Six Essential Strategies for Government Contractors Responding to Criminal Investigations

In honor of the recent release of the 6th edition of the Government Contracts Compliance Handbook, we’re sharing six essential tips for government contractors facing the complexities of a criminal investigation. Drawing from our latest edition, these strategies offer key insights into protecting your organization, navigating compliance challenges, and minimizing liability. As leaders in the field of government contracts law, we understand the stakes involved when a criminal probe arises, and we’re here to guide contractors through the nuanced demands of federal investigations. Here are six strategies every contractor should keep in mind to manage risk and ensure compliance in today’s high-stakes regulatory environment.

1. Engage Experienced Counsel at the Outset

As soon as you are notified of an investigation, securing experienced legal counsel is imperative. When it comes to responding to federal criminal probes, knowledge of both government contract and criminal law is essential. Outside counsel with expertise in these areas can quickly assess the company’s exposure and develop a response strategy, potentially avoiding missteps by inexperienced in-house teams. By involving counsel early, contractors can ensure that all communications with investigators are handled effectively, minimizing potential risks arising from inadvertent statements by employees. Legal representation can also help shape the company's internal messaging to staff, which is crucial for maintaining a cohesive response.

2. Avoid Any Obstruction or Perception of Obstruction

Contractors must remember that actions perceived as obstruction, such as destroying documents or attempting to interfere with witnesses, can lead to severe repercussions, including additional charges. During an investigation, counsel should emphasize to all employees the importance of transparency and cooperation. Federal law prohibits obstruction of justice, which encompasses hiding documents, tampering with witnesses, or misleading investigators. Even unintentional actions, such as responding too readily to investigator questions, can be misinterpreted as an attempt to manipulate the process. All communications, whether verbal or written, should be carefully managed by legal counsel to ensure accuracy and clarity, preventing any appearance of obstruction.

3. Implement a Strategic Document Retention and Deletion Policy

An effective document retention policy is a powerful tool for managing records in compliance with federal obligations. For contractors, maintaining accurate records is not just a legal requirement but also a crucial factor in responding to investigations. Document retention periods are often specified in federal contracts, and failing to comply with these requirements can increase a company’s exposure. An organized, compliant retention policy not only ensures critical information is available if requested but also supports the routine deletion of irrelevant data, which can reduce the volume of documents subject to review if an investigation arises. A well-implemented policy also helps employees understand when documents can be disposed of without violating legal obligations, providing peace of mind in complex situations​.

4. Train Employees to Identify and Respond to Investigation Indicators

Employees are often the front line in detecting early signs of an investigation, and training them to recognize these indicators can help the company respond effectively. Unusual inquiries from auditors or contracting officers, sudden requests for interviews, or detailed document requests may all signal an active investigation. Training employees to handle interactions with government agents is equally crucial. Employees should be advised to be polite, non-combative, and, above all, defer any substantial questions to legal counsel. By maintaining professionalism, they can avoid disclosing unnecessary information that may complicate the investigation. Educating employees on these processes helps create a unified and composed response strategy, further protecting the company’s interests​.

5. Carefully Manage Search Warrants and Subpoenas

Receiving a search warrant or subpoena is often the first indication that an investigation has escalated. Contractors should know how to respond if federal agents arrive with a search warrant or subpoena, as mishandling these moments can have serious consequences. When served, it is critical to check the warrant or subpoena’s validity and take immediate steps to involve legal counsel before sharing any documents or information. Counsel can negotiate the scope of document production, review each item for compliance, and prevent the disclosure of privileged information. During the execution of a search warrant, employees should be instructed not to answer any substantive questions from agents until counsel is present. Managed effectively, this process allows the company to maintain its legal rights without obstructing the investigation​.

6. Review Insurance and Indemnification Coverage Early

Before responding to any investigation, contractors should review their insurance policies and indemnification clauses. Coverage terms often require prompt notification, so early review of these policies is essential for preserving benefits. Some policies may cover certain legal expenses or damages related to investigations, which can offer a significant financial buffer. Additionally, indemnification clauses within company agreements can protect directors, officers, and even certain employees involved in government investigations, if they acted within the scope of their employment. Consulting counsel early in the process helps clarify the scope of coverage and allows the company to meet any conditions required for coverage, providing much-needed protection during the investigation.

Conclusion

Navigating a criminal investigation as a federal contractor is no small feat. From selecting the right legal counsel to ensuring compliance with record-keeping and cooperation requirements, the strategies outlined in the Government Contracts Compliance Handbook equip contractors with the knowledge to respond effectively. Our firm, with its deep expertise in government contracts, can provide the guidance contractors need in these high-stakes situations.