Preparing Executives and Employees After a Corporate Target Letter

Responding to a Corporate Target Letter

What is a Corporate Target Letter?

A corporate target letter is a concerning notification from a government agency like the Department of Justice (DOJ) or Securities and Exchange Commission (SEC) indicating that a company is under investigation for possible legal violations[1]. These letters often come during complex investigations into financial crimes, antitrust issues, government contract fraud, and other corporate misdeeds. While this notice causes uncertainty and anxiety, receiving a target letter does not mean a company is guilty. However, it does signal the government has reason to believe violations may have occurred and typically requests documents and information related to the investigation[2]. Companies that receive a target letter should promptly consult experienced legal counsel and take the matter very seriously.

Initial Response by Executives

When company leadership first receives a target letter, their initial response is crucial and can impact the course of the investigation. Executives should remain calm and take thoughtful steps, including: carefully reading the letter to note all details like the requesting agency, applicable laws and regulations, document requests, and any deadlines; immediately contacting experienced outside counsel to guide the response; refraining from destroying or altering any relevant documents to avoid obstruction charges; gathering the legal and compliance teams to develop a coordinated response strategy; considering issuing a litigation hold to preserve documents by suspending deletion policies; and avoiding public statements about the investigation internally or externally[3]. While receiving a target letter causes alarm, executives need to respond deliberately and thoroughly, as early missteps can worsen the situation.

Communicating with Employees

After taking initial actions, executives should carefully consider how to communicate with employees about the investigation. The ideal approach depends on the specific circumstances. Recommendations include: consulting legal counsel to ensure communications don’t hinder the investigation; strongly emphasizing that the letter does not imply guilt but rather indicates a preliminary information-gathering step[4]; reassuring staff that the company takes the matter very seriously and will fully cooperate; reminding employees about policies on document preservation, confidentiality, and external communications; designating internal points of contact for questions; avoiding speculation about the focus of the investigation; and conveying it’s business as usual unless otherwise advised. The right communication strategy maintains employee morale while protecting the company. Transparency is key, but executives should be careful not to compromise the investigation or imply guilt before all facts are known.

Preserving Relevant Documents

A crucial priority after a target letter is preserving all potentially relevant documents, as companies have a legal duty to retain any records that may relate to the allegations[5]. Recommended actions include: issuing a litigation hold memo to suspend routine document destruction; gathering both physical and electronic records from all locations; cataloging and securely storing collected documents; hiring outside vendors to assist with collection and processing; and making copies before handing over originals. While document preservation requires extensive resources, it is vital for demonstrating full cooperation and avoiding accusations of concealing evidence.

Responding to Investigators

Government agencies typically request information and documents soon after sending a target letter. Carefully responding can positively influence the investigation. Best practices include: designating one point person to coordinate responses; ensuring communications go through outside counsel; never destroying requested records; asking for clarification if requests seem unclear; providing organized records by agreed deadlines or negotiating extensions if needed; having counsel present for employee interviews; and otherwise demonstrating the company’s good faith efforts to resolve the matter.

Conducting an Internal Investigation

Beyond responding to the government inquiry, companies often launch internal investigations after a target letter to uncover facts and provide recommendations. An effective internal investigation may involve: assembling a team led by experienced outside counsel; developing an investigation plan and timeline; interviewing knowledgeable employees; reviewing applicable policies, training, and controls; analyzing relevant documents and communications; evaluating compliance with laws and regulations; identifying any systemic issues or control deficiencies; determining root causes of problems; making recommendations for remedial actions; preparing a report of findings; and presenting the report to management and the board. A comprehensive internal investigation is essential for fully understanding the situation and demonstrating the company’s commitment to compliance and integrity. The findings will guide the company’s response and help prevent any recurrence of identified problems.

Receiving a corporate target letter can be an unsettling experience, but following the proper response steps is crucial for protecting the company and its employees while demonstrating cooperation with government authorities. Experienced legal counsel provides invaluable guidance for navigating a complex government investigation.