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Being Ready for Government Investigations in a Time of Financial Crisis

By David Krakoff and Peter White
February 23, 2009

The global credit crisis has already spawned numerous investigations seeking to determine whether wrongdoing at financial institutions caused any part of the financial meltdown. The press has reported ongoing investigations by the Department of Justice (DOJ) and the SEC of many of the most recognizable names in the financial world, including Bear Stearns, Lehman Brothers, Credit Suisse, UBS, AIG, Fannie Mae and Freddie Mac. With the public furious over corporate excesses, the Obama Administration is likely to devote significant enforcement resources to ensuring that none of the federal bailout money is used improperly. Task forces will be formed. More civil cases will be filed. The pressure on financial institutions from government regulators is certain to be intense.

In this heightened enforcement environment, it is more important than ever that corporate general counsel be ready and able to navigate a minefield of complex issues as soon as they become aware that their company is the focus of a government investigation. Upon learning of a subpoena for corporate records, counsel must quickly assemble the correct team, analyze the subpoena, and determine who may have responsive documents. Given the stress of this process, companies should strive to have proper controls in place well before becoming the target of an investigation. Regardless, counsel must be extremely organized from the beginning and must work effectively with both the business units and the IT department to establish an infrastructure which assures that everyone is working from the same playbook. At best, early mistakes will cause later headaches; at worst, they can be devastating.

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