tv Health Care Fraud Cases CSPAN January 6, 2017 4:18pm-5:22pm EST
to do a lot of things. the senate can do a lot with 50 -- they've got the tie breaker -- 50 votes via reconciliation, but that doesn't give them much wiggle room. if you start making big loosers out of states who comprise that margin of error, it becomes much more difficult. these are very, very real and very, very difficult conversations that you only really get into when you open up that hood and start looking at how that car actually runs. all right. we are at time. i think you guys need to eat lunch so thanks for having us.
good afternoon everyone. welcome back from lunch. deputy sallie yates who last december 2015 promulgated the individuality memo and that memo is more evolutionary than revolutionary. it's the government's ongoing efforts to try and shift focus to emphasizing the role of individuals in alleged corporate fraud and to hold them
accountable. we're going to discuss that policy today. we call it the yates memorandum. deputy yates doesn't like it to be called that. she would prefer it to be called the believability -- accountability memorandum. my name is david douglas. i'm a partner in a d.c. law office where i specialize in representing corporations and individuals who have been wrongly accused of fraud. in doing that, it's largely my role to protect my clients from people like the gentleman to my right. >> i see how this is starting
out. i'm the united states attorney for the northern district of new york. i am in my 20th year with the department of justice, the first 13 of which were spent as an ausa doing violent crime cases, white collar crime work and all manner of things that we do in our office. the last seven years i've had the privilege of being the united states attorney and during that time have a healthy new perspective for all the different kinds of challenges that we face in this area. i have also served on the attorney general's advisory committee and that's been a privilege and gotten to know a good bit about the department's viewpoint on things like individual accountability. nice to be hear. thank you. >> good afternoon. i am the general council of wellstar health care system in atlanta. we have about 11 hospitals. we have a large medical group,
about 1,000 providers in the medical group and 200 am baatory locations. we went from five hospitals to 11 hospitals last year. >> i'm a partner the d.c. office. i've been with the firm for two years. prior to that i had a 25 year career at doj, including a stint in the fraud health care unit supervising cases in brooklyn and houston and baton rouge and getting a favor for health care fraud matters and getting a flavor for what the department wanted to do in the corporate health care fraud context. >> thank you. let me put into the broader
context and tell you why it's so important that we all understand the substance and implications of the yates memorandum. what we say in false claims act investigations, it's also a criminal false claims act because there's a statute although we don't talk about it much, but also because of some of the underlying conduct that can lead to false claims liability. so in many respects however that threat has been more theoretical than real. many times practitioners are attempted to ignore the criminal case and say the criminal folks aren't looking at it, but what the yates memo is designed to do is to require the civil attorneys to cooperate with their criminal counter parts to make sure the department of justice has looked at both civil
and criminal liability in every false claims act case and to have a plan for resolving individual accountability, be it civil or criminal. so the yates memo. at least in the short-term and we can talk later about what the long term implications are, but in the short-term it has made the theoretical very real. if you are handling a false claims act case, now as a matter of doj policy there is a criminal ausa who will be looking at that case and considering potential criminal liability as well. so there are two important considerations. one if you're representing the corporation, what does it mean for cooperation credit? and then the second, there are ethical concerns that relate to representing the relationship between the corporation, your client and its employees who are not your clients. so this is something that has changed the way we practice and
it has focused our attention on criminal liability. so with that, let me just start with the basics and ask rick, what is the doj's policy with respect to cooperation credit for a company? >> so the policy, david, is straightforward and it is this, for a cooperating company to get credit as a threshold matter, it needs to provide all relevant facts relating to the individuals responsible for misconduct, all relevant facts. it's a threshold analysis. it's not a sliding scale analysis. there's no partial credit given for cooperation that fails to meet that threshold. all relevant facts. what does that mean, all relevant facts? it doesn't mean theories, legal theories or conclusions. it means facts. what happened, who did what, who
promoted the conduct, how and when did it occur, who is responsible for approving it, what documents show and describe how it happened and how the events unfolded. so those are some of the basic things that we are looking for when we say that. we are trying to get at the truth of what happened. we're not looking for a pelt or somebody necessarily to be served up. we want to understand the facts. sometimes there can be some questions or confusion about what we're looking for. i think the deputy attorney general has said and others you should contact the prosecutors if you have questions. you should engage in dialogue with us. i know my folks talk routinely with defense counsel. we're as open as we can be. sometimes we can't lay everything out for strategic reasons but we try to help build a dialogue so you know what we're looking for. i don't think this is a new
concept as you alluded to. we have always been interested in what individuals are doing, who is responsible individually. corporations act through their employees, through their executives, but it can be difficult sometimes to untangle the different levels of corporate structure and there can be thousands involved in corporations. sometimes corporations are overseas and it can be difficult to obtain witness testimony. these are special challenges in these white collar cases and that is the purpose behind it all. >> when we talked about cooperation credit for years, what we're really talking about were criminal prosecutions of organizations and what does that mean for credit under the sentencing guidelines, but as the slide presents the question is the yates memo limited to just criminal investigation? >> it's not. it applies to civil investigations as well and our assistant attorney general for
