Spying in the Business Context Almost Obsolete in the Digital Age

Clients often call us for advice on investigating their employees and competitors.  They really want the benefit of recorded clandestine conversations, of following employees to catch them in the act of meeting with the competition, of an evening ‘stake-out’ to catch the theft and passing of trade secrets.  Some extremely few times, this is merited; most often it is not.  And the way clients often try to do surveillance can be illegal, and even if successful, can produce evidence barred from use in court.

Electronic public records can in so many instances replace much of what was often discovered by traditional ‘gumshoe’ detective work.  What is available for free on the internet was almost impossible to obtain even ten years ago; what is available through pay services to anyone now is downright scary, considering others can get such information on us.  But this trend has been increasing since the ‘90’s and shows no indication of slowing.  (Indeed, I told Forbes Magazine in 2006 that “there are a lot of ways to obtain information without breaking the law,” [from company owned phone records, recent moves or real estate purchases, other public documents like credit reports and criminal histories, [even an application]…for a fishing license in Alaska.” [1]

More than that, “Big Data” companies have incredible access to electronic information, and the ability to decipher it; recent media investigations have shown how information collected on popular phone apps that should be anonymized can easily reveal individual name, location and, most importantly, spending data. [2]

Just because it can be done is not a reason to or a license for doing it.  In Pennsylvania, it remains illegal to surreptitiously tape someone, including on a telephone call, without each party to the conversation consenting; use of such a recording in court, if obtained, is barred.  A GPS tracker cannot be placed an automobile by anyone but the owner (and a husband can’t track a wife’s whereabouts unless the vehicle is jointly titled in his name!).  And you can’t place a hidden video camera in a home unless it’s yours.

These are just a few of the basic rules for modern-day surveillance within the bounds of the law.  It is complex and specialized; call us before you try this “at home.”

 


 

[1] Clark, “How to Legally Spy on Employees,” Forbes Magazine Oct. 26, 2006, at: <https://www.forbes.com/2006/10/25/leadership-hewlett-packard-spying-lead-manage-cx_hc_html#5b36dd719aa4>.

 

[2] Thompson, Stuart A. and Charlie Warzel, “One Nation, Tracked,” NY Times, Dec. 12, 2019

