search warrants & dawn raids: before, during, and after search warrants and dawn raids... ·...
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US and EU Cartel Investigations: A Webinar Series
Search Warrants & Dawn Raids: Before, During, and After
Thursday, April 25, 2013
arnoldporter.com
Thursday, April 25, 2013
5:00 p.m. GMT, 6:00 p.m. CET, 12:00 p.m. ET (60 Minute Webinar)
Table of Contents
Agenda ........................................................................................................................ Tab 1
Presentation Slides .................................................................................................... Tab 2
Speaker Biographies .................................................................................................. Tab 3
Annette Schild; Will Mudge
Practice Overview ...................................................................................................... Tab 4
Antitrust/Competition practice
US and EU Cartel Investigations:A Webinar Series
Search Warrants & Dawn Raids: Before, During, and After
Tab 1: Agenda
arnoldporter.com
US and EU Cartel Investigations: A Webinar Series
Search Warrants & Dawn Raids: Before, During, and After
Thursday, April 25, 2013
5:00 p.m. GMT, 6:00 p.m. CET, 12:00 p.m. ET (60 Minute Webinar)
Agenda
12:00–12:05 p.m. Introduction
12:05–12:50 p.m. Presentation and Discussion
Speakers:
Annette Schild, Partner, Arnold & Porter LLP, Brussels
Will Mudge, Partner, Arnold & Porter LLP, Washington, DC
12:50–1:00 p.m. Question-and-Answer Session
CLE credit is pending
Tab 2: Presentation
arnoldporter.com
Arnold & Porter LLPUS and EU Cartel Investigations:
A Webinar SeriesStage 2: Search Warrants & Dawn Raids
1
Will Mudge, Washington, DC
Annette Schild, Brussels
April 25, 2013
Agenda
Overview of Search Warrants & Dawn RaidsOverview of Search Warrants & Dawn Raids
Do's and don'ts when agents arrive
Protecting company interests during the search
The agents' search is over: Now what?
Planning ahead: Be prepared!
2
Importance of Dawn Raid/Search Warrant Plan
Dawn Raids and search warrants are commonDawn Raids and search warrants are common
in cartel investigations.
Search warrants also are used in other criminal
investigations.
Both are executed without advance warning.
Plans and procedures must be in place before Plans and procedures must be in place before
they are needed.
3
Search Warrant – Elements of Warrant
Issued by a judicial officer with y jauthority in the District.
Based on probable cause to believe a crime was committed.
Supported by an affidavit or sworn testimony.
Description of the premises toDescription of the premises to be searched.
Description of the items to be seized.
4
Search Warrant – Form of Warrant (Example)
5
Description of Premises to be Searched (Example)
6
Description of Items to be Seized (Example)
7
Dawn Raid – Authorisation to Inspect
Simple (“ordinary”) inspection
W itt th i ti b th Di t G l f C titi– Written authorisation by the Director General for Competition.
– Undertakings may refuse entry but once they have accepted voluntarily the entry of the inspection team, they are obliged to cooperate fully with the EC.
– If an undertaking refuses entry, the EC may proceed further by way of decision.
Inspection pursuant to a binding decision
– Decision by the Commissioner for Competition, after prior consultation of the local competition authority.
– Undertakings are required to submit to the decision, and to cooperate fully with the EC.
– If they do not submit voluntarily, the EC may require the assistance of the Member State to enable it to conduct the inspection, including the assistance of the police or the judicial authority.
Most of the EC’s dawn raids are ordered by binding decision.
8
Dawn Raid – Decision (Example)
9
DO'S AND DON'TS WHEN AGENTS ARRIVE
10
Dawn Raid – Preliminary Response Steps
Reception and security
– Don’t be obstructive or hostile to the officials.
– Provide an empty conference room with IT access, telephones etc. to the inspectors as a base, preferably away from employees and customers.
– Tell the investigators that someone is coming to meet them and immediately contact designated legal and IT managers.
