Preparing Executives and Employees After a Corporate Target Letter

| by sasmatipati@gmail.com

Last Updated on: 2nd October 2023, 05:50 pm

Receiving a target letter from the government can be an incredibly stressful and uncertain time for any company. These letters notify corporations that they are under investigation for potential criminal violations. While the implications are serious, there are steps executives and employees can take to prepare themselves both legally and emotionally. This article provides an overview of target letters, how to respond initially, managing employee concerns, potential legal defenses, and strategies for moving forward.

What is a Corporate Target Letter?

A target letter is a notice sent by government investigators, usually federal prosecutors, indicating that a corporation or individual is a target of a criminal investigation^[1]. These letters are often sent in white collar crime investigations related to areas like fraud, bribery, money laundering, and more. Receiving a target letter means charges have not been filed yet, but prosecutors believe there is substantial evidence to bring a case.

Target letters will identify the specific allegations being investigated. They usually advise the target to cooperate with the investigation and provide information to potentially avoid indictment. The letters will also often try to persuade targets to plead guilty. While alarming, it’s important to remember that receiving a letter does not mean guilt has been determined or that charges will definitely follow.

Initial Response to a Target Letter

The first step upon receiving a target letter is not to panic. While the stakes are high, there are measured steps executives can take to protect themselves and their company. Some best practices include:

• Carefully review the letter and identify exactly what allegations or potential crimes are being investigated.
• Contact experienced white collar defense counsel as soon as possible. Reliable legal advice is critical for navigating investigations.
• Do not destroy or alter any relevant documents, emails, texts, etc. This can lead to obstruction charges.
• Avoid discussing the investigation with anyone outside approved attorneys and executives. Loose talk can find its way to investigators.
• Begin compiling relevant documentation in an organized manner. This aids the legal defense.
• Have counsel reach out to prosecutors on appropriate response and cooperation.

While the knee-jerk reaction may be to deny any wrongdoing, experienced counsel can help targets make informed decisions on responding to allegations and interacting with investigators. This helps avoid missteps that can worsen the target’s position.

Managing Employee Concerns

A target letter can send shockwaves throughout a company, leaving employees feeling anxious and uncertain about the future. Transparent communication and empathetic leadership is vital for maintaining morale and productivity. Consider taking the following steps:

• Hold an all-hands meeting with employees as soon as appropriate to announce receipt of the letter. Be open about the process ahead.
• Express empathy and acknowledge this causes stress. Assure employees you aim to minimize disruption.
• While case facts can’t be shared, explain the general nature of the allegations and your intent to cooperate fully.
• Highlight that no determinations of guilt have been made and many investigations do not lead to charges.
• Encourage employees to voice concerns and questions they may have.
• Remind the team of the company’s overall mission and values that continue unchanged.
• Promise to keep employees updated as able on any material changes.

Ongoing transparency and creating opportunities for employees to speak openly helps maintain trust and unity during difficult times. Leaders setting the tone with measured optimism can be invaluable.

Potential Legal Defenses

While each case has unique complexities, common defenses in white collar investigations include:

Lack of Criminal Intent

Most financial crimes require prosecutors establish criminal intent beyond a reasonable doubt. Evidence showing actions were taken in good faith without intent to break the law makes charges harder to bring. Thorough documentation and email records can help demonstrate lawful motivations^[2].

Lack of Materiality

Charges like securities fraud require prosecutors to prove misrepresentations or omissions were materially significant to investors. Evidence showing the impact was minor or investors were not misled can undermine allegations^[3].

Lack of Knowledge

It may be possible to show executives were reasonably unaware of any potential misconduct occurring within the company. Demonstrating proper compliance procedures were in place and management acted responsibly can defeat charges^[4].

Unclear or Contradictory Laws

Vague regulations or unclear precedents may indicate the company reasonably tried to comply with the law. This argument has been used in response to charges like honest services fraud^[5].

These are just some of the many options skilled counsel can leverage to mount a defense. Former prosecutors hired as defense attorneys are very familiar with the methods needed to protect targets.

Moving Forward Productively

Despite the disruption caused by a target letter, companies can take proactive steps to continue operating productively:

• Keep senior management focused on core business priorities and maintaining relationships with customers/partners.
• Task a dedicated crisis response team to handle the investigation and employee communications.
• Bring in outside expertise as needed – legal, PR, HR – to supplement existing staff.
• Reassure stakeholders like investors and board members by being transparent about the process.
• Refrain from public comments on the active investigation until counsel approves messaging.
• Identify opportunities for improvement – compliance programs, training, controls – that can be addressed.

While the situation is undoubtedly serious, approaching matters methodically can help companies maintain perspective. While the legal process can stretch out over many months, staying focused on executing business objectives is crucial. With experienced counsel guiding the response to allegations, corporate leaders can reassure employees and stakeholders that the company remains strong and resilient. Adhering to core values around transparency, compliance and customer service allows companies to demonstrate commitment to operating ethically, even under pressure.

By tackling challenges openly yet optimistically, corporate executives can mitigate much of the uncertainty and fear that legal investigations create. A target letter marks the beginning of a journey, not the end. Maintaining a thoughtful, step-by-step approach in close consultation with counsel gives companies the best chance of reaching the most favorable outcomes. While it will require patience and dedication, many companies emerge from investigations more cohesive and better positioned for the future. With preparation and perspective, executives can guide their organizations through the storm.