Tips for Representing Bankers in OCC Investigations

Unlike the financial industry scandals of 2008, bank regulators are now increasingly holding institutions and individuals accountable for financial loss.  On January 23, 2020, the Office of the Comptroller of the Currency (“OCC”) announced it had resolved its administrative action against former Wells Fargo CEO John Stumpf wherein he agreed to a lifetime prohibition from the banking industry and $17.5 million-dollar civil money penalty (“CMP”).  Other former senior bank management agreed to pay CMPs in the millions.  On the same day, the OCC issued a notice of charges against five former senior bank executives seeking similar sanctions.  The OCC’s sanctions against Wells Fargo stem from the bank’s account fraud scandal, the effects of which are still being felt.  Over the last twenty (20) years, Wells employees created millions of fake bank customer accounts, issued unapproved insurance policies, transferred funds between accounts without customer consent, misrepresented that certain financial products were only available in packages with other products, and accessed and falsified personal account holder information.  Bank employees said they took these actions to satisfy unrealistic sales quotas.  They singled out the bank’s deeply-engrained tradition of cross-selling financial products, such as pressuring checking account holders to also take out a mortgage through the bank, or obtaining a bank issued credit card, as the root of the scandal.  The OCC investigated and found that former senior bank executives long knew about sales misconduct and the company culture driving it but failed to address it, despite numerous and repeated complaints from employees and account holders.  The OCC While not well-known, the OCC has expansive enforcement authority.  The bank regulator is an independent bureau within the United States Department of Treasury that charters, regulates, and supervises all national banks.  Some of its employees are tasked with routinely monitoring financial institutions in certain parts of the country.  Its primary objectives are to ensure and maintain the safety and soundness of the national banking system and to investigate misconduct committed by institution-affiliated parties (“IAPs”), which include national bank officers, directors, employees, agents, and independent contractors (including appraisers, attorneys and accountants).[1]  The OCC initiates administrative investigations and actions against IAPs for unsound and unsafe banking behavior, breaching their fiduciary duties, or violating banking laws and regulations or agency orders.  The OCC can enter into a formal agreement, issue a cease and desist order, assess a CMP, or prohibit an IAP from working in the industry for life.  It issues a notice of charge, as is the case with the former senior Wells Fargo executives, when the OCC and the investigated IAP cannot reach a resolution.[2]  The OCC has wide latitude in the remedies it orders, including ordering affirmative actions, like making restitution or correction of problems. A removal or prohibition from banking penalty results from when a banker’s misconduct caused a loss or potential loss or other damage to the bank, financial gain or benefit to the individual, or prejudice to the interests of depositors, and involved personal dishonesty or exhibited willful or continuing disregard for the safety and soundness of the bank.  Tips for Representing Bankers in OCC Investigations With individual liability now at the forefront of regulatory investigations, its necessary that defense counsel be well-equipped to defend against these matters.  The Grail Law has successfully represented banks and bankers in multiple OCC investigations and actions, and believes counsel representing bankers should adhere to the following best practices: Parallel Investigations OCC investigations often parallel a criminal investigation.  Counsel usually encounter an OCC investigation while or after representing a banker in a criminal matter.  Counsel should represent their client’s interests accordingly.  Counsel must portray its client’s conduct in the most favorable possible way that not just avoids criminal but also regulatory penalties.  It is possible for a banker to avoid prosecution but be sanctioned by the OCC.  Proactive Communication with OCC Enforcement Counsel As early as possible, counsel should establish an open line of communication with OCC enforcement counsel.  Counsel should obtain a full understanding of the scope and focus of the regulator’s investigation.  Counsel should also begin framing their client’s conduct in the best light possible.  OCC enforcement counsel usually view your client’s conduct differently from the OCC examiners responsible for routinely overseeing it.  The sooner you can firmly plant a favorable client narrative in regulatory counsel’s mind, the better. Discovery Counsel should oversee and direct all document production to the agency.  Some banks turn over documents to the OCC wholesale without consulting counsel.  Counsel should devote significant time to reviewing OCC’s document requests and produce only responsive information. Counsel also need to sufficiently prepare their client for their sworn statement under oath.  Here, OCC enforcement counsel and examiner staff ask questions of your client.  Aggressive advocacy in this setting can go a long way to successfully resolving the matter.  Counsel must create a clear, complete record that accurately portrays your client’s conduct and its impact.  It is another excellent opportunity to positively frame your client’s behavior. Request an In-person Meeting with Enforcement Counsel After they conclude discovery, OCC enforcement counsel will take some time to decide whether or not to sanction your client.  This provides a small, but important window to make a final argument regarding your client.  An in-person presentation to regulatory counsel is often highly effective at convincing the agency not to sanction your client.  Really, any opportunity to communicate in person with OCC enforcement counsel can be highly beneficial to your client’s case.    With the Wells Fargo scandal leading to calls for increased regulatory sanctions against bankers, it is likely more bank regulators will initiate aggressive administrative investigations and actions against IAPs.  In such a regulatory environment, it is imperative that defense counsel are cognizant of the risks and best practices associated with the legal representation of such individuals.


[1] 12 U.S.C. § 1813(u). [2] An IAP must file an answer to the charges, after which the matter proceeds to a formal administrative hearing.  The rules governing the practice and procedure for these hearings are contained in 12 C.F.R. § 19.1 et seq.

Pennsylvania Appeals Court Addresses Scope of Attorney-Client Privilege in Corporate Investigations

Controversy occurs at work all the time, and as a result, employees file lawsuits. Pennsylvania businesses often struggle with how to properly investigate these lawsuits, especially with how to obtain and keep confidential statements from employee witnesses. Now a Pennsylvania appellate court has provided guidance.

**

Karen Newsuan was working at a Republic Services, Inc. recycling center when a front-end loader crushed her leg, requiring it to be amputated.  Newsuan sued Republic and other owners/operators for negligence.  Sixteen employees witnessed the incident. Republic’s corporate counsel interviewed twelve of them about the incident, taking notes at the interviews. At the end of each interview, corporate counsel asked the former/current employee if they wanted corporate counsel to represent them.  

Newsuan’s attorney requested all of the employees’ statements, but Republic’s counsel refused to produce them, claiming that all of the employee witnesses agreed to be represented by corporate counsel. They invoked attorney-client privilege with respect to the communications made during their interviews with the former/current employee fact witnesses.  Notably, Republic’s corporate counsel admitted that during the interviews, they did not inform the former/current employee fact witnesses about any potential conflicts the company lawyers may have in simultaneously representing the company and the witnesses, nor did they obtain an informed waiver of any conflicts. 

The trial court rejected the existence of a purported attorney-client relationship between Republic’s corporate counsel and the former/current employees. It ruled that Republic had to produce the former/current employee contact information and all written communications and notes of oral interviews occurring prior to corporate counsel’s offer of representation.

Republic appealed, arguing that the statements represent privileged communications because its corporate counsel and each employee formed a specific attorney-client relationship at the end of the interviews. Republic also argued that counsel’s notes taken during the interviews were also protected under the work product doctrine.  The Superior Court agreed that the violation of rules of professional conduct by Republic’s corporate counsel prevented the direct formation of an attorney-client relationship between counsel and the employees. 

