Legal Briefing

White-collar crime: the specialists’ view

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White-Collar Crime | 12 December 2017

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Kate McMahon and, Tamlyn Edmonds of Edmonds Marshall McMahon discuss their approach to white-collar crime investigation and the unique role that specialist firms can play.

When do in-house counsel first come to you with white-collar crime problems?

It depends. It can be at the beginning of, during or after a regulatory or criminal investigation has been started by the police, Financial Conduct Authority (FCA) or Serious Fraud Office (SFO). Infrequently, it can be at the end in order to assist in preventative measures for the future. We are also often consulted prior to any law enforcement involvement. Where a corporate victim comes to us with a suspected or actual internal fraud and want the matter dealt with swiftly and effectively, they might opt to deal with the matter through a private prosecution. Often the corporate will wish the evidence we uncover to be provided to the FCA as well asdeployed in any case so that it is clear to the regulator that they are dealing responsibly and quickly with the issue and if necessary, have corrected the controls and procedures which enabled the fraud or corruption to occur.

What are in-house counsels’ objectives?

We have never worked for an in-house lawyer who operates in a strictly ‘legal’ vacuum. In-house lawyers are masters of juggling many different balls simultaneously. Our in-house legal and compliance clients are typically fully aware of the commercial imperatives of the business, which include reputational management (which can have direct effect upon share pricing and market positioning), regulatory scrutiny, and corporate stability (including the views and positions of senior managers and employees).

Time is usually an important issue: Will this take a long time to resolve? Will it require a lot of time input from senior people (which will divert them from their day-to-day commercial roles) and is there a clear endpoint in view that we can work towards and announce, either internally or externally?

In-house counsel are also usually far more alive to costs issues and often request more innovative pricing than any other type of client: fixed fees or fixed stages, different payment timings and reductions in fee levels.

In your view, what are in-house counsel looking for in a white collar crime or investigations law firm?

In-house counsel are usually very well aware of some of the more ineffective and costly tasks undertaken by law firms and are usually far more outcome focused than traditional lawyers. We have had many clients come to us who have been dissatisfied with law firms or investigative firms taking months or, in one case, years, to search millions of documents within shared drives and inboxes without giving much thought to what the case is or is likely to be, what evidence is required and what might be the smartest or quickest way to get it.

In almost all cases, we find that we get better results by planning and thinking at the beginning of the investigation rather than springing into action only to realise that the extent or type of problem is completely different to that which was initially discussed. Careful planning from senior and experienced lawyers, client advisers and client corporate leaders is key to conducting an investigation which will withstand regulatory and prosecutorial scrutiny in years to come; it’s as important to have independent lawyers experienced in investigations as it is to have company representatives who understand the business inside out. While in-house counsel will often know what to do in such an event, they are typically looking for someone who does this type of work day in and day out.

We consider that there are a number of things of which in-house counsel will always be aware. The first is rapid preservation (rather than interrogation) of data. Surprisingly, there is often a desire for speed which is not usually created by necessity, unless there is illegitimate money movement or immediate action from an authority. In-house counsel often understand the different commercial imperatives and personalities within the business. Usually, it is critical that the smooth running of the business is well managed while the necessary investigations are carried out. In-house counsel are often looking for lawyers who understand these types of competing imperatives.

Why have specialist firms become a more popular choice for in-house counsel?

Many of the clients we work for have fallen prey to paying for large teams of relatively unskilled junior lawyers or paralegals creating large bills but very little of substance. It is important, when a company is hit with a crisis, that they turn to lawyers who deal with this type of work day in and day out. It is important that if interaction with an authority is required, such interaction is undertaken by someone who has the trust of the authority. It is important that any lawyer instructed knows precisely how the relevant agency works, and indeed, understands the people who will be making the internal decisions.

Indeed, in-house lawyers are significant in changing the way clients approach firms. These days, in-house counsel often know in advance the lawyer and counsel they want rather than the firm or chambers. Indeed, in more cases than not our clients come armed with a shortlist of counsel and a long list of requirements.

Specialist firms tend to be able to deal easily with such requests as they are both nimble and often do this type of work – investigations, prosecutions and referrals – day-to-day rather than a couple of times a year. One of the reasons that this new breed of firm works and has become so successful is that specialists typically have higher partner and senior lawyer input and relatively controlled paralegal and junior lawyer assistance. That means that the result outlined by the client is planned for, step by step, from day one.

Secrecy and confidentiality cannot be underrated in these type of investigations; both within the investigative team and within the organisation. Smaller firms understand such imperatives very well.

What do you consider is imperative when dealing with an internal or external fraud or corruption matter?

The first is always to know what the company considers to be success. Whether that be the quickest settlement possible, a full understanding of how the company got to be in the position it’s in or a full vindication of the people and company systems; each of these options require a very specific (and different) action plan.

We firmly believe that every step in a matter, every meeting and every advice given should be focused upon achieving whatever goal has been set by the client. After all, despite what lawyers might think, we are not the ones in charge.