Kick That Sleeping Dog!

And then ' Nothing.

For a short time, the client and all involved personnel were relieved to get back to their regular course of business. The client calls occasionally asking for any news, and you say there is none, perhaps because these prosecutors have been busy with other matters. As more time passes, the stakes begin to go up for your client. Executives and board members want to know when the matter will be resolved. The client may want to know, for example, whether it is necessary to continue including the investigation in SEC filings. The client commissions a long and careful memorandum on the statute of limitations, which concludes that prosecutors have several years to decide whether to indict.

Months later, still nothing.

The Old Saw

In such circumstances, we ask: 'Why raise our flag at this juncture?' Absent a compelling circumstance to demand a resolution ' and they are rare (a pending sale of the company, for example) ' 'It's better to let sleeping dogs lie.' By now, you have already repeated this line several times to your client. But that conclusion warrants careful re-examination.

The Sleeping Dog Rule envisions prosecutors who are so busy (or otherwise occupied) that they have either forgotten about the matter or, more likely, just have not had the time to pursue it further. The Rule is based upon a hope ' that prosecutors simply will let so much time pass that they will decide not to bring charges in the end. At a minimum, significant delays may leave you with some equitable pleas against a resumption of a long-dormant prosecution; for example, that resumption would cause the client to suffer a new round of adverse publicity, or that the client long ago took remedial steps whose success should now weigh against charges. The Sleeping Dog Rule is also based upon a very specific fear ' that a call from you or meeting with you will prompt the prosecutor to take action that will have a profoundly negative impact on your client.

Is It Wise After All?

There is a further, hidden premise in the Sleeping Dog Rule. It assumes that the prosecutors have not made a firm decision about what to do. Both the hope and fear that underlie the Sleeping Dog Rule posit that the prosecutor could decide either way, and that a prompt from you will force them to chose. That choice could be the wrong one for you and your client.

Here, however, is the potential flaw in the Rule. Whether or not the prosecutor has in fact made a decision, it is not in the interests of your client to let the matter remain quiet. Prosecutors close investigations and, occasionally, issue letters declining prosecution when they discover (or are led to discover) that the evidence at hand or the applicable law does not support their initial impressions. While you stand to one side, case agents and others who do not have your interests at heart are very likely working with the evidence and maybe even with witnesses who are outside your control. Even if you know the prosecution's legal team is busy with another matter, you cannot assume that your client's documents are quietly tucked away in a file room. Following the Sleeping Dog Rule, therefore, may only result in the sudden reemergence of prosecutors who have an impression of the case that is fully formed and not at all malleable.

The reality is that prosecutors, like the rest of us, tend to make up their minds quite early. After all, they have at least decided there is enough to launch an investigation, even though some may have a different threshold for that than others. If a decision has already been made, your client is better off knowing it, whether the news is good or bad. If the news is good, then of course your client needs to know it if only to stop the bleeding on legal fees. Likely there are other, more important benefits, such as ending disclosures that are unnecessary, quelling anxieties in the market, and avoiding further distraction. And if it's bad news, the client will want to prepare, both internally and externally. Early warning signs about pending bad news may help in other ways. You may develop defenses before evidence is stale ' before, for example, a key employee for the defense moves on to a competitor, where he or she will be very disinclined to take the time to assist you.

That Dog May Only Look Asleep

We also cannot discount the reality that prosecutors have numerous tactical reasons to go silent. Prosecutors often go silent to see what happens. They know that the waiting game can put tremendous pressure on companies and individuals who are scared. The simple pressure of uncertainty may force a deal ' cooperation, a plea, or both. The dog may not be sleeping at all, just waiting for you to get near enough.

Alternatively, prosecutors may have made a decision not to bring charges at all, but nonetheless feel it appropriate to let your client 'sweat a little' before being taken off the hook. Where that is the case, pressure from you may put an end to this indirect punishment.

