Photo of Jessica Nall

Jess Nall has conducted a multitude of internal investigations for corporate clients, Boards of Directors, and Special Committees, including in the areas of suspected financial reporting violations, environmental enforcement violations, False Claims Act violations, insider trading, stock option backdating, and many other areas.  Ms. Nall also represents individual executives and companies facing Securities and Exchange Commission (SEC) investigations and enforcement actions, Department of Justice (DOJ) investigations and prosecutions, and related civil actions in a wide range of matters including insider trading, mortgage fraud, tax crimes, environmental crimes, FCPA violations, off-label marketing of pharmaceuticals, immigration fraud, and all types of financial fraud.

person using touch screenIt doesn’t take a millennial to know that these days not all pertinent business-related communications are to be found on corporate e-mail servers. As we have increasingly seen in recent internal investigations, the most important written communications (especially between high-level executives), are now to be found in a place that most lawyers at the senior level have for years either ignored altogether or for some reason considered untouchable – cell phone text messages. The New York Times recently reported on the implications of this trend—which is hardly new— of executives at all levels taking sensitive communications off e-mail. See As Elites Switch to Texting, Watchdogs Fear Loss of Transparency.

The same potential loss of key communications from “the record” are present in internal corporate investigations where texts are left out of the investigation plan. If text messages and other forms of messaging are not fully considered, an internal investigation result may be at best incomplete or at worst incorrect. The worst mistake is when investigators assume that if communications are not found in corporate e-mail that they did not occur, and draw inferences based on that assumption. But text messages can be difficult to collect from individuals, and, due to a patchwork of inconsistent corporate policies regarding their preservation and use, may present privacy considerations on behalf of the individuals who are texting. Those difficulties begin to make it more understandable why most internal investigators would prefer to ignore their existence altogether and simply rely on easily attainable, and searchable, corporate e-mail. Continue Reading Use of Text Messaging Should Change the Nature of Evidence Gathering in Internal Investigations

people in meeting

In the present uncertain legal and regulatory environment, the role of shareholder activists in scrutinizing corporate behavior seems to be gaining steam. See, e.g., An Activist Investment in Whole Foods Exposes Shifting Power on Wall St. We are increasingly seeing corporate internal investigations being influenced, if not driven by, the presence of activists on the Board. It remains to be seen whether the role of activists in policing corporate governance and other corporate regulatory issues will continue to increase in an environment where SEC Enforcement is increasingly under pressure (budgetary and otherwise) from the current presidential administration.

whistleblower

In a company with a robust compliance culture, potential whistleblowers can express their concerns without fear of retribution. By contrast, the penalty for a culture that silences whistleblowers just got steeper.  Companies caught punishing those who raise red flags, especially when they turn out to be lawyers, could be forced to confront documents otherwise inadmissible against the company due to attorney-client privilege.  Continue Reading Revenge of the Whistle-blower: Possible Consequences of Compliance Failures

The announcement that San Francisco private company Hampton Creek faces an SEC inquiry related to their alleged “buyback” program of vegan mayo comes as no shock. See reporting on Bloomberg. As soon as the facts were initially reported it seemed only a matter of time until the regulators, who have been looking for a poster child (or rather, a whole class of poster children) of private company enforcement in the Bay Area, swooped in. Continue Reading Developments in SEC Private Company Enforcement: Sophisticated VC’s in the Role of Victim

We noted with interest the latest moves by some Bay Area tech giants to permit their employees to sell restricted stock to help them realize the stock value as part of their compensation: See New York Times reporting here. It should come as no surprise that private company employees in our tech economy rely on their potential restricted stock value as an important part of their compensation package, and also their decision whether to work for, or stay working for, one of the “hot” pre-IPO companies (which are legion in Northern California). What may surprise private companies is that this kind of restricted stock sale by employees creates a very easy “in” for the SEC to bring a case should any hidden compliance failures or fraud later be revealed. Continue Reading Private Company Employee Stock Sales Highlight Hidden Dangers of Compliance Failures