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Civil and Criminal Liability: The Blurring of the Lines

Civil and Criminal Liability: The Blurring of the Lines. April 24, 2014. Gary W. Davis, Esq. BOWMAN AND BROOKE LLP. THE NEW FACE OF LITIGATION. Individual Plaintiff Cases (State). Individual Plaintiff Cases Fed MDL. Consumer. Public Relations. Class Action. State Attorneys General.

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Civil and Criminal Liability: The Blurring of the Lines

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  1. Civil and Criminal Liability: The Blurring of the Lines April 24, 2014 Gary W. Davis, Esq. BOWMAN AND BROOKE LLP

  2. THE NEW FACE OF LITIGATION Individual Plaintiff Cases (State) Individual Plaintiff Cases Fed MDL Consumer Public Relations Class Action State Attorneys General ISSUE Non-consumer CONSUMER CONFIDENCE Securities Litigation Independent Investigation Regulatory Agency U.S. Justice Department Congress

  3. Themes: ONE: • If you make or do anything productive in this world today, you WILL be attacked from time to time, and • Governmental, in addition to civil, investigations are becoming more likely

  4. Themes: TWO: • Civil and Criminal Defenses are inextricably intertwined • Civil claims often precede and greatly affect criminal prosecutions • Legal standards are more similar than one would think • Same facts and defenses determine outcome

  5. Can This Happen to Us? • U.S. Justice Dept: Toyota mislead consumers about safety problems • Largest penalty to date against an automaker • Settlement "serves as a model for how we treat cases with similarly situated companies" ~U.S. Attorney General Eric Holder

  6. Can This Happen To Us? • Senators slammed General Motors for "fraudulent and reprehensible concealment" • DOJ asked to require GM to intervene in pending civil actions to oppose any action by GM to deny responsibility for damages • Senators praised Attorney General Holder's decision to initiate a criminal investigation and urged him to do more

  7. Can This Happen To Us? • Charged with violating the federal Pipeline Safety Act • NTSB blamed PG&E for "baffling" mistakes, a "litany of failures," and lax oversight. San Bruno, 2014

  8. Can This Happen To Us? • East Harlem explosion highlights risk of natural gas lines • NTSB is probing whether a faulty gas main played a role • Companies are trying to decide what to do with aging, cast iron natural gas mains – many which date back to World War II. • Many cities with cast iron mains have "unaccounted for" gas.

  9. Can This Happen To Us? • Applies to less publicized matters as well

  10. How Bad Can it Be? • U.S. Department of Justice • Federal Grand Jury Subpoena • FBI

  11. How Bad Can it Be? Congressional Testimony

  12. How Bad Can it Be?

  13. Government Inquiries: What Congress and Regulators Will Do • Broad Discovery • Demand Answers in Unreasonable Time • Ignore Any Notion of Privilege

  14. Example: “Discovery” from the Legislative BranchCongress’ January 28, 2010 Letter to Toyota

  15. Demand Answers Immediately

  16. Fines For Not Responding • Daily fine for not providing enough information or "fully cooperating"

  17. Ignore Any Notion of Privilege

  18. What Legal Standards Can Apply • Criminal standards are not so high • Or they are so subjective that they can be relatively easily alleged when desired

  19. What Legal Standards Can Apply • Wire Fraud • Tampering with Governmental Records • Negligence • Securities Fraud • Pipeline Safety Act • Foreign Corrupt Practices Act

  20. What Legal Standards Can Apply: Negligence • Negligence • acting or failing to act in an objectively reasonable fashion • Gross Negligence: (negligence +) • the actor was aware of the risk but did not care (subjective), and his indifferent conduct posed an extreme degree of risk (objective) • Criminal Negligence: (negligence +) • the actor should have been aware of the risk (subjective), and his failure to recognize the risk was very unreasonable (objective)

  21. What Legal Standards Can Apply: Tampering with Governmental Records • A person commits an offense if he: • Knowingly makes a false entry in a government record • Makes, presents or uses any record, document or thing with knowledge of its falsity and with intent that it be taken as a genuine government record; • Intentionally destroys, conceals, removes or otherwise impairs the verity, legibility, or availability of a governmental record

  22. What Legal Standards Can Apply: Pipeline Safety Act • National Gas Pipeline Safety Act • Criminal penalties include fines and up to 5 years imprisonment • Owners/operators of pipeline facilities shall: • Comply with safety standards • Follow a plan for inspection and maintenance • Allow access to records and entry for inspection • Conduct a risk analysis and implement an integrity program

  23. What Legal Standards Can Apply: Foreign Corrupt Practices Act • It is a federal criminal offense • For any U.S. domestic concern • Directly or indirectly • To make a "corrupt payment or gift" • To any "foreign governmental official" • To obtain or retain any business advantage

  24. What Legal Standards Can Apply? Not "Perfection" - instead • Reasonableness and • Knowingly & willfully

  25. What Can We Do to Reduce the Likelihood of Charges? 1. Philosophy 2. Know the laws

  26. What Can We Do to Reduce the Likelihood of Charges? • 3. Compliance Policy • Have a written compliance policy • Shows you "know" and you "care" • With reasonable procedures in place • Evidence you take it serious • Full-time compliance people? • Training continually

  27. "We have a simple rule: We do not pay bribes" • "Prevent corruption within our company" • Signed by company president

  28. What Can We Do to Reduce the Likelihood of Charges? 4. System to monitor complaints • CLOSE THE LOOP! • Document the closing of the loop 5. Pay close, quick attention to "Notable Events" • High publicity • Governmental investigation • Civil suits

  29. What Should We Do if Charges Are Made or Anticipated? 1. Assemble your "knights"

  30. What Should We Do if Charges Are Made or Anticipated? 2. The "Truth" – Find it! • Accurately • Fast • Documents and witnesses • Objective vs. subjective

  31. What Should We Do if Charges Are Made or Anticipated? 3. Goals • Clearly define & refine • Where are you going?

  32. What Should We Do if Charges Are Made or Anticipated? 4. Credibility – Maintain it! • If you speak, speak 100% accurately with objective facts • Cooperate and communicate well with government investigators • NTSB, Fire department, Police, DA, DOJ • Give objective facts • Voluntary production better than subpoena

  33. What Should We Do if Charges Are Made or Anticipated? • 5. Prepare to tell your story accurately and wisely • Press? • What can you say at what points? • Company spokesperson vs. PR? • Post claim, sometimes lawyer safest • Testimony? Employee/corporate representative depositions/interviews! • Most difficult, important thing • FBI interviews? • Congressional testimony

  34. What Should We Do if Charges Are Made or Anticipated? • 6. BELIEVE • In the basic goodness of your business and its "Philosophy" and the good effort to fulfill it • 7. DEFEND YOURSELF! • "Be careful what you put behind you • because you may be putting • it in front of you."

  35. Questions? Gary W. Davis, Esq. BOWMAN AND BROOKE LLP 2901 Via Fortuna Suite 500 Austin, Texas gary.davis@bowmanandbrooke.com Direct: 512-874-3866

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