the civil division gave a speech and made clear that this corporation policy applies as a threshold matter in civil cases as well and we use corporation for determination of whether we should go forward, what charges we should bring, how to determine penalties and damages. these are -- this is a factor that we utilize, laid out clearly in the u.s. attorney's manual, that are important in our analysis. so they apply on both sides of the equation. >> in a criminal case, i can get a reduction in points under the guidelines, but in a civil case should i come to you and make my same pitch for getting some kind of reduction in the civil damages and penalties by virtue of my outstanding cooperation? >> absolutely. i think that's clear and i think that we have a record in our office certainly of crediting
cooperation and lowering damage calculations in situations where we have clear cooperation by the company that we're looking at. >> what other policies and strategies that doj is pursuing that creates this tension between companies and employees and i'll direct that to bill. >> thank you. i think the most important one for this group to be focused on is that doj is applying traditional investigative techniques, traditional law enforcement investigative te techniq techniques such as lining up cooperators and sending them in to talk to hospital administrators, using search warrants, using other investigative techniques such as bugs in offices, cameras, gps trackers, all kinds of
techniques traditionally associated with organized crime cases. the section is now taught and i know that because i taught it when i was there about four years ago, different investigative techniques to use in these investigations. to give you a couple of recent examples, in the riverside hospital case which was a case out of houston, texas, i supervised that case back in the day and in that case a cooperator was -- that was a data driven case. i think you heard some other speeches about how is doj finding these leads? it's relaters in cases and it's data driven annalyses. in that case it was data driven and a cooperator was identified, somebody who had a drug problem, and that person was enlisted to cooperate to wear a body wire and to go in and have conversations with the hospital
adm add straighter. that executive was prosecuted on a tape recording. from the good old days of doing drug cases they oouused to call them dry conspiracy cases in drug cases. it was a tough case to prosecute what the fbi, dea, all the government agencies wanted to do was go out and do wire taps and recordings and catch people in the act and that same thought process is being transferred to corporate health care fraud cases. the other example is the hospital case which i was not personally in, but did start during my time there and in that case the agent went out with -- i think with the fraud section trial attorney and in an early morning sort of wake up confrontation, knocked on the door of the suspected kickback
recipient, confronted her and she confessed and agreed to cooperate and similarly they confronted a hospital admin straighter and this all occurred without the knowledge of the hospital, the counsel for the hospital, this all occurred in the background without anybody realizing what was going on and it's this type of proaccount ai -- proactive investigation that's occurring in both civil and fraud health care investigations. >> so leo, when bill comes to you in a case and says i've got good news and bad news. i have lobbied rick and he's down to double damages, i'm sure if phil was doing it would be down to 1.5, minimum number of penal penalties, this is well within what we expected, it's a good disposition for the company, but he wants you to serve up some of
our key people. talk about what that means to you as a general counsel and the challenges that presents. >> that's not a good day to have that happen. we have an organization -- i shared the yates memo with the leadership team when it came out as an example of what's going on. i haven't broadcasted up and down the organization so everybody knows about it, but certainly the leadership team is aware of it and it's -- so what's the concern? the concern obviously is that they are going to be less inclined to want to cooperate with the investigation. other leaders in the organization, employees, may want to lawyer up earlier in an investigation. it may or may not be something that in another case prior to this coming out they would have had that focus on, but now knowing that there's a focus on this sort of individual accountability and executives in organizations are being charged, they could be less forthcoming. if they go out and select their own counsel or want to select their own counsel, that can obviously be a problem.
if it's not somebody who is experienced in this area, it's not that we don't want people who need counsel to have appropriate counsel, but these kind of cases are unique and you want somebody who is obviously going to protect their rights, but my duty is to represent my client. i want somebody that's going to cooperate with us, maybe consider a joint defense, so forth. the other area is -- there was a session about this yesterday and there was conversation about the upjohn warnings where i have to make clear while we're talking to an individual, an employee, we represent the organization. we have to be real clear about that. we really the organization and be not them individually which leads to the question of whether they should get their own lawyer. >> i should have mentioned at the outset, we invite questions from the audience throughout the presentation, although unlike me you all will have to make up your own questions. so i wanted to ask rick just
what is your sense from your work on the u.s. attorney's committee of where the different offices are in approach to yates issues if you have any general observations. >> i think it's fair to say when i started -- i'll use my office as an example. we were not doing a lot of affirmative health care fraud work. a lot of the smaller offices and we're not really equipped in their civil divisions to do more than defensive work. so during my tenure i've doubled the side of my civil division and hired some civil enforcement lawyers who have expertise in this area. i would say i'm not a lone. i think there's been a lot of districts, i'm talking about districts other than the districts with which we are most familiar that have been engaged in this work for a lengthy period of time, boston, massachusetts, philadelphia, south florida, southern district, eastern district of new york. those are obviously hot spots
with lots of resources. so i think there's been a redirection of resources and i think there's been an emphasis as well on something that the individual accountability memo requires now and that is to have our lawyers in the civil and criminal divisions work in tandem with each other and that's something that we do now as a matter of routine, as a matter of course, and i think it has made our work better. our lawyers are working well together. they can bring the tools and techniques from each of the house to bear on investigation and they can really drill down more quickly on the facts and get to a quicker resolution at the end of the day that's in the interest of justice and the interest of our department and in the interest of certainly people who are effected. >> i think it may be in the interest of the department of justice, i'm not so sure it's in the interest of justice. that's a cocktail debate. >> i see how this is going.
