Internal Investigations and the Food, Beverage and Agribusiness Industry

In this episode, host Jonathan Havens, co-chair of Saul Ewing Arnstein & Lehr’s Food, Beverage and Agribusiness (FBA) Practice, speaks with colleague Jennifer Beidel, co-chair of the firm’s White Collar and Government Enforcement Practice and a former federal prosecutor, about internal investigations. Jen and Jonathan discuss that, given the heavily regulated nature of the food, beverage, and agribusiness industries, internal investigations regarding potential regulatory violations are common. The two further discuss that internal investigations in the space could also involve allegations of misconduct or criminal issues. Jen guides listeners through the goals of the investigation at the outset, looking for potential conflicts between the group running the investigation and the witnesses to be interviewed, how best to keep the information being investigated privileged, and deciding how and when to report findings to the appropriate regulatory body. Jen and Jonathan emphasize the importance of having a robust compliance program in place and thinking through a preliminary investigative plan before it is needed to understand compliance trends and help reduce risk. 

Transcript

Internal Investigations and the Food, Beverage and Agribusiness Industry
Jonathan Havens and Jennifer Beidel March 2022

Jonathan Havens: Hello, and thank you for joining us for today's episode of “Don't Miss a Beet,” Saul, Ewing Arnstein and Lehr’s food, beverage, and agribusiness podcast. My name is Jonathan Havens and I'm the co-chair of both the firm's Food, Beverage and Agribusiness Practice as well as its Cannabis Law practice, and I'm based in our Baltimore and Washington, D.C. offices. Today, I'm thrilled to be joined by my friend and partner, Jen Beidel, co-chair of Saul Ewing's White Collar and Government Enforcement Practice Group. Jen is a trial lawyer and former federal prosecutor who represents organizations and individuals in white collar, criminal defense cases, internal investigations, corporate compliance matters and complex commercial disputes. She draws on her extensive trial and investigative experience in both the public and private sectors to assist clients facing criminal and civil investigations of fraud and other misconduct in the health care, life sciences, food and agriculture, and financial services industries among many others. Jen, thanks so much for joining us today. I really appreciate it. It would be great to hear from you a little bit more about you and your background.

Jen Beidel: Yeah, thanks so much for having me. I'm happy to be here today. So, as you said, I'm the co-chair of the firm's White Collar and Government Enforcement Practice Group. I come to the firm with experience as a federal prosecutor in the Southern District of New York, where I prosecuted a wide variety of cases, mostly in the fraud and cybercrime space across a number of industries. In terms of food and agriculture, I also bring to the table having grown up on a farm in central Pennsylvania and gotten an undergraduate degree in agriculture. I thought I was going to go to vet school and I'm one of those folks who changed course, and went to law school for the opportunities it provided. And I find myself practicing white collar law, but I'm always happy when that intersects with food and agriculture, which is where my passion is.

Jonathan Havens: That's great. We're very glad that you had that career shift, very glad for the opportunity to work together. So the focus for this conversation is going to be on internal investigations, and something that you and I talked about offline is: internal investigations apply to a wide variety of industries, right? Whether someone's in manufacturing, whether they're in technology, whether they're in food, beverage and agribusiness, life sciences, whatever industry—internal investigations can be present. But, I think the focus of today's conversation is internal investigations through the lens of food, beverage, and agribusiness. We'll get into why that topic in a few minutes, and I think it will be apparent to our listeners. But before we get into the weeds, can you talk a little bit about, first of all, what is an internal investigation and at a high level, some of the factors that should be considered when a company is formulating an internal investigation plan.

Jen Beidel: So an internal investigation is designed to uncover the facts and circumstances around an issue that's been flagged as a concern for whatever company and for whatever reason. At a high level, the first thing you want to consider is what the goal is of your investigation. Sometimes the goal is deciding an appropriate employment context or consequence for an individual or otherwise changing internal controls, but not in a way that impacts compliance with federal or state regulations. That's sort of one track. Where though you're in a heavily regulated industry like food and agribusiness can be, you need to consider at the outset of an internal investigation what your end goal is. You're typically trying to determine whether there's been some violation of a regulation, and if so, how persistent that violation is. Is it isolated to one person? Has the conduct stopped or is it a persistent concern throughout a business unit or even broader than that? And if you uncover those types of concerns, how then will you report them to whatever the appropriate regulatory body is to get the right outcome? So, the first high-level factor is: what's the end goal. If it's purely internal, that's one set of concerns. If it could be externally and government-facing, that's another set of concerns.