Even when the prosecutorial silence is not a matter of tactical choice, an ongoing dialogue will almost certainly help. You or someone you know may have been lucky before, where a case simply 'went away' for lack of attention. There's no guarantee it will happen again. In fact, the prosecutor who remembers you or your client from that previous event may not want to repeat it. In any event, a dialogue will bring opportunities to uncover just what information the prosecutor has and to identify the legal issues where you disagree. At a minimum, you will be able to emphasize your defensive points.

Just Do It

Our private concern as risk-averse lawyers is to avoid doing something that will cause harm to our client. If nothing is happening in a case, we do not want to be the ones to cause it to happen. But, as the above indicates, this confuses cause and effect. The much greater likelihood is that whatever happened following your call or meeting, whether good or bad, was going to happen anyway. Your actions will only prompt an earlier resolution, which your business clients and even individual clients will tell you, if only much later perhaps, is a good thing in the end.

If the Sleeping Dog Rule was ever sound, that was long ago. Decades back, some cases being handled by prosecutors working solo in fact fell through the cracks. Today, however, prosecutors' offices deploy sophisticated tracking systems and have more defined and rigid supervisory systems. The day has passed when inattention could mean salvation for your client rather than mere delay.

It is now time to repeal the Sleeping Dog Rule. Let us instead follow the Reach Out and Touch Rule.

Jeffrey T. Green, a member of this newsletter's Board of Editors, is a partner with Sidley Austin LLP, where he is a member of the White Collar Group in the firm's Washington, DC, office.

Many months ago, federal grand subpoenas arrived on your client's door step. Their unexpected arrival and broad scope set off typical alarm bells and suddenly displaced a good deal of ongoing business. Your client immediately turned to you to undertake an investigation of the matter and a response. Your client's Information Services Department swept all electronic databases, and you directed phalanxes of young lawyers to conduct interviews and review documents for responsiveness.

From the outset, you've been communicating and meeting with the prosecutors. They have been moderately forthcoming and ap-pear to have both determination and skills. They've declared your client a 'subject' and seem to take a dim view of the events as you understand them. You have uncovered some questionable actions but also some credible explanations, and this one looks to you like it could go either way.

Together with your client, you have explored worst-case, best-case, and middle-case scenarios. Your client has long since made the appropriate notifications to internal committees and commissioned long memos on the law and facts at issue and has disclosed the investigation, as appropriate, to governing agencies and the press, which has somehow gotten wind of what's transpiring. After an extensive, rolling production, you have submitted all of your responsive documents to the grand jury.

And then ' Nothing.

For a short time, the client and all involved personnel were relieved to get back to their regular course of business. The client calls occasionally asking for any news, and you say there is none, perhaps because these prosecutors have been busy with other matters. As more time passes, the stakes begin to go up for your client. Executives and board members want to know when the matter will be resolved. The client may want to know, for example, whether it is necessary to continue including the investigation in SEC filings. The client commissions a long and careful memorandum on the statute of limitations, which concludes that prosecutors have several years to decide whether to indict.

Months later, still nothing.

The Old Saw

In such circumstances, we ask: 'Why raise our flag at this juncture?' Absent a compelling circumstance to demand a resolution ' and they are rare (a pending sale of the company, for example) ' 'It's better to let sleeping dogs lie.' By now, you have already repeated this line several times to your client. But that conclusion warrants careful re-examination.

The Sleeping Dog Rule envisions prosecutors who are so busy (or otherwise occupied) that they have either forgotten about the matter or, more likely, just have not had the time to pursue it further. The Rule is based upon a hope ' that prosecutors simply will let so much time pass that they will decide not to bring charges in the end. At a minimum, significant delays may leave you with some equitable pleas against a resumption of a long-dormant prosecution; for example, that resumption would cause the client to suffer a new round of adverse publicity, or that the client long ago took remedial steps whose success should now weigh against charges. The Sleeping Dog Rule is also based upon a very specific fear ' that a call from you or meeting with you will prompt the prosecutor to take action that will have a profoundly negative impact on your client.

