IT Considerations In Responding To Governmental Inquiries

Wednesday, August 27, 2014 - 13:44

The Editor interviews Thomas P. Keegan, Principal, KPMG LLP’s Forensic Technology Services Practice - specialist in Investigations and Dispute Advisory Services.

Editor: Please tell us about your background.

Keegan: It’s a bit of the road less traveled. I graduated from Rutgers Law School and decided at that time that I didn’t really want to practice law. I spent a few years installing elevators and then decided that I wanted to find a more intelligent and useful way to use my degree and my IT background. I joined KPMG’s forensic practice about 16 years ago. For the past 10 years, I have headed our Forensic Technology Services Team in the New York metro area.

Editor: How should a company react to receipt of a subpoena or other communication indicating that a government enforcement agency is initiating or conducting a non-criminal investigation into some of the company’s business activities?

Keegan: Obviously the reaction will depend upon which government agency and the type of communication/request received from the agency, but generally speaking the first step is for the company to assess what the agency is after. For example, a client may receive a document request that looks fairly innocuous in the beginning but can signal big trouble in the future. That’s why it’s critical that the initial request be referred to in-house counsel or other specialists who understand whether or not it may signal larger problems down the road. If it does, it is important that the company look at the possible impacts of those problems within its organization. If it completes that assessment and the situation is of serious concern, it should create a steering group to notify affected business units and to manage the company’s responses to the agency. It’s also critical that consideration be given any document retention obligations that may be triggered by receipt of the request and the reasonable concerns it may generate, including with respect to the retention of electronically stored information. A comprehensive list of potentially relevant ESI sources should be prepared and documented. Such ESI should be preserved to avoid a spoliation charge.

Editor: How does your answer change if the investigation has criminal scope?

Keegan: Obviously there are significant differences between whether an investigation might generate criminal or civil charges by the government agency. One of the first things that needs to be done is to determine whether outside counsel is needed. If criminal charges are possible, in most cases you will want promptly to retain outside counsel. Also, it may be desirable to bring in outside counsel if there is a potential for the company to be involved in a civil proceeding or inquiry in which a number of different governmental agencies are involved. 

Editor: How can defense counsel get to know enough about their clients’ technology systems to be able to speak intelligently in response to broad government demands for copies of electronic communications?

Keegan: One of the approaches that most successful attorneys use is to rely not only on the more senior levels of management, but to have a conversation with  the IT individuals responsible for the administration of the systems in which they ask those individuals how they would respond to the subpoena. This will often produce different results/options.

Editor: What are the best ways to treat relevant but privileged documents? Is there a possibility of a “clawback” of inadvertently produced privileged documents?

Keegan: I think the best way to treat relevant but privileged documents is obviously with great care. Every organization that we work with and its outside counsel has a preferred way to handle potentially privileged documents, but the fundamental rule is to ensure physical or electronic segregation of the documents to avoid inadvertent disclosure.

Many organizations physically create separate repositories for ESI once they’ve identified it as potentially privileged and maintain category and access controls to reduce the risk that they’re ever inadvertently produced to the government. When dealing with the government or an adversary, a clawback agreement should always be sought. However, it is dangerous to rely upon a clawback, especially in responses to government inquiries, because while they may not be able to produce or use the documents, the horse is already out of the barn if you inadvertently produce those documents to them.

Editor: Are there problems specific to requests for protection of structured databases? Perhaps you should first define structured databases.

Keegan: It’s any system that records data into predefined structured fields within a database. A structured database is typically a transactional system. It’s your ERP system, including your payroll system, your invoicing system, your accounts payable system, and your inventory control system that monitors your archives. Unstructured data are typically the user documents that don’t fit within a structured database such as Word documents and PowerPoint files.  There’s a big difference between collecting somebody’s e-mail and pulling data from a structured database.

In the past, both parties to a litigation  have relied upon the business records that are produced from structured data repositories, but they frequently don’t tell the entire story. I think e-discovery of structured data repositories is going to be a growth area for consideration when it comes to ESI both in civil and criminal government inquiries. Increasingly, things are being automated, and that automation frequently involves a structured repository. Skilled professionals will not only know how to extract the data in a usable format but will also have the ability to determine how data existed at a given point in time.

I think we’re going to see the government getting more aggressive in asking for ESI from structured repositories.

Editor: Should “user guides” be provided to government investigators?

Keegan: Full disclosure of the process that you go through in order to extract the information is critical as well as an upfront agreement with the government about the manner in which you’re going to produce it. You can extract data out of any source system. You can put it into Excel. If it’s too large for that, you can put it in a number of different formats that enable the user to store and use the information.

Editor: Should outside vendors be employed to assist in this process?

Keegan: Outside vendors are probably more critical when dealing with structured data than they are with unstructured data. Although a significant number of outside vendors now have the ability to do collections of unstructured data and have a defensible process that can be used in both civil and criminal matters, more attention needs to be paid to dealing with structured data.  

Editor: The Department of Justice has collaborated with a number of organizations on the defense side to create the ESI Protocol for Federal Criminal Cases. Could you describe for us the origins of the Protocol?

Keegan: The Protocol came out of district court rulings that clarified the federal rules for defining certain interactions between the government and defendants in criminal matters. Obviously they don’t have the same mandatory nature as the Federal Rules of Civil Procedure (FRCP); however they are beginning to receive almost the same consideration from the federal district courts that the FRCP do.

Editor: Can use of the ESI Protocol utilize the advantages of technology while avoiding undue costs for both government and defense?

Keegan: For individual defendants or smaller corporate defendants, it certainly does have a significant ability to help reduce the cost of ESI. I do think that most large commercial defendants are going to probably preserve broadly using the same standards they would have used prior to the adoption of the ESI Protocol, so I don’t see it as providing the same financial savings for them. Smaller defendants will find that their ability to avoid mistakes and what they can rely upon from the government are expanded.  The government sets the speed of the investigation quite differently than in a normal civil proceeding. I don’t know that the ESI Protocol alone would get to a faster resolution of any matter, but it would provide a more consistent and faster understanding of the ESI that is involved and how it will be handled. The investigative process with the government will follow a timeline that is not necessarily set by ESI Protocol.

Editor: I would expect that if you’re a typical corporate counsel with general responsibilities, or even general counsel, you would not be very familiar with things like ESI Protocol.

Keegan: I would agree with that. There is so much economic activity relative to non-governmental civil litigation that the general rules of civil procedure and their relevance to ESI receives 99 percent of all consideration and the ESI Protocol for the federal criminal cases is the other one percent at best. So, if you’re hiring outside counsel to defend you in a criminal case, you should be sure he or she is familiar with the Protocol.

Editor: What are some of the factors to be considered in the selection of counsel to handle an enforcement agency investigation?

Keegan: Certain regulatory bodies prefer that the representatives of an organization maintain an image of objectivity, and, in such cases, using outside counsel may be a better choice. Some outside counsel and consultants may be former members or staffers of the agency making the inquiry and would have a better feel about their processes and reactions to the investigative facts.

On the other hand, some agencies may feel that in-house counsel can speak more authoritatively about the company and its policies. 

It is also important to assess your resources and their scalability. Most organizations, especially coming out of the recession of 2008-2009, became smaller, not larger. Your ability to scale up to handle a governmental inquiry in-house depends on whether you have sufficient in-house resources to treat it with the care that it requires. Primary factors in making your decision about whether to seek outside help are the costs and other consequences of a failure to provide satisfactory responses to the inquiry. 

 

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is recevied or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. KPMG LLP does not provide legal services. 

Please email the interviewee at tkeegan@kpmg.com with questions about this interview.