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Across a wide spectrum of legislative and
oversight matters, Congress has broad rights
when it comes to requesting information and
initiating investigations. In the current
climate of regulatory, public and media scrutiny
on corporate performance and conduct, don’t be
surprised or alarmed if Congress comes calling.
Instead, be prepared and ready to participate in
what, at its essence, is a unique brand of
theater.
By Jeff Heilman ~ Illustration by Randy Lyhus
Imagine
arriving at work primed to lead an investor
conference call, consider an international
expansion or engage in any other customary chief
executive activity, only to confront the news
that the U.S. Marshal’s office has just served
your corporation with a Congressional subpoena.
An investigating House, Senate, joint or select
committee is requesting your testimony at an
upcoming hearing, along with the production of
proprietary documents that could be publicly
disseminated. Time to throw up a defensive wall
and bunker down? Think again. “The first rule
and abiding wisdom,” says Washington, D.C.-based
Patton Boggs’ partner Jonathan Yarowsky, who was
formerly special associate counsel to President
Clinton and served as general counsel to the
House Committee on the Judiciary, “is to
recognize your obligation to respond. There
should be no underestimating the authority of
Congressional investigative oversight, with no
light regard for the stakes involved. The
response is forthright, not evasive.”
Andrew Friedman, of
counsel to Patton Boggs and also
Washington-based, says that Congressional
investigations can have unpleasant outcomes. “If
you refuse to answer,” explains Friedman, who
has substantial experience in counseling
individuals and corporations involved in
criminal, federal agency and Congressional
inquiries, “or are deemed to have refused to
answer, the committee can recommend that you be
held in contempt of Congress and refer you to
the U.S. Attorney or other enforcement agencies
for criminal prosecution.” Drawing needless
attention or raising suspicion can also
transform an otherwise relatively innocuous
inquiry into a full-blown investigation, or open
up additional fronts on a battle already in
progress. “Disagreeable, obstructionist behavior
such as stonewalling or refusing to produce
documents,” he adds, “negatively charges the
atmosphere and heightens the possibility of
triggering ‘parallel’ civil, regulatory or
criminal proceedings relating to the original
inquiry—or aggravating proceedings already under
way.”
While naturally
gravitating towards specific matters of fraud,
abuse and malfeasance, though, Congress has a
far broader policymaking mandate, geared towards
creating new legislation and reforming existing
laws. Receiving a Congressional letter or
subpoena is, therefore, not necessarily a threat
or prelude to a fight—it may be an opportunity
or invitation for a company to participate in a
policy discussion. “While it is compelling to
think of the hearing as being only about the
corporation,” says John Hellerman, a partner in
the Washington, D.C.-based public relations firm
Hellerman Baretz Communications, “it is really
an interactive, public conversation with heavy
political considerations.”
Nevertheless, one of
Congress’s foremost powers is the oversight of
interstate and foreign commerce—which means that
if you are in business, you can be investigated,
with soft landings far from guaranteed. When
summoned by Congress, says Patton Boggs’ partner
Robert Luskin—a former special counsel to the
Department of Justice—corporations can find
themselves on unfamiliar turf. “These
investigations might walk and talk like classic
litigation,” he says, “but the rules and
contexts are reversed. Think of a traditional
litigator as a pilot, taking measures to correct
a stall in the courtroom. In the Congressional
setting, if he follows his natural instincts, he
is likely to crash.”
Often described as
political theater, hearings before Senate or
House committees are as old as the Constitution
itself, although they were used sparingly until
World War II. The advent of the television age,
however, greatly elevated their profile and
impact, as American citizens in the 1950s avidly
tuned in to the Kefauver mob hearings and
McCarthy’s anti-Communism tirades. Today, there
are hundreds of hearings during each session of
Congress, and the stakes in this long-running
American institution are as high as ever. To
Luskin and his colleagues, a sophisticated weave
of legal, policymaking and storytelling skills
are necessary for staging this complex show.
Make Friends Today, Not Tomorrow
While the
Constitution does not expressly grant Congress
investigative powers, Supreme Court precedents
and legislative practice through the years have given the House and the
Senate plenty of room to operate. In his
well-known work Congressional Government (1885),
Woodrow Wilson wrote, “Quite as important as
lawmaking is vigilant oversight of
administration,” while in 1927, the Supreme
Court affirmed that, “the power of inquiry, with
process to enforce it, is an essential and
appropriate auxiliary of the legislative
function.” Today, Congress has a broad right to
seek information for “legislative purposes.”
