Seven Critical Steps to Follow if You Receive a Civil Investigative Demand
Civil investigative demands (CIDs) are powerful investigative tools that the U.S. Department of Justice (DOJ) and other federal agencies use to gather evidence in support of civil charges. However, while CIDs involve civil inquiries by definition, if a CID leads to evidence of criminal culpability, then criminal charges are a very real possibility as well.
Given the substantial risks involved with facing any federal law enforcement investigation, the receipt of a civil investigative demand is a matter that needs to be taken very seriously. If you have received a CID, here are some key pieces of information you need to know:
A CID is a Form of Administrative Subpoena
A civil investigative demand is a form of administrative subpoena. This has two very important implications. First, as administrative tools, civil investigative demands are not subject to court approval. This means that federal agencies that have been endowed with the authority to issue CIDs can do so at their discretion. These agencies can issue CIDs at any time—with or without initiating formal legal proceedings.
Second, as a form of subpoena, CIDs are eligible for judicial enforcement. Thus, while agencies do not need to seek a federal judge’s approval prior to issuing a CID, they can ask for a federal judge’s help in enforcing a CID in the event of non-compliance. In fact, non-compliance with a CID can lead to a finding of contempt, and this can potentially lead to a federal criminal charge under 18 U.S.C. Section 402.
Several Agencies Use CIDs to Conduct Law Enforcement Investigations
Congress has endowed several federal agencies with the authority to issue civil investigative demands. This includes the U.S. Department of Justice (DOJ), the Federal Trade Commission (FTC), and the Consumer Finance Protection Bureau (CFPB). Upon receiving a CID, one of the first steps involved in preparing a response is to identify the issuing agency. This should be apparent from the face of the CID.
“A civil investigative demand from the DOJ, FTC, or CFPB requires immediate attention. The response burden can be substantial, and anything less than full compliance can lead to significant adverse consequences.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
In addition to identifying the agency that issued your CID, it is also important to quickly begin efforts to understand the scope and nature of the investigation. While the FTC and CFPB both have relatively limited jurisdiction (although both of these agencies still investigate an extremely broad range of federal offenses), the DOJ can use civil investigative demands to investigate all types of statutory violations. The DOJ often works in conjunction with other federal agencies as well, so this demand from the DOJ could relate to virtually any type of federal inquiry.
Federal Agencies Issue CIDs to Witnesses, Suspects, and Targets
The DOJ, FTC, and CFPB use civil investigative demands to obtain evidence from witnesses, suspects, and targets. This is important, because it means that parties that receive CIDs are not necessarily at risk for facing charges—at least not based on what the investigating agency knows currently. Of course, upon receiving this demand, you should not assume that you are being treated as a witness, but instead, take the steps necessary to determine your posture in the relevant agency’s investigation.
How can you determine whether you are under scrutiny or simply a source of information? In some cases, your posture in the investigation may be apparent from the nature of the information sought by the CID. In others, you can simply ask—or, more appropriately, have your legal counsel ask for you. In others still, it may take your legal counsel’s own investigative efforts to determine whether you are at risk for prosecution based on the focus of the issuing agency’s investigation.
7 Critical Steps for Responding to a Civil Investigative Demand
So, you’ve received a CID. What do you need to do now? Here are seven critical steps to take after receiving a civil investigative demand from the DOJ, FTC, or CFPB:
1. Institute a Legal Hold
Upon receiving a civil investigative demand, it is necessary to institute a “legal hold.” This is a structured effort to preserve any communications, electronic files, and hardcopy documents that could potentially be responsive to the demand. Failure to preserve responsive records can be considered tantamount to destruction—and this can lead to serious allegations regardless of whether you are the focus of the pending investigation.
What is necessary in terms of instituting a legal hold depends on the specific circumstances at hand. For large companies, in particular, this can be a substantial undertaking. However, all CID recipients need to be careful to prevent overwriting, shredding, and other forms of destruction, and preservation efforts should be documented so that they can be proven if necessary.
2. Determine Whether You Must “Meet and Confer”
Depending on the agency that issued your civil investigative demand, you may have an obligation or opportunity to “meet and confer” with agency personnel. If you do, a strict deadline will apply, and failure to meet and confer could result in the waiver of certain rights—including potentially the right to challenge the CID.
The purpose of the meet and confer process is to afford CID recipients the opportunity to clarify the scope of the demand and ensure that they are able to prepare a compliant response. In some cases, the process can be used to negotiate clarifications or reductions in a CID’s scope, although the fact that agencies have broad authority to issue CIDs means that their incentive to negotiate tends to be limited.
3. Begin the Process of Collecting and Reviewing Responsive Documents
Due to the substantial burden that responding to a civil investigative demand typically entails, upon receiving a CID, it is important to begin response efforts immediately. This begins with developing a systematic approach to collect all documents that are potentially responsive. Once these documents have been collected, they must then be reviewed in order to determine whether a disclosure is necessary.
4. Identify Responsive Documents that are Privileged
In addition to assessing the relevance of collected documents, it is imperative to assess whether any responsive documents contain privileged information. If information is privileged, then it is not subject to disclosure—notwithstanding the fact that it falls within the scope of the civil investigative demand.
When a CID requests voluminous records, this can present a significant undertaking. However, protecting privileged information is extremely important, as failing to do so can potentially result in the pertinent privilege being deemed waived. CID recipients must work with their legal counsel to assert their privileges effectively, and to do so in a way that makes clear that their CID responses are fully compliant.
5. Assess Grounds and Strategies for Challenging the CID’s Scope
While the grounds for challenging a civil investigative demand are limited, there are circumstances in which challenging a civil investigative demand will be appropriate. Typically, however, this involves challenging the scope of the CID—rather than challenging the CID as a whole. If the scope of a CID is such that timely compliance is impossible or unduly burdensome (i.e. because much or all of the responsive information is already in the investigating agency’s possession), then it may make sense to either negotiate with the investigating agents or file a motion to quash in federal district court.
6. File a Motion to Quash (if Warranted)
If a motion to quash is warranted, the motion should be prepared and filed promptly. However, while the motion is pending, efforts to comply with the civil investigative demand should generally continue. Filing a motion to quash does not delay the response deadline; and, if the motion is unsuccessful, any delays could result in failure to submit a timely and compliant response.
7. Prepare Your Response to the CID
After collecting and reviewing all responsive documents, communicating with the investigating agents, and filing a motion to quash (if warranted), the final step is to prepare your response. All responsive, non-privileged documents will need to be submitted to the location and in the manner specified in the CID. At this stage, the investigating agents will review your response; and, depending on the conclusions they draw, you may or may not hear from them again. However, your legal counsel can inquire to learn the status of the investigation and determine whether further inquiries or civil charges are likely to be forthcoming.
The Risks of Failing to Properly Respond to a CID
Due to the fact that a civil investigative demand is not labeled as a “subpoena,” many recipients initially fail to take them seriously. However, as mentioned above, failing to submit a complaint response can have significant consequences—including facing charges for criminal contempt. Crucially, this applies not only to ignoring the CID in its entirety, but to submitting a deficient response as well. Failing to submit a compliant response is also likely to raise questions with the investigating agents, and this could in turn lead to more intense federal scrutiny.