Jonathan Havens: That's great. So, one of the things you teed up is something that I really wanted us to talk about, which is regulatory requirements, reporting requirements, compliance requirements, anything under the heading of what is something you are required to do by a set of regulations that govern your industry, your organization, so on and so forth. So, I'm thinking of a hypothetical whereby—and we've dealt with this with clients before—where there's a reporting requirement. Someone got sick eating your product, or you noticed a manufacturing deviation. It's very feasible that someone who is being investigated or who should have done something and didn't, is going to be a fact witness or the subject of the investigation. Can you talk a little bit about how you approach that or what you recommend doing if in fact in-house counsel is a fact witness or the subject of the investigation that you’re conducting?

Jen Beidel: Sure. So in terms of scoping the investigation, which is something you need to do at the outset, you need to look for any potential conflicts between the control group that's running the investigation internally, and the witnesses you need to speak with. If, for example in a hypothetical scenario, the general counsel has been involved in some preliminary steps of an investigation, or maybe has advised an employee on what to do or what not to do, then the counsel doing the investigation—whether that's in-house or external—would need to report their results to someone other than the general counsel. Because you don't want to be in a scenario where you've now given the fact witness more information than they otherwise had. You want that fact witness to stay pure in their personal knowledge so that that's all they are required to share with a government regulator or whomever the audience is later. You also want to think through at every step how best to keep the information you're investigating privileged and within the control of the organization until such time as you decide, intentionally, to give that information to someone else. There can be a lot of reasons to decide to make information external. It could be for a PR reason. Maybe the issue has already become public and the organization wants to rebut that with the story that they've uncovered through this investigation. It might be that you're required to report. It might be that you want to report to avoid worse consequences. There are a lot of federal regulators that have policies that say they will reward companies who come forward and blow the whistle on themselves essentially and say, “We've had this aberrational conduct; we've put compliance programs in place to prevent it. But we want to reveal to you that this is what happened.”

Jonathan Havens: That’s great. So you talked about privilege and a lot of clients will ask us: when do we reduce something to writing? When should we have conversations over the phone? Who should be present? Should they bring witnesses? So maybe, briefly, if you could touch on how would you go about determining whether to do an oral or written investigation and to whom you provide it? You mentioned a little bit on the second part about to whom you provide it and why, but maybe just the written versus oral aspect of an investigation might be helpful.

Jen Beidel: Right. So the best thing I can tell you on all of those questions is in every investigation, you need to have a discussion about those questions and make an intentional decision. The only wrong decision is a decision that happens by default. So there's no set of rules that fits every set of facts. You need to look at your particular set of facts and say: will this particular circumstance become public eventually? If so, do we want every aspect of the investigation to become public? Or do we want to just tailor maybe an executive summary that's what we will release. And if we're going to just release an executive summary, maybe we don't reduce everything else to writing at all. And we just create a small control group of individuals who speak with counsel orally about what will become reduced into that written report. So once you reduce everything to writing, the cat is essentially out of the bag. (I guess I should use “the horse is out of the barn” on an agriculture podcast.) But once you write it, you have to think through the scenario that privilege could be waived as to everything written there, including fact witness statements. And so if you write it, you have to be prepared that that could become a public document or at least a government-facing document at some point. And so you want to have put every possible thought into that decision before you get there.

Jonathan Havens: That's great. I think there's this fear—and it's well-founded, right, because people are familiar with litigation and discoverable documents—when you reduce something to writing, it becomes discoverable. But I've also seen that go too far where someone says, “I'm not going to reduce something to writing because I'm so afraid of it being discovered.” Well, that can sometimes, I think, shoot an organization or a person individually in the foot. But it needs to be intentional, right? It can't just be willy-nilly.

