When a grand jury subpoena arrives.

• Author: Yannett, Bruce E.

What's a director to do? Here are some pitfalls to avoid and steps to take.

Your nightmare has come true: an FBI agent appears at your office with a subpoena stemming from a grand jury investigation of a company on whose board you sit. While even the thought of such an event can - and should - be a cause for concern, the actions you and your company take in response to that subpoena may have a dramatic impact not only on the company's potential exposure to criminal liability but also on your own potential civil and criminal liability.

The recent decision by the Delaware Chancery Court in the Caremark derivative action (see box) has been widely reported as a warning to directors that paying insufficient attention to their company's ethics and compliance efforts could lead not only to criminal liability for the company but also individual liability for the director. What has often been overlooked in discussions of the Caremark decision, however, is that Caremark's first awareness of potential legal troubles came when it received a subpoena from the Office of the Inspector General of the Department of Health and Human Services, and that it was Caremark's immediate and vigorous response to the problems identified by that subpoena that helped shield the Caremark directors from personal liability.

Accordingly, this article offers an overview of some of the steps you and your company should consider when served with a subpoena by a criminal investigative body.

Beware of loose conversation

The first pitfall to avoid is making potentially harmful comments if the FBI or other government agent personally serves a subpoena on you. The agent probably will try to engage you in a conversation regarding the subpoena and the government's underlying investigation, and you may be tempted to join in that conversation in an effort to learn about the investigation or to convince the agent that there is no basis for the investigation.

However, you are under no obligation to speak with the agent and should bear in mind that the agent will prepare a memorandum setting forth his recollection and understanding of any statements you make. These memoranda are often replete with errors, frequently stemming from the agent's lack of familiarity with the operations of legitimate corporations.

The danger inherent in speaking with the agent without an attorney present is that the agent's memorandum may later become the basis for a prosecution for making false statements. It is wise to bear in mind the admonition that "anything you say can and will be used against you."

Which attorney to consult?

The first step to take after you receive the subpoena...