2007 Issue 1 - New York City Bar Association

L A W Y E R ’ S R O L E I N C O R P O R A T E G O V E R N A N C E
Often, however, the decision whether to self-report is a difficult one.
Given the substantial costs to a corporation of many regulatory investigations,
a public company may justifiably determine not to self-report in
some circumstances. Those circumstances cannot be determined in advance.
Each case is different. What is mandated is careful consideration
by the client, with the assistance of counsel, of the relevant considerations.
In general, a client determining whether to self-report should consider
the following, among other relevant factors: (1) the nature and extent of
possible wrongdoing and the circumstances of its discovery (for example,
if the problem was discovered in the context of an acquisition transaction
requiring regulatory approval, self-reporting might be desirable even
if the issue could be remediated promptly); (2) whether the possible wrongdoing
is in the past or is ongoing; (3) the cost and collateral consequences
of reporting; (4) the possibility of harm to the corporation, its shareholders,
or other constituencies; (5) who is alleged to have engaged in wrongdoing;
and (6) whether there are (or are likely to be) other investigations or proceedings
with respect to the possible wrongdoing or related matters, including by
a governmental or regulatory body. The client should consider that a
decision not to disclose likely will be viewed as a failure to cooperate if the
government later discovers the wrongdoing, and may lead to a corporate
penalty or even indictment—the ultimate penalty that could put the corporation
out of business. Where the possibility of wrongdoing appears highlevel
or widespread, or where it is ongoing, establishing a satisfactory compliance
program is essential to a corporation’s interests, and, therefore,
full disclosure of the problem will often be the only sensible course.
4. Exercise of judgment
Supreme Court Justice Robert H. Jackson famously observed that “[w]ith
the law books filled with a great assortment of crimes, a prosecutor stands
a fair chance of finding at least a technical violation of some act on the
part of almost anyone.” 206 That observation applies no less to investigative
counsel hired by a corporation than to a federal prosecutor working
206. Robert H. Jackson, The Federal Prosecutor (Apr. 1, 1940) (published in 24 J. Am. Jud.
Soc’y 18 (1940)). See Abraham S. Goldstein, Conspiracy to Defraud the United States, 68 Yale
L.J. 405, 408 (1959) (observing that the terms “conspiracy” and “defraud” have taken on very
broad and unspecific meanings); Ralph K. Winter, Paying Lawyers, Empowering Prosecutors,
and Protecting Managers: Raising the Cost of Capital in America, 42 Duke L.J. 945, 954-55
(1993) (noting that mail and wire fraud statutes, whose underlying doctrine “posits a duty of
agents to inform their principals of material facts such as kickbacks,” have been interpreted to
criminalize a “wide range of conduct involving conflicts of interest, alleged misrepresentations,
or the failure of agents to inform alleged principals of certain facts”).
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