Legal
– Request and copy the ID of the inspection team and their legal authorisation document. Fax/send copies of decision to external lawyers.
– Ask the inspection team to wait for external counsel before commencing the raid. They may agree to wait for a reasonable period of time, but are not obliged to do so.
11
Dawn Raid – Preliminary Response Steps
– Case in point: Koninklijke Wegenbouw Stevin (T-357/06, 27 September 2012):September 2012):
• 10% uplift of KWS fine for obstruction of dawn raid. KWS had denied EC officials entry to premises for 47 minutes because it wanted to wait for outside counsel. Later counsel had refused access to certain offices.
– As a result: At their request, the inspectors should at least be able to enter the premises, serve the inspection decision and take the measures necessary to ensure that there is no destruction of evidence or communication with competitors or others.
Internal– Agree with inspectors on circulation of a reassuring message to
the staff to inform them that a raid is under way and that they should remain calm and cooperate with the inspectors and members of the internal team. Make clear that nobody must conceal or destroy documents.
12
Search Warrant – Preliminary Response Steps
Call legal counsel and fax/email copies of the t ASAPwarrant ASAP.
Ask agents to wait for legal counsel to arrive.
Do not obstruct or interfere with the search.
Record name, affiliation, and contact information of all agents and the prosecutor in charge.
Inform agents that the company does not consent to g p ysearch, but intends to cooperate.
Inform agents that lead counsel is the only person on site authorized to speak for the company regarding this search.
13
Search Warrant – Review for Defects
Request a copy of the warrant and review for q pydefects in:– Description of location to be searched;
– Detailed description of property to be seized;
– Name and signature of the magistrate or judge;
– Timing of search:– Within 14 days of issuance;Within 14 days of issuance;
– Usually between 6:00 a.m. and 10:00 p.m.
If defective, ask agents to halt the search.
If agents refuse, do not interfere with the search.
14
Decision to Inspect – Make sure you know the content- and attack later
Make sure you understand from the mandate:h t th ll d i f i t i– what the alleged infringement is;
– what products and/or services are covered – in a sufficient degree of precision to permit limiting cooperation;
– which company/other premises and what countries are covered; and
– what time period is covered.
The EC must have sufficient grounds to investigate products.– Nexans & Prysmian (Cases T-140/09 and T-135/09, 14 November
2012):2012):
• First time a mandate was attacked successfully: General Court found that the EC did not have “reasonable grounds” for suspecting an infringement of competition rules with respect to all products listed in the decision.
• As a result, the GC annulled the inspection decision for the products for which no such reasonable grounds existed.
15
PROTECTING COMPANY INTERESTS DURING THE
SEARCH
16
Search Warrant – Scope of Search
Proper scope of the search is defined largely by the warrant:
– Description of property to be searched;
– Description of items to be seized.
Attempt to ensure that the search stays within areas described
and/or areas likely to contain materials described in the warrant.
Object if agents search outside such areas or seize materials not
described in the warrant.
Object to seizure of equipment and files necessary for the company
to operate.
Counsel may consider contacting prosecutor or judge regarding very
significant departures from the scope of the warrant.
17
Search Warrant – Privileged Documents
Attorney-client and work product privileges apply.y p p g pp y
Identify privileged documents or files likely to be within the search area and seek to protect them against disclosure. – Object to search or seizure of the files/computers until
counsel can agree on a procedure to protect privileged information;
S t d l i th h til l i– Suggest delaying the search until counsel can review documents or data for privileged material; or
– Suggest that such files or computer records be segregated and sealed until the issue can be resolved with the lead prosecutor or the court.
18
Dawn Raid – Scope of Search Where can the EC search?
– Company premises, land and means of transport:
• All offices/archives/cars etc. containing documents relating to the subject matter of
the investigation.
• Court warrant normally obtained in advance; if not, NCA can seal premises until
warrant obtained.
– Private homes of directors and other members of staff:
• Requires formal EC decision, prior consultation with NCA and court warrant.
