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Corporate America should prepare now for increased Congressional oversight

Corporate America should prepare now for increased Congressional oversight
© Stefani Reynolds

The midterm elections are over; we now have a Democratic House and a Republican Senate, and the key question — for the new Democratic House majority, the Trump Administration, and Corporate America — is what this new divided government will mean.

One important change is clear: with subpoena power now available to Democrats in the House, much of the nation’s attention will shift to Congress’s constitutional authority to conduct oversight and investigations.

Although there was considerable focus during the campaign, in the media and elsewhere, on the expected clash between a Democratic House and a Republican Administration, it is essential not to overlook another likely and important midterm outcome: Congressional oversight of the business community and what it means for Corporate America.

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With the power to conduct official investigations beginning in January, the Democrats can use the next two years, in the run-up to the 2020 Presidential election, to leverage their investigative authority to make a political case to the American people. If recent political history is any indication, this is the likely playbook that Democrats will deploy, and Corporate America would be well-served to pay attention.

America’s business community — like the Trump Administration — stands on the verge of an invigorated era of intense Congressional investigations. Although one might expect that the Democrats’ investigative energy in the House will be consumed by direct oversight of the Trump Administration, its policies, and its politics, history demonstrates that a more comprehensive public and private sector oversight strategy will be the more likely approach adopted by the new Democratic majority in the House.

Just as Democrats investigated private defense contractors following the 2006 midterms as a proxy to attack the Bush Administration and the Iraq war, and just as Republicans, upon assuming power in 2010, investigated private insurance companies and other healthcare interests as a proxy to attack the Obama Administration and the Affordable Care Act, it is likely that new Democratic committee chairs in the House will focus extensive investigative resources on business sectors and individual companies with close ties to the Trump Administration and its policies.

It is likely that such an investigations strategy would give special attention to sectors and companies benefiting from particular policies championed by the White House and also to companies contracting with the government in such areas. The goal will be to highlight the administration’s ties to corporate interests, while also using private sector targets as a proxy to attack White House policies. Potential inquiries could focus on a range of business sectors engaged in issues with particular political resonance, such as immigration policy and border security, disaster response and recovery, energy production and the rollback of environmental regulations, just to name a few.

These corporate investigations will likely proceed in parallel to direct oversight of the administration for two principal reasons. First, the administration is unlikely to cooperate eagerly with such inquiries, and any fight over the validity of a subpoena or the sufficiency of the administration’s response will be a lengthy procedural and legal undertaking. This makes it very unlikely that such inquiries would quickly procure the documents or information sought by Democratic leaders. Second, by sending investigative requests to both the administration and to related private sector companies, the Democrats will be able to “pressure test” what the administration is providing in response, and raise immediate red flags if it differs from information provided by the private sector companies. Though essentially a “belt and suspenders” approach, House Democrats will likely view this strategy as helpful in building an investigative mosaic in the two short years before the 2020 Presidential election.

A private sector investigative strategy could also mean active oversight of companies perceived to be benefiting substantially from major Trump initiatives, even without a direct link to the White House. For example, some leading Democrats, while still in the minority, have signaled an appetite to probe the effects of the 2017 tax reform law, specifically targeting companies that have engaged in recent stock buybacks instead of passing along the full benefits of lower tax rates to their employees and consumers.

Corporate America will also be subject to the traditional, bread and butter investigations so common under past Democratic control — including an increased focus on consumer protection, civil liberties and privacy, big data and technology, labor issues, the financial sector, the healthcare sector, and other areas. Even as votes are still being counted, Democratic Congressional leaders are trying to focus attention on the issues that voters signaled mattered the most in their everyday lives. One can expect this focus will be evidenced in Congressional investigations and hearings to come.

All of this underscores that a wide range of companies could face unique legal and reputational jeopardy in the coming years.  

Given the current political landscape, it is conceivable that such companies could easily end up caught in the middle of competing political narratives — trapped in the crossfire between a Democratic House on offense and an aggressive Executive Branch on defense, or between a House and a Senate controlled by opposing parties.

In light of these looming political dangers, and the business, legal, reputational, and regulatory challenges that such inquiries often present, it is critical for business executives to appreciate the unique risks posed by Congressional investigations and take early steps to prepare, even before Democrats pick up their gavels in January. By considering these issues before subpoenas start to fly, Corporate America will be best positioned to navigate the choppy waters ahead.

Steve Ross and Rafi Prober are co-heads of Akin Gump’s Congressional Investigations Practice, and – between them ­– have worked on Congressional investigations in both the public and private sectors for nearly five decades. Steve previously served as General Counsel to the U.S. House of Representatives, and Rafi previously served as an Associate Deputy Attorney General at the U.S. Department of Justice, overseeing responses to Congressional investigations and oversight for the Department. They have represented clients in some of the most high stakes, consequential investigations of the last decades, appearing before almost all Congressional committees across a range of industries and issue areas.