PLRadio_Litigation_Investigators

In this episode of PL radio, Mitchell Snyder discusses the value of bringing in a private investigator to a business dispute. John Schmidt, a partner at Phyllis Lytle, and Patricia Hensley, COO of Peter M. Vito and Associates, join the show to share their insights. They discuss when to involve a private investigator, the services they provide, the importance of responsiveness, and the role of surveillance in investigations. They emphasize the need for confidentiality and the collaboration between investigators and attorneys to gather relevant information. They also highlight the importance of identifying internal allies within a business. If there is a threat of violence or immediate danger, law enforcement should be contacted, but for financial or business-related concerns, other options should be considered. Hello and welcome to PL radio. My name is Mitchell Snyder. I'm an associate with the litigation practice here at Phyllis Lytle. In this episode, we will be exploring the value of bringing in a private investigator to a business dispute and the impact they can have on bringing disputes to a close. Joining me today is John Schmidt, a partner in the litigation practice team here at Phyllis Lytle, and Patricia Hensley, the chief operating officer of Peter M. Vito and Associates, Inc., a private investigation firm in Buffalo, New York. Thank you both for joining the show. Glad to be here. Thank you for having me. Now, before we jump into some of these topics, you know, I've had the pleasure of working with both of you, but not everyone listening at home has. So, John, why don't you tell us a little bit about your background and introduce yourself to our listeners? All right. I'm a litigation attorney at Phyllis Lytle. I've been here for coming up on 30 years. Early on, I got involved in business litigation, employee fraud case, workplace fraud, shareholder disputes. And in the course of those kinds of cases, I started working with forensic accountants, computer forensic specialists, and private investigators. And I've worked often with Trish Hensley at Peter M. Vito and Associates. And I'll turn it over to her. My name is Trish Hensley. I have been a private investigator for 20 years, working for Peter Vito and Associates. Prior to that, I was a federal law enforcement officer with U.S. Customs, now known as Department of Homeland Security. And in 2018, I obtained my certified fraud examiner's accreditation. Great. So I want to get into sort of a discussion about how someone in the position of our listeners might approach this. So, John, if I'm a business owner or in-house counsel, and I have a concern of whether it's embezzlement or some type of business fraud or see a business dispute on the horizon, what's the first thing I should do? Get your outside counsel. Well, it depends on the situation, obviously. Business owners know their business. In-house counsel know their clients. And I think the issue is, is this something that I can handle myself or do I need to run this past somebody? And I will say this, is that, one, if you've got a counsel that's experienced in, say, a workplace fraud case or a trade secret disclosure or something that involves anything from pinching cash sales out of the cash register to cyber crimes, if you've got some experience there, you know, you make a determination as to whether your suspicions are legitimate. Do I scratch the surface? Do I need to talk to somebody about whether my suspicions are legitimate? And one of the advantages of having outside counsel get involved is you can talk to them confidentially. You can talk to them as opposed to a trusted employee in the workplace. They have relationships within that workplace and maybe have an approach to doing business or dealing with people that you may not want to sort of pollute the environment with your suspicions. And talk to your lawyer. So I reach out to my lawyer. I decide, you know what, I do want that experienced outside consultant to go through and really discuss these details with. How do you decide when is the right time or when is, you know, what is the right case to bring on a private investigator? Just based on experience, not every case requires a private investigator. Not every case requires civil litigation. But if you've got suspicion that something is awry in the workplace, I think it's important to outline a course of investigation and to do it confidentially and involving as few employees as possible. Involving as few outside parties as possible. And also stressing to them that the investigation is confidential and can't leave the confines within which you discover, whether it's an office or a factory or out in the field somewhere. Confidentiality is paramount. And with that often comes the need for speed, so to speak. And if you're bleeding, you've got to stop the bleeding. There's reputational harm with customers. There's a need to mitigate that. If there's the possibility of adverse media exposure or social media exposure, how do you mitigate that? How do you minimize that? And then you make a determination of who you need to help. And if it involves employees or if it involves a shareholder or a partner, you may start to think about what kind of claims could potentially be brought. If there's a threat of violence or physical disruption or sabotage to the business, do you need to go straight to law enforcement? But if it's not a matter where you need to call 911 right then and there, I'd like to work with people that do basically law enforcement quality investigations privately. And that's a private investigator. Chris, kind of talking about what kind of services and things a firm like yours can provide. John's talking about forensic analysis, all these other areas. What kind of things can a private investigator do to assist the lawyer in building and developing these types of cases? We conduct extensive background investigations, which could show possible prior histories of embezzlement or wrongdoing. So not only do we do background investigations, but we also perform surveillances based on different needs of the client. If there's a workplace violence threat, we will surveil either the person making the threat or we will make sure that the principles of the business who are being threatened against are protected properly. We take witness interviews and we are not required