews by the Criminal Division, including . . . former officers and employees.

To understand the problem with requiring a company to make an officer or employee “available for interviews” by DOJ, we need to unpack what happens when a company learns about potential illegal conduct.

Lots of people can raise red flags about a company’s conduct: current employees, former employees, an auditor, a vendor, and so forth. The allegations can be specific and credible. Sometimes, they are vague and not credible. If they are facially credible, the company will begin an internal investigation, either by in-house counsel or outside counsel. If it’s a potential criminal matter, a company will almost always use outside counsel.

At the beginning, the law firm will interview a relatively small number of company employees who might know something about what happened. These are preliminary interviews; the law firm doesn’t know much about what happened and is trying to get a sense of whether the allegations are true, who else needs to be interviewed, what documents exist, and so forth.

After this preliminary investigation, the law firm will report to the in-house lawyers—and possibly business leaders—about what it found and discuss whether to self-disclose this conduct to DOJ. With the new policy, there are significant advantages to self-reporting, because if the rest of the investigation reveals serious wrongdoing, then the company has a better chance of DOJ’s declination of the entire matter.

Let’s say the company takes the “safer” route (this is in quotes since reporting things to DOJ is never a completely “safe” option) and self-discloses the conduct to DOJ. The company will generally give some sort of proffer, meaning that its lawyers will tell DOJ the facts that it uncovered during the preliminary investigation. If a company is in cooperation mode, then it will tell DOJ who said what.

Here’s where the problem arises. Quite often, an employee (we’ll call him Joe) will admit to doing something wrong during that first interview or will admit to doing something that DOJ may think is wrong. Either way, Joe’s admission now places Joe’s interests in a different place than the company’s interests.

On the one hand, this situation means that company counsel cannot give Joe legal advice about whether he should or should not appear for a DOJ interview. Those lawyers cannot represent both Joe individually and the company under the rules of professional conduct because they have different interests.*  

On the other hand, the new DOJ policy says that to get full cooperation credit, the company must “mak[e]” Joe “available for interviews by the Criminal Division.”

What’s the company lawyer to do?

In these circumstances, the company will often agree to pay for Joe to have separate counsel to advise him about the investigation, including whether he should agree to a voluntary DOJ interview. This is the appropriate course of conduct because it does right by Joe and ensures that company counsel doesn’t commit any ethics violations by giving Joe advice in his individual capacity. It may also smooth the way to a joint defense agreement that can help Joe and the company.

What happens if Joe—with the advice of his new lawyer paid for by the company—decides that a voluntary interview is not in his interest and declines an interview? Does that mean that the company has not made Joe “available” for an interview and thus is not eligible for full cooperation credit?

I hope the answer is no because DOJ should recognize that (1) company counsel cannot represent every employee individually due to, you know, ethics and stuff; and (2) the company is not declining to make Joe “available” but instead allowing him to make that decision on his own with advice of counsel.

(“Should” is doing a lot of work here, but hey, but I’m an optimist.)

There are reasons why a client may not appear for a DOJ interview other than his Fifth Amendment rights, but those are too complicated to go into here.

It would be nice if DOJ acknowledged in this policy how things work in real life and make explicit that companies will not lose cooperation credit if an employee—and not the company—makes the decision not to appear for an interview. This is likely how it will play out, but it places company counsel in an awkward position. They may need to explain to business leaders why they cannot advise Joe to appear for an interview or why the company should not try to force him to choose between keeping his job and appearing for the interview.

Now, it would be a different matter if the company told Joe, “if you are asked for an interview and say yes, we will cut off your legal fees,” or “if you are asked for an interview and will agree to say no, then we will pay your legal fees.” It would also be a different matter if a company tells its employees that they may not be interviewed by DOJ or they will lose their jobs. This conduct would not only exclude the company from cooperation credit, but likely open it up to obstruction of justice or witness tampering charges. They are Very Bad Ideas.

One other issue: Could DOJ say that by paying for Joe’s lawyer, the company was not “cooperating” or making him “available”? The answer to that question is almost certainly no. DOJ was smacked down a few years ago when it tried to force companies to cut off payment of legal fees for employees as a requirement for cooperation credit several years ago. (See United States v Stein, 435 F.Supp.2d 330 (S.D.N.Y. 2006)). We should be safe on that front.

* Yes, there are conflict waivers, but even if a waiver would work, DOJ may push back on it.

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