However, it also held that Republic possessed a privilege over the communications because its corporate counsel sought them to assist in providing legal advice to Republic in the lawsuit. As such, the particular communications shared between Republic’s employees and corporate counsel fell within the scope of Republic’s attorney-client privilege and did not have to be disclosed. 

The court emphasized that Republic’s corporate counsel made clear to the employees that predominant corporate-interest purpose of the interviews.  Also, the court observed that while the resultant attorney-client relationship that corporate counsel and the employees believed they had formed was invalid for reasons of potential conflict of interest without informed consent, the apparent agreement to keep their communications confidential satisfied the confidentiality requirement of attorney-client privilege. The court did note that the privilege does not protect underlying facts, and therefore allowed Newsuan to seek ex parte interviews with each employee – to the extent they are not represented by counsel – regarding their factual observations of the incident and seek further discovery through depositions and interrogatories.

The court also held that Republic’s corporate counsel’s notes regarding his communications with the employees were protected by the work product doctrine, which precludes disclosure of the mental impressions of an attorney or their conclusions, opinions, memoranda, notes or summaries, legal research or legal theories.  In doing so, it noted that the work product doctrine is closely related to the attorney-client privilege but broader because it protects any material constituting the mental impressions and processes of an attorney acting on behalf of a client, whether prepared in anticipation of litigation or not.

**

Newsuan is an odd case with odd facts. Nevertheless, the decision serves as an important reminder for corporate counsel of the potential privilege pitfalls with regard to conducting interviews of former and current corporate employees. Corporate counsel should remember that:

  1. Their client is not the individual they are interviewing, but the corporate entity;
  2. Counsel should inform the interviewee that they are not their personal attorney; and,
  3. In order to secure privilege protection, be clear from the outset of the interview that its purpose is to assist them in advising the corporation on legal matters.   

The Grail Law Firm advises business victims of crime, conducts internal investigations, and also defends suspects and persons accused of criminal and other bad acts, and also defends companies and professionals in federal and state regulatory enforcement actions.

Upcoming Event: The First Amendment

Attorney Efrem M. Grail will present on the First Amendment as it pertains to a free press at the McKeesport Community Newsroom, as an initiative of the Center for Media Innovation at Point Park University Center. The Community Newsroom supports citizen journalism and storytelling by residents of the Mon Valley’s largest city and surrounding areas.

“Freedom of the press is irrelevant if journalists ignore the facts and voters ignore the news, and each accepts “alternative facts” as anything other than falsehoods,” said Attorney Grail. “Liberty requires a dynamic partnership between a media committed to exposing truth responsibly and consumers willing to pay them for the effort, even when they occasionally get it wrong.”

The presentation, to be held on Thursday, October 17, 2019 at 6:00 pm at the Tube City Center, will include discussion on freedom of information, libel, and how to file under Pennsylvania’s Right-to-Know Law. The event is free and open to the public. More information is available on the McKeesport Community Newsroom website.

Attorney Grail is a Pittsburgh lawyer and former journalist who works on First Amendment speech, press and religion cases, in addition to his White Collar Criminal Defense practice.

 

Dispensing Controlled Substances from the Office: A Guide for Physicians

Given law enforcement’s current focus on combating the opioid epidemic, controlled substance-dispensing physicians are under increased scrutiny from local, state, and federal governments. Below is a brief overview of the law and regulations covering physicians’ office-based dispensing of controlled substances, specifically those pertaining to prescription drug monitoring, practice management, security, and diversion prevention.

  • Routinely monitor compliance with your state’s dispensing and PDMP laws.

Any physician dispensing controlled substances from their office must ensure their practice complies with the applicable federal laws and regulations, namely the federal Controlled Substances Act. They also must know and be in compliance with their respective state dispensing laws.  Some states prohibit physician dispensing, others restrict which controlled substances can be dispensed (or their quantity and frequency), while some states require dispensing physicians obtain an additional license, as well as follow their Board of Pharmacy regulations. Many states regulate who must hand the medicine to the patient, often mandating that only the physician can do so. 

More importantly, physicians dispensing controlled substances must know and comply with their respective state’s Prescription Drug Monitoring Program (“PDMP”) requirements. PDMPs are electronic databases that collect designated information on dispensed controlled substances. After conducting any PDMP mandated prescriber queries, approved physician dispensers must promptly report certain dispensed controlled substance information to their respective state’s PDMP.  In most states, dispensing physicians can delegate the PDMP query and data input to a few specifically identified practice employees.