to Mirandize like law enforcement is, even if it is a suspect in a crime. Trish, what is one of the most important aspects of an investigation? That the investigator is able to be reached 24-7 and is responsive 24-7. And that our clients can trust us. So John, how important for you as counsel overseeing an investigator, how important is responsiveness to you? Litigation is not a 9-5 job. Clients, I think, expect and deserve immediate responsiveness when they're facing threats of financial, physical, reputational harm. If I can't respond, then I'm not doing my job. And if I call my private investigator and they can't respond, they're not doing their job. And I think it's a testament that Trish Hensley and Peter Vito and myself at Phillips Lytle have been working these business fraud cases together for over 25 years. It was, I'd say, about 28. Because we maintain a level of responsiveness and it's effective. Now you mentioned surveillance is one thing that you do. What kind of, what goes into surveilling someone? And what kind of methods have you used in your experience? We use physical surveillance. So generally we have two investigators following one person. Or we have a team of investigators following multiple people. Because there are often times that there's multiple people involved in any type of crime or questionable activity with a business. Now John, in terms of the type of information you're looking for when you're investigating these types of cases or you're looking to advise a client, maybe who doesn't necessarily want to litigate, but wants to make sure that they're mitigating the risks or potential damages, what kind of information do you seek from the investigators you work with? Well I don't know so much if I'm seeking information from the investigators. It's a collaboration where we talk about, we have to know the facts. You have to learn the client's business to understand really, you know, in that business, in that industry, that profession, what's proper, what's improper. What's normal course of conduct versus what's shady, suspicious, unethical, illegal. And we talk about it and start to develop an idea of what we should look for. And if it comes down to financial documents, that's, you know, what does the client have? What does the client not have? What can we obtain through subpoenas if we commence litigation? What might the potential defendant have that we need? And is there an ethical, legal way to obtain that prior to commencing litigation? And there often is. And that's where a private investigator might be more effective in reaching out to third parties or potential suspects. Also I think in evaluating internal allies. Who are the people that have had suspicions in the workplace and that want to talk about it and that want to help? So Tricia, you know, if you're working on a case and you're trying to identify some of those allies that Jen's talking about, what do you look for? What kind of goes into trying to identify those people? A lot of these situations I am brought right into the business itself and I learn the software programs and I work with employees so we can develop our case accurately and effectively. And while doing so, you become close to people who are teaching you those roles and the different programs and the way the business runs. Usually they'll come up to you and say, hey, you know, did you ever think of this? Or, while I was working this day, I thought of this and something seemed suspicious. So you have a wealth of knowledge within your workplace that you may not even be aware of because they never thought of anything until this all started coming together. Now, if there's someone who discovers some type of business fraud or suspected illegal activity, they may have the instinct to immediately go to law enforcement. Why should they give pause for a second and think about other options? Well, first I'll take an example where maybe they shouldn't pause. If there's a threat of violence or imminent destruction of property or anything of value or if anybody's in danger, call 911, call the police, call your local police department. But if it's financial, if it's business oriented, if you're thinking about it after hours, if you come across it with your accountant who's starting to do or your auditor who's starting to look at your books after the year closes and you start to see some smoke, then you might not want to go straight to law enforcement. I've seen circumstances where people I've consulted with have decided not to pursue a private litigation, civil litigation for money damages against people that had the assets. By the way, that's another great thing that private investigators tend to be pretty good at is finding the money. Where are the assets? Public record searches, just doing an in-depth background check and Trish mentioned background checks earlier. A private investigator or my experience with Peter and Vito and Associates is the background checks are much more thorough and organic and fit the specific circumstances of the individuals that we're investigating and just a heck of a lot better than the background checks that you're going to get off of the internet, let's say. Now Trish, I'm looking to find the money. What kind of things do you go in and look for as an investigator helping and assisting counsel like John in identifying assets and ways to recover what was taken? I personally as a certified fraud examiner, I review bank statements, credit card statements. I look at public records, mortgages, deeds, judgments, liens, bankruptcy records, anything that will show where the money could have went during the commission of the crime or after they were found out and it involves a lot of research and a lot of internet skills. Now we've talked quite a bit already about some of the differences between going to law enforcement and utilizing a private investigator. Trish, would you mind talking to us a little bit about the types of things that you can do as a private investigator that maybe law enforcement is unable to do in the same way? So we're fortunate because we do not have the same limitations as law enforcement officers do. We can interview without Mirandizing. We can request permission to search, obtain and collect evidence without a search warrant. We can tailor our investigation based to a client's needs or wants. We have the ability to determine when law