>> but it's something if you actually dig around in the archives, maybe ten or as many as 15 years ago back when massachusetts was really sort of pioneering aggressive prosecution under the false claims act, you can find an article he wrote in the u.s. attorney's bulletin, they have a newsletter. >> that's right. >> he was saying i don't know why more -- he was saying that in their office back then civil and criminal worked hand in hand and he gave examples of how well it worked and he was surprised then that more u.s. attorneys' offices weren't doing and he was commenting that the civil lawyer says, well, i'm going to send a subpoena and a criminal lawyer says i'm going to send an agent with a search warrant. it's taken a while, but it seems like doj has adopted that approach or is going in that direction. >> it really helps us get at some difficult proof challenges
in white collar cases. it is not always easy to prove intent beyond a reasonable doubt. when we have both sides of the house involved in a case, again the u.s. attorney and my supervisory staff we can make assessments that are more tailored to the facts of the case and be bring these cases to conclusion. sometimes white collar cases can langish as lawyers try to get at this challenge. i think this is a good development. i think we're seeing it kind of be used much more frequently across the country. >> so, bill, the question is should the lawyer who represents the company and employees, give us a little bit of grounding in the conflict of interest rules and why that's so -- such an important question. >> so the -- obviously the ethical rules apply here and the predominant ethical rule is
1.782 which -- i'll preface this by saying i've been out for two years and this question has been asked of me a half a dozen times. why don't you represent the employees. why do i have to get an outside lawyer. you know about the case. i have to pay them to learn it. why don't we do that. so the conversation that i have starts off well there's this ethical consideration that if there's a significant risk that will be a conflict in the future, then i should not take on that representation and i think with the yates memo it's obvious now that with the -- again, prior to the yates memo, we always knew there was focus on employees, but now it is so o universi overt you have to say i think this is a very likely scenario there's going to be an individual conflict here. >> leo. >> i'll probably follow the penn state investigation and sort of what happened there with the general counsel at the university and it was one of
those instances where the general counsel obviously represents the interests of the university. she met with the president of the university, the vp of finance, the athletic director as part of the sandusky investigation. there was a subpoena from the attorney general of the commonwealth and she met with those folks and didn't give clear upjohn warnings. she said what you tell me is not confidential. i may tell the board of trustees, but she didn't give anything akin to an upjohn warning. in her defense the attorney general's office said i'm not going to ask you about anything that's privileged. they're not targets. so she also showed up for the grand jury testimony and appeared as their lawyer. she later was called by the attorney general's office to give testimony against those folks and on behalf of the university waved the privilege and she believed that she was representing only the university at that time and that she didn't represent the individuals. as you can imagine the whole
thing sort of blew up. she's no longer with the university and the criminal charges against those three gentlemen that were derived from her grand jury dwere dismissed. that's something i get all the time. it's a unique situation when you're inside and work with the cfo and the compliance team every day and you have to come and be asked those hard questions to make sure they understand who you represent and i bring in somebody like bill so i don't have to do that. >> that brings us to the next point. if i can't represent the employ employee, who should. >> the way we structure to go forward so the corporation and
the employees may have separate counsel can work together and share privileged information is we enter into a common interest agreement that are called joint defense agreements, but it's a common interest agreement and it may not apply only to situations where there are adverse legal interests. but a common legal interest is that the parties to the agreement have a common legal interest. it doesn't have to be an identical legal interest, but it has to be a primary interest such that their interests are sufficiently aligned so it makes sense for them to share privileged information. that's really all it is. most of the ones i frankly do are on a handshake because i know the lawyers that i'm inclined to enter into an agreement with, but i've always done them and they can be multiple pages, particularly in large investigations of multiple corporations where there are
many interests to consider sharing of documents, return of documents, proprietary information and the like. so the concept is very simple. we simply agree our interests are aligned. we agree to protect privileged information we receive from the other party under a common interest agreement. you are not obligated to provide privileged information, but you are entitled to. so if i provide it to bill as we work together in rick's investigation, he has to preserve, even though i wasn't obligated to provide it, if i choose to, he is then obligated to preserve it. actually, speaking of rick, did the doj -- what is doj's view of joint defense agreements? and can i just note you clearly are a u.s. attorney because you haven't made that disclaimer because u.s. attorneys don't care what justice thinks. >> that's not true.
