Why Minority-Initiated Congressional Investigations Can Be Just as Dangerous as Majority-Initiated Congressional Investigations

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Just because an inquiry comes to a company from a Democratic member of Congress, whose party is in the minority, that doesn't mean it can safely be ignored or discounted, write authors Margaret Krawiec and T.J. Parnham of the Skadden firm. Citing recent examples, they warn that such inquiries will be among the few tools embattled Democrats possess to try to push their agenda in the coming Congress. Simple letters from a House member can and have morphed into full-blown, bipartisan, bicameral investigations, agency actions and even actions by state government enforcers or private litigation. A company should avoid getting caught sleeping at the switch when it has the time and notice to make changes—or at least present its side—before it gets swept up into a substantial action.

Margaret E.  Krawiec Thomas  Parnham

By Margaret E. Krawiec and Thomas A. Parnham

Margaret Krawiec is a partner in the Skadden, Arps, Slate, Meagher & Flom Washington, D.C. office. She has represented clients in connection with U.S. Department of Justice investigations, state attorney general investigations, investigations by various congressional committees, matters before federal agencies and complex civil litigation.

Thomas “TJ” Parnham is an associate in Skadden's D.C. office. He represents clients in connection with congressional investigations and government enforcement matters. He also focuses on complex civil litigation at both the trial and appellate levels, having briefed and argued matters before federal and state courts.

Despite the fact that Republicans have been in control of both the House and the Senate since the 2014 elections, the last two years have produced a number of bipartisan congressional investigations that were initiated in the first instance by Democrats who were able to attract enough visibility to ultimately generate investigations supported by both parties. Perhaps the most obvious examples are the various bipartisan investigations into drug pricing. Calls for Congress to investigate drug pricing stem back to at least 2014 when Rep. Elijah Cummings (D-Md.) and Sen. Bernie Sanders (I-Vt.) began pushing the issue by writing letters to various companies, which they followed with proposed legislation in 2015. Further, House Democrats formed the Affordable Drug Pricing Task Force in 2015, in an effort to shine a spotlight on drug pricing and gain the attention of the chairmen of oversight committees such as the Senate Special Committee on Aging and the House Committee on Government Oversight and Reform. Their efforts clearly worked.

Perhaps the biggest lesson to be learned from this and other minority-initiated investigations is that companies should be very careful as to how they approach the receipt of letter requests from individual members of Congress, even if the letter requests are from individual minority-party members. Careful consideration should be given as to a company's level of cooperation as well as strategic steps that should be taken to potentially prevent an inquiry from spiraling into a full blown, majority-supported congressional investigation. Sometimes such industry-specific investigations cannot be avoided. But how a company treats individual members of Congress in the first instance can have a direct impact on its profile and treatment in a related bipartisan investigation down the road.

This article identifies relevant considerations that a company should assess if it receives a letter request from one or more minority-party member(s) of Congress or, even if not a recipient, if it becomes aware of a letter request that raises industry-related issues that could materially impact the company's business.

Companies Should Not Thumb Their Noses at Oral or Letter Requests and Wait Until Formal Subpoenas are Issued

While each committee has its own rules, generally speaking, the issuance of a subpoena requires a vote of the majority of members; authorization of the chairman; or concurrence of and/or notice to the ranking minority member. However, such requirements are not imposed on individual members who want to make oral requests for information or issue written letter requests. Historically, individual members—whether minority-party members or majority-party members—use such tools to gather information that will help them increase the visibility of an issue that is of particular relevance to their constituents or on issues for which they have been long-time champions. Oftentimes the goal is to convince the chairman or majority members that a thorough investigation should be conducted. A company that receives a written letter request from individual minority members should not ignore such a request simply because there is no readily available legal mechanism to enforce the same. Rather, companies should be mindful of the fact that the issue can be escalated by the individual members to the chairs of influential oversight committees. For example, Martin Shkreli, the former CEO of Turing Pharmaceuticals, refused to engage with Rep. Cummings and Sen. Sanders and, eventually, these members of Congress were able to attract the attention of Sen. Claire McCaskill (D-Mo.), the Ranking Member of the Senate Special Committee on Aging, who in turn got the attention of Susan Collins, the Chair of the Committee. The Senate Special Committee on Aging went on to hold a series of hearings on what they characterized as companies engaging in sudden and aggressive drug pricing.

Sometimes the information sought by a letter request (as opposed to a subpoena) cannot be provided by a company due to statutory legal obligations. However, companies can explain such impediments to congressional staff and work in a constructive and creative way to try to get the congressional staffers the information they seek. A company should give serious thought as to how to respond before deciding simply not to respond at all. As seen with the various drug pricing investigations, not responding is not always an effective way of avoiding a formal congressional investigation.

