# BEXLEY MEDICAL DEVICES — 14-DAY PARALLEL-PROCEEDING SEQUENCE ## Part I. Four decisions that must be locked before anything else These are not close calls, and every other step depends on them: 1. **The company will not produce the outside-counsel investigation memorandum to anyone.** Not to shareholder counsel for a deposition extension, not to prosecutors for cooperation credit. Under the supplied rules, disclosure to either adversary waives privilege, a civil protective order does not restore it, and a grand jury can subpoena what was voluntarily disclosed. There is no selective waiver. The memo is the one asset that cannot be re-created; the deposition extension can be obtained other ways. 2. **The corporation will not "invoke the Fifth and produce nothing."** A corporation has no privilege against self-incrimination as to nonprivileged corporate records. Refusal means grand-jury contempt, civil sanctions, and an obstruction narrative — while forfeiting the credibility needed for a stay. 3. **Nora Keene gets her own lawyer before company counsel says one more word to her about testimony, invocation, or the declaration.** Her interests may diverge; the prosecutor has already named her. Company counsel represents the entity only. 4. **The CEO's proposed declaration will not be signed in its current form by anyone.** "Every distributor sale was final and no executive knew otherwise" is (a) beyond Nora's personal knowledge — she has not reviewed all side letters, (b) contradicted by the very allegation the company is investigating, (c) a false-statement/perjury and obstruction risk in the criminal forum, (d) a waiver risk for her own Fifth Amendment rights, and (e) a "sword-and-shield" filing that would destroy the stay motion — the company cannot make broad exculpatory claims while the same witness declines discovery. --- ## Part II. Day-by-day sequence ### Day 1 — Preservation, conflict triage, and stopping the two worst ideas **Preservation (both matters, one program).** - Issue/reissue a written litigation hold covering the grand-jury categories *and* civil requests: side letters, amendments, distributor emails and texts, sales-rep and messaging-app content, board and audit-committee materials, revenue-recognition workpapers, reserve and return analyses, quarter-end cut-off files. - Suspend all auto-deletion, email retention purges, ephemeral messaging, and device-wipe policies. Confirm in writing with IT and get written confirmation back. - Forensically image devices of Nora, the CEO, the controller, revenue accounting, and the distributor sales leads. Image first, review later. - Send hold acknowledgments to every custodian; log non-responders daily. - Written instruction to all employees: **do not discuss the facts with each other, do not compare recollections, do not reconstruct documents.** Preservation and no-coaching are Rule 7 obligations in both forums. **Conflict triage.** Identify exposed individuals: Nora (named), the CEO (author of the false-declaration request — that alone is a diverging-interest signal), the controller, the VP of distributor sales, any director who approved the side-letter transactions. Give Upjohn warnings again, in writing, before any further interviews. **Freeze the declaration.** Tell the CEO in writing, through the board's counsel channel, that the declaration will not be circulated, drafted, or presented to Nora. Instruct that no executive contact Nora about her testimony. **Prosecutor contact — same day.** Call and then confirm in a short letter (nonprivileged, no facts, no memo references): - Request written designation of Bexley's and Nora's status (target, subject, or witness). - Request the government's position — support, oppose, or neutral — on a narrowly tailored civil stay limited to Nora's deposition and overlapping merits depositions. - Propose subpoena logistics: scope clarification, ESI protocol, and a rolling production with a modest extension for the heaviest categories. - State affirmatively that Bexley will produce nonprivileged corporate records and is asserting privilege over attorney work product; do not offer, hint at, or "hold open" the memo. **Board.** Convene the board; adopt a resolution forming an **independent special committee** of disinterested directors (no director who touched the transactions) with its own separate counsel, delegated authority over: privilege waiver decisions, the declaration, cooperation posture, and internal investigation oversight. Notify D&O carriers. ### Day 2 — Separate counsel actually retained; collection begins - Nora retains independent counsel from a conflicts-cleared list she chooses; company advances fees under the indemnification/bylaws with **no control, no reporting on her advice, and no conditioning of fees on cooperation**. Company counsel's substantive contact with Nora now runs through her lawyer. - Do the same for the CEO and any other executive whose interests may diverge. Assess the controller and distributor sales lead; retain pool counsel if needed. - Consider a **common-interest agreement** only where interests genuinely align on a shared legal strategy — and paper its limits: it does not privilege underlying facts, does not permit joint representation of conflicted individuals, and does not authorize sharing witness accounts. Do not put Nora in a common-interest arrangement that lets the company learn or shape her testimony. - Launch collection with an e-discovery vendor: one collection, dual tagging (civil-responsive / subpoena-responsive), single privilege review. This prevents inconsistent productions between forums. - **Identify a non-exposed records custodian** (e.g., a compliance or finance employee with no transaction involvement, or a vendor) to authenticate and certify productions in both forums, so no individual's act-of-production privilege is implicated. - Letter to shareholder counsel: confirm the Day-7 production will be made; **decline the memo-for-extension trade**; and put alternatives on the table (Part III below). ### Day 3 — Build the overlap record; meet and confer - Prepare a **category-by-category overlap chart** mapping each civil request and deposition topic against each grand-jury subpoena category. This chart is the factual core of the stay motion and