State legislatures have also amended their state PDMP laws to make them more rigorous in light of the opioid crisis, and law enforcement and professional licensing boards are increasingly scrutinizing PDMP records to track controlled substance prescribing and dispensing rates.

  • Protect your practice from theft.

Dispensing controlled substances requires the implementation of a strong system of inventory control and medication security. Having these substances in stock places your practice at greater risk of a break-in and increases the possibility of employee theft.

All controlled substance dispensers are required to provide effective controls to guard against theft and diversion of them and must be bolted or cemented to the floor. Additional controls might include: a wall safe or locked steel cabinet; a storage unit alarm system; video surveillance of medicine storage locations; and employing security personnel. How substantial your security measures need to be is based on your practice location, the type of physical buildings it’s in, the type and quantity of controlled substances stored on the premises, the control of public access to the facility, the adequacy of practice’s alarms and detection systems, and the availability of local police protection.

If you do become a victim of theft, the theft must be reported to the DEA immediately, and may, depending on the state, have to be reported to additional regulatory and law enforcement entities, like the state medical board, state pharmacy board, or local law enforcement.   

  • Always prescribe medication for a legitimate medical purpose.

It goes without saying: both prescribers and dispensers are responsible for ensuring that controlled substances are issued for a legitimate medical purpose by a practitioner acting in the usual course of professional practice. A person who knowingly fills a prescription not issued for a legitimate medical purpose and not in the usual course of professional practice can be found civilly or criminally liable under the Controlled Substances Act. Enforcement actions can cost you your medical license, hospital privileges, DEA authorization to prescribe substances, and revocation of panel participation.

Some state courts have permitted individual controlled substance users who admittedly broke laws to obtain controlled substances to bring civil actions against their doctors and pharmacists for negligent prescribing and dispensing that allegedly caused the users’ drug addiction. Of course, a criminal conviction lead to a prison sentence and a hefty fine and possibly a restitution award.

In addition, malpractice insurance might not provide coverage or even a legal defense for a dispensing physician in a dispensing lawsuit because the court may find that the controlled substances were dispensed not for a legitimate medical purpose and not in the usual course of professional practice.  Such illegal conduct is usually not covered by insurance.  Physicians should contact their malpractice insurance carrier before dispensing controlled substances.

  • Check the background of your employees, train yourself and your staff on drug-seeking behavior, and restrict the number of employees with access to controlled substances.

In most cases, physician controlled substance dispensing removes the pharmacist from the prescription review process. Pharmacists often alert physicians to prescribing errors or a patient’s controlled substance prescription history, leading some to conclude that physician dispensing eliminates a crucial second check of the prescribed drug therapy, potentially increasing the chances of diversion. In light of this, physician controlled substance dispensers must be well trained in identifying drug-seeking behavior among their patients and must thoroughly train their employees in how to recognize it. They must screen prospective employees to ensure they do not have past controlled substance and/or theft felony convictions and can be trusted to work in a security stringent office. 

They should also restrict the number of employees who have access to controlled substances and the prescription and dispensing records.  Many instances of diversion start where a physician or the physician’s employee dispenses a controlled substance to a family member, a mistress, or fellow employee “off the books.” Never prescribe a controlled substance to anyone without logging its dispensation. Dispensers must ensure they and their staff are proactive in monitoring the practice’s patients, its drug supply, its PDMP reporting, and its internal records.

And if at all possible, avoid treating and prescribing a scheduled narcotic to anyone near and dear to you.

  • Don’t be afraid to dispense controlled substances, but be cautious.

Though the potential liability may dissuade practitioners from dispensing controlled substances, it’s possible to do so in a compliant and safe manner that greatly reduces the chances of diversion and law enforcement scrutiny. Consult with experienced counsel or compliance professionals for assistance. There are no ‘do-overs’ when it comes to the DEA so be sure to get it right the first time.

How To Not Become a Victim

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At least monthly — sometimes weekly — some attorney calls me seeking help for their client(s), whose long-time trusted employee has embezzled from the company; for a business whose systems have been hacked and their customers’ credit card numbers taken; or victimized by some other bad actors. Sometimes, it’s just a little money taken; oftentimes, unfortunately, it’s a lot. Worse, many of these dollar losses could have been minimized or avoided altogether with some small efforts to keep business funds and assets out of reach of the bad guys, and also to insure through adequate coverage against monetary loss in the event something bad does happen. 

It is therefore well worth every business owner’s and senior manager’s effort to spend just a little amount of time on financial and asset protection ‘due diligence’. This is especially important for those businesses who have seen their operations grow recently, or who are transitioning from a sole proprietorship or small business operation to an expanding operation with more than subsistence profits, or ones which have recently acquired a new business line or entity.

