How Does a Government Investigation Work?

New York agencies and federal authorities derive their investigative powers from different laws. State matters may involve the New York State Department of Financial Services, the New York Attorney General, or a licensing authority, while federal inquiries may involve the SEC, a U.S. Attorney's Office, or another federal agency.

For example, New York Financial Services Law § 306 authorizes the Superintendent of Financial Services to subpoena witnesses, compel testimony, and require relevant records. Other agencies operate under their own enabling statutes, so a business should identify the legal basis for a demand before responding. Businesses facing broader inquiries may also review Government and Internal Investigations.

Individuals may have constitutional protections against compelled self-incrimination, but corporations do not receive those protections in the same manner. Under the collective entity doctrine, a corporate records custodian generally cannot withhold organizational records solely by invoking a personal privilege against self-incrimination.

The New York Court of Appeals addressed this distinction in Matter of Nassau County Grand Jury Subpoena Duces Tecum Dated June 24, 2003, 4 N.Y.3d 665 (2005). The court declined to give organizational records broader self-incrimination protection under Article I, § 6 of the New York Constitution than under the Fifth Amendment.

A subpoena does not prevent the recipient from examining whether the demand falls within the government's lawful authority. Depending on the applicable statute and procedural rule, counsel may consider whether the request is authorized, sufficiently specific, unduly burdensome, or directed at protected material.

For example, General Business Law § 343 permits a recipient of an Attorney General subpoena issued under that provision to seek relief under CPLR 2304. The court may address whether the subpoena should be quashed, modified, or made subject to appropriate conditions.

Attorney-client privilege generally protects qualifying confidential communications made for the purpose of obtaining or providing legal advice. Work-product protection may also apply, but an existing business record does not become privileged merely because it is given to counsel.

A response team should therefore separate potentially privileged communications from ordinary corporate records before production. Voluntary disclosure may also create waiver issues, so internal legal analyses and investigative materials require separate review before they are provided to regulators.

Once an investigation or related proceeding is reasonably anticipated, relevant emails, messages, accounting data, and other records should be preserved. Routine deletion practices may need to be suspended for information within the scope of the inquiry.

A structured response can include written preservation instructions, identification of responsive custodians, privilege review, and a designated point of contact for investigators. Companies dealing with broader enforcement issues may also consult Government Investigations.

When company counsel conducts an internal interview, the employee should understand that counsel represents the organization rather than the employee personally. An Upjohn warning can also explain that the company controls the attorney-client privilege associated with the communication.

This distinction becomes more significant when an employee's personal interests may differ from those of the company. In that situation, separate counsel may need to be considered rather than assuming one lawyer can represent both interests.

A grand jury subpoena is connected to a criminal investigation and can compel documents or testimony relevant to the grand jury's inquiry. Its receipt does not establish that the recipient committed an offense or will ultimately face criminal charges.

For individuals, counsel may need to evaluate Fifth Amendment protections before testimony is provided. Corporations generally cannot invoke that privilege to withhold organizational records held in a representative capacity. When an investigation develops into possible fraud, obstruction, false-statement, or other criminal exposure, White Collar Defense and Investigations may become relevant.