can be filed without revealing strategy. - Rule 26 meet-and-confer with plaintiffs: seek stipulated adjournment of Nora's deposition and a sequencing agreement; offer a tolling stipulation so plaintiffs lose nothing. - Second call to the AUSA if no response; document the request and any refusal in a nonprivileged memo to file. - Negotiate the subpoena return: rolling tranches, with tranche 1 (side letters, distributor communications) on Day 14 and remaining categories on an agreed extension. ### Day 4 — File the targeted stay / protective-order motion File early enough to be heard before Day 10. Two separate filings, by two separate lawyers: **(A) Bexley's motion** — a *narrow* motion, not a global stay: - Stay only (i) Nora's deposition and (ii) merits depositions of individuals whose accounts overlap the subpoena categories, for a defined, short period (e.g., 90 days, or until indictment/declination, whichever is earlier), **with status reports every 30 days**. - Expressly **not stayed**: the Day-7 document production, third-party and distributor discovery, non-overlapping 30(b)(6) topics, written discovery answerable from documents, and the preliminary-relief briefing schedule. - Weigh the governing factors on the record: near-total overlap (chart), criminal prejudice to individual witnesses, minimal civil prejudice given documents are flowing and tolling is offered, efficiency (one deposition later beats a transcript of invocations now), public interest in an unimpeded grand jury, and candid acknowledgment that **no indictment has issued** — which is why the request is short and reviewable rather than open-ended. - Support with a **counsel declaration** reciting only nonprivileged, objective facts: the subpoena exists (attach it, under seal if needed), its return date, the categories, that the prosecutor described statuses as "under active review," and that Bexley requested and did/did not receive the government's position. **No Nora declaration. No merits assertions.** - Serve a courtesy copy on the U.S. Attorney's Office and invite the court to solicit the government's views. **(B) Nora's own motion**, filed by her counsel, asserting *her* Fifth Amendment interest and seeking postponement or a protective order as to her deposition. **Company counsel must not assert Nora's privilege for her** — that blurs the representation line and invites the argument that the company has adopted her position. ### Days 5–6 — Production discipline, insurance, disclosure, auditors - Complete review; finalize objections and a **detailed privilege log** entry for the investigation memorandum (author, date, subject matter, basis) — logged, not produced. - Seek a Rule 502(d)/clawback order plus a confidentiality protective order. Tell the board plainly: the protective order **does not** shield anything from the grand jury and **does not** restore privilege lost by voluntary disclosure. - If plaintiffs refuse to adjourn Nora's deposition, file an emergency application for a ruling before Day 10. - Audit committee communicates with the external auditor; disclosure committee reviews whether the subpoena and the allegations require public disclosure and whether any prior statements need correction. Ensure nothing said publicly, to auditors, or to the court is inconsistent across forums. ### Day 7 — **Make the civil document production on time** - Produce all responsive nonprivileged ordinary business records, including the side letters, with the privilege log and objections, certified by the non-exposed custodian. - **Do not** default this deadline; do not trade it for anything. Timely, complete document production is the single strongest predicate for asking the court to defer *testimony*. The message to the court is: "We are producing everything we must; we are asking only that one witness not be forced to choose between testifying and self-incrimination while a grand jury sits." ### Days 8–9 — Hearing and contingency staging - Argue the stay. Concede what should be conceded: the corporation has no Fifth Amendment right, documents are flowing, and the request is narrow and time-limited. - Prepare both branches: - **Stay granted (full or partial):** confirm sequencing order, calendar status reports, continue rolling grand-jury production. - **Stay denied:** Nora's deposition proceeds with her counsel present; she invokes **question by question** on the record. Company counsel attends as entity counsel only, does not instruct her, does not signal, and does not adopt or disclaim her invocation. Preserve the record for later reopening and for a motion to limit use of the invocation. ### Day 10 — Nora's deposition date - Adjourned, or narrowed to non-overlapping topics, or proceeds with invocations. In every branch: **no witness preparation of Nora by company counsel, no coaching, no coordinated accounts.** - If a corporate witness is needed for non-overlapping topics, designate a 30(b)(6) witness with no personal exposure, educated **only from nonprivileged documents**, and confine the designation in writing to avoid an implied subject-matter waiver. ### Days 11–12 — Opposition to preliminary relief - Build the opposition from **documents, the plaintiffs' burden, and legal argument** — reliance, loss causation, scienter pleading, the equities of injunctive relief, adequacy of remedies. - Use only truthful, personal-knowledge declarations from **unexposed** declarants (e.g., the controller on the mechanics of revenue recognition, if uninvolved; counsel on procedural facts). Every declaration is narrow and non-exculpatory-in-the-abstract. - **Sword-and-shield discipline:** no assertion the company cannot back with a witness who will answer discovery. Do not say "no executive knew"; say what the documents show and what plaintiffs have failed to establish. If the record is genuinely uncertain because the internal review is incomplete, say the review is ongoing rather than asserting a conclusion. - File on Day 12. ### Days 13–14 — Grand-jury return - Produce the negotiated tranche(s) of nonprivileged corporate records, with the non-exposed custodian's certification and a cover letter asserting privilege over attorney-client and work-product material and identifying withheld categories. - Confirm any extension for remaining categories in writing. - Docket forward: 30-day stay status report, rolling productions, completion of the special committee's investigation, renewed request to the government for status designations, and a diary for indictment/declination triggers. --- ## Part III. Issue-by-issue rationale ### The memo-for-extension trade — decline, and substitute real value Producing the memo to obtain 30 days would waive privilege as to shareholders *and* leave it subpoenable by the grand jury. It would also convert investigating counsel into fact witnesses and hand plaintiffs a roadmap. Offer instead: - Complete, early production of all underlying nonprivileged documents — including every side letter. **The underlying facts were never privileged; only the memo is.