None of this guidance is new, and none of it is earth-shattering or difficult to implement.  But time and again, it is business owners’ and managers’ unawareness of just a few small steps, or lack of time, or simple trust of the individuals who work for them, or outright neglect, that can mean the difference between being wise and being taken.

This is a mistake. Bad things DO happen. Long-time employees with access to checking accounts and credit cards have drug problems or want to provide a better lifestyle for themselves and their family, or simply find the availability of “free cash” too tempting. Hackers and thieves outside of your business can gain access to your unprotected or poorly-protected IT system(s) and get their hands on your money. 

Many people live their whole lives without becoming the victim of an office theft or fraud scheme, just as the majority of drivers never suffer a motor vehicle collision.  But no one would ever think not to buy auto insurance “just in case,” and no business owner should think they are immune from the risk of theft or scam.  So act now, while you still can.  Here are some quick, easy, and simple tasks to help keep your business protected from needless exposure to risk:

  1. Trust your financial staff and employees, but verify: the same person who opens the mail and totals up received checks should not fill out or make the bank deposit, or reconcile the accounts receivable.  In the same way, the functions on the payable side should be separated as well:  the corporate checking account should not be reconciled by the same person who causes checks to be issued. Your accountant can provide advice on how to implement simple cash controls and other financial “baby steps,” to help with the safe-keeping of company finances.
  2. Know your finances and review them regularly, especially accounts receivable and accounts payable, statements of cash flow, credit card statements, and checking account registers. Does the amount of money the company takes in square with current expectations and past performance? Are there new or additional charges for costs you don’t recognize? Where is money being spent, and who has a company credit card to spend it?
  3. Has each of your employees undergone a background check? This can be as simple as accessing their state criminal “rap” sheet, through the Pennsylvania on-line court website.  Search online for “PA Dockets,” click on “Common Pleas Court,” select “Court Information,” and search by participant name, for all counties’ records of criminal cases.  (All other information for which there are blanks in the “drop-down” menu are optional.) This search will provide a broad, “back of the envelope” background check for Pennsylvania criminal convictions of persons. Otherwise, it is well worth the cost of paying a service the small fee for a criminal background check, especially for candidates you are considering to hire.
  4. Are employees driving more expensive cars, wearing fancy jewelry or taking more lavish vacation trips than their salary would logically support? Are they distracted at work, or exhibiting other signs of illicit drug use? Each of these can be the telltale indicator of financial need out of line with a normal lifestyle.  Your business could be funding it. Manage defensively, as if your business assets are your own.  (If you’ve read this far, they probably at least in part are.)
  5. What is the dollar limit for an employee or manager’s authority on a check or other payment method? Your bank can assist with implementing controls for requiring a second signature for any payment instrument over a certain dollar value, or another way to protect against unauthorized charges. At least once quarterly, verify from the bank that the amount you have in your company’s accounts are what your employee(s) tells you is in these accounts.
  6. Has your electronic system(s) been analyzed/reviewed by a competent “IT” professional, for security breach or vulnerabilities? Does your business use an online portal for numbers from customers, such that clients’ essential financial or even personal information is at risk?  Have you received a suspect number of “false charge” complaints or credit charge-backs recently?
  7. Is your business insured against risk of loss through internal theft, and specifically, does your “CG&L” policy provide for ‘dishonest employee’ coverage? Or, do any of your financial staff have a separate fidelity bond?  Call your insurance broker; the policy cost may pale in comparison with the cost of an uninsured loss.  The same is true for cyber-security coverage; if you don’t have it, consider getting it, especially if your business is heavily involved in e-commerce.  If you do have cyber insurance, confirm that your policy covers forensic investigation costs in the event of a breach.  In short, do a coverage audit to determine if your insurance is adequate to protect your business, and consequently, yourself.

These steps are simple, easy and quick.

They are necessary.

Better to spend time on simple financial and loss prevention on due diligence now, then to remain vulnerable and exposed. 

__________________________

The Grail Law Firm advises business victims of crime, conducts internal investigations, and also defends suspects and persons accused of criminal and other bad acts, and also defends companies and professionals in federal and state regulatory enforcement actions.

How to Prevent Another College Admissions Scandal: Proactive Compliance

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It’s difficult to say anything that is not painful about the college admissions scandal, where Boston federal prosecutors already have a dozen wealthy parents, including actress Felicity Huffman, pleading guilty to fraud in helping  their children get into elite colleges. Most painful (to me) are all the kids who should have been accepted on merit, but whose classroom seat was taken by those less worthy but rich. Painful, for those who got admitted when they shouldn’t have without even knowing it, and now have to face the consequences. Painful for the school administrations that trusted the corrupt coaches, and painful for the Athletic Directors who hired them; painful for the friends and families of the involved parents, who must confront their family member’s very public fraud and deceit. Painful even for the inequality of consequences sure to follow: the Manhattan star law firm partner defendant will surely lose his license to practice, along with his career and the lifetime of effort he spent building it, versus the Hollywood stars, who might even get role-playing themselves in the spin-off series that are likely already being scripted.