• EC must have a reasonable “suspicion” that relevant documents are kept at
those premises.
What can it search for?at ca t sea c o
– All documents within the scope of the investigation, subject only to legal
professional privilege :
• all types of hard copy and electronic documents, books, records, diaries, travel tickets,
phone records, expense claims, etc.
• located in any piece of furniture, on electronic servers, laptops, desktops, tablets, mobile
phones, USB keys…
19
Dawn Raid – Scope of Search
– Company may have to produce documents requested by EC (active duty to
cooperate).
• Attempts to avoid handing over a document may be construed as failure to cooperate.
What does that mean in practice?
– Includes access to private phones / smartphones used for work purposes,
handbags, and probably also private e-mail accounts if the company allows them
to be accessed from work.
– Password protected / encrypted documents: employees may have to provide
passwords.
Any limits at all?
– If a document does not seem relevant to the subject-matter of the investigation:
• The inspection team can examine document to check relevance.
• Show “just enough” to demonstrate irrelevance. Select view that does not show contents.
– Privilege: more on next slides
– In case of disagreement on either of these:
• Seal the document in an envelope.
• Appeal to the Hearing Officer, who will decide whether the document in question shall be
included in the case file. 20
Dawn Raid – Privileged Documents
The EC is not entitled to require the disclosure of written exchanges between a company and its EU qualified external lawyers seeking orbetween a company and its EU-qualified external lawyers, seeking or giving advice on EU antitrust law:
– When it follows the (formal) initiation of proceedings and concerns the company’s defense; or
– Is linked with the subject-matter of those proceedings.
EU Legal Professional Privilege (LPP) does not apply to company correspondence with in-house lawyers (although this may qualify as privileged under national law).
Whenever a privileged document is reviewed:
– Provide evidence that the document is privileged: disclose the heading or certain passages of the document, or produce documents referring to the privileged document.
– In case of disagreement on the day, seal the document in an envelope and appeal to the Hearing Officer.
21
Search Warrant – Observing the Search
Observe the agents throughout the search.Observe the agents throughout the search.
Take detailed notes or recordings, including:
– Specific areas and files that are searched;
– Amount of time for which each area is searched, and
in what order;
– Any documents, materials, or data seized or copied;
and
– Any statements made or questions asked by agents.
22
Dawn Raid – Observing the Search
Arrange and brief a team of external and/or in-Arrange and brief a team of external and/or in
house lawyers who shadow all inspectors.
– Often the “shadow’s” role is to facilitate the inspection.
– Shadow should check the status of documents
reviewed regarding obvious irrelevance or privilege.
– Take detailed notes similar to US– Take detailed notes, similar to US.
– Take note of questions asked to employees, e.g., in
order to explain file organization or similar. Interfere if
questions overreach.
23
Search Warrant – Copying Documents & Data
Pointing out correct areas for agents to search,Pointing out correct areas for agents to search,
while being clear not to give consent, will often
reduce disruption.
Have employees make copies of any documents
being seized.
Assistance with copying electronic information Assistance with copying electronic information
may avoid seizure of computers or durable
storage media.
24
Dawn Raid – Copying Documents & Data
Inspectors can take copies of all relevant documents. Make sure they have copiers available and prepare several copies y p p p pat once (provide assistance).
Inspectors can search the IT environment and storage media. They may use their own dedicated software to copy, search and recover data.
Storage media can be retained by the inspection team until the end of the inspection. A copy may be made.
The company should designate an IT expert to assistThe company should designate an IT expert to assist the inspectors, e.g., regarding password-protected documents, encryption.
Resist to the extent possible to the copying/mirroring of the entire contents of PC and/or servers.
If there is too much to copy on one day, the EC may seal premises.
25
Dawn Raids – Affixing of Seals
The EC will seal rooms, books or documents to ensure that no document may
be taken out by the company while inspectors are absent (e g at night)be taken out by the company while inspectors are absent (e.g., at night).