enforcement interaction is needed, required or recommended. We also can assign our cases to investigators who have a unique talent or a unique skill set which will definitely benefit the investigation in the long run. So when you say unique skill sets, what kind of skill sets are we talking about? Anywhere from interviewing skills, surveillance skills, people skills, client management skills, They also say this, it also depends on whether or not litigation has been commenced. And a lot of them I think what we're talking about here are pre-litigation investigations. Because once litigation is commenced, we as lawyers have ethical obligations to not just our own clients but parties on the other side, whether they're represented yet or not. And when a private investigator is introduced to litigation, there are some ethical constraints there with regard to what's appropriate. I can't think of a scenario as I sit here now where I or a private investigator could interview a party represented by counsel in a case that's being litigated. That requires the consent of the other lawyer. And typically the other lawyer is going to want to be sitting there protecting their client if they're worth their salt. But pre-litigation, there's a lot more flexibility. I've seen Trish and the other investigators, Peter Vito in particular at her firm, sit down with suspects and just start to talk about the circumstances of the cash that they were stealing, of the computer files that they were transferring to their private email addresses, the shares that they created while the president of the company was out on disability, and then took those shares, and then for years took those shareholder distributions every year because they thought they were entitled and they want to plead their case. They want to demonstrate that they were entitled. In terms of getting that information early on, when we talk about pre-litigation investigations, how does that shape your work, John, when you're either deciding do we pursue litigation or what steps do we take maybe before we pursue litigation? When you get access to this information about whether it's almost a borderline confession about taking these shares or just information more generally about what these people, what these employees were doing day-to-day in the business? Well, it depends on the circumstances, but you're always evaluating the evidence that you're obtaining, what it looks like compared to the rest of the evidence, where there are gaps, where there are indications that there is other fraud. We had one client that came to us and they said, here's the fraud. They viewed it, it was just this discrete series of transactions. And we said, well, how long has the person worked for you? Okay, back X number of years. How many years have they been in this position? And as it ended up, the fraud was not just what they had suspected in this box of time and money. It went back several more years. And it wasn't their original type of fraud. It was almost an evolution of sort of simple payroll fraud into a whole variety of different scams that she was running through their payroll processor. You mentioned a little bit earlier the importance to many clients of confidentiality, and both talking with you and looking into some of these potential issues that might involve long-time employees or perhaps more senior members of your team. How does that confidentiality extend to the investigators that you may bring in, or maybe the other experts or consultants you work with? All right. And confidentiality is not a bad thing, particularly if your customers are in the public. You may deal with government regulators, media exposure, family and friends, the people you see in church or on the golf course or at restaurants in your neighborhood. Do you want this to be public information? And there may come a time where you can't avoid that, but when you retain a lawyer, everybody knows about the attorney-client privilege. I imagine many people also know about the attorney work product protection. And both of them can also extend to people we retain to assist in the development of a case. And that would include private investigators, accountants, computer forensics folks, experts. But the best way to maintain confidentiality in that regard, when you start to bring in third parties to assist the lawyer in developing the case, is it came out of a case called United States v. Covell. And the shorthand term is a Covell letter, and it's essentially an engagement letter that outlines the requirements that were laid out in that case and its progeny as to what the purpose of that third party is in assisting the lawyer in developing the case. And that everything is meant to be confidential. Everything that they develop or are given or come in contact with or acquire in the course of the investigation is confidential. And unless the client says otherwise, or ultimately if it goes to court or if it's provided to prosecutors, then that stuff becomes public. But a Covell letter protects the confidentiality of a private investigator who's engaged in a case. And it's also something that I think often Trish, if she gets a call from a potential client on an investigation, she will talk with them about whether or not it's appropriate to engage counsel for the purpose of developing and maintaining the confidentiality of any information we come across. Trish, is that sort of a regular conversation you're having when people call in to you? Definitely. I am referring my clients to attorneys, especially Philip Slidal. More often than that. We understand that there's a need for legal advice in most of our cases. And most of our cases are business situations. So we do refer quite a bit. John, have you ever had a time where a client maybe decided, you know what, I'm going to do an investigation myself. I'm going to look into these on my own and maybe talk a little bit about why maybe that's not the best idea. I am a big fan of self-help. I'm not going to put on a new roof on my house, but if I got a plumbing leak, you know, if I can tackle it in a Saturday afternoon, then I'm probably going to try to save myself a couple of grand by hiring a plumber. You know, and to a certain extent, a business owner or an executive or a shareholder or partner, they know their business better than anybody. And they can probably investigate and develop certain