** - Stipulations on authenticity and business-records foundation. - Full interrogatory and RFA responses on document-provable matters. - A 30(b)(6) deposition on non-overlapping topics now. - A binding stipulation to produce Nora for a full deposition after criminal resolution, with tolling so plaintiffs suffer no prejudice, plus agreement not to seek dispositive relief on issues her testimony bears on during the interim. If plaintiffs still refuse, that refusal becomes evidence that the memo — not information — is the objective, which strengthens the stay motion. ### Corporate production vs. individual rights Two clean lines: the **entity** produces nonprivileged records in both forums, through an unexposed custodian, and asserts privilege only over privileged material. **Individuals** assert their own Fifth Amendment rights through their own counsel, question by question, never on the entity's behalf and never at the entity's direction. The company neither encourages nor discourages invocation; it funds independent advice and stays out of the decision. ### Adverse inferences — real risk, honestly managed A valid invocation by Nora can support a reasonable adverse inference **against her** in the civil case where independent evidence supports it; it does not automatically establish liability and does not automatically bind Bexley. Mitigation: - Postpone rather than produce a transcript of invocations (the point of the narrow stay). - If invocation occurs, move to limit its use: the entity did not authorize it, she is not a 30(b)(6) designee, and the inference requires independent corroboration. - Rebut with documents and unexposed witnesses, not with a false declaration. **The one thing that would make the inference far worse is an exculpatory declaration the declarant cannot defend in a deposition.** ### The CEO's declaration — the counter-offer Tell the CEO and the special committee, in writing: the declaration as drafted is unsignable. Personal knowledge is absent (unreviewed side letters), the "no executive knew" clause is knowledge she cannot have, it risks perjury and obstruction, it may waive Nora's Fifth Amendment protection on the central subject, and it would defeat the stay by making the company's own affirmative use of her voice conditional on her silence elsewhere. Offer: narrow, truthful, personal-knowledge declarations from uninvolved declarants on discrete points; the rest carried by documents and law. If the CEO persists, escalate to the special committee and paper the advice. ### What to ask prosecutors — and what to do if they refuse Ask for: (1) written status designations for Bexley and Nora; (2) the government's position on a narrow stay; (3) subpoena scope/rolling-production terms; (4) confirmation that asserting privilege will not be treated as noncooperation. If the government declines — which is likely and permissible — do **not** treat silence as a green light and do **not** characterize the phone call beyond its literal content. Proceed on the objective record: the subpoena itself proves overlap; "under active review" is quoted verbatim; the absence of an indictment is disclosed and is the reason the request is short and reviewable. Tell the court the request was made and refused, serve the USAO, and invite the court to seek the government's views. Renew the request at each status report. ### Board governance - The special committee of disinterested directors, with independent counsel, owns the privilege-waiver question, the declaration, and cooperation posture. Neither faction of the current board should decide unilaterally. - Restrict memo access to committee members and counsel on a need-to-know basis; no wide board circulation, no summaries in email, no copies to directors who are potential witnesses or targets. - Minute the deliberations, the advice given, and any dissent — including the advice that waiver is irrevocable and that a "produce nothing" posture invites contempt. - Communications hygiene: no company-wide narrative about what happened, no townhalls on the facts, no press statements inconsistent with court filings, no HR retaliation against cooperating employees, and legal review of any securities disclosure so that public statements, the civil opposition, and grand-jury representations are mutually consistent. ### Why the order matters 1. **Preservation first** — a spoliation problem cannot be fixed later and taints both forums. 2. **Separate counsel before any testimony advice** — advising Nora while conflicted contaminates everything downstream, including the declaration and the deposition. 3. **Prosecutor request before the stay motion** — so the motion can report the answer or the refusal. 4. **Stay motion before Day 7 and well before Day 10** — a motion filed after a missed production or on the eve of the deposition reads as gamesmanship; a motion filed on the heels of a complete production reads as good faith. 5. **Document production on time, memo withheld** — compliance buys the credibility that funds the narrow testimonial deferral. 6. **Opposition brief last** — after the stay ruling is known, so the brief's affirmative content matches what the company is willing to defend in discovery. **Net position at Day 14:** nothing waived, nothing defaulted, all records preserved, corporate documents produced in both forums, Nora independently represented and not compelled into a false declaration or an uncounseled invocation, a narrow and reviewable stay on the record, and the privileged memorandum intact.