0. Global investigations
Dawn raids: how to get through the first 24 hours
Jon Lawrence Tobias Klose Machiel Lambooij Tom Ensign
14 February 2012

1. Today’s agenda and speakers
Introduction
Recent practice and trends
Criminal dawn raids
Jon Lawrence Partner, London
T M E freshfields.com
Key current issues
Legal privilege
IT issues
Simultaneous raids
Tobias Klose Partner, Düsseldorf
T M E freshfields.com
Challenging dawn raids
During the raid
After the raid
Machiel Lambooij Partner, Amsterdam
T M E freshfields.com
Preparing for a dawn raid
Raid procedures – the next level
Other steps you can take
Tom Ensign Partner, Washington, DC
T M E freshfields.com

2. Introduction to dawn raids

3. Steady flow of dawn raids in 2011
EU Commission
US FBI
UK FSA
UK SFO
German FCO
Container Shipping
Natural Gas
Bearings
Trucks
Engines
Derivatives
Seat Belts, Airbags and Steering Wheels
Auto components
Banks – Libya Sanctions
Castlestone Management
Tchenguiz Brothers
Porcelain
Train Technology
Foam Bedding Products
Sources: ACT wiki, Freshfields doc: KM154884; EC website; Independent newspaper; Freshfields ACT Germany list of dawn raids; State Bar of Michigan E-Newsletter (re US FBI raid)
Commercial Vehicles – OFT
Trucks – Commission 18 January 2011 (EC press release)
Container Liners – Commission 15 May 2011 (EC press release)
Engines – Commission 25 May 2011 (EC press release)
Natural Gas Supply – Commission September 2011 (MLex reports)
FSA attended various banks‘ offices in London in late February/early March 2011 to supervise implementation of Libyan sanctions (source: FSA presentation at BBA conference, 29 September 2011)
FSA/City of London Police – raided Castlestone Management on 20 July 2011 (The Guardian and others) following a complaint about approx. £335million of investors‘ money.
SFO/City of London Police/Icelandic investigators – arrested Tschenguiz brothers on 9 March 2011 in connection with funds flows out of Kaupthing in Independent reports 135 officers „swooped“ on addresses in London.
FCO carpets – raid on 30 November 2010 (MLex)
FCO porcelain – raid on 3 February 2011 (MLex)
FCO train technology – raid on 11 May 2011 (MLex)
FCO foam bedding products (RPM – 2 August 2011) – we represent British Vita (raids also reported in trade press and confirmed by other parties, though not our client)
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
(selected public cases only)

4. What are the trends? More co-ordination between regulators
Cross-border co-ordination (eg EU Commission and US DoJ)
Co-ordination between regulators (eg competition and financial services regulators)
More simultaneous raids in multiple locations
More sophisticated and IT-centric raids
More aggressive officials
Increase in allegations of obstruction
‘Re-purposing’ of existing dawn raid procedures

5. Why it matters to get it right
Avoid allegations of obstruction – some recent examples:
Polkomtel – €33m fine for delaying start of raid, refusing to provide hard disk and providing incomplete set of documents (Polish competition authority)
Spanish ferries – €2m fine for delaying start of raid and access to personnel/documents (Spanish competition authority)
E.ON – €30m fine for breaching seal (European Commission)
Benefit from leniency and other co-operation discounts
Candle waxes – Sasol saved over €300m through 50% leniency discount
Laundry detergents – Proctor & Gamble saved over €200m through 50% leniency discount and 10% settlement discount (Henkel reported the cartel and obtained immunity from fines)
Flat glass – Asahi saved over €100m through 50% leniency discount

6. Dealing with criminal dawn raids
Criminal law dawn raids present particular difficulties
More aggressive powers and officials
Dealing with increased PR, shareholder and employee concerns
Dealing with individuals who are implicated
Conflicts of interest and separate representation
Employment issues
Securing co-operation for subsequent investigations and litigation
Whistleblowers and no action letters
Interaction with parallel administrative raids

