When the New York Times runs a story on its cover with inflammatory language about a product or service that you issue, sell or promote, attention must be paid.  On August 1st, the Times reported in a cover story1  how “thousands” of consumer “victims” have been “lured” by “online fraudsters” into sending money via prepaid cards, described in the article as the “money conduit of choice” for such scam artists.

In our experience, this could lead local or federal law enforcement to question entities involved with the issuance, sale or distribution of prepaid products – including holding hearings, issuing requests for information and subpoenas, and even (although rare) issuing search warrants.

This Client Alert has been designed jointly by Bryan Cave’s Prepaid and Emerging Payments Team and our White Collar Defense and Investigations Group to answer our clients’ questions regarding how to respond to such investigations. We hope this important background information will be of assistance should you or your company ever be subject to any such law enforcement actions.

Notice of a Government Investigation

Often, a company is alerted to a government investigation when it receives a grand jury or an administrative subpoena. It is important to have in place procedures as to who receives such subpoenas and where subpoenas should be directed within your organization. Those who receive such notifications must understand the difference between a sealed Grand Jury subpoena, a Civil Investigative Demand, and a subpoena or document request from private litigants. Good record- keeping as to how and when such notifications are received is important. Keep in mind that timing is critical when responding to such items.

Steps to Take Upon Receipt of a Subpoena or Document Demand

Below are some helpful tips to guide you in response to a subpoena from a government agency:

  • Retain counsel immediately, as there may be the potential for criminal liability, even if you believe you have done nothing wrong.
  • Immediately instruct employees to preserve all potentially relevant hard-copy and electronic documents and to halt any routine document destruction; distribute a detailed document preservation notice that makes clear that you expect complete cooperation from all employees in responding to the government’s requests.
  • Designate an administrative employee as the “records custodian” to oversee your document collection and production.
  • Instruct employees to not talk about the subpoena among themselves.

Your counsel can contact the issuing attorney and help negotiate the scope of the subpoena and try to find out the government’s intentions with respect to its investigation. For instance, counsel can find out whether your company is a target, subject or witness, and therefore help guide your company’s next steps.

Steps to Take Upon Receipt of a Search Warrant

In the unusual event a search warrant is executed on company property, you should keep in mind some basic points:

  • Do not consent to the search, and get an experienced attorney to the scene as quickly as possible.
  • For a federal investigation, try to reach the Assistant United States Attorney overseeing the investigation in order to manage the search.
  • Formally demand that agents not interview employees and inform employees that they are not obligated to speak to agents, that they are entitled to be represented by an attorney during any interview, and that the company will provide such representation.
  • Do not, however, instruct employees not to speak to investigators.
  • Take steps to identify legal department files and any attorney-client materials before agents begin the search, and alert the agent in charge as to the presence of such materials so you can try to protect them from seizure.
  • Obtain a detailed inventory from the agents of everything they have seized before they leave company premises.

Conclusion

Negative media stories involving potential consumer fraud or criminal activity can often generate law enforcement scrutiny. Being prepared is critically important.