When Crisis Strikes: A Step-By-Step Response Guide

Author: Ben DiPietro, The Wall Street Journal, Risk & Compliance Journal

Using the scenario of a whistleblower calling in allegations of wrongdoing involving senior-level executives on the day before a meeting of the board’s audit committee, a group of attorneys and a crisis communications expert offered tips on how to respond in the initial hours and days after the claims are made.

Speaking Thursday at the 2014 Business Law Institute Symposium in New York, the panelists reiterated the importance of gathering the facts as quickly as possible, and doing so in a way that best protects the company against any possible litigation or criminal charges that may follow.

Along with gathering the facts by interviewing people who may know what happened, it’s vital to assemble the right people onto the team that will handle the crisis, the panelists said. The amount of potential criminality that could result if the allegations are proven true will determine who is summoned to become part of the team, said Thomas Walsh Jr., a principal in the law firm Brody Wilkinson. Once assembled, the team must analyze potential exposures the company faces, determine who in the company may be involved and whether they need to have individual counsel, as their interests may differ from those of the company, Mr. Walsh said.

“The only advantage you have is to find out the facts as quickly as possible so you can formulate a strategy,” said Halsey Knapp, an attorney at Krevolin Horst who specializes in corporate crisis cases. Getting the facts right from the start is vital, as this allows the company to create a truthful narrative that can save it from embarrassing revisions if it has to come out and say what it thought had happened didn’t happen in the way it said it did, Mr. Knapp said.

Once the team is created, Mr. Knapp said its first task is to decide how decisions will be made, and who will be the ultimate decider. In cases in which he has been involved, he has advised setting up Gmail accounts to keep communications between the team of the company’s servers. The next step is to hire a crisis communications firm, and decide whether it can be protected under attorney-client privilege. Finally, it’s important to add team members whose expertise extends beyond legal so other aspects such as business risks and institutional risks can be considered when plotting strategy.

Andrew Brimmer, partner and vice chairman at crisis communications firm Joele Frank Wilkinson Brimmer Katcher, said while attorneys want to keep as much information bottled up as possible, they need to be sensitive to the need for the communications team to speak to regulators, media, the public and the company’s employees and other stakeholders.

Both Mr. Brimmer and Mr. Knapp said crisis team members need to understand they must speak with one message and not speak independently and not speak without first going through the group to decide what to say and where and when to say it. Panel moderator John Queenan, a partner at law firm Iseman Cunningham Rester & Hyde, said it’s important for the spokesman to be someone who has enough knowledge of the matter so that no internal documents to get that person up to speed are created, as these could be subpoenaed or requested as part of a government investigation.

Once the basic facts are compiled, if they indicate members of senior management or the board may be involved in the alleged wrongdoing, those people must be isolated from the crisis response group, which is easier said than done, Mr. Knapp said. Also, once the preliminary investigation is done, the crisis group must decide what documents need to be preserved, what computers must be imaged, which emails may be needed, and this may require a change in the company’s policies to prevent such information from being wiped off servers or otherwise destroyed, Mr. Walsh said. “The hint of a coverup may be worse than the action” being investigated, he said.

To complete this first phase of the crisis response, the general counsel or outside counsel should create a very detailed work plan that lays out who is involved in the crisis response and what their responsibilities are, said Mr. Queenan. This will prevent problems in the future when clients are being billed and query costs, and also to make sure everyone involved knows what is expected of them. “This way people will understand just how much work is going on,” he said.

While all this is happening, Mr. Brimmer said it’s important to keep executives and employees focused on the company’s business, as it does no good to have everyone distracted by the investigation. He advises naming a smaller group of board members to handle the crisis so the others are free to get back to their jobs.

Finally, if news of the allegations is to go public, the company should be the one to make the announcement, as this could preserve the company’s integrity, which is what the whole effort is aimed at preserving, Mr. Brimmer said. “The sooner it gets out, the sooner it will die,” Mr. Knapp said.

Write to Ben DiPietro at ben.dipietro@dowjones.com, and follow him on Twitter @BenDiPietro1.

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