There’s more than enough pain to go around here.

Turn on the news: the defendants have already learned to loudly, publicly profess their guilt, their shame, and their remorse, some even before their pleas have been made in court. According to the federal Sentencing Guidelines, acceptance of responsibility is key to bringing down both the calculation of the Guideline “level” (and consequently, its corresponding range of prison terms), and any “variance,” that last little tweak a federal judge can make to drop the sentence below that guideline prison sentence, all the way to house arrest and probation.

Well after the sentences are handed down and the media moves on to the next sensation, colleges and universities will have to face the challenge that goes beyond bad PR: putting controls in place to prevent this type of fraudulent misconduct from happening again. As Arthur Middlemiss points out in his latest for Bloomberg Law, colleges will no longer be able to simply express remorse over a bribery scandal and walk away unscathed. “If schools ignore these risks and refuse to build intelligent controls,” he writes, “they face a real danger that the next time a scandal explodes, the prosecutor or regulator, or the court of public opinion, may determine that the word ‘unwitting’ no longer describes their involvement.”  Shame on the parents for their crimes against the schools’ admission process this scam revealed.  Shame on the schools themselves if they don’t rejigger the application process to protect against this scam.

Implementing — and most importantly, executing on — an effective compliance and ethics programs will be the only way for colleges to avoid exposure to liability or prosecution by officials who are unsympathetic to such “unwittingness.” Several colleges have already implemented measures in the wake of the scandal, and many more will be designing new risk avoidance and compliance measures over the coming months. These programs will require administrative officials to assess their risk, implement new operational controls, and work with leadership to ensure a similar scandal doesn’t befall their collegiate communities in the future.  

My colleague Laurel Gift, Esq., a former prosecutor at the Schnader law firm in Pittsburgh, posted a list of proactive steps for institutions of higher education to consider in real time – i.e., now (review records of students receiving extra time on admissions exams; scrutinize athletic recruits’ admission files; audit whether athletic recruits actually played their sport in college; review overall admissions policies and procedures for weaknesses; conduct internal investigations where ‘red flags’ indicate possible improprieties). 

Admission decision processes are as varied as are the institutions, valuing to a greater or lesser degree admissions test scores, GPAs, extra-curricular activities, recommendations, athletic ability, relationship to alumni, diversity (of all types), in-person interviews, and more. At a more fundamental level, admissions testing authorities, educational institution accreditors, guidance counselors, and the institutions of higher education themselves – who have wrestled for the better part of half a century or more over who to let in to their colleges, and how to identify them – must continue to wrestle with greater intensity, and hopefully, diligence.

In the end, as my wife’s experience teaching at an elite Ivy League school showed, you can always tell the ‘legacy’ students from the ones who matriculated on their own merit. There’s always the old-fashioned way of securing your kid’s spot in a certain college: donate a boatload of money. Only the super-rich can do it, and it certainly isn’t fair – but it isn’t illegal either.

In addition to defending entities from white collar crime, the Grail Law Firm has worked with dozen of clients to develop proactive initiatives and compliance programs, especially in response to discovery of ongoing improprieties. Contact the Grail Law Firm to learn more.

Efrem Grail Offers Session at ASAM Annual Meeting on Why Physicians Must Be Proactive in Understanding Laws, Regulations

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Efrem Grail, along with his co-presenter, Ericka Adler, offered a special session at the American Society for Addiction Medicine’s Annual Meeting last week: “The New Enforcement Environment: How to Keep Your License & Avoid Indictment.” 

The Department’s recent establishment of 12 Opioid Fraud and Abuse Detection Units under former U.S. Attorney General Jeff Sessions unfairly targets opioid prescribers, they said. U.S. attorney’s offices, along with federal agencies, state medical boards and state attorneys general, have focused on prescribers of buprenorphine and other medications to treat opioid use disorder in their efforts to detect and prosecute prescribers.

During the session, both Grail and Adler shared advice on how to stay on the right side of the law, survive a law enforcement investigation and avoid being targeted by an investigation in the first place.

“’Best practices include reasonable compliance procedures and ongoing education that puts patients and physicians on clear notice of what the law requires,” ASAM wrote in their coverage of Grail’s and Adler’s session. “Noncompliance by a physician literally puts his or her medical license on the line,” they said.