elements of a case, definitely whether or not to confirm their suspicion that something's going wrong. I think when it becomes an issue or a risk is when they start to engage in activities that they don't have experience in. And it can be innocuous. Accessing a website that the employee accesses from their work computer, is that appropriate? There are definitely circumstances where it would be entirely appropriate. And there are definitely circumstances where it would be entirely inappropriate. And if a client is getting that deep into an investigation, they run the risk of ruining the investigation by engaging in improper or illegal conduct. And so it's, even early on, I think it's best to communicate with counsel as to what's going on. I've seen clients come to me with a fair body of evidence to justify their suspicions. And I've seen clients come to us that have obtained evidence that confirms their suspicions, but it's also maybe evidence that we're never going to be able to use, or that's damaging to them because of the way they obtained it. Now, John, I know you often work with investigators in some of your cases. When you're looking at how best to utilize an investigator's experience in a case, or maybe identifying what kind of expertise you need, how do you go about coordinating that with your investigators, or working to get to that resolution with your investigators? Well, it depends on the case. You know, early on, if you're trying to figure out if your potential targets are collaborating, you know, do we want some surveillance, you know, to see if they're meeting, or are they collaborating with the competitor? Does that require somebody to tail somebody on their way into or out of the office or their lunch hour? Are they stopping in the competing business's parking lot and dragging their laptop into that office? Okay, so surveillance. Actually, you know, another issue is security. If you've got somebody that's erratic, potentially violent, do you want to put them under surveillance simply because that is more cost-effective than hiring bodyguards, or deploying security throughout your facilities? It might be. Not that they're going to be tailing somebody for the purpose of taking them down if it gets violent, but they'll be the first to know. They'll see the warning, hopefully see the warning signs, and that can be another effective use of surveillance. Also, while you're watching them engage in their daily activities, which can often tend to involve illegal conduct. From a strategic role, what do you look at when you're framing out how to approach a case or an investigation? Who I'm going to assign the case to in my office, what steps we're going to take in order to prove what we need to prove, constant communications with our clients, whether they're attorneys or individual people or business owners, and that's it. We've talked quite a bit about the benefits of partnering and working with a private investigator. Are there any precautions or things you have to consider in terms of how best to approach utilizing those expertise, but maybe not going too far, not doing too much with an investigator? One, no one can really replace a lawyer's role in a legal case. Just think about drafting affidavits for the purposes of obtaining injunctive relief, sometimes emergency injunctive relief. That's often going to involve a collaborative process between us and the client witnesses and involve the private investigators in the evidence that they've obtained. In the way that they obtain it, they are essentially acting as a collaborator or an agent or assisting you in developing the case. They should receive instructions as to how to proceed that fulfill the lawyer's ethical obligations to do things ethically and properly, honestly. Not to say that anybody's going to do anything dishonest left to their own volition, but some of the requirements that are placed on lawyers in a litigation sense might be counterintuitive to non-lawyers. In terms of cases that you may have worked or situations, one scenario that comes to mind that I think might be of interest is, have you ever had a case that you've worked, whether it was together or maybe individually, where the investigation you did up front helped you avoid the need for litigation later? Early on, where you tie up the evidence of the embezzlement and you just turn it over to the district attorney and the client doesn't need restitution because they've got insurance? Sure. Or we find out information that could help settle or mitigate a case rather than go all the way. Right. You have a client who is not completely ethical and going to trial could hurt them. I would say that almost as a rule, when we've engaged in a thorough pre-litigation investigation, we're going to go into litigation in the early stages knowing what we already have. The other side doesn't know what we have other than what we disclose in court, in affidavits or motion papers, in whatever courtroom procedures we've used to freeze their assets or seize their data. But the pre-litigation investigation, one of the goals is to bring an early resolution to litigation. If that happens before litigation is commenced, that can be a win right there. You get evidence of the embezzlement. It's an amount that the client believes or has insurance coverage for. Let's just turn it over to the district attorney. Let's work with them. The good thing about working with a private investigator, particularly those with law enforcement experience like Trish, is that you know that the evidence has been obtained in a manner that will pass muster for a criminal prosecution. Early resolution. A lot of times you come into a case where you obtain a temporary restraining order to stop the harmful conduct and then it will go to a preliminary injunction stage and either in between the two or after the preliminary injunction is obtained, then you can look towards laying the evidence out in the context of settlement discussions or in a further motion practice. Maybe you need summary judgment. Maybe you need a hearing on damages. But all of that, if you've got the pre-litigation investigation locked up, it's all a lot quicker than standard litigation. Well, John and Trish, I want to thank you guys so much for taking the time to talk through this with us today and explore this really interesting topic. Our pleasure. Thank you. Thank you.