What Executives Can Learn From Theranos About Individual Legal Representation

Theranos founder and former CEO Elizabeth Holmes departs the San Jose federal courthouse on February 10, 2020

By Michael Warren

Workplace investigations can be an intimidating process, regardless of your role and presence in the investigation. It is even more so for an executive whose company is under investigation—or especially when the executive is the target of the investigation. For executives, the importance of engaging separate counsel in a pending investigation cannot be overstated, even if initially it does not appear the executive is the subject of the investigation.

The stakes, whether or not the investigation is high-profile, may be great given the potential implications of the outcome on an executive’s career and reputation.

For an example, look no further than Elizabeth Holmes of Theranos infamy. Following investigations into her company, Holmes’s reputation suffered even before she was charged with fraud by the Securities and Exchange Commission for deceiving investors through false and exaggerated claims. She was recently convicted for defrauding investors.

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Investigations may be unsettling, and ultimately risky to handle without representation, as Holmes’s experience indicates. Following are key reasons executives should retain their own attorney during an investigation.

Preparing for the interview

Before meeting with the investigator, the executive should meet with personal counsel to review the facts, gather and organize any evidence, and focus on the issues relevant to the investigation. An attorney can provide the executive with an objective and dispassionate analysis of the situation, facilitating better preparation for the investigation interview.

Mike Warren, an attorney with law firm McManis Faulkner

Prior to the interview, the attorney and executive will work together to develop and articulate the executive’s story to the investigator in an effective and persuasive manner. This may involve preparing and preserving relevant evidence, highlighting certain evidence or statements for the investigator’s attention, or preparing a chronology to help organize events or show a link between important factual developments.

Company’s interests vs. executive’s interests

Holmes tried, during pretrial proceedings, to flag her communications with the Theranos’ lawyers as attorney-client privileged, but the court concluded the attorneys were the company’s lawyers, not her personal attorneys.

It may be a tough pill to swallow, but executives should understand that the company has separate interests and that the company is not obligated to protect the executive’s reputation or career.

An attorney representing the executive’s interests is often in a better position to identify this conflict. The lawyer may then develop a strategy to protect the executive and guide him or her through the process.

Prepare an exit strategy, if needed

If it appears the investigation will lead to the executive’s exit from the company, an attorney is well-positioned to shift the focus from dealing with the investigation to negotiating a favorable exit. Depending on the circumstances, the lawyer may initiate discussions with the company regarding a separation agreement as part of an overall strategy to protect the executive’s long-term interests.

Even if the investigation does not result in a recommendation of termination, the executive may want to take the opportunity to leave the company voluntarily on favorable terms. This may happen when the executive’s duties change in a way that makes remaining with the company less attractive. The attorney may help make the best out of a difficult situation through effective exit negotiations.

Holmes’s situation is a prominent and poignant example for company executives, and there have been many similar situations in recent years. While most executives will never experience a formal workplace investigation during their careers, if the time comes, it pays to have a dedicated advocate by your side to guide and protect your individual interests through the process.

Mike Warren, an attorney with law firm McManis Faulkner in San Jose, California, has represented numerous high-level Silicon Valley executives in investigations, negotiating favorable exits to avoid liability or scrutiny. 

Photo: Theranos founder Elizabeth Holmes departs the San Jose federal courthouse on February 10, 2020 [photo by Marlize van Romburgh]


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