Accordingly, when
the government caught wind of suspected
deceptive accounting procedures at Enron, the
House Committee on Energy and Commerce came
calling. When Halliburton subsidiary Kellogg
Brown & Root was flagged for oil contracting
abuses, Senator Byron Dorgan of North Dakota
declared a “screaming” need for Congressional
oversight. Earlier this year, Congress lashed
out at Google, Yahoo, Cisco and Microsoft for
their respective roles in exposing the
identities of Chinese Internet users to the
Chinese government. Lucrative Native American
contracts in Alaska was another recent topic, as
was steroid use in major league baseball. As
long as there exists a tenable connection to its
legislative function, Congress can initiate an
inquiry.
Luskin emphasizes
that businesses should expect Congressional
attention, especially when operating in
industries or sectors of core interest. “These
inquiries never arise in a vacuum,” he notes.
“If you are in, say, finance, energy,
pharmaceuticals or anything related to
government contracts, it’s a safe bet that you
are under continuous review.” Luskin says that
having a “government relations plan” is a smart
corporate strategy. “Congress’s foremost
concerns are political in nature,” he continues.
“Understanding what animates those concerns,
relative to your particular business, takes the
surprise or alarm out of hearing from Congress.
Reach out to the committees or subcommittees
focused on your industry or sector, become
familiar with their staff, agenda and
timetables, and foster a proactive, long-term,
coherent communications strategy. The idea is to
make friends today, not tomorrow.”
However,
relationships grounded in networking and aligned
around policymaking initiatives, no matter how
sympathetic, can only take a corporation so far
when Congress comes calling. “Investigating
committees set a course,” says Yarowsky, “from
which they do not deviate. Knowing the rules of
engagement is critical, and that starts with
understanding and embracing the unique aspects
of Congressional culture.” To successfully
navigate a congressional inquiry, adds Jamie
Gardner, a partner in Patton Boggs’ Litigation
practice, “counsel must understand the legal and
political issues underlying the investigation
and directing its course.”
A
Unique Arena
Whether a hearing is
legislatively focused or in pursuit of alleged
wrongdoing, a corporation’s reputation and
business interests are on the line, requiring
the same levels of protection as in a
traditional litigation. Before Congress, though,
Yarowsky recommends setting the tooth and nail
approach aside. “Counsel should be fully aware
and protective of the corporation’s possible
jeopardy, but when it comes to dealing with the
committee and preparing for the hearing, they
should conduct themselves like a legislator,
governed by a public affairs temperament of
cooperation and accommodation.”
Luskin says that
otherwise skilled white-collar defense lawyers
or dogged litigators will quickly find
themselves out of their depth if they attempt
their customary tactics before an investigating
committee. “While formal,” he explains, “these
inquiries are neither judicial nor adversarial
in nature, falling instead between the legal and
regulatory dimensions. There is no neutral
fact-finding body, no formal pleadings, no
provision for calling or cross-examining
witnesses, no verdict or other aspect of
traditional litigation. And when judge and jury
are the investigating majority (party in
control) committee, the media and the American
people, then the strategic and tactical
requirements are different.”
For one thing,
counsel has little direct participation in
hearings. According to Luskin, “most committees
will not even let counsel speak during the
proceedings.” Luskin likens counsel’s
constrained role to that of an iceberg. This
means working behind the scenes to gain some
control and influence over how the proceedings
unfold. Similar to rehearsals for a Broadway
production, the time for this comes during the
informal preliminary stages leading to the
formal hearings.
According to
Friedman, the committee staff members who
typically manage investigations are receptive to
discussing themes and identifying possible
shared points of view. “Congress’s goal is to
identify the people and issues that they
perceive will be most interesting and impactful,”
he says, “and so informal interviews are often
used to shape the right questions and witnesses
for the formal proceedings. Participating in
this process becomes instructive for formulating
the company’s response strategy.”
Part of that
strategy, Luskin says, involves negotiating
around the investigation’s inherent constraints.
“The investigating majority committee always has
a corresponding minority committee,” he
explains, “with which it exists in adversarial
tension. The minority team stands as a naturally
sympathetic ally, whose voice you can engage
where you are otherwise restricted. ”
Furthermore, adds
Yarowsky, this is an opportune time for counsel
to establish certain ground rules and protocols
regarding testimony and document production.
“While Congressional subpoenas are often
extremely broad,” he says, “the legal options
for resisting them are limited. The Fifth
Amendment right against self-incrimination is
available, but it can be problematic in this
setting. Similarly, Congress may reject
non-Constitutional privilege claims for
protecting documents. There is, however, room to
work on compromise disclosures, such as
redacting sensitive information or restricting
public dissemination.”
Throughout all the
advance preparation, casting and dress
rehearsals, the dominant theme in negotiating a
Congressional hearing is storytelling. Whether
outlining the rationale behind your legal
defenses in letters to the committee, preparing
statements for witnesses to read into the record
or formulating the answers to anticipated
questions, a coherent narrative is
essential—especially in the iceberg-melting heat
of the inevitable media spotlight.