7. Handling dawn raids: key current issues
Legally privileged documents
IT records and related issues
Simultaneous raids at multiple sites
Witness interviews on-the-spot

8. Legal privilege in dawn raids
The privilege rules vary by jurisdiction and regulator. So, the first step is to confirm:
Where are you being raided, and by which regulators
Where are the privileged documents stored
Can the privileged documents be accessed from the site of the raid(s)
What to do if an official tries to access privileged documents:
Be prepared to explain why document is privileged without revealing its contents (but avoid obstruction under applicable rules)
Officials will generally refuse to allow the document to be withheld where no explanation is provided to prove it is privileged
If a dispute arises:
Escalate, initially to lead investigator and then within the regulatory body
The ‘sealed envelope’ procedure as a way-out?
Consider redactions – is the legal advice truly relevant to the investigation?
Severe penalties for obstruction – privilege claims cannot be used as a delaying tactic

9. Dealing with IT records and related issues
Increasingly sophisticated methods of electronic recovery – officials often bring IT specialists with them
Officials typically have powers to:
Access and search computers and IT servers
(In some cases) seize IT equipment, including mobile phones, Blackberries
(In some cases) take forensic ‘images’ of hard disks and servers
Download records of phone calls, voic s, faxes sent/received
Key issues:
How to maintain ‘live’ systems during raid
Access to overseas servers
Access to data hosted by third parties

10. Co-ordinating response to simultaneous raids
Regulators are more ‘joined-up’, so raid response teams must be
Have mechanisms in place to ensure rapid risk-assessment, consultation and decision-making
Two team approach – raid management and co-ordination/strategy issues
Raid ‘hotline’ – an open conference line with member of strategy team always on the line
Assess potential exposure and damage limitation on a global basis

11. Challenging dawn raids – principles
Key objective is to protect the company’s position
But, consider tactical position and negative effects of challenges
PR position
Impact – higher fines?
Avoid penalties for obstructing investigation eg E.ON; Norris

12. Challenging dawn raids – during the raid
Difficulties of challenging raid as a whole ‘on the scene’
How far should you go during the raid?
Ensure officials don’t go beyond authorisation (scope of raid)
Legally privileged documents (eg Akzo Nobel)
Electronic data
Active co-operation requirements
Interviewing staff
Techniques
Discussion
Negotiation
Escalation

13. Challenging dawn raids – after the raid
Follow-up on objections made during the raid
Recovering evidence once it has been seized
Correcting evidence given in interviews
Procedural objections at a later stage – should the whole investigation be struck down?
Example: Solvay in European competition proceedings
Use of separate judicial review proceedings (or threat of them)
Deutsche Bahn appeal to the European General Court against European Commission raids
Alstom and Tchenguiz judicial reviews of UK Serious Fraud Office raids
Challenges on human rights grounds
ECtHR judgments in the Canal Plus and Primagaz cases
But note Paris Court of Appeal judgments in Unibeton/Cemex

14. Preparing to cope with a dawn raid
Prevention: compliance systems and training
Put in place procedures for dawn raids, and train staff

15. Dawn raid procedures – the next level
Raid procedures should be fit for purpose
Many are outdated and leave companies underprepared
Procedures and raid response teams should be updated to
Meet the intensity and sophistication of modern raids
Address liability and self-reporting considerations during the raid
Coordinate strategy across multiple sites in simultaneous raids
Make better use of technology
Ensure that predetermined and consistent positions are taken on contentious procedural points eg privilege or data imaging

16. Other steps you can take in advance
Decisions to take in advance
Lines of communication and co-ordination
Decision-making – authority and process
Content of communications to staff
Know your IT systems or know who does
Have pre-determined positions on potentially contentious areas
Legally privileged documents
IT searches
Interviews

17. Questions?
SRA authorisation reference: 049/FRS

18. This material is for general information only and is not intended to provide legal advice.
© Freshfields Bruckhaus Deringer LLP 2012