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Compliance Week Panelists Discuss Congressional Investigations

At Compliance Week's recent conference on governance, risk and compliance, one of the sessions focused on Congressional investigations and the sometimes parallel government proceedings. Mary Ellen Fraser, with McKenna Long & Aldridge's government contracts practice, noted that whatever shows up on the cover of the Washington Post is likely to be the subject of an oversight hearing. If an oversight committee calls your government affairs office inviting you to testify, she said try to get out of it. If that fails, Fraser said it is very important to be truthful to the staffer with whom you speak because that is the person likely to be writing the questions the member will ask.

Your opening statement before the committee is also very important, according to Fraser, because it is likely the first time the committee members are hearing from you. Try to talk to minority staffers in advance of the hearing in order to get some "friendly questions," she suggested. Another option is to get a member who represents your company's state to ask some questions. The person testifying must completely understand the facts in order to tell "your side of the story," she said, since the testimony is likely to be under oath.

Stefan C. Passantino, also with the McKenna firm, said the number one goal is to convince the committee that you are not the one they want to talk to --and give names that may point it in another direction. You cannot prepare your people well enough for parallel proceedings and the attendant media scrutiny, he said. Even information shared with a staff member that was considered "off the record" is likely to end up in a report to the committee chair.

Joshua R. Hochberg, also with the McKenna firm, said counsel should be involved in the process. The Congressional hearing is the tip of the iceberg, he said. A criminal investigation may be right behind the Congressional hearing and could tie you up for the next two years.

An individual does not always have the same status as the company, according to Hochberg, so the company must determine whether individuals need their own counsel and whether their interests diverge from the company's. He pointed to the Department of Justice's mishandling of recent Congressional scrutiny of the firing of U.S. attorneys general. They thought it was a political issue and that they could handle it, he said, but they should have known that they must learn the facts before they start testifying.

Paul Pelletier, with the Department of Justice, advised that career people would know not to go before Congress unprepared. Individuals who know they are the targets of investigations will often testify before Congress based on ego or confidence, he said. That testimony will provide a treasure trove of evidence, according to Pelletier. DOJ sends people to hearings or orders the transcripts for hearings of interest, he said.

There is a protocol for whether to honor requests by Congress for witness immunity. Sometimes it is helpful to the case to have someone testify, he explained, such as Jeff Skilling. When he testified before Congress he had an arrogance problem, Pelletier said, which ultimately led to a criminal problem. Taped conversations with his trader differed substantially from what Skilling told Congress.

Pelletier pointed to a "hall of fame" of people who obstructed Congress or Justice and helped make the case against them. He named Martha Stewart, Scooter Libby, David Safavian, Frank Quattrone and the accounting firm Arthur Andersen. He suggested that none of them would be in trouble if they had told the truth. Safavian was not on the radar screen until he testified before Congress, Pelletier added. He "flat out lied" to the McCain panel and DOJ was able to use that testimony to convict him at trial, he said.

It is hard to prove scienter, according to Pelletier. DOJ's job is made easier when someone lies. It is sometimes easier to prove the lie than the underlying scheme, he explained. Employees of the government have an extra obligation to tell the truth, in his view.

An audience member suggested that when DOJ gets information about a potential case from the Washington Post, it triggers a "witch hunt." Pelletier replied that Justice does not typically get its cases from the Post. Usually there's an FBI agent involved, he said. He added that most employees who work for a company that is under investigation believe it is a witch hunt. It is not an unusual reaction, he said.

Passantino said that when you go in for an off-the-record briefing, it is hard to put that information "back in the bottle." It can become fair game. He said there is an absolute media bias to identify any conflicts or false statements. Every statement is like catnip, he said, in that it poses a challenge to the media to find any discrepancies. In a high profile case, in addition to Congress and the DOJ, a third investigation may take place in the media.

Passantino urged everyone to be aware of new lobbying rules on gifts and entertainment for Congress and staff. Two similar, but competing bills are in conference, he said, and may come out in a month or so. The laws will change and the required disclosure will increase, in his view. The information on gifts will be filed online and will be downloadable and sortable. The disclosure will receive increased scrutiny, he explained, and is subject to false statement penalties. He urged businesses to make sure their internal compliance personnel are aware of what the ethics rules are.

Fraser asked Pelletier why it is uncommon for DOJ to grant immunity requests from Congress. Pelletier said that you never know how a criminal investigation is going to turn out. When people are in play, for instance when they have grand jury status, a grant of immunity will have implications for DOJ's ability to prosecute if the person turns into a target. It becomes harder to get them to cooperate, he said.

Jacquelyn Lumb