How To Stop Outside Counsel From Mishandling Enforcement Matters

Pick an agency, any agency.

Let’s say you picked the Securities and Exchange Commission.

You receive a subpoena from the SEC.  You hire Bigg & Mediocre to handle the matter for you.

The SEC requested the production of documents on May 15, three weeks after the day the subpoena was issued.  So Bigg & Mediocre waits until May 14 to pick up the phone, introduce itself as outside counsel, ask the SEC to explain each request in detail, and ask for an extension of time to respond.

Sound familiar?

Of course.  It’s the usual way firms operate.

But your firm has already annoyed the SEC, because the firm is demonstrating that it didn’t even start gathering documents until the date the documents were due.  (If Bigg & Mediocre didn’t understand the requests on May 14, it sure wasn’t doing any work before then.)

Instead, how about picking up the phone immediately — say, on May 1 — introducing yourself, and asking the SEC to explain each category of documents?  You’re then at least bluffing that you’re actually starting to collect documents before the due date.  You can then call again, on May 14, to ask for more time to respond, which would still get you the extension, but not let the SEC know how irresponsible you are.

When Bigg & Mediocre finally responds to the document requests, it retypes request number 5:  “All documents concerning or reflecting BigCo’s decision to keep elephants in the lobby.”  Bigg & Mediocre types its response:  “The enclosed DVD contains all significant documents concerning or reflecting BigCo’s decision to keep elephants in the lobby.”

The SEC will properly scratch its head:  Are you producing all documents?  Or are you producing all “significant” documents?  If “significant,” then what gives you the right to do that?  And please don’t tell the SEC that you’re just helping the SEC to save time; the SEC will think that you’re probably hiding something.

Bigg & Mediocre of course produces some documents, but — like certain lawyers for political players who will go unnamed — screws up the redactions.  For example, Bigg & Mediocre redacted the privileged parts of documents in the TIFF images, but forgot to redact those portions in the accompanying metadata text files.  The SEC is thus both reading privileged communications — “In the future, we should try to avoid breaking the law!” — and thinking that Bigg & Mediocre has lived up to its name.

The SEC decides to interview BigCo’s general counsel about matters relevant to the investigation.  When the SEC has the general counsel, along with outside counsel, on the phone, the SEC says that it has no intention of asking the general counsel about the inadvertently produced documents.  The GC is shocked:  “WHAT inadvertently produced documents?”  The B&M partner explains meekly:  “Well, uh, we didn’t want to bother you with minor details . . . .”

What do I suggest?

From the corporation’s point of view:  Insist that outside counsel send to the in-house lawyer responsible for the investigation a copy of every piece of correspondence to or from the SEC.  Indeed, the in-house lawyer should consider introducing himself to the SEC staff as another lawyer representing the company and inviting the SEC to call the inside lawyer, as well as outside counsel, as needed throughout the investigation.  That would guarantee that the outside lawyer isn’t secretly antagonizing the SEC or otherwise mishandling the investigation.

From outside counsel’s point of view:  Don’t be a stereotypical jerk.  Be conscientious.  If you make a mistake, disclose it to your client.  Don’t antagonize the SEC staff; don’t withhold responsive documents; don’t mislead the SEC staff; don’t fail to return phone calls; don’t explore whether you could represent multiple parties in ways that obviously create conflicts of interest.  I understand that all of these things are tempting — because no one taught you how to be a lawyer — but they’re not the way you gain an agency’s trust.

Yes, yes:  All of this is obvious to good lawyers.  But why do I keep hearing about this stuff from people on the staff of regulatory agencies?  Or does that question answer itself?

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Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

How To Stop Outside Counsel From Mishandling Enforcement Matters curated from Above the Law