After Charges Against Former eBay Executives, It’s Time to Rethink Investigations

EBay is not the first company to encounter problems due to the illegal or unethical use of investigations, nor will it be the last, but companies can start thinking today about how to avoid being the next.

The facts contained in the FBI agent’s affidavit were unusual.

When two members of eBay’s executive leadership became frustrated with the editor of an online newsletter perceived as critical of the company, eBay security and intelligence executives and employees sent the editor a series of threatening messages. They ordered a box of cockroaches, a bloody pig Halloween mask, a book on surviving the death of a spouse, a sympathy wreath and a fetal pig to be delivered to the editor and her husband. They posted an ad on Craigslist inviting strangers to sex parties at the couple’s home. They subscribed to “Hustler: Barely Legal” and had the magazine delivered to two of the couple’s neighbors, addressed to the husband but at the neighbors’ houses. They wrote the name of an anonymous Twitter account critical of eBay—the identification of which was, relatedly, a top priority to eBay’s executive leadership—on a fence outside the couple’s home. And they conducted surveillance of the couple and took steps toward breaking into the couple’s garage to install a GPS tracking device on their SUV. When the security and intelligence executives and employees learned that their conduct was being investigated by law enforcement, they obstructed the law enforcement investigation, lied to police and took steps to frame a third party.

Federal prosecutors have charged six eBay security and intelligence executives and employees with conspiracy to commit cyberstalking and conspiracy to commit witness tampering. All were fired, as was eBay’s chief communications officer, and, at or around the same time, based on a number of considerations, the company’s CEO stepped down.

Illegal and Unethical Investigations

How does a Fortune 500 company with greater than $10 billion in revenue find itself in a situation in which its security and intelligence executives and employees have been accused of committing crimes? EBay is not alone.

Although the activities of the eBay security and intelligence executives and employees were barely investigative, they highlight issues that have caused problems for major companies, a global bank and high-profile executives during the past 15 years. The use of illegal or unethical investigative techniques, and inadequately planned or supervised investigations, by in-house and outside investigators, to address legal, reputational or other business concerns, have led to criminal charges, a Congressional investigation, court action, negative media and removals or departures of top executives.

Legal Considerations

In addition to the federal charges, in most state jurisdictions, the conduct of eBay’s security executives and employees might also give rise to conspiracy or substantive charges for stalking, cyberstalking and obstruction, as well as burglary, trespass and criminal mischief.

The facts might also support civil causes of action for intentional or negligent infliction of emotional distress.

Previous cases, unrelated to the eBay matter, have involved pretexting, hacking and illegal wiretapping.

It is not enough to know the law, or even to know criminal law. Investigators or those supervising them need to be able to anticipate legal issues that arise prior to and during investigations. Failure to do so will expose the company, and the individuals involved, to legal and reputational consequences.

Ethical Considerations

Based on the evidence disclosed to date, eBay’s lawyers were not aware of the conduct targeting the newsletter editor and her husband, nor the steps that were taken to obstruct the law enforcement investigation that followed. However, most company-directed investigations are related to a legal function, involve the company’s in-house or outside counsel, and therefore trigger the rules of professional conduct.

A lawyer cannot counsel a client to engage in, or assist a client in engaging in, conduct the lawyer knows is criminal or fraudulent. In representing a client, a lawyer cannot knowingly make a false statement of material fact to a third person, use means that have no substantial purpose other than to embarrass or burden a third person, or use methods of obtaining evidence that violate the legal rights of a third person. And when a lawyer employs or retains an investigator, he or she is responsible for conduct of that investigator that would be a violation of the rules had it been engaged in by the lawyer, if the lawyer orders or knowingly ratifies the conduct involved.

Even those investigations that do not involve the company’s lawyers or relate to a legal function will benefit from adherence to ethical guidelines and one need look no further than the eBay matter to understand why.

Beyond the legal and ethical issues in the matter of the eBay security and intelligence executives and employees, between the lines of the FBI agent’s affidavit, there is evidence of another issue which is, unfortunately, not uncommon.

Rethinking Investigations and Intelligence

At some point, every major company requires accurate, reliable information, intelligence or evidence. Due diligence investigations can reduce money laundering and reputational risks. Internal investigations can identify fraud and corruption. Litigation support investigations can protect and defend company interests. White-collar investigations can resolve government inquiries. And intelligence investigations can support deal teams and help the company seize opportunities. But to be of greatest value, investigations need to be conducted legally, ethically and expertly.

Any company with its own in-house investigative capabilities should consider where those capabilities are located within the organization, how the department is structured, staffed and led, and what it is that investigators are being called upon to do.

Companies should resist the temptation to conflate security with investigations. Investigations are not security operations, nor for that matter are they the practice of law. All are important, but each is distinct. A company should not automatically assume its security personnel are well-versed in the law or the bar rules, or that its corporate counsel has experience conducting or managing complex investigations. It would also be unreasonable for a company to assume that an investigator skilled at financial investigations is equally skilled at interviewing subjects or conducting moving surveillance.

And whether a company has its own in-house investigations department or not, the company will almost certainly have to engage outside investigative consultancies or outside private investigators. The company should vet those outside firms and individuals the way the company would vet its outside counsel.

To be offended by the conduct of the now-former eBay executives and employees is understandable, but not productive. They now have their own problems with which to deal and in retrospect probably wish they had taken a more conservative approach to resolving the frustrations of the company’s leadership. To expend energy criticizing eBay is similarly not productive. EBay appears to have taken quick action—cooperating with the law enforcement investigation, engaging outside counsel, conducting an internal investigation, and firing the executives and employees involved. The company faced problems and expenses, and its general counsel probably had headaches, that should have been avoidable.

EBay is not the first company to encounter problems due to the illegal or unethical use of investigations, nor will it be the last, but companies can start thinking today about how to avoid being the next.

Jarrett Wolf is the president of Wolf Global/Wolf P.A. and focuses his practice on crisis management and investigations. He is a former prosecutor and Drug Enforcement Administration agent.

Reprinted with permission from the June 29, 2020 edition of CORPORATE COUNSEL© 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.