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The Democrats Retake the House: Understanding the Impact for Congressional Investigations

As a result of this week’s elections, Democrats will hold a majority in the House of Representatives when the new Congress convenes next January. This change in the House will likely be followed by new congressional investigations and an increase in congressional oversight in some areas. Understanding how congressional investigations work, and what the impacts of these investigations can be, can help those caught up in these investigations manage and mitigate the impact of such investigations.

Those expected to lead the House Committees this upcoming year have already made clear that congressional investigations are coming. Representative Elijah E. Cummings (MD-07), poised to head the House Oversight Committee, is likely to pursue the large number of investigations that were not possible when the Republicans were in control of the House. Similarly, Representative Jerrold Nadler (N.Y.-10), poised to become chairman of the House Judiciary Committee, stated Tuesday night that the Trump administration “will be held accountable to our laws and the American people.” Likewise, Representative Adam Schiff (CA-28), poised to head the Intelligence Committee, has continuously advocated his support for the investigation of the Trump administration and campaign, and is likely to push for answers now that Democrats will hold a House majority.

Anticipating Areas of Investigation

Congressional investigations are often driven by political agendas. With the next Presidential election only two years away, a Democratic Majority House is likely to focus on areas that will give them a political advantage in winning the White House and the Senate in 2020. While some investigations will inevitably be low-substance/high media profile affairs, there will be others that will be more serious fact-finding exercises.

For example, there have been significant regulatory changes in a number of industries, such as oil and gas, financial services, steel and aluminum, tech, and automobile. The Trump Administration has also created many benefits for companies through the passing of the 2018 Tax Reform. Many of these changes have been controversial and it is expected that there will be investigations into how some of these changes took place, who has benefited, who has been negatively impacted, and whether rollback of recent changes would be possible or prudent.

We believe that investigations into areas such as fracking, offshore oil and gas drilling and development, hydrocarbon emissions, and coal mining are likely, if not inevitable. While President Trump and his Administration will be the direct target of many of these investigations, companies that have benefited from or advocated for the relaxed enforcement of regulations, changes in tax benefits, or other changes will likely be caught up in investigations.

Congressional Investigations vs. Regular Government Investigations

Congressional investigations are different from regular investigations. There are few consistent rules or precedents and committees and members vary widely in their approaches. Congress can issue subpoenas and investigate almost any topic; courts are extremely unlikely to intervene and there are few realistic ways to stop congressional inquiries. Subpoenas are often broad and imprecise, and objections to such requests are often rejected because they are heard by the same people who originally issued the subpoenas. Congress often places short deadlines to respond to these requests, and companies that refuse to comply can be threatened with contempt and may be loudly and publicly criticized by members of Congress. Confidentiality of information can be problematic, and leaks are common.

Responding to Congressional Investigations

The way a company responds to a congressional investigation can determine how harmful the investigation might be to the company and how far the investigation goes. Typically, Congress will first seek information on a voluntary basis by sending a letter or asking for an informal interview. While a company is free to refuse to answer to this voluntary request, responding to it voluntarily might have some advantages if, for example, there is a chance to frame a factual picture or put issues into context. Whether and/or how to voluntarily respond should be made only after thinking through all sides of the issues and consulting with experienced counsel and evaluating the benefits and risks. The failure to voluntarily respond often, but not always, leads to the issuance of subpoenas.

When providing information — including sensitive and proprietary information — to Congress, it is important to keep in mind several considerations. First, Congress does not recognize many common law privileges that exist in regular investigations, including the attorney-client privilege or the attorney work-product doctrine. Second, there is no guarantee that information provided to Congress will be kept confidential. Third, there is almost always a political public relations or media aspect to these matters. CEOs and other high-ranking officials are often called to testify under oath, on live television, and forced to answer questions that may have serious consequences to a company’s reputation and may affect stock prices and deals with other companies. Fourth, although Congress itself cannot bring a criminal or civil action, it can, and does, refer matters to the DOJ, SEC, and other enforcers and regulators.

Being involved in a congressional investigation can be a daunting and life changing event. A solid understanding of all the dynamics at play is essential. These are matters that require not just legal knowledge, but also experience, judgment and perspective. At Vinson & Elkins, we have experience successfully guiding clients through these investigations and protecting them against the negative effects that can come from a congressional investigation. We encourage our clients and prospective clients to contact us as soon as possible in the process to begin developing the most effective strategy from the beginning.

Visit our website to learn more about V&E’s FCPA & Global Anti-Corruption practice. For more information, please contact Vinson & Elkins lawyer Mike Dry .

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.