DEALING WITH DAWN RAIDS
Unannounced investigations, or dawn raids, by regulators and law enforcement agencies can create disruption for an organisation. Given the increasing criminalisation of business practices, the potential for a dawn raid to be executed against a company may be an everyday reality.
Organisations must have plans and teams in place if they are to respond appropriately. Staff must be briefed and ready for what could be a chaotic and stressful situation. “An ill-prepared company may face a substantively worse outcome by not putting its best foot forward,” cautions John Schmidt, a partner at Arnold & Porter.
Failure to respond to and cooperate with authorities and regulators can have disastrous consequences – legal, financial and reputational. Cooperation failures can be damaging for the organisation, including its directors and officers (D&Os). “If a company does not properly prepare for a dawn raid, it jeopardises the protection of its legal rights or company staff not fully appreciating the extent of their legal obligations,” notes Stefanie Benson, a partner at White & Case. “These risks include unsolicited disclosure of information beyond the scope of the investigation, or improper concealment and destruction of documents and data, leading to the potential obstruction of inspectors and substantial fines.”
Understandably, a dawn raid can be expensive if mistakes are made and deliberate efforts to hinder the investigation are identified. “The consequences of not preparing for a dawn raid can be seen in obstruction decisions, which involve significant fines – up to €38m at EU level – and serious reputational damage,” says Nathalie Jalabert-Doury, a partner at Mayer Brown. “These decisions are public and concern seal tampering, document destruction or other forms of obstructing an investigation. Any action of that nature could be considered a sign that infringement most certainly occurred and that ethics and compliance do not matter to the company in question.”
Oct-Dec 2023 issue
Richard Summerfield