Last month, Congress returns from the August recess to resume its work. With its return, we are sure to see a growing wave of congressional investigations. Some, such as a review of social media companies and privacy policies, were announced before Congress recessed and will be spurred on by recent events such as the Federal Trade Commission’s settlement with YouTube regarding allegations it illegally collected children’s personal information. Others, such as data breaches at major financial institutions and investigations of e-cigarette manufacturers due to a spike in the number of individuals facing life-threatening pulmonary diseases, began during the August recess and will continue to gain momentum. The fervor to pursue investigations of corporations and their policies should come as no surprise because they focus on issues garnering national attention that impact or are of interest to most Americans.
We have already seen a rise in congressional investigations targeting specific industries and companies since the change in House of Representatives leadership at the beginning of this Congress. These investigations, sometimes promised on the campaign trail, are often aimed at highlighting key political issues. The number of hot-button congressional investigations is only likely to grow as we near election cycles. Members frustrated with congressional gridlock may look to promote legislative priorities and issues important to their constituents in advance of the upcoming debates. Many of those issues and legislative priories will shine a public spotlight on industries such as healthcare, financial services, and technology.
It is important to recognize the difference between a congressional investigation and other types of government investigations. A congressional investigation presents its own unique challenges and risks and is likely to garner intense media attention. Congressional committees generally have the authority to conduct sweeping investigations and issue subpoenas to companies and individuals as they deem necessary, sometimes with few limitations. These investigations may stem directly from general committee staff concerns, personal policy issues important to a specific committee member, or even from a committee member who supports a particular political agenda. In many cases, the spectacle of these congressional hearings results in negative publicity, financial ruin, and legal issues for the targeted company. So, when should a company prepare for a congressional investigation? Now. You should take steps now to be prepared to respond quickly to a congressional inquiry. Proper preparation includes monitoring any issues harshly criticized or emphatically embraced by committee chairpersons, members, and congressional leadership. A company should research, understand, and keep tabs on hot-button industries and issues that could trigger congressional oversight. You also need to understand the interests and concerns of the committee and subcommittee chairpersons for any committee that might have jurisdiction over your company’s industry. Now is the time to create a plan and think through the issues likely to arise should a congressional investigation become imminent. You may not be afforded much time to respond once you receive a request or subpoena, so here are five things to consider before Congress comes calling.
1. Congress has subpoena power. Don’t neglect requests from a Committee.
Congressional investigations typically begin with an informal (meaning voluntary) request for information. A committee will send a letter seeking information, such as company records related to developing, testing, and marketing its products. The requests may be fairly broad in scope and will require significant resources in order for your company to craft a response. Although these requests are voluntary, the committee sends them with an expectation of cooperation. Committees have the power to compel the production of documents and testimony and may also bring other pressure to bear. Just the threat of a subpoena or intense media commentary about a company’s perceived lack of cooperation can have a lasting negative impact. Most companies will want to avoid escalating its interaction with a committee to the point where a subpoena becomes necessary.
2. Different congressional investigations have different purposes. Consider the purpose of the investigation.
Although some congressional investigations seek to understand and resolve a discreet issue, others are more sweeping and intended to take a broader look at an industry as a whole. Is your company a target of the investigation, or is your company simply a leader in the industry and an important source of information Congress should consider during its investigation? The former company’s response might take on a more defensive approach, while the latter may be more forthcoming. Some investigations are designed to effect immediate change without accompanying legislation, while others seek to understand an issue for the purpose of enacting legislation. The better you understand the purpose of the investigation, the more prepared you will be to respond to the investigation.
Your company might be one of the main targets of the investigation. You may have received a request for documents, briefings on an issue, or testimony before Congress at a hearing about a particular event or series of events. Or, your company may be a secondary source of information for the committee’s investigation. A company with a singular product or service may face greater risks associated with negative coverage of the congressional investigation than a company with multiple product lines or a suite of services. Any company should take into account the public nature of the congressional investigation and its potential financial impact on the company.