joint defense agreements, i think there's two rules that are important for our discussion today. one, participation in the joint defense agreement does not make a corporation ineligible to receive cooperation credit. that's an important point. and we do not request that a corporation, second point, refrain from entering into such an agreement. that is a matter for the corporation to determine. we note, however, that sometimes these agreements can complicate a corporation's ability to cooperate because they may have derived information from an employee and that employee may be represented and there may be some bar or prohibition from the company then sharing information with the prosecutors. that can present a challenge so i think that challenge has to be identified and weighed and assessed by the corporation. >> sometimes it's hard to know how that plays out because if i
get privileged information that i then can't share with you, it's not as if you're deprived of information, right? so you're not getting less, so sometimes these kinds of arrangements actually can complicate both our jobs, right? >> that's right. so let's turn to sort of one of the difficult issues that arises in these cases. you have the company. you've done your investigation. it's clear that some folks have done something wrong. they are probably also under investigation or may be. they're also value. you have a lot of intellectual capital in those people. those people have their own market value. few things bring company morale down more than firing a bunch of people when the company is under investigation and that has
ripple effects. so leo, i'm going to dump all that on you. >> so the harder question i would -- is the one you didn't ask, which is if you're early in the investigation and you don't really know what's happened, you can still have employees now who are getting nervous about things and they're reluctant to talk to you. so if you don't know, what do you do and how do you work through that? they may or may not have counsel and you have to be carefully whether you know they've done something wrong or you don't we're very careful about anything that can be perceived as retaliation. whistle blowers have protection against retaliation. you have to be very careful about how you handle those things. we have, like others, i think, looked at different things like suspending somebody add administratively and paying them. if we don't think they're a wrong doer, then we might try to
put them on administrative suspension. that can be retaliation even if you're paying them. you have an aggressive lawyer saying this is ridiculous, you shouldn't take them out of the job just because they're exercising their rights, but i have the duty to represent the corporate interests and not the interests of these employees. so you have to clook at these things very carefully and it's a facts and circumstances analysis, but there are times you have to do that. >> and bill, i'll open it up to anyone, who do you do about the employee who says i don't want to talk to you? >> right, so that's the $64,000 question, how do you react to this. and representing the corporation, i know that i have to talk to doj and i have to report to them what my investigation found and was my investigation a solid investigation and what did i do about that employee or what did the company do about that employee. i know that in the -- i don't think we pointed this out, but
in addition to the individual accountability memo, there's a website at doj which has helpful thing like speeches and frequently requested questions and the answer to one of the frequently asked questions is that a company i think rick would echo this is not required to take specific action against employees, but your response to the misconduct is something that the doj is going to take into consideration. until recently i think that people sort of thought, well, okay, we can do certain things, we can take interim steps, we might be able to dock a little bit of pay, but in the recent ember case doj actually exacted a financial penalty on the company for failing to discipline to the extent that doj thought was appropriate a senior executive who doj felt was involved in the misconduct.
so it's very problematic now what to do about an employee. as leo pointed out, if they're a whistleblower and you don't always know who the whistleblowers are, if you take action against them that's retaliation. if you don't take action against them and doj thinks that they're cupable, then you may have a financial penalty. and they may be one in the same person. the whistleblower may be the most cupable person involved. what do you do in that case. obviously i think i'm supposed to answer those questions, but i'm just posing them because there's no easy answer. it's a difficult situation. >> in house when we do something like this and you talk to your board about what you found, they're going to ask you what are you going to do to the person if you have identified a wrong doer who is acting, this wasn't an accident or a mistake, this is something that's doing something that's deliberately wrong.
