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Company Interviews of Employees Suspected of Wrongdoing

BY Marjorie J. Peerce
October 30, 2007

Since Sarbanes-Oxley ('SOX') became law in 2002, companies have had a heightened interest in determining if there has been wrongdoing within their business. When a company has reason to believe that one or more employees may have engaged in practices that could expose it and them to civil lawsuits, regulatory actions or criminal charges, good business practice calls for the company to find out what occurred, who was involved, how extensive the conduct was, and how it happened. From the very beginning of this process, a particularly difficult issue is what employees interviewed in the company's investigation should be told about getting their own lawyers.

Prompt Action

In today's climate, prompt investigative action by the company is crucial. The company must decide when and whether to inform government agencies, and, if so, must work with those agencies to ensure that the company gets credit for the early and timely reporting. The federal Sentencing Guidelines and the so-called McNulty Memo and Seaboard Release set out factors that are considered by the Department of Justice and the SEC in determining whether a company will be charged for the acts of its employees and, if so, what sanction if any will be imposed on the company.

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