Keeping these factors in mind, a company may want to develop a strategy to help shape potential legislation aimed at solving the problem raised by the investigation. Assess whether Congress is looking for a particular response, like a change in corporate policy, altering product prices, or increasing safety protocols. Sometimes members of the committee conducting the investigation will make the desired action plain by pointedly asking the company to take certain steps. You need to understand what steps the committee wants your company to take and whether your company is willing to comply. Consider whether the requested change is less burdensome than the resulting investigation.
3. Congress Always Investigates Certain Industries and Certain Events.
Certain industries receive more attention from Congress than others. Technology, healthcare, and financial services are three big targets traditionally on the congressional radar no matter the party in power. If your company is part of those industries, big or small, private or public, you must stay engaged and keep abreast of the particular issues on which Congress is currently focused. Monitoring committee activity helps you keep track of which issues are important and current. You are probably already monitoring any civil litigation related to your company’s industry. Be aware that a rise in major tort claims associated with your industry, such as claims regarding defective products or potential cancer-causing ingredients in the products, may heighten a committee’s interest in that particular issue.
There are also certain events, such as a data breaches that expose private financial information, products recently linked to public health issues, or major catastrophes involving use of public funds given to private industries for disaster response and recovery, that most often become the subject of a congressional investigation. Companies are usually more in-tune with the intricacies of their specific industry and have a good grasp on the problems garnering congressional interest long before those issues make headlines. However, should your company become the subject of a congressional investigation, do not discount the depth of knowledge and experience congressional staff have about a particular topic when preparing your response.
4. A Congressional investigation is not like litigation. Don’t approach it the same way.
A thorough response to a congressional inquiry will likely require a lot of time and resources, and you may be tempted to approach it like you would litigation. Unlike a courtroom, however, there is no third party during a congressional investigation to adjudicate disputes about issues like discovery, privilege, and other “legal” matters. In fact, each committee adopts its own rules relating to how it conducts investigations. The committee is seeking real answers to real questions and wants to have access to information that will help it answer the questions. Committees conduct investigations that are important to the committee members and its staff and are in it for the long game. This means a committee’s request for information may be fairly broad but have a relatively short timeframe for response. You should evaluate how best to be responsive to the committee’s request while also protecting your company’s interests.
It is important to establish a professional and courteous working relationship with the committee in the early stages of the investigation. Know the players. Establishing rapport with committee staff is essential to navigating and working through any tricky issues that may arise. This might include ensuring the information you provide to the committee is kept confidential, seeking and receiving additional time to respond to the requests, and determining whether public testimony is necessary.
Whether your company is a small privately-held company, or a larger public company, may have an impact on how you are regarded by committee staff and how you respond to the congressional inquiry. In addition to considering written responses to the committee’s request, you should also think through how you will respond to a request for testimony at a congressional hearing. A committee may conduct a hearing to advance its investigation and often insists on having a high-level executive from the target company appear at the hearing. A closely-held corporation may not need to weigh and balance factors such as how a public hearing may impact investors, however a large public company has to account for the impact a public hearing could have on investors and company stock. This factor should not be underestimated and will impact how the company prepares for the hearing. There is always an optics issue that must be considered. Even requesting an extension to respond to a request for documents may lead to public scrutiny, so be prepared to answer questions about why the path chosen was the best path for all parties involved.
5. Engage counsel early. Don’t wait until it’s too late.
If you suspect your company may become the target of a congressional inquiry, or if you have already been contacted about a congressional investigation, it is important to immediately engage counsel to develop an effective response strategy. Getting out in front of the investigation early to help manage the issues and media response is important to ensure your company successfully navigates the investigation. Once public perception of an issue takes hold, it can be difficult to reshape the narrative. Your company may find itself making reactionary decisions influenced by the congressional and media narrative instead of thoughtful decisions with the best interests of the company in mind.