in that case it's probably a pretty easy decision. your board is going to expect you to do that and given the government's view of things that's what you're going to want to do and also to protect your organization, if you have a wrong doer in the organization you're going to want to get them out of the organization, you want to get rid of them. the claim will be made whether it's a good one or bad one anyway. you can ek size the problem from the corporation and deal with the consequences later. >> just to be clear, the department doesn't require that a company take a specific act against an employee for it to remain eligible for cooperation. that is obviously one of the factors that we look at. it does present a bit of a conundrum for the corporation. we want to know what remedial action has been taken, what a company does to -- about a wrongdoing employee, says a lot about where the corporation is, what their attitude is, and that is a factor that we assess when we're determining, you know, what charges to bring, what
penalties or damages to assess, and the like. >> and i want to add a little more gray to this situation. which is, when it's not clear, when it's not clear how involved the supervisor was, whether the supervisor really knew, or was negligent, what do you do in that situation. there's a little brit of dance that goes on with doj. because they're not going to tell you to terminate somebody, or tell you what to do. but if you say i think we're recommending that we keep so-and-so on, and then you look for a reaction. and if it's okay, or a glum look, you say, although -- >> my prosecutors are trained not to react to bill. >> but you do. you try to feel this out. and you try to propose possible solutions to gauge what the doj reaction is. so that you can advise your client on, you know, this seems to be what's going to happen. because at the end of the day, in the ember case, why should
the corporation pay 10% more, that was a multimillion dollar supplement, why should they pay 10% more if they didn't adequate are i consider, maybe we should take greater action against this employee. it's a difficult situation to be in all the way around. >> it sounds a little bit from what leo and rick were saying, as a practical matter, it's probably going to be very difficult to say to the government, we've identified this person as the person who made the false certifications, or even this person who seems to be within the zone of miscond t misconduct, but refused to talk to us. we're keeping them on the payroll. not only do you have the problems with the prosecutors, you have prodder problems about what it says about the company, the board of directors, shareholders, customers, if you have someone who engaged in wrongdoing or refuses to explain
to you exactly what they did on the company's behalf. >> i would certainly seek counsel on it. if you have an investigation and you've got documents that point in a direction and you've got to ask questions of an employee, and that employee refuses to talk to you, they have an obligation as an employee to talk to you. again, recognizing that there are risks, as the attorney for the organization, i expect them to comply with it. and we have had occasion where we've had to do that before, where someone won't talk to you. and sometimes they ask to bring an attorney in. if we have a conversation, an internal conversation, you don't have the right to bring an attorney in, when we have that interview. in different circumstances of employment disputes in particular we would not allow somebody to bring an attorney in. you're our employee, and if they don't, that will be subject to a sanction probably. >> in some instances, i've encountered this where i've gotten the person an attorney, when they won't talk -- you know, my view is, i have to be a
devil's advocate, not a heartless advocate. you fire people under the cloud of investigation, they're never going to work. you want to do things precipitously. sometimes i have recommended, let's get that person an attorney and let that attorney clarify the person's thinking about where they are. >> that's absolutely true. there are a lot of times that it's to the company's benefit for the employees to have an attorney. but frankly, to have a good attorney. everything works better when you have good attorneys involved, folks that know the lay of the land, and what the likelihood of adverse consequences to the employee, or what information the employee has to share. and it may be in the employee's best interest, all our best interests to share in all that. i don't mean that that's the first step -- you try to work through it, to see if you can get the cooperation, because it's to everybody's benefit to do that. >> plus, this notion of multiple representation, i generally am
of the view of hiring counsel for employees is the best money spent. because it's much easier when those employees have their own advocates that, frankly, helps them to remember what happened, and to be free, and to talk with them clearly. but also, so that i'm not the bad guy when rick starts asking tough questions. i'm going to say, well, they have their own attorney. go talk to that person. i think it would be hard, maybe, for rick to agree that i've cooperated if i've not disclosed facts that i've gotten in a privileged way. if there's an employee with a lawyer, and i'm saying, i'm telling you all i can tell you, go leverage that person, i think it would be harder for you to make the case i haven't cooperated if i don't represent some of the key individuals. bill? >> and i think we all remember the days not too long ago when doj's position was, the company should not pay for the lawyer to represent the employee, and
really -- there was a thompson memo that was re investigated. so now -- i think i'll defer to rick on this. i di doj's position is, if you want to pay for employees to have lawyers, god bless you. it's all to the good. and they should not hold it against you. >> so now we have all this privileged information. but i'm desperate to communicate it to the government to get a good deal for my client. bill, what do we do? >> well, so the first thing is, we have to decide whether or not to waive the privilege. and i think the first question may be for rick is, what is doj's position on whether we have to waive privilege. >> well, i think the rule there is clear. we do not require a waiver of the privilege. we've been directed not to ask for the waivers. sally yates in recent speeches she's given has even challenged
the defense bar to let her, or her office know if some prosecutor asks their client to waive the attorney/client privilege. and so that is not something that we're going to do. the situation can change, however, if there's an advice of counsel defense raised. in those situations, communications with in-house or outside counsel that occur prior to, or contemporaneous with the alleged wrongful conduct, those can be expected to be produced. we're not required to just take on faith some representation that this person acted on advice of counsel. so that situation prevents -- i think it presents a different story. there are cases that support that approach. and we've had cases, and bill, i know, has had experience with this, too, where, you know,
we've -- on advice of counsel, defense is raised, and we delve into it a little bit and get ahold of the lawyer and find out what the lawyer was told, and lo and behold, the lawyer wasn't told all of the facts that were relevant in order to give this advice to the client. what a shocker that is sometimes. and we've seen that happen on a number of occasions. >> and really, this comes up not so much with the corporation relying on advice of counsel, but with the corporate employees relying on advice of counsel, the defense that in-house counsel told me this was okay. has that ever happened, leo? has anybody ever said, you told me it was okay? >> it happens every day all day. we have to be careful about that. >> as rick points out, typically, in my experience, in those situations, was the employee thinking that this is okay, is different from the "this" that the in-house lawyer or outside lawyer said was okay.
