Proskauer Partner Sigal Mandelker on Corporate Crisis Management

Sigal Mandelker spent many years with the Department of Justice prosecuting corporate and white collar crime.

She’s now a partner at the corporate criminal defense practice at Proskauer in New York. And part of her practice is what she calls corporate crisis management.


“That’s where a company is in crisis because, for example, they might have a whistleblower accusing them of wrongdoing or a senior executive who has been alleged to have engaged in some fraud or other violation,” Mandelker told Corporate Crime Reporter in an interview last week. “Or there is some internal misconduct. In those cases, it is not a natural state for the company to be in. There is some sense of urgency to resolve the issues. I like to come in and be like the calm in the storm, to quickly step in and provide a path forward for the company. That will typically include an internal investigation, determinations about whether there is any truth to the allegations, and a path forward to help them out of the crisis.”

What might be an example of how that might work?

“You have a whistleblower who has alleged wrongdoing within the company. And the wrongdoing goes to the most senior levels of the company,” Mandelker said. “When that happens, that gets the attention of a lot of senior management, it can get the attention of boards and audit committees and the like. There is always, of course, the fear that it is going to travel outside of the company, that it is going to become public.”

“In that kind of case, I would put together a plan for the company as to how we are going to deal with these allegations. We would do an internal investigation, make a determination as to whether or not they actually do have a problem or whether the allegations don’t amount to anything substantial. And then provide the company with a path forward. Sometimes that involves changing policies within the company. If there is some truth to the allegations, make sure they are addressed quickly, deciding what to do with potential wrongdoers within the company. You have to be very sensitive to the fact that you have a whistleblower who has brought forth an allegation, to minimize any potential harm.”
Mandelker agrees that increasingly, that path might not involve reporting to the government.

“Companies are thinking — what is the risk/benefit of self-reporting?” she says. “They have to consider whether or not it makes more sense to go in and clean up the problem, enhance their internal controls, take whatever measures they would have taken had they self reported and in a sense roll dice and see whether or not the government gets wind of the underlying allegations. And their hope is, if that does happen, they will get close to the amount of credit they would have gotten had they cooperated.”

False Claims Act relator attorneys will tell you that they get a ton of inquiries from whistleblowers and they take a very small percentage of the cases. Maybe fewer than five percent make it into False Claims Act litigation. Do you find that once a complaint is filed, there is something real there?

“That is obviously their hope,” she says. “Once a complaint is filed, what a company has to worry about first and foremost is what the Department of Justice or HHS is going to think. That concern is heightened now because Leslie Caldwell, the head of the Criminal Division, has said that she wants her prosecutors to review the False Claims Act complaints to see whether or not there are legitimate allegations of criminal wrongdoing.”

Those cases are filed under seal. Does that mean she can get them even though they are filed under seal?

“It’s one Department of Justice. And it does go to the Justice Department for review.”

But the company doesn’t hear about them when they are under seal, right?

“We don’t get to see the complaint until the seal is lifted,” she says. “But you are certainly alerted to the case, because you might get a civil investigative demand from the Department of Justice asking for all sorts of information related to the underlying complaint. You try and piece together what the allegations may be.”

The whistleblower complaints are coming in now — not just under the False Claims Act, but also under the SEC whistleblower program. What is your sense as to overall the legitimacy of whistleblower complaints?

“It’s hard to say overall, because every case is so fact dependent,” she says. “I have seen whistleblower complaints that have some legitimacy and some others that didn’t.”

“The SEC under their whistleblower program says they have had thousands of complaints. But at the end of the day, they have brought very few cases. They have made very few awards under the program. That could suggest a number of things. It could suggest that they don’t have enough resources to address each and every complaint. But it could also suggest that there isn’t all that much merit to a number of those complaints. But as a public company, any time you have a whistleblower come forward, you have to factor in the possibility that that whistleblower is going to understand what that bounty program is all about and go to the SEC or the Department of Justice.”

[For the complete q/a format Interview with Sigal Mandelker, see 29 Corporate Crime Reporter 12(13), March 23, 2015, print edition only.]

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