courtroom technology gavel

 

Following an explosive Wall Street Journal report regarding how app developers accessed deeply private data on a social media platform—such as users' medical and health information—regulators, enforcement agencies, grassroots organizations, and lawmakers pounced. This report and its fallout illustrate the risk that private innovators face from fickle and fast-moving government scrutiny. Companies can take steps to prepare for the unpredictable.

It Only Takes a Spark

In the case of the social media apps, New York Governor Andrew Cuomo mounted an extraordinarily aggressive response to the report, by ordering a multitude of state agencies to investigate the underlying charges and calling on federal regulators to do the same. He was able to get the attention of sympathizers in Congress and has laid a foundation for continued scrutiny. Governor Cuomo's move touched nearly every level of government.

In response, the New York Department of Financial Services wasted no time. Within days of the Governor's order, it issued letters to request information from the social media platform and a group of 11 app developers.

This type of blazing fast process—with the spark of an investigative report (or even a social media posting by an influencer)—can quickly consume a company. It immediately exposes the organization to risk it was not expecting, and can spread in unpredictable ways. This is true even if the company is found, and known, to have done absolutely nothing wrong.

The Risk is High

There is no way to prevent these types of investigative inquiries. This is true because so many companies and/or industries now are immersed in enterprises that can often involve “a deluge of data.” In other words, just by being in the data game, companies face a heightened risk of being called for quick fouls.

The stakes are higher and scrutiny comes faster these days across the economy, but particularly for companies in areas of higher regulatory risk. Hot areas include data monetization and targeted marketing, connected products, communications media, and artificial intelligence, to name a few. Privacy and security practices are sensitive. And heightened supply chain concerns make international business dealings fodder for scrutiny.

Preparation is Key

While a company cannot prevent itself from becoming a target, it can prepare to survive. As with any crisis, it takes preparation, preparation, and preparation, before a crisis hits to help mitigate risk. More specifically, organizations should take several important steps to prepare for a rapidly moving investigation that invariably becomes a parallel investigation, involving multiple state, local, federal, congressional investigators.

1. Define your team and your internal and external communications channels. Before crises hit, it's important to have the silos of any organization—communications, public affairs, in-house counsel, outside counsel, the C-suite, board of directors, investor relations, government relations, employee relations—all able to sing from the same sheet of music. This means making clear exactly what the lines of communication and authority are in responding to any crisis, and mapping out information and data flow so that it is channeled appropriately.

2. Know your regulators and law enforcement agencies. As is the case with any relationship, it is important to establish credibility with regulators and law enforcement agencies far before a crisis hits, rather than have someone else establish (or tarnish) your credibility before you have the opportunity to do so (such as the news media).

3. Retain counsel with regulatory/law enforcement landscape fluency. State regulators operate differently from federal regulators. There are different lines of authority, decision-makers, and personalities. There are also different substantive and procedural legal issues and investigative tools that can be invoked. The same is true for state and federal law enforcement. It is therefore important to have counsel who understand each of these nuances, who can ascertain appropriately how to address, and possibly fight, investigative inquiries.

4. Establish relationships with counsel with subject matter fluency. To enhance credibility with regulators/enforcers, it is important to ensure that counsel has mastery of the facts. This means counsel who know how to conduct efficient and adequate investigations, as well as counsel who possess sophistication with respect to the underlying technology or industry at issue and its broader dynamics.

Companies may not be able to keep themselves out of the crosshairs of government oversight or media conflagrations. But, they can take prudent steps to prepare to respond and limit the damage.

 

Megan L. Brown is a Partner in the Telecom, Media and Technology and Privacy and Cybersecurity practices at Wiley Rein LLP in Washington, D.C. She is former counsel to the attorney general at the U.S. Department of Justice, serves on the U.S. Chamber of Commerce Cybersecurity Leadership Council and is a 2018 fellow at George Mason University's National Security Institute. She can be reached at [email protected]. Peter Hyun, a Partner in Wiley Rein's White Collar Defense & Government Investigations Practice, is a former Assistant U.S. Attorney in the Eastern District of Virginia's U.S. Attorney's Office, Assistant Attorney General in the New York Attorney General's office, and Chief Counsel to U.S. Senator Dianne Feinstein on the U.S. Senate Committee on the Judiciary. He can be reached at [email protected].