it's that discrepancy that leads to the inability to a certain advice of counsel. >> i would just note, par parenthetical parenthetically, the doj's position evolved from the point that doj prosecutors are not to ask for waivers except on advice of counsel. but the s.e.c. actually reserves the right to ask for a waiver. if you're ever involved in a case in which the s.e.c. is involved. they have to go through their own supervisory review. they are clear, they do reserve the right to request a waiver. of privilege from a company under investigation. >> all right. so how do we go about disclosing these facts and what are some of the implications? bill? >> there's a fair amount of case law out there. one of the traditional ways, traditional way number one, i conduct the investigation, i have this -- associates are taking careful notes. we prepare an interview
memorandum. i go in to talk to the government, say, here are all the memoranda of the interviews we've conducted. that is clearly a waiver of privilege. some lawyers do that. that's the way this edecided to practice, that's what they want to do. you need the permission of your client, of course, to waive privilege and tell them that's what's going to happen. the second way that i've seen people do it, quite frequently, is what everybody calls the oral download. and i think that people use the oral download with not being susceptible to waiver, but in essence, lawyers come in, and they read the memo to the prosecutor without handing it over. and recently courts have said that that, too, is a waiver. that's effectively the same thing as handing them the memo. but the third possibility is an oral download that's not reading each memorandum, but giving the
overall approach. and in those cases, that's not a waiver of privilege with respect to the specific memos, or the specific interviews that you conducted. but there's another technique that is fast gaining traction. and that's the hypothetical proffer. and in that case -- in the southern district case where the judge approved it, it's sort of, if you were to ask so-and-so, he might say this. i expect that you might hear this if you were to interview someone. and at least in the southern district, with that particular judge, that was not a waiver. and that was actually basically the judge said that was a brilliant strategy by the lawyer to both communicate to the government the facts the government needed to know, and not waive the privilege in connection with it.
>> so, should the company become concerned about waiving a privilege? or is that just a lawyer's concern? >> i think that there are concerns about waiving privilege. and we're going to get to the way around that in a second. but certainly, if you waive privilege and it's a subject matter waiver, then you have to be concerned about everything, you know, a search of your files, and everything going over. and this would come up in particular, if an employee is charged, or if the employee is the subject of a -- of an investigation, where the employee's lawyer is now asking the company to turn over their privileged matter because it's a subject matter waiver. but there's another concern, leo, right? with shareholder litigation. >> thankfully we're a nonprofit so we don't have to worry about that. but absolutely, shareholder litigation, and there can be
collateral consequences. but if you're thinking about waiving the privilege, think carefully about the potential collateral consequences for the use of that information. you know, either in the court of public opinion or in another court. >> and it's important to underscore, it's not the form that determines the waiver, whether it's written, whether it's oral, if you disclose facts, or privileged factual information, it's a waiver. the issue of oral versus written really is more of a -- well, it's two fold. the oral hypothetical, other than the standard, well, if my client told you this, what would happen. there you haven't disclosed any privileged facts, it's a hypothetical. but to the extent you are relaying facts, this is what our investigation found. it is a waiver, but because it's oral, its -- it really makes it harder for third parties to get at it. >> right.
>> so we should talk about federal evidence 502, which was put in place to make it easier for parties to investigations, or potential litigation to manage the privilege issues. and what 502 provides is that, in privileged information that is disclosed in a federal proceeding, is a waiver only to the extent of the information disclosed. it's not a subject matter waiver. the rule 502 generally was really driven by the scale of e-discovery, and the problem of reviewing, you know, thousands -- tens of thousands, sometimes hundreds of thousands of documents. and then you find you missed a privileged one in there and it was completely unmanageable, frankly, for all parties. so i think that was the heart of rule 502. but in our context, 502a provides valuable protections.