European seals are made of plastic. If they are removed, they are not torn, but
the word "VOID" appears on the location where they were affixed.
Whenever a seal is affixed, minutes are prepared.
26
Dawn Raids – Breach of Seals
In case of breach of seals, the EC can adopt a decision to fine the
undertaking up to an amount of 1% of the worldwide turnover in theundertaking up to an amount of 1% of the worldwide turnover in the
preceding year, either deliberately or negligently.
– E.on Energie: € 38 million fine (2008) – 0.14% of worldwide turnover
• Confirmed by the Court of Justice. Considered as proportionate given that the
maximum fine for an infringement can be 10% of worldwide turnover.
– Suez Environment: € 8 million fine (2011) – 0.065 % of worldwide
turnover
• The lower fine was justified by Suez’s cooperation Less than 48 hours after the• The lower fine was justified by Suez s cooperation. Less than 48 hours after the
breach, Suez communicated spontaneously to the EC surveillance-camera footage,
the perpetrator’s confession and corroborating testimonies; in addition, the company
declined to dispute the decision.
As a result: Take all necessary measures to protect seals:
– E.g., lock the doors, inform cleaners; install cameras or use security guards.
27
Search Warrant and Dawn Raid – at the End of the Day: Inventory and Receipt
A t i d t id i t d i t f it i d Agents are required to provide an inventory and receipt of items seized before they depart.
Review the inventory for accuracy.
Receipts often are not very detailed, so supplement them with notes of counsel or others who observed the search.
The inspectors will submit a copy, in electronic or paper format, of all documents and data copied.documents and data copied.
Check accuracy of inventory and request copy.
Ask for time to review this list and try to ensure there are two sets of copies from the start (one for the company, and one for counsel).
Ensure that any inaccuracies are noted and agreed with the investigators.
28
Search Warrant – Employee Issues
Instruct employees not to destroy evidence or obstruct search.
Request that company counsel be present for any
employee interviews.
An employee may decline to be interviewed, but this is entirely at
their discretion. Take care not to suggest that employees refuse to
speak with agents.
Advise employees not to discuss the search with anyone else other
th l i ll th dithan counsel, especially the media.
Consider closing business areas being searched and dismissing
non-essential personnel for the day.
29
Search Warrant - Employee Interviews
An employee may, but is not required to,An employee may, but is not required to,
consent to an interview.
An employee may limit the scope of the
interview and/or end it at any time.
An employee has a right to have legal counsel
present during any interviewpresent during any interview.
Agents may conduct interviews and execute
warrants at employees’ homes – the same rules
generally apply.30
Dawn Raids – Employee Interviews The inspectors have the right to ask certain questions and may also want to
obtain statements from employees.
Questions:
– Inspectors may:
• ask for explanations on facts or documents that are relevant to the inspection;
• direct those questions at any member of staff or representative of the company; and
• record the answers given in any form.
– Inspectors may not:
• require employees to answer questions if the answer would lead to an admission of
guilt; and
• require employees to answer overly complicated questions on the spot• require employees to answer overly complicated questions on the spot.
– Shadowers should take precise notes of all questions and information given.
Statements:
– Should inspectors ask members of staff to consent to provide a statement, this
should normally not be given (and in any event only be given after careful
consideration with counsel). Usually company preference is to submit responses
to additional questions in writing.
31
Dawn Raids – Employee Interviews
Statements (ctd.)
– When responding, staff should:p g,
• insist on the presence of the company representative and/or legal counsel;
• give short, concise, factual and accurate answers - not offer views or opinions;
• understand that the most correct answer is often “I don’t know” (they should not
speculate or guess);
• refer to hierarchy or counsel if they do not understand a question or are uncertain about
whether to answer; and
• ask for complex questions to be put in writing and offer to respond at a later date.
– Employees have a right not to answer if the answer would amount to an
admission of guilt (no self-incrimination).