You can read the full coverage of the session at the American Society for Addiction Medicine’s Annual Meeting on Sunday, April 7, 2019 here.

Victims of Business Crimes Aren’t Always Better Off Seeking Prosecution

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A week hasn’t gone by since I left my job as a prosecutor in 1995 (yes, 1995:  Bill Clinton was president, the Dow topped 5,000 for the first time ever, O.J. Simpson was acquitted of murder that year and the iPod wouldn’t come out for another six years) when a client hasn’t called asking how to have someone prosecuted and sent to jail. Businesses find local, state and especially federal law enforcement almost uniformly unresponsive to their victimization at the hands of employees and competitors. Companies often feel victimized a second time by “the system,” when all they really want is what almost no victim ever gets in the way of justice: vindication, to make up for the betrayal of trust.

Before calling 911, though, business crime victims should consider the risks and drawbacks of involving themselves in the criminal justice system.  Investigations and court cases are rarely short or cut-and-dried, especially when the target has significant knowledge of your business and its employees or operations. Meeting with police and prosecutors, going to court and even testifying there can be a major distraction to key personnel. It can risk the confidentiality of company processes or trade secrets, and can even provoke investigation of the business victimized in the first place. The decision to “blow the whistle,” then, even when justified, should be made for good business reasons, and not for emotional ones, and be thought through thoroughly at a high level of policy/decision making.

The exception to the “think before you fink” rule is for highly-regulated business, which are likely required to report thefts or other misconduct by employees, directors and competitors: chiefly banks and financial institutions, health care providers which seek reimbursement of federal or insurance funds, environmental permit holders (mandated to regularly report discharges), and industries which handle classified national security data (e.g., defense contractors, advanced software and computing research, etc.).

Simple embezzlements by employees, additionally, should always be reported when the identity of the culprit is certain.  Reporting to the police is almost always a prerequisite to recovering on a dishonest employee provision to the business’s insurance coverage or employee fidelity bond.  (Note: let this be a reminder to check with your company’s broker or risk managers to ensure that there is dishonest employee coverage, in sufficiently high enough dollars to adequately protect the entity against loss.)

But affirmatively pressing for criminal charges (beyond simple reporting) can be counter-productive. Often a company’s best chance of recovering any restitution informally is before a prosecution, through negotiation. This should be done by experienced counsel consistent with lawyers’ professional conduct rules, to prevent accusations against company personnel of committing extortion and themselves becoming a target of an investigation, and also to ensure the company’s duty under a policy of insurance to cooperate with law enforcement is fulfilled, thereby preserving coverage.

Prosecutors and investigators often see businesses’ reports of crime as pressing them into service for a private entity, and not the public safety.  Trade secret theft allegations are most often ignored by law enforcement.  Federal prosecutors are reluctant to become involved in lengthy disputes between private parties, for which there are civil remedies available, such as the private right of action recently provided by the recent enactment of the Defense of Trade Secrets Act.    The exception, again, is for employees and competitors of banks, government contractors (primarily including health care providers,) and businesses in which there is a national security interest.  And state and local police and prosecutors aren’t set up to bring “white collar” cases that exceed simple fraud/theft matters (even those can tax a district attorney’s office, more comfortable with ‘guns and drugs’ case).

Sophisticated theft prosecutions can harm the victim as well.  Prosecutors may not be sufficiently attuned to protecting confidential security or manufacturing/development processes, and courts may not adequately protect against their disclosure to the defense.   While the Justice Department is getting better at handling trade secret misappropriation cases, early prosecution efforts under the Economic Espionage Act of 1996 risked disclosure of the very trade secrets alleged to have been stolen.

And the unfortunate truth is that former employees and competitors  facing criminal prosecution often retaliate by alleging criminal wrongdoing by the complaining business, rightly or not. This is especially true in small businesses, or small units of larger ones. It does no good to accuse an employee whose wages are not being completely reported of theft, when that employee can in turn complain to the IRS about the employer’s tax fraud.  (That case led to convictions of both the business owner and the former controller). Employers need to understand what they risk in publicizing an internal matter, including in the way of adverse publicity, when it is them who have been ripped off.

Seeking redress as the victim of a theft or other crime shouldn’t be difficult, and it shouldn’t require a business seconding-guessing itself.  But the realities of the justice system, the economics and the politics of what drives it, and especially the fact that desperate persons facing the possibility of criminal conviction and jail will often lead desperate people to desperate acts, to your detriment. Economic crime victims shouldn’t shy away from seeking justice and restitution, if for no other reason than to highlight to others that crimes against them will not be tolerated. But how best to be made whole after being victimized requires a well-thought out decision with the help of counsel experienced in the justice system, and not an emotional response to make senior executives feel better. In the long run, it may only make things much worse.

