PROTECT DIRECTORS, OFFICERS WITH COVERAGE.

• Author: Mincey, Patrick
• Position: 2018 LAW JOURNAL

In both public and private companies, executives and board members are sued for a variety of reasons. Directors and Officers liability insurance--commonly referred to as "D&O" coverage--exists to protect them and their companies.

As the Federal Government continues to ramp up enforcement against white collar crime and combat corporate fraud across industries from finance and health care to defense contracting and real estate development, it is more essential than ever for business leaders to recognize the role D&O coverage can play in criminal investigations and prosecutions.

A company's indictment--let alone conviction--can lead to the death of the business.

Because of this reality, and the full-blown crisis it creates, I encourage clients to rely on D&O coverage and think about how to engage their insurance providers if and when the government comes knocking.

Wait, The Government is Looking at My Company in a Criminal Case?

The government can signal its interest in your company in a criminal investigation in many ways, from the in-person contact between an FBI agent and the company's accountant to surreptitious scrutiny by intelligence agencies monitoring transactions with foreign politicians abroad. Often times, recognizing the first clue the government is scrutinizing your business depends on your industry. A securities broker will receive different types of notices from the Securities Exchange Commission compared to a hospital provider that might be contacted by the Department of Health and Human Services. A defense contractor and bio-pharma company may be operating in the same sub-Saharan nation but receive very different kinds of scrutiny from various United States agencies about their respective business practices.

Executives and management must be extremely sensitive to becoming entangled--even peripherally --in a criminal investigation. Often, the loudest alarm sounds through the Grand Jury subpoena. In my experience, companies too often treat the Grand Jury subpoena like a routine civil lawsuit subpoena.

That is a mistake.

Grand Jury Subpoenas Are Different

The Grand Jury investigates in secret, directed by prosecutors from the United States District Attorney's Office. While protections like the right to remain silent under the Fifth Amendment technically exist, a corporation has no such privilege. A witness's attorney may not be present while the government elicits testimony before the Grand Jury.

Even for seasoned executives...