Civil Investigative Demand (CID)

Civil Investigative Demands: A Comprehensive Guide

Civil investigative demands (CIDs) are powerful investigative tools used by federal agencies to compel individuals and organizations to provide documents and testimony during investigations. This guide examines what CIDs are, which agencies issue them, compliance requirements, challenging CIDs, and defending against CIDs with experienced legal counsel.

What is a Civil Investigative Demand (CID)?

A civil investigative demand is an administrative subpoena issued by federal agencies during civil investigations. CIDs allow the government to gather information to determine if violations of federal laws have occurred.

Some key facts about CIDs:

• Requires producing large amounts of documents, written answers, oral testimony
• Issued without court approval
• Short response deadlines – typically only 20-30 days
• Limited grounds to challenge or modify CIDs
• Noncompliance can lead to substantial penalties

While related to civil matters, CIDs can uncover evidence leading to criminal charges. Responding properly is essential.

Which Federal Agencies Can Issue CIDs?

The main federal agencies with authority to issue CIDs include:

• Department of Justice (DOJ) – Broad powers to investigate suspected civil violations of federal law.
• Federal Trade Commission (FTC) – Issues CIDs to investigate unfair or deceptive trade practices affecting consumers.
• Consumer Financial Protection Bureau (CFPB) – Investigates unfair, deceptive, or abusive acts by financial companies under (12 U.S.C. § 5562).
• Commodity Futures Trading Commission (CFTC) – Investigates violations of commodity trading laws.

Other agencies like the SEC and EEOC also issue CIDs in limited circumstances. Each agency has specific statutory authority governing its CID powers.

Civil Investigative Demand Compliance Requirements

CIDs compel broad disclosure from targets. A single CID may require:

• Documents – Tens or hundreds of thousands of records, including emails, reports, data, recordings, and more.
• Interrogatories – Requiring written answers to questions related to the investigation.
• Depositions – Oral testimony from employees, executives and other witnesses.
• Inspections – Allowing access to facilities and tangible items pertinent to the investigation.

CIDs often request several years of records with short deadlines, so recipients must start gathering information immediately. Common requirements when responding to CIDs include:

• Institute a legal hold on all potentially relevant documents
• Compile records from personnel and departments across the organization
• Review all materials to prevent disclosing privileged information
• Meet with agency officials to discuss the investigation
• Provide status updates and attest to completeness under penalty of perjury
• Allow inspectors access to facilities and tangible items

Compliance is resource intensive. Enlisting experienced legal counsel is highly recommended when facing a CID.

Challenging or Modifying Civil Investigative Demands

The grounds for fighting CIDs are limited, but recipients can try modifying or quashing them by:

• Petitioning the agency – Recipients can petition the issuing agency directly to modify or set aside a CID they believe lacks foundation or is unreasonable in scope. Most agencies require “meet and confer” sessions to try resolving disagreements before filing a challenge.
• Going to court – If agency petitions fail, recipients can file motions in federal court seeking judicial review of a CID’s legality. But courts generally defer to agencies, so legal burdens are high.

To modify or quash a CID, petitioners typically must show:

• CID exceeds agency’s authority
• Compliance would severely impair operations
• Request is unreasonably broad or vague
• Information sought is duplicative

While modifying CIDs is difficult, experienced attorneys can negotiate concessions like expanded deadlines. Noncompliance without properly challenging a CID first can lead to contempt.

Penalties for Noncompliance with CIDs

If targets fail to fully comply with CID requests, substantial civil penalties can be imposed for:

• Contempt – Up to $25,000 per day in fines for refusing to respond.
• False statements – Fines and up to 5 years imprisonment for making false or misleading disclosures.
• Obstruction – Up to 5 years imprisonment for destroying or concealing documents.

In addition, agencies can seek court orders to enforce compliance and initiate litigation if CID recipients are uncooperative.

Responding to CIDs with Legal Counsel

Navigating CIDs is challenging, especially for companies unfamiliar with investigations. Experienced legal counsel can help respond appropriately. Attorneys can:

• Note all deadlines and lead response efforts
• Identify potentially relevant information across the organization
• Prepare personnel for meetings with investigators
• Assert privileges and other protections over sensitive documents
• Negotiate with the agency when feasible to limit disclosure
• File petitions challenging overbroad or unfounded CID requests
• Avoid missteps that could lead to contempt or obstruction allegations

Engaging counsel quickly when served with a CID is essential to avoid mismanaging the response.

Using CIDs in Parallel Investigations

One complication is that agencies like the DOJ and FTC often initiate CID investigations in parallel with criminal probes by other agencies like the FBI. The DOJ’s Civil Division and local federal prosecutors may collaborate with sharing evidence.

The DOJ can then use CIDs to force disclosure of documents on civil grounds that criminal targets could otherwise refuse to provide. Some tips for managing parallel investigations with dual counsel include:

• Carefully segregate civil and criminal response teams to avoid accidental privilege waivers
• Limit civil production to the minimum information clearly required for CID compliance
• Refuse informal agency requests for voluntary production or cooperation lacking procedural safeguards
• Delay civil depositions/testimony until resolution of criminal matters due to Fifth Amendment concerns

Attorneys handling the civil and criminal matters must coordinate closely. But keeping response efforts segregated is crucial to protect against self-incrimination.

Case Study: Responding to a DOJ Civil Investigative Demand

To illustrate the CID response process, consider this hypothetical case study:

The DOJ opens an antitrust investigation into price-fixing in the pharmaceutical industry. As part of a broad inquiry, the DOJ’s Antitrust Division serves a CID on ABC Corporation requesting:

• Pricing data and strategy documents from the past 5 years
• Written interrogatories on drug pricing models and communications
• Oral testimony from the CFO and sales VP

ABC Corporation retains an experienced CID attorney who:

• Institutes an immediate legal hold on pricing records
• Gathers an internal CID response team including counsel, records personnel, and senior management
• Asserts privilege objections to disclosing pricing strategy documents
• Seeks DOJ approval for ABC’s Chief Compliance Officer to testify instead of the CFO and VP
• Negotiates with DOJ to limit the document request to a 3-year period
• Provides responsive documents and interrogatory answers within the 30-day deadline

Through effective response strategies, counsel reduced ABC’s burden while demonstrating cooperation. The case was ultimately resolved through consent decree without further penalties.

Defending Against Civil Investigative Demands

Recipients of CIDs require experienced legal counsel to defend their interests. Skilled CID defense attorneys can:

• Carefully analyze CID requests to identify overbroad or vague demands
• Meet with agency officials to negotiate reasonable modifications
• Only disclose the minimum information clearly subject to disclosure
• Assert all privileges and protections over responsive documents
• Develop a strategy to challenge CIDs exceeding agency authority
• Avoid missteps triggering contempt, false statements, or obstruction allegations
• If necessary, litigate motions seeking to quash or modify CIDs in court
• Handle responses in parallel criminal and civil probes without waiving rights

Without proper legal advice, mistakes responding to CIDs can greatly compound liability. Retaining counsel with specific CID defense experience is strongly advised.

Conclusion

Civil investigative demands should never be ignored. The extensive document production and interrogatories mandated can disrupt business operations. And failing to respond properly can result in crippling penalties. Anyone facing a CID should engage experienced counsel to protect their interests. With the right legal strategy, onerous CID burdens can be mitigated despite agencies’ broad authority. But defending against CIDs requires lawyers intimately familiar with the investigative and litigation process. Retaining competent counsel promptly is essential when served with a CID.