Getting Ready for the Close-Up
Icebergs were the
topic of conversation in 1912, when the Senate
held hearings on the Titanic disaster. The
survivor testimony was dramatic, and the
subsequent reforms in maritime safety were
significant, but in an age before television and
the Internet, the hearings went largely faceless
before the public. In 1951’s Kefauver hearings,
though, they saw the face of organized crime,
followed by Joseph McCarthy’s ill temper in
1954, and ever since—from Nixon’s Watergate
denouement to slugger Mark McGwire’s ham-mouthed
strikeout—television and the media have stood
poised to scrutinize and often magnify the
people and issues involved in Congressional
hearings. More sophisticated than “spin,” the
communications strategy anticipates an evolving
set of strategies, objectives and contexts. The
challenge, states Yarowsky, “is to ensure that
your story is not shaped in a way that goes
beyond your control.”
Reiterating his
caution to corporations not to be self-centered,
Hellerman says that the audience around a
hearing is broader than just Congress. “The
media and the public are of course key
constituents,” he says, “but when a corporation
is involved, shareholders, institutional
investors and employees become stakeholders,
too. More than just speeches and statements
before Congress, the corporate story has to be
relevant for each individual stakeholder, while
remaining coherent, compelling and consistent.
It is a delicate balancing act.”
A critical voice, of
course, is the one speaking directly for the
company. When convening the response team at an
investigation’s outset, says Friedman, gaining
input from inside the business helps to
determine who should be talking. Hellerman
agrees, saying that, “similar to decisions a
company makes in crisis situations, the idea is
to rise to the occasion. Matters of higher
import naturally point toward the executive
suite, while a more technically themed inquiry
might call for an engineer.” No matter who is
speaking, though, Hellerman recommends training
beforehand. “Even when a CEO has experience
speaking to the media,” he notes, “the risks
involved in Congressional hearings warrant
training for the moment.” Beware, too, the
lingering spotlight, he adds. “If you have just
been before Congress justifying high oil
profits, for example, you can expect to be
talking long after the hearings end.”
While the mediative
route makes for smoother sailings in dealings
with Congress, it does not preclude raising the
stakes if necessary. “If there is a sense that
the company has exhausted its options working
under the Congressional canopy,” states Yarowsky,
“then there may be grounds for a more aggressive
strategy.” That said, Congress is hardly some
ogre roving the landscape hunting for
wrongdoers. Rising to the occasion of a
Congressional hearing, in fact—script in hand
and fearless before the spotlight—may turn out
to be good for business. “Corporations should
not necessarily organize their communications or
legal strategy around simply getting free of the
investigation,” says Yarowsky. “These inquiries
typically involve broader policy initiatives or
concurrent legislative discussions. Counsel
should understand what else is involved. There
may be a favorable opportunity to play a role in
policymaking, which should not be missed.”
CT
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Necessary
and Proper Powers
Preeminently chartered under Article 1,
Section 1 of the U.S. Constitution, the
two-chamber Congress began operating as
the legislative branch of the U.S.
federal government in 1789. In 1792,
Congress conducted its first
investigation, looking into a failed
military campaign that saw nearly all of
a 1,400-strong American regiment killed
or wounded. Calling upon President
George Washington for “such persons,
papers and records, as may be necessary
to assist their inquiries,” an outraged
House of Representatives set the stage
for the evolution of the investigatory
oversight process.
While not
expressly set forth in the Constitution,
Congress’s authority to collect
evidence, subpoena witnesses and punish
for contempt have long served to
reinforce its role in preserving the
federal government’s separation and
balance of powers. Key legal and
legislative decisions through the years
have strengthened this authority. In
1798, Congress authorized testimony
under oath and punishments for perjury.
A tariff-related decision in 1827
empowered the House and Senate to summon
anyone inside or outside the government
to testify. In 1881, the Supreme Court
confined investigations to “valid
legislation” only; in 1927, the Court
broadened the definition to “legislative
purposes.”
While
broad, however, this power of inquiry is
not unlimited. In Watkins v. United
States (1957), the Court gave witnesses
testifying before Congress the same
constitutional protections as provided
in a court of law, including the rights
against self-incrimination and
unreasonable search or seizure.
Similarly, Congress cannot use hearings
to advance the political agendas of its
members. Other areas are less sharply
drawn, such as Congress’s discretionary
control over claims of executive or
attorney-client privilege. Patton Boggs’
Jonathan Yarowsky puts the Congressional
story in perspective. “Every case is
different,” he says, “but if there is a
common navigable path, it is to approach
Congress with respect and think of any
investigation as a high stakes
undertaking.” |
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