Is It Wise After All?

There is a further, hidden premise in the Sleeping Dog Rule. It assumes that the prosecutors have not made a firm decision about what to do. Both the hope and fear that underlie the Sleeping Dog Rule posit that the prosecutor could decide either way, and that a prompt from you will force them to chose. That choice could be the wrong one for you and your client.

Here, however, is the potential flaw in the Rule. Whether or not the prosecutor has in fact made a decision, it is not in the interests of your client to let the matter remain quiet. Prosecutors close investigations and, occasionally, issue letters declining prosecution when they discover (or are led to discover) that the evidence at hand or the applicable law does not support their initial impressions. While you stand to one side, case agents and others who do not have your interests at heart are very likely working with the evidence and maybe even with witnesses who are outside your control. Even if you know the prosecution's legal team is busy with another matter, you cannot assume that your client's documents are quietly tucked away in a file room. Following the Sleeping Dog Rule, therefore, may only result in the sudden reemergence of prosecutors who have an impression of the case that is fully formed and not at all malleable.

The reality is that prosecutors, like the rest of us, tend to make up their minds quite early. After all, they have at least decided there is enough to launch an investigation, even though some may have a different threshold for that than others. If a decision has already been made, your client is better off knowing it, whether the news is good or bad. If the news is good, then of course your client needs to know it if only to stop the bleeding on legal fees. Likely there are other, more important benefits, such as ending disclosures that are unnecessary, quelling anxieties in the market, and avoiding further distraction. And if it's bad news, the client will want to prepare, both internally and externally. Early warning signs about pending bad news may help in other ways. You may develop defenses before evidence is stale ' before, for example, a key employee for the defense moves on to a competitor, where he or she will be very disinclined to take the time to assist you.

That Dog May Only Look Asleep

We also cannot discount the reality that prosecutors have numerous tactical reasons to go silent. Prosecutors often go silent to see what happens. They know that the waiting game can put tremendous pressure on companies and individuals who are scared. The simple pressure of uncertainty may force a deal ' cooperation, a plea, or both. The dog may not be sleeping at all, just waiting for you to get near enough.

Alternatively, prosecutors may have made a decision not to bring charges at all, but nonetheless feel it appropriate to let your client 'sweat a little' before being taken off the hook. Where that is the case, pressure from you may put an end to this indirect punishment.

Even when the prosecutorial silence is not a matter of tactical choice, an ongoing dialogue will almost certainly help. You or someone you know may have been lucky before, where a case simply 'went away' for lack of attention. There's no guarantee it will happen again. In fact, the prosecutor who remembers you or your client from that previous event may not want to repeat it. In any event, a dialogue will bring opportunities to uncover just what information the prosecutor has and to identify the legal issues where you disagree. At a minimum, you will be able to emphasize your defensive points.

Just Do It

Our private concern as risk-averse lawyers is to avoid doing something that will cause harm to our client. If nothing is happening in a case, we do not want to be the ones to cause it to happen. But, as the above indicates, this confuses cause and effect. The much greater likelihood is that whatever happened following your call or meeting, whether good or bad, was going to happen anyway. Your actions will only prompt an earlier resolution, which your business clients and even individual clients will tell you, if only much later perhaps, is a good thing in the end.

If the Sleeping Dog Rule was ever sound, that was long ago. Decades back, some cases being handled by prosecutors working solo in fact fell through the cracks. Today, however, prosecutors' offices deploy sophisticated tracking systems and have more defined and rigid supervisory systems. The day has passed when inattention could mean salvation for your client rather than mere delay.

It is now time to repeal the Sleeping Dog Rule. Let us instead follow the Reach Out and Touch Rule.

Jeffrey T. Green, a member of this newsletter's Board of Editors, is a partner with Sidley Austin LLP, where he is a member of the White Collar Group in the firm's Washington, DC, office.