Congressional and Government Investigations in 2023: What to Expect from the New Congress

For potential targets, government investigations pose many distinct risk management challenges. Such government investigations are unpredictable, political and public. Congressional investigations can be especially challenging because Congress serves as the investigator and arbitrator. Even if investigators find no evidence of wrongdoing, targets can experience significant fallout from the negative media attention and public scrutiny that a congressional investigation imposes. As such, potential targets should take proactive steps to avoid and mitigate risks related to a congressional investigation.

Congressional Oversight Powers

Congress has near plenary power to conduct investigations so long as they relate to legislative activity. Within the scope of this investigatory power, Congress may hold hearings, take testimony and gather documents, and even compel such evidence via subpoena. Congressional investigators may invoke their subpoena power to “secure needed information” so long as (1) it is related to and in furtherance of a congressional task; (2) it serves a “valid legislative purpose;” and (3) the subject of the investigation is a topic on which Congress may legislate. (Trump v. Mazars USA, LLP, 591 U. S. ____ (2020) (slip op., at 11—12).) The exact processes and procedures for issuing subpoenas are determined by congressional and committee leadership.

Congress also exercises significant control over the testimony that it may solicit. While Congress is required to respect constitutional privileges, many are surprised to learn that it is not obligated to recognize common law privileges, such as the attorney-client privilege. It is up to committee chairs to set the rules for investigations by their respective committees. These rules may address who can exercise subpoena power, whether the committee will choose to recognize claims of privilege, whether hearings will be confidential and other crucial procedural issues. This all combines to form an environment that can be unpredictable and unusually risky for targets.

Given the unique risks presented by congressional investigations, an effective response to such inquiries requires a strategic combination of litigation, negotiation and advocacy skills and experience.

Likely Targets of Aggressive Congressional Oversight by House Republicans

We expect that Republican leaders in the House will act quickly to increase and intensify their use of congressional investigative powers. Already, several likely incoming Republican committee chairs have begun to telegraph their investigative targets. Those chairs include the Republican members who will lead the House Oversight Committee, House Judiciary Committee, House Financial Services Committee and House Permanent Select Committee on Intelligence.

In Republican leadership elections on November 15, 2022, Rep. Kevin McCarthy (R-CA-23) received majority support from congressional Republicans, making him the presumptive speaker of the house for the 118^th Congress. However, Rep. McCarthy will likely need to make concessions within his own caucus to garner the 218 votes needed to be named speaker. As McCarthy navigates these dynamics over the coming months, it is likely that House Republican’s investigative priorities will crystalize. That said, the following topics are likely to be top priorities for investigation during the 118^th Congress:

1. Cryptocurrency Industry: Following the collapse of several prominent cryptocurrency exchanges (including, most notably, FTX) and issuers, the House and Senate are poised to initiate inquiries into the digital asset industry that will likely continue into the 118th Congress. On November 28, 2022, Senate Finance Committee Chair Ron Wyden (D-OR) sent a letter to several prominent cryptocurrency exchanges requesting they provide information regarding the measures they have in place to protect customer assets. Congressional investigations into the cryptocurrency industry will add another layer of complexity to an already unsettled regulatory framework, as numerous agencies, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) and DOJ, pursue parallel regulatory and criminal investigations.
2. Chinese Influence on Trade and Technology: McCarthy has stated that, under his leadership as speaker of the house, House Republicans will establish a select committee focused on China. Once formed, the committee will investigate issues relating to Chinese acquisition of U.S. intellectual property, Chinese influence on U.S. supply chains and investments by Chinese entities in the United States.
3. Technology Companies: Jim Jordan (R-OH-04), the likely leader of the House Judiciary Committee, has indicated that he will begin investigating “BigTech” for allegedly suppressing conservative viewpoints on their platforms. The Judiciary Committee may also refocus antitrust investigations on technology companies. Those investigations may present opportunities for bipartisan collaboration in both the House and Senate.
4. Financial Services Industry: There are likely to be investigations into the financial services industry on a number of fronts, including investments by institutions in China and the implementation of business practices by financial firms purportedly to the detriment of shareholders, particularly in the context of policies related to diversity, equity and inclusion (DEI) and Environmental, Social and Governance (ESG).
5. Antitrust Violations in the ESG Context: On November 3, 2022, Senators Tom Cotton (R-AR), Mike Lee (R-UT), Chuck Grassley (R-IA), Marsha Blackburn (R-TN) and Marco Rubio (R-FL) sent a letter to 51 law firms that maintain ESG practices stating that these firms and their clients should begin to preserve documents in anticipation of congressional investigations into antitrust violations in connection with ESG initiatives. As Democrats have retained control of the Senate, it is likely that House Republicans will take up this oversight issue.
6. Fraud in Pandemic Relief Programs: The House Oversight Committee and Select Committee on the Coronavirus will likely investigate the use of funds in pandemic relief programs such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan (ARP) Act. On December 1, 2022, the Select Subcommittee on Coronavirus released a report outlining analyses indicating that “fintechs likely facilitated a disproportionately high number of fraudulent and otherwise ineligible PPP loans.” We expect future investigations from both Congress and DOJ relating to fintech firms and PPP fraud. 
7. Origins of COVID-19 Pandemic: The expected chair of the House Oversight Committee, James Comer (R-KY-1), has also indicated that the House Oversight Committee, under his leadership, would investigate the origins of the COVID-19 pandemic, explaining that he hopes to work with his Democratic colleagues in a bipartisan fashion.
8. The Biden Administration: Rep. Comer also has already stated that the Committee will be undertaking a variety of investigations into the Biden administration. These investigations will likely focus on the current state of policies regarding the U.S.-Mexico border and the withdrawal of U.S. troops from Afghanistan.

Mitigating Risks: Three Steps Companies Can Take to Prepare for Increased Congressional and Government Oversight

Companies concerned about potential investigations should not wait until they receive a subpoena or request for information to begin preparing. In preparation for January, companies should invest the resources now to institute best practices to mitigate the risks and effects of a congressional inquiry.

1. Conduct an Internal Risk Assessment: Companies should conduct an internal risk assessment of their compliance programs with applicable laws and regulations. Companies should pay special attention to the priorities of incoming investigators: fraud, technology, abuse of federal dollars, implementation of ESG and DEI initiatives and other possible areas of likely congressional focus, including compliance with political law.
2. Update Compliance Policies and Procedures: Companies likely to be targeted should document efforts to put compliance first, including implementing policies and procedures to meet legal and regulatory requirements. Maintaining a robust compliance program can prevent incidents that would attract congressional attention and demonstrate a meaningful commitment to corporate social responsibility. Evidence that a company has made the effort to create a culture of compliance can also go a long way toward reducing potential penalties.
3. Prepare a Crisis Management Plan with Counsel: Companies that do not have a privileged crisis management plan should prepare one as soon as possible. This plan should identify protocols for activating key legal, communications and policy advisors and workstreams in the event of an investigation or subpoena. Having these procedures in place will ensure an effective and rapid response should the company become a target of an investigation.

Congressional investigations and the public attention they generate can often trigger civil actions or criminal investigations. A thoughtful response requires a broad view of the legal landscape, familiarity with congressional investigative committees and an artful application of best legal practices for responding to a committee’s investigation. Pillsbury’s Public Policy and Corporate Investigations & White Collar Defense teams have extensive experience successfully representing public companies, foreign investors, nonprofits and individuals in congressional, criminal and regulatory investigations conducted by various federal and state enforcement authorities.