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April 16, 2014

Not All Investigations Are Alike

“Say a company finds out that it is under investigation for possible criminal violations. Its challenge is to figure out the chances that the investigation will result in charges and the possible impact of those charges on its business. Not all investigations are alike, and there are telltale signs about how serious a threat one may present.”

“Federal prosecutors have broad authority to initiate grand jury investigations, which often start with issuing subpoenas for documents. There is no requirement for prior judicial approval of a subpoena, unlike a search warrant, which can only be issued if there is probable cause a crime took place. As the Supreme Court pointed out in Branzburg v. Hayes, a case involving a demand for a reporter’s notes, “an investigation may be triggered by tips, rumors, evidence proffered by the prosecutor, or the personal knowledge of the grand jurors.”

“The grand jury is shrouded in secrecy, its operations protected by a strict rule against disclosures by the government. Thus, information can be scarce about the status of a case. And figuring out whether the Justice Department will seek charges or quietly let the matter drop can devolve into a guessing game.”

“The secrecy rule does not apply to those who receive subpoenas, however, and they are free to reveal that they have been contacted by the grand jury or investigators looking into possible violations. Companies frequently disclose the receipt of a subpoena because it is better to let shareholders know that there is a potential for a criminal prosecution rather than letting it be a surprise.”

“But even the issuing of grand jury subpoenas does not necessarily mean charges are expected, even if they can be a good indication that prosecutors consider the underlying conduct to be worthy of further scrutiny. The absence of a demand for records, though, does not always mean there is no investigation. In fact, the absence of such a demand may indicate that an investigation has been opened as a type of placeholder in case information comes to light later about possible violations.”

“For instance, DealBook reported last week that the Justice…”


Read full New York Times article here.

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