Jen Beidel: Right. Exactly. I think you typically want to at least have an executive summary or maybe a PowerPoint or an outline or something to go back to. If this issue comes back to light two years from now, how do we guide the conversation back into this topic?

Jonathan Havens: So speaking of litigation, one of the things that I know you've looked at quite a bit and help clients with is what happens when you're dealing with a whistleblower? So let's shift the conversation, if we could, a little bit to best practices when an investigation is prompted by a whistleblower coming forward with some sort of allegation of wrongdoing.

Jen Beidel: Ok, so whistleblowers are human beings like everyone else, and they tend to be curious about the subject that they blew the whistle on. So there it runs the gambit, really. You might have a whistleblower that calls a hotline or sends in an email, and you never hear from them again. But more often, what we see is that whistleblower becomes invested in the topic area and wants updates on what's happening, wants to sort of become in that control group of the investigation. But you have to remember that the whistleblower is a fact witness. So just like we discussed with the in-house counsel, who may be a fact witness, you have to be careful not to give that whistleblower any additional information that they did not have prior to blowing the whistle on whatever the conduct is. That can be unsettling, sometimes. Maybe the whistleblower is blowing the whistle on conduct that affects them personally, that's in their job duties, that they feel like they've been asked to do something inappropriate. It's not for the investigation team, though, to quell those concerns. Presumably there's HR or some other structure above this person that can separately deal with the employment consequences or aspects of whatever is going on. But in terms of the investigation, the whistleblower needs to be treated just like any other fact witness. What I tend to do is speak to the whistleblower as the first witness. They are the person who brought the issue to light. They tend to have at least enough facts to get you started in terms of scoping who else you need to speak with, what documents you need to collect, et cetera. But it is important at the outset of that conversation to try to build a rapport with the whistleblower, while at the same time making clear to them that the information flow is really one-way. “I'm not going to be able to share with you the results of this investigation. If it's something that impacts you organizationally, you'll learn about that through your work. But unfortunately, I can't tell you about the outcome of the investigation.” And usually that quells the concerns and stops the whistleblower from expecting more information than other witnesses might get.

Jonathan Havens: Sure. And I think something that I see clients struggling with is when someone comes forward with an issue, a complaint, an allegation of wrongdoing, everyone just wants to make things right as quickly as possible so everyone can move on. And I see—clients will offer someone maybe who just hasn't been brought into the fold, who doesn't really understand corporate communications and the importance of not saying more than you're authorized to say or should say—and I think that's particularly true also in dealing with whistleblowers. Right? I think it could go both ways. Someone could react very negatively, just be dismissive of the whistleblower or be too accommodating. And so I think like with everything else we're talking about today, it's important to have a plan and a coordinated effort and not a shoot-from-the-hip kind of strategy.

Jen Beidel: Absolutely. And I think it's important to have a plan that's flexible. Every investigation plan I've ever worked on has had three or four or five rounds of edits over time because every witness you talk to, every set of documents you collect might lead to additional information. You might interact with the whistleblower and determine there's a
slightly different way that you need to interact with this person than your typical. So, there's sort of a way things are done, but you also need to be flexible enough to deviate from that if it's necessary for the individual investigation you're conducting.

Jonathan Havens: Sure. So I think my last substantive question is: if you conduct an internal investigation, maybe it doesn't turn up anything, but maybe it does turn up something. What if it turns up criminal conduct? What then? I mean, where do we go from here?