– At the end of the interview, inspectors will usually read aloud what they have
noted and ask for the employee’s approval. The company will get a copy of the
statement.
– Supplying incorrect or incomplete answers may severely damage the company
but counsel will usually negotiate some (limited) time to correct inaccurate
statements.
32
Dawn Raids – No Obstruction
The EC can impose fines in case of obstruction or refusal to co operate:co-operate:
– Independent fine (up to 1% of the worldwide turnover in the preceding year)
• Failure to block an e-mail account and diversion of incoming e-mails: fine equivalent to 0.25 % of the turnover (EPH, 2012)
– Aggravating circumstance in the final decision finding an infringement
• Destruction of relevant documents selected by the inspectors: Increase of 10% in the basic amount of the fine to be imposed (Bischof+Klein in10% in the basic amount of the fine to be imposed (Bischof+Klein in Industrial Bags, 2005)
• Refusal to provide oral explanations and destruction of a file labeled “Competitors Pricing”: Increase of 30% in the basic amount of the fine to be imposed (Sony in Professional Videotapes, 2007)
It does not matter whether conduct had no effect on the investigation: a deliberate obstruction is sufficient.
33
THE AGENTS' SEARCH IS OVER: NOW WHAT?
34
Search Warrant & Dawn Raid – Post-Search Steps
Counsel should collect observer’s notes and promptly interview employees regarding: p y g g
– Details of areas and files searched and materials seized;
– Any questions agents asked of employees, and any answers provided.
Supplement inventory of seized items with notes from observers and interviews.
Prepare a file memorandum recording the details of the search.
Contact public relations personnel ASAP.
– Execution of a search warrant or dawn raid often becomes public.
– Consult legal counsel before making any public statement.
– Provide adequate information to prepare statements and/or responses to media questions.
If necessary, contact lead prosecutor to obtain copies of any seized materials.
Initiate internal investigation into the facts underlying the search.
35
Search Warrant & Dawn Raid – Post-Search Steps
Largely the same as in US, in particular also re media relationsre media relations.
Remember: leniency applications can still lead to significant reductions of the fine even after the dawn raid. So it makes sense to consider your options:– Review the material seized;
– Discuss with the employees concerned to establish what happened;
– Establish whether there are documents/materials relevant that were not seized by the EC.
If l i t i d R i d t If employees were interviewed: Review and correct statements and provide supplementary information in writing.
Follow up with inspection team if certain files are reviewed off premises, send counsel/IT specialists to participate.
If necessary follow up on review by Hearing Officer.
36
PLANNING AHEAD: BE PREPARED!
37
Search Warrant and Dawn Raid - Planning Ahead
Identify inside and outside legal counsel to contact in th t f h t h f ilit f bl ththe event of search at each facility – preferably those who can arrive on site quickly.
Designate one person as lead counsel (or compliance professional) at each facility to lead the company’s response.
Identify fall-back options if designated leader or outside counsel are not available.
Conduct thorough training for key employees: security, receptionists, senior managers, IT staff, and records managers at each facility.
38
THANK YOU FOR LISTENING!
39
Annette Schild
Advises on EC and international cartel
investigations, merger control, restrictive
agreements and abuse of dominance issues.
Represents companies in EC cartel
investigations, from immunity / leniency
application to Court of Justice.
Experience with compliance counseling, audits
and risk analysis in relation to collusive and otherand risk analysis in relation to collusive and other
restrictive conduct.
Languages: English, French, German
[email protected] +32 (0) 2 290 7814
40
Will Mudge
Represents companies in criminal antitrust
investigations, civil antitrust litigation (including
federal and state class actions, and individual
opt-out cases), and mergers.
Substantial experience in US FTC and US
DOJ civil antitrust investigations involving
alleged collusive conduct and exclusionary
practicespractices.
Provides counseling to corporations and trade
associations on competition law issues.
[email protected] (202) 942-5404
41
Tab 3: Speaker Biographies
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Tab 4: Practice Overview
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