Bicameral Efforts that Catch the Attention of the Majority Can Result in a Company Facing Parallel Congressional Investigations in Both the House and the Senate

Companies should be mindful of letter requests that come jointly from minority members in both the House and the Senate. Again, one can refer to the Cummings-Sanders efforts on drug pricing issues, which went on to be subjected to the careful examination of both House and Senate oversight committees. Indeed, Rep. Cummings and Sen. Sanders have teamed up a number of times in the past. The same can be said for other representatives and senators. For example, in September 2011, Sen. John Thune (R-S.D.), then in the minority, and various representatives on the Committee on Energy and Commerce and the Committee on Appropriations co-chaired a bicameral congressional investigation comprised of a working group of various Senators and Representatives into the Patient Protection and Affordable Care Act's establishment of a long-term care insurance entitlement known as the Community Living Assistance Services and Supports Act. If the issue is significant enough, especially when the focus is promoting change to an industry-wide problem, a company can find itself responding simultaneously to letter requests and/or subpoenas from House and Senate oversight committees, as well as appearing in hearings before those committees. Additionally, congressional committees and/or members can make referrals to various regulators such as the Department of Justice (“DOJ”), the Federal Trade Commission (“FTC”), the Department of Labor and/or State Attorney Generals' Offices. By way of example, Senator Sanders recently asked the DOJ and the FTC to investigate insulin drug makers for alleged price fixing. Moreover, Representative Cummings has at times used his close relationship with the Office of the Maryland State Attorney General to refer matters when the recipients of his letter requests have chosen not to cooperate. A company's ability to satisfy the individual member(s) in the first instance, or at least cooperate to a level that might turn the attention to another company in the industry (or at least distinguish the company's cooperation from another company in the industry), might make a significant difference.

A Republican President and Republican Congress May Lead to an Increase in Minority-Initiated Investigations

Given that the Presidency and both houses of Congress will be controlled by Republicans beginning in 2017, it is likely that we will see the same pattern of, or even an increase in, investigations initiated by minority-party members. Democratic members will have a difficult time convincing the chairs of the various oversight committees to take on investigations unless such investigations are clearly to the benefit of the Republicans as well. Accordingly, such Democratic members will have to pursue aggressive tactics such as Representative Cummings and Senator Sanders took with respect to drug pricing issues.

Moreover, unlike the divided government that we had during much of the Obama years – indeed, over the last few years, the Republican Congress has pursued a large number of investigations focused on the Obama administration – the alignment between President Trump and a Republican-controlled Congress will likely lead to careful coordination to ensure that certain Republican agendas are pursued via congressional oversight. And chairs of oversight committees have already signaled that many of their agendas will continue to focus on issues that arose during the Obama administration. Accordingly, minority-party members will need to continue to initiate their own investigations so as to gather information that will help them increase the visibility of an issue that is of particular importance to them. In this regard, minority-party members likely will have no choice but to pursue their agendas via minority-party initiated investigations.

If Industry-Wide Issues are Being Raised by Members of Congress, Take Proactive Measures to Place Your Company in the Best Position Should Members of Congress or Other Regulators Come Knocking

Oral requests or letter requests from individual members of Congress often find themselves in the media just like letter requests from chairs of major oversight committees. Oftentimes, letter requests are sent to various companies in the industry, particularly when the issue being raised is an industry-wide issue. For example, in 2014 when Representative Cummings and Senator Sanders sent letters to various generic drug developers regarding rising generic drug prices, such letters were sent to seventeen different companies. If an issue is an industry-wide issue that numerous companies in the industry face, a company should not stick its head in the sand simply because it was not the recipient of such a letter request in the first instance. Rather, a company should focus on the issues being raised and analyze internally whether the company shares similar issues or would be subject to similar criticism. If so, the company should give thought as to what steps can be taken to place it in the best position going forward while, at the same time, not having a dramatic impact on their business.

A company should also start shaping the story it would tell if it received inquiries from members of Congress or regulators. If issues that are being raised in the letter request or the investigation impact the industry generally, a company would be wise to assess whether any of the changes sought could and/or should be made proactively. A company also should give thought as to whether any other changes should be made, whether policies should be revamped, and whether certain training should be provided. A company should also take steps to assess its potential exposure, whether that entails looking at targeted documents relevant to the issues under investigation or speaking with relevant employees dealing with such issues, to make sure there are not any hidden surprises that could be addressed proactively before Congress or a regulator comes knocking.

If swept up in a congressional investigation, companies can find themselves caught up in a several-year legal process—once done with Congress, companies can face regulators and then face private-party litigation—if they are lucky in an orderly fashion but frequently on parallel, simultaneous tracks. A company should avoid getting caught sleeping at the switch when it has the time and notice to make changes that will position it well in the event that it gets swept up into an industry-wide investigation—either before Congress or by regulators and private party litigation down the road.

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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