The civil investigative demand is one of the most-potent tools available to investigators at the Department of Justice (DOJ) and other federal agencies. Civil investigative demands can be extremely broad in scope. In addition, federal district court judges will often defer to investigators when it comes to deciding what is necessary to efficiently and effectively investigate allegations of federal offenses.
Individuals and organizations served with civil investigative demands can face civil contempt if they fail to respond appropriately. Also, if they share more than is necessary, any information “voluntarily” disclosed has the potential to trigger civil or criminal charges.
With these considerations in mind, individuals and organizations served with civil investigative demands must be extremely cautious. They must take great care to avoid mistakes when preparing their responses. While this list is not exhaustive, some of the key mistakes to avoid include the following:
8 Mistakes to Avoid After Receiving a Civil Investigative Demand
Mistake #1: Ignoring the Civil Investigative Demand
First and foremost, a civil investigative demand cannot be ignored. Federal agents are not simply going to drop the investigation if you choose not to respond. In fact, the more-likely result is that your failure to respond will raise additional questions. Indeed, it will only heighten the level of scrutiny.
Furthermore, as noted above, failing to respond to a civil investigative demand can result in a charge for civil contempt. This will hold true even if (i) you are not otherwise liable for a civil offense, and/or (ii) you do not have any responsive information in your possession.
Mistake #2: Assuming that You Must Hand Over Everything
While it is necessary to respond, it is not necessary to immediately hand over everything. Although the DOJ’s and other agencies’ power to compel disclosure of records and information through the issuance of a civil investigative demand is broad, it is not absolute.
Specifically, the power to obtain information pursuant to a civil investigative demand is limited in scope. It is confined to information that is (i) relevant to the government’s investigation, (ii) not overly-burdensome to produce, and (iii) not already within the investigating agency’s possession.
The issuance of a civil investigative demand also must not amount to an abuse of the judicial process. Witnesses and targets served with civil investigative demands are entitled to preservation of the attorney-client privilege.
What about information that may be self-incriminating? In the context of a civil investigative demand, this is a uniquely-challenging issue. While individuals and organizations may initially withhold self-incriminating evidence based upon the protections afforded by the U.S. Constitution’s Fifth Amendment, the DOJ has the power to compel production of such information under 18 U.S.C. § 6004
This is, of course, provided that it is not used for criminal prosecutorial purposes (other than prosecution for perjury, giving a false statement, or failing to comply with an order issued pursuant to 18 U.S.C. § 6004).
For executives, business owners, in-house counsel, and other individuals concerned about the potential for complying with a civil investigative demand to result in exposure of self-incriminating information, it is essential to discuss the possible options and their ramifications with an experienced federal defense attorney.
Mistake #3: Assuming that Efforts to Challenge the Civil Investigative Demand Will Succeed
Oftentimes, the best approach to limiting an individual’s or organization’s disclosure obligations in response to a civil investigative demand will be to negotiate with the agency personnel responsible for issuing the demand.
In many cases, it will be possible to clarify and limit the scope of a party’s disclosure obligations. This can be achieved simply by explaining why a fully-compliant response is unfeasible or unnecessary to the agency’s investigation.
If efforts to negotiate are unsuccessful, the recipient of a civil investigative demand has the legal right to challenge the demand at the administrative or judicial level. A challenge can address a civil investigative demand in whole or in part, and it can be based upon any of the grounds discussed above (i.e. seeking irrelevant information or imposing an undue compliance burden).
However, when filing a challenge, it is important not to assume that the challenge will be successful. Once again, the courts will often defer to agency personnel in deciding what is necessary to adequately conduct an investigation; and, if the challenge is denied (either in whole or in part), the recipient will need to be prepared to submit all necessary information by the stated deadline.
Mistake #4: Destroying Responsive Documents (or Allowing Them to Be Destroyed)
Upon receiving a civil investigative demand, it is necessary to preserve any hardcopy or electronic records that could potentially be relevant to the government’s investigation. This is commonly known as instituting a “litigation hold.” At a minimum, a litigation hold should involve:
- Instructing personnel to retain any potentially-relevant computer files, emails, and other documents;
- Contacting third-party vendors that provide document storage or destruction services and instructing them to preserve potentially-relevant documents; and,
- Suspending any regularly-scheduled purges or overwrites of stored files or communications.
This litigation hold must be instituted promptly, and it must be tailored to the specific documents and files that are potentially at issue. Allowing relevant documents to be destroyed, even unintentionally, can lead to enhanced scrutiny and additional charges.
Mistake #5: Assuming that You are Innocent
When facing a federal investigation, assuming that you are innocent because you have not intentionally committed an offense or you are not aware of any improper conduct can be a huge mistake.
If you assume that you have nothing to hide, you decide to cooperate with the investigating authorities, and it turns out that you (or someone within your organization) has committed an offense, you can count on the authorities using any and all available information against you.
Contrary to popular belief, you do not need to intentionally engage in unlawful conduct in order to face federal charges for a civil offense, and you could very easily be at risk for prosecution under a federal statute (or a specific provision of a statute) of which you are not aware.
Mistake #6: Assuming that You are Guilty
While it is critical not to assume you are innocent, it is equally important to avoid assuming that you are guilty of a federal offense. Although many federal statutes are designed to allow for civil or criminal prosecution under a broad range of circumstances, there are also numerous potential defenses to all types of federal charges. This is true even if you have taken the steps necessary to establish civil liability or criminal culpability for a federal offense.
In all cases, civil and criminal, the federal government has the burden of proof. If federal authorities do not have the evidence they need to prove their case, then you cannot legally be held liable or convicted. When responding to a civil investigative demand, this is a critical factor to keep in mind, as you need to be careful to ensure that you do not unnecessarily disclose any information that federal prosecutors could present as evidence in court.
Other potential defenses include safe harbors, constitutional protections, and various other statutory and common law defenses. As you learn more about the specific allegations against you (assuming you are the target of the government’s investigation), you can begin crafting a defense strategy that is designed to prevent charges from being filed or, if necessary, mitigate any potential penalties based upon the particular facts and circumstances at hand.
Mistake #7: Misrepresenting Information or Omitting Relevant Documents
Once you have been served with a civil investigative demand, one of the costliest mistakes you can make is intentionally misrepresenting information or withholding responsive documents.
The investigating agency is most likely seeking information from multiple parties; and, even if your deception is not apparent from the response you provide, it may be exposed by information obtained from other sources.
Intentionally interfering with a government investigation is a criminal offense carrying fines and up to five years of federal imprisonment, and federal authorities do not take attempts to evade prosecution lightly. If you are concerned about the potential consequences of disclosing certain information, withholding the information is not the right approach.
Mistake #8: Responding to the Civil Investigative Demand Without the Advice of Legal Counsel
Due to the complexities and risks involved, responding to a civil investigative demand is a task that should only be undertaken with the advice of experienced legal counsel. From interpreting broad document requests to negotiating with federal agents, and from challenging the scope of civil investigative demands to preserving the attorney-client privilege, virtually all aspects of responding to a demand involve highly-complex federal legal issues.
An attorney who is experienced in handling federal investigations will be able to help you avoid costly mistakes while dealing with federal authorities on your behalf, and will be able to provide you with sound legal advice that is custom-tailored to the circumstances at hand.
Dr. Nick Oberheiden is a federal defense attorney and founder of Oberheiden, P.C., a federal defense law firm headquartered in Dallas, Texas that represents clients in civil investigations nationwide. The firm can be reached online or by phone at 888-519-4897.