Jen Beidel: So, there is a variety of ways an investigation might turn up criminal conduct. I recently conducted an investigation that turned up criminal conduct of an entirely external set of actors tangentially related to the company only. And in that kind of scenario, the company is essentially like any citizen where you can, as a matter of your civic duty, go to the U.S. Attorney's Office or the D.A. or whomever and report that conduct. Those types of reports are always better done through a lawyer who's trained in the area because that office will be more receptive to a report received in a certain way that they're used to. So that's sort of an optional report. If we're talking about existing in a heavily regulated space and you turn up a violation of those regulations by your company, then it's typically best to at least consider self-reporting that information to whomever the appropriate regulator is. Obviously if you're going to engage in a self-report, you want to do that with someone who's trained in the particular regulator and the particular space so that you self-report in the way to get the best benefit. You also want to make sure that self-report is accurate, right? That's why doing a well-scoped investigation is important. The worst case scenario, I think, in self-reporting is to report some conduct that ends up becoming 5% or 10% of much broader conduct. That gets you in trouble, where it might look like you intentionally reported only a small amount to avoid liability more broadly. You don't want the government to be in a scenario to uncover facts or circumstances or additional conduct that you did not self-report. So, while it's attractive to go into an internal investigation and get it done quickly, you also want to make sure, especially if it’s an area where there might be criminal conduct to report, that it's scoped appropriately. You don't have to necessarily run every lead to the ends of the earth, but you want to be sure that you've uncovered, at least by topic area, the things that are of concern so you can't later be accused of having attempted to hide some fact or circumstance from the government.

Jonathan Havens: Sure. That's great insight. And again, it is along the theme of something we were talking about a few minutes ago. People want to make problems go away quickly, but some of these problems—you can't make them go away quickly and trying to do so could really come back to bite you. And I think your point about reporting—when you are ready to report and understand all of the facts and circumstances or reasonably the facts and circumstances that are at your disposal—is much better than going in looking like you were trying to mislead and defeating the purpose of self-reporting in the first place, which is to show the government, the regulator, the stakeholder that something bad happened, but we're trying to make it better. And here's how we're going to make it better.

Jen Beidel: Right. I mean, there absolutely can be circumstances where maybe your investigation runs parallel to the government's investigation. If something leaks and it's in the media and you know they might be aware of it, you might go in and say, “We're looking
into this. We're going to report to you as we go on. This is what we know for now.” But make clear, “That's not the full report. We're still working on this.” So again, this is something that isn't one-size fits all, but needs to be intentionally decided with every investigation.

Jonathan Havens: Great. So, I told you it would go fast. We're just about at the end of the episode. I guess a couple of observations. You keep me honest; if I miss the point on any of these, let me know. But it seems to me that one of the things—and I love your statement of making decisions not by default, but intentionally—to me, that's one of the biggest takeaways here is that you need to have a plan for what you're doing. It cannot be off the cuff when you're dealing with potential criminal issues, whistleblowers, regulatory violations, whatever you're talking about, misconduct of any kind or alleged misconduct. You really need to have a plan. I guess in wrapping up, it sounds to me like—and this might be a little bit of a softball point or question—an organization is far better served by having a plan that's been vetted before you're in crisis mode. And you mentioned going through three, four, five drafts. Better to have the room to do that when you're not dealing with alleged misconduct, but I assume you agree with that and maybe anything to add on having a plan and how to get a plan in place before you even need one.

Jen Beidel: Yeah, absolutely. I think you hit the nail on the head with not doing these investigations by default. Certainly the more serious the potential outcome, the more planning that needs to go into what you're doing. And if you exist in a heavily regulated industry, it is a good idea at the outset to think through the three or four areas where you might have the most potential for running afoul of a regulation. There's always a set of regulations that impact any company or industry and there's areas where you could talk to counsel about trends, compliance trends. What is the government looking into? And then you could think through, before that crisis mode, what would we do if there was a concern in this area? Who are the stakeholders? Better yet, do we have the right compliance structure in place? Have we trained the folks in those areas on how they're supposed to be compliant so that when you get to the investigation phase, you've hopefully reduced the risk and also thought through your preliminary plan. So you can get counsel or whomever is doing the investigation onboard quickly and get them started and get to a government report as quickly as you can.

Jonathan Havens: That's great. Well that about does it for today, Jen. Thank you so much. I always learn a lot when we record these episodes, but that's particularly true today. I think you gave very, very good advice and insight to our listeners. And if anyone has any questions about internal investigations, developing a plan, please reach out to either one of us. We'd be more than happy to talk to you. And again, thank you so much to our listeners for tuning in for yet another episode. Please be sure to join us next time on “Don't Miss a Beet.”