Takeaways from the Annual Pennsylvania White Collar Criminal Defense Lawyers’ Conference

Pittsburgh White Collar - Grail Law Firm

Newsflash: the Justice Department is still an insider’s club, criminal practice is not for beginners, and courts still penalize defendants who exercise their constitutional right to have criminal charges against them tried by a jury; Western Pennsylvania is the only judicial district in the country regularly prosecuting doctors who prescribe Suboxone, and everyone’s rekindled interest in the Nixon case as a prediction of Special Counsel Robert Muller’s next move.

That’s our “takeaway” from the annual White Collar Criminal Defense seminar featuring top prosecutors, judges, and federal defense practitioners, hosted by the Pennsylvania Association of Criminal Defense Lawyers in Philadelphia this past month. The annual event brings key Justice Department lawyers from Washington, and practice chiefs from the local and neighboring U.S. Attorneys’ Office, together with judges and defense practitioners, to discuss the Government’s enforcement focus and the strategy and tactics to defend them. The program provides insight into current Government initiatives, and a window onto what has changed in the law; what we learned is that the more things change, the more things remain the same.

This year’s program featured the Eastern District of Pennsylvania Federal Judge Wendy Beetlestone, on sentencing practices for criminal defendants in White Collar Cases. The implicit message in her remarks, as well as in those of appellate lawyers at the program following her address, was the implicit bias of the judiciary against criminal defendants who insist on exercising their constitutional right to trial by a jury of their peers on the charges against them. Of course, this sounds counterintuitive to non-lawyers; the federal United States Sentencing Guidelines, however, place an enormous emphasis on having criminal defendants admit their guilt and show remorse, to the extent of rewarding those who plead guilty with a lesser sentence. Unlike plea bargaining in many states, however, federal criminal procedure does not provide for a plea of “no contest,” where the defendant withdraws their plea of not guilty because they believe that taking the prosecution’s offer without a trial “is in their best interest” (California law provides for this in what is known as an Alford plea; in West Virginia it’s referred to as a Kennedy plea).

Sure, the Bill of Rights to the U.S. Constitution provides that every defendant is presumed innocent until proven guilty – but defendants who put the prosecution and the courts through the exercise of a trial are routinely punished for relying on that right.  Since they have not admitted their guilt or shown remorse, this is generally true in practice even if they do not take the stand to testify in their own defense, or present evidence directly disputing that they are guilty of the charge(s), and instead exercise their constitutional right to remain silent.  Indeed, the implicit rule has not changed little: if you must go to trial, be certain that you win because the price of losing is higher than the price of admitting guilt.

And speaking of trials, the overwhelming takeaway from appeals of political trials seems to be that under no circumstances should the defense ever sit quietly while a judge sends an indictment into the jury room, as the “road map” for consideration of the charges. Indictments are in effect the government’s statement of its case, replete with excess and prejudicial allegations which in no instance reflects at all well on the defendant, and further, object strenuously to the judge holding her jury charge conference in chambers, without a court reporter present; there is too much potential to waive legal objections through lack of adequate preservation of the issues. The familiarity and closeness of the government prosecutors and defense lawyers on a personal level emphasized, once again, how many of us as defense lawyers started out as prosecutors, and oftentimes how many prosecutors start out as defense lawyers. 

We hang out together because we speak the same language, we often respect each other, and most of the time we even like each other.  Don’t underestimate the value of personal relationships and familiarity with the system in choosing your criminal defense advocate.  The “Main Justice” Department in Washington and the U.S. Attorneys Office(s), are notorious for being places where “inside baseball” is played, or as we say in Pittsburgh, where only “home cooking” is served.  If your civil lawyer who doesn’t know where the U .S. Attorney’s Office is or who sits in it, tells you they can handle the criminal matter just fine, don’t believe them; this isn’t something you want your attorney to learn at your expense.  

In health care prosecutions, as Buzzfeed recently noted online, the Western District of Pennsylvania seems to remain the only federal judicial district in the country prosecuting doctors who allegedly misprescribed buprenorphine (suboxone).  Doctors beware. 

And finally, what we learned at the White Collar Seminar was that if acting Attorney General Whitaker (or his successor) unseats special prosecutor Mueller, the Chief Judge of the judicial district in the District of Columbia may not maintain an investigation without the Justice Department leading it.  That having been said, former PA Western District U.S. Attorney Harry Littman said just several days ago on TV that, regardless of Special Counsel Mueller’s longevity in office, his plans for the further investigation and possible prosecution of Donald Trump, Jr., the President’s son, Jared Kushner, the President’s his son-in-law, and even the President himself should all be revealed in short order.  Stay tuned!