>> i think it's important to understand, and the advisory committee notes make clear, the exception, if the waiver's intentional, which would typically occur in an internal investigation, yes, here are the interview memoranda. does the disclosed and undisclosed communication concern the same subject matter. certainly there's going to be internal memoranda between me and my associates, and perhaps with the client discussing, weighing the benefits of disclosing, those would be on the same subject matter. but the third criteria, they ought in fairness to be considered together, the advisory committee notes make clear that what's intended is to do away with subject matter waivers. that the important consideration is, it's unfair if it's misleading. so if i turn over an interview memorandum from an interview of rick that says x did not happen, and that's my proffer to the government, but i also have an interview with leo which says, x
sure as hell did happen, that would, under the rule, that would be misleading, misleading attempt. so in fairness, they ought to be considered together. but typically and traditionally under rule 502, it's intended to be a waiver of only what you actually either orally or in writing produce. and there is another component to 502, 502d which really seals the deal. 502d allows the parties to obtain a court order which is binding and definitive in both state and federal litigation that a particular waiver is simply a waiver as to the documents provided. >> a couple of other quick notes on 502. 502 provides different kinds of mechanisms for regulating how you handle the disclosure of
privileged information. one is a clawback. you give it to the other side. and you get it back. i think it really contemplates more of an inadvertent disclosure. the alternative is a quick peek. you allow the other side to look, and if they say we're interested in that, and you say, well, that's privileged, and then you decide where to go from there. the difference between clawback and quick peek is burden shifting, because it's who has the responsibility, who bears the costs of dealing -- identifying and managing the privileged issue. so in a clawback, the burden really is on the party producing the information to be vigilant and say we want it back. in the quick peek, it goes to the other side, i think. >> all right. >> so how do you get the rule 502 order? >> rule 502 says that
litigation, if it's pending before the court, then you can get a court order. and you say to yourself, well, how does that apply to me? well, certainly if you receive a grand jury subpoena, a grand jury proceeding is a type of proceeding that is pending before the court, and you are -- and i have successfully obtained, with the consent of the government, 502d orders that is a disclosure of certain things that are not subject matter waivers. there are other examples. i think rick can fill us in. >> grand jury, matters sometimes under seal, sometimes it's difficult to know if there's a q 10 under seal. there are circumstances we may get a partial seal lift. >> right. >> to allow the order to be obtained. >> so if i was negotiating with a u.s. attorney's office or doj in a case where i wanted a 502d
order, and of course, they don't tell you there's a seal key, but you have enough experience to figure out that's probably the case, you would then, again, the dance, well, if you could get a judge to sign this, then we would be happy to provide you with this material, and lo and behold, a signed order appears, and you can move forward with this. >> so let's go back to the big question of cooperate or not to cooperate. rick, from the view of the u.s. attorney, can or should a company decline to cooperate with the government? >> this is the $64,000 question. and i think the bottom line here is, it's up to the company to decide, just like it's up to any client or any target or defendant to decide whether cooperation is in their best interests. and typically, that decision is made as a result of consultation with their lawyer.
communication with our office. and, you know, it works out one way or another. so we can't force anybody, compel any person or corporation certainly to cooperate. and if someone doesn't cooperate, that doesn't necessarily mean we're going to be pun a tiff or seek an indictment. we'll make an individualized assessment of the fact, and weigh the principles of prosecution, take a look at the nature of the conduct and look at the background of the defendant, and we're going to look at the strength of the evidence and we're going to make that decision upon an analysis of all the factors that we need to think about when we're making those hard decisions. >> leo, do you have a -- >> i was going to say, also, it depends on what you mean by cooperate. we would certainly -- we have policies. our policy to cooperate with an investigation. if somebody shows up, we're going to respond to document
requests, we're going to do what we need to do. you know, we will certainly if there are individuals who need to be interviewed, they may or may not have counsel that we may or may not have paid for. we would, i would say, cooperate with it. so we may do the investigation and think, hey, you know, this was not reckless, maybe there was a mistake made. you can disagree about the ultimate outcome. but cooperate during the course of the investigation, i think. >> and i think the department has made clear, although rick has stated it very benignly what the consequences are for cooperate or not cooperating. and you can look at it in the difference in these cases, but you could find examples in health care cases of petro tiger versus alston, where in speeches, the department, various officials have pointed out, look what happened to petro tiger. they did not cooperate. they got a fine that was in the middle of the guideline range,
whereas -- i'm sorry, petro tiger did cooperate. alstrom did not cooperate. they got a fine in the middle of the range. it really makes you think, okay, you have to cooperate. but you always have to ask yourself this question. the 20% discount off of what, and that's -- you know, that's the elephant in the room. what is the "what" that we're talking about. if we're talking about $5 billion -- or $500 million was the elephant in the room, and you can have serious disagreement about whether it should be $500 million or $200 million or $100 million, and it's a difficult one, so i would say it's obvious that once you have arrived at a number, you're much better off cooperating and getting the discount. but if to arrive at the number to cooperate you have to agree to some inflated, or what you believe to be an inflated
number, then you're not really getting much of a benefit at all. >> it's interesting. as a practical matter, it's hard for a company to just flat-out tell the government to go pound sand. and particularly for health care providers, apart from doj, you have permissive exclusion issues if oig decides you're not doing the right thing. it can be different with individuals, however. these rules are so complex, the regulations are arcane, the e-mails may be unclear. the government needs an individual, and it can be that there are cases where you simply say to the government, i'm sorry, i'm not going to talk to you. good luck to you. if you get something, come back and talk to me. maybe, you know, i'll cooperate with immunity. we all like immunity. i'll talk your ear off once i get immunity. but i don't know that it makes sense -- it does not always make sense for individuals to
cooperate, and in the context here of these multiple representations, as a corporation, i would expect to be in close communication and coordination with company counsel saying, hey, here's where i am. and it might be that bill's representing a company, he's saying, i didn't tell you to do that, but good. >> and i do think it's clear that in the government's view to cooperate includes an admission to whatever the government says the facts are, and whatever the government says the number is. now, there may be negotiation over the facts and the number. but the end document that you're going to see is going to be an admission. and again, going back to the good old days, it used to be you could enter into settlements where it would say, the government contends that, and the defendant, or the company disputes that, but in order to resolve this, we agree to this, that is becoming less and less frequent. it's still -- there are still districts where you can get that, but there are districts
that will not enter into dispositions that do not contain a definite admission of either guilt or wrongdoing, whether it be criminal or civil. >> we are one such district. we require clear admissions, a clear statement of conduct. we think it's in the interests of transparency and the interest of the public understanding, the nature of an investigation, and why we arrived at a resolution. so these are -- you know, there are negotiating points certainly throughout these cases. and, you know, we think it's very important that we be clear about, you know, why we're doing what we're doing. we want to inspire confidence in the justice system, in the work of the prosecutors. and so that's really the reason behind this requirement. >> it is difficult in a civil investigation where the potential damages under the false claims act are, you know, add as many zeros that you want to. and you're trying to make a
business decision that i'm not going to risk the future of my company because we did a lot of x-rays, or whatever you think-oi think of some claim. it only takes 50 claims to get $1 million under the new false claims act penalty. you're making a business decision to resolve it. even if you don't think you acted recklessly, sometimes you're being forced to confront, do i have to admit this or make a business decision. so i think it is difficult when you have a district that might not allow you to do that. i'm certain you would be willing to consider the facts and circumstances of every case with an open mind. but i do think that creates some difficulty. it is a business decision sometimes on just how you settle these things. >> let me also turn to one additional point about resolving they cases under the yates memo. now what the yates memo requires is when there is a resolution, that the aosa resolve in the case have a clear plan of resolving the liability of implicated individuals.
so if you charge the company, but not charging the individuals, now you're going to have to prepare a memorandum, explain either saying this is my plan i'm going to go after them, or here's why i'm not going after them. >> that's right. emphasis on documentation, of deck la nations, which we do normally. this is going to be a refocus by the deputy attorney general requiring there to be supervisory analysis interaction about these decisions. no signoff, no passes for culpable individuals without high level u.s. attorney or aig approval. so these are things that are built into the policy that are going to affect a more rigorous analysis of how we're handling these cases. and i actually think it's a good thing. it's something that we have required for the most part during my tenure as u.s. attorney, requires our ausas to really focus on the conduct of
the people involved in the case, and to be clear as they approach their supervisors about how they're going to reach a disposition, and be clear about the reasons for the settlement, or disposition. >> that's what i really hate when ausa is really focused. but the practical problem, and something to keep in mind is, i find in dealing with justice, if you have to get someone to write a memo to get approval to get what your client wants, you're in a lot of trouble. here's a place, particularly whether you're representing the company, but also particularly the individuals, you can really help your client by preparing the memo. by saying, here's all the reasons i think you should not prosecute any individuals here. you say, it may be true for the company, that you have a basis to prosecute, but my client, 45 years old, has always obeyed the law, was operating -- i really don't think a jury is going to convict this person beyond a
reasonable doubt, particularly after i bring in three experts to say this is routinely done and it's ambiguous, and blah, blah, blah. so i've now given you something that you can turn around into the memo you need. >> the kind of information you described gets a hard look from us. our ausas distill it. our supervisors look at it. i frequently require it. i just did so recently in a case. a significant response to the defense submissions beyond the original material that i had about been given to review a white collar case. i said, go back and answer every one of these arguments and i want to see it in writing and i'll weigh it and assess it with my supervisory team. unless you think these submissions get ignored, that's not the case in my experience. >> bill, since you invited me to join this panel, i'll let you wrap up with the last word about compliance. >> i see the time has run out on
the shot clock. just quick point about compliance. the request eis, does a preexisting compliance program help you, and the answer is, sometimes. in the case of olympus corporation, the doj determined that their compliance program is inadequate, and they were then punished really, a higher fine was imposed under the guidelines than otherwise would have been in place, or imposed, because, again, the doj's judgment, their compliance program was not up to snuff. >> we're looking for effective compliance programs here. i think leslie caldwell called it kicking the tires regularly. you know, what is an effective compliance program. the senior leadership provides support for it. does the compliance officer have authority. does the compliance office have resources. are training programs comprehensive and are there
rewards for compliance and disincentives for noncompliance. these are things we drill down on, to get at whether compliance is real or not. >> right. and i've heard the phrase paper tiger, which is the prosecutor's way of sloughing off the compliance. that's a paper tiger. it didn't catch this. how good could it be. which is a challenge. if it's a good program, why didn't it catch this particular type of misconduct. so i think you have to be prepared to answer that question. the skeptical prosecutor will always ask that question. >> thank you all for your attention. i'm sure if you have questions, the panel will be happy to answer them afterwards. thank you. [ applause ] >> we're here at the tail end of this summit. thank you to those of you who have suck around for it. thank you for those of you who were listening on our live webinar.