# Question 26: The Hotline Clock

## Your role

You represent Solstice Transit Group after a hotline report alleges payments to customs officials through a distributor. Design the privileged investigation and preservation sequence, protect employees from retaliation, and decide when the company can rationally choose whether to seek the fictional regulator's voluntary-disclosure credit.

## Governing law

Assume the following investigation and disclosure rules apply:

1. A company receiving a credible allegation of unlawful payment must promptly preserve relevant evidence, stop reasonably suspected ongoing payments, and investigate through a structure capable of independent legal judgment.

2. Attorney-client privilege protects confidential communications made for legal advice when counsel directs the investigation for that purpose. Underlying facts, ordinary business records, and remediation work do not become privileged merely because counsel is involved.

3. Interviewing counsel must explain that counsel represents the company, the company controls privilege, the interviewee may need separate counsel, and retaliation is prohibited. Counsel may not promise personal confidentiality the company cannot honor.

4. A legal hold must reach company systems, personal devices used for work, messaging applications, finance records, distributor files within company control, and identified custodians. Auto-deletion and routine destruction must be suspended or collected.

5. The voluntary-disclosure program provides a presumptive 50 percent civil-penalty reduction if the company reports within 30 calendar days after its legal or compliance function obtains credible evidence supporting a reasonable belief that a covered payment occurred, and before the regulator contacts the company.

6. A bare anonymous accusation is not necessarily credible evidence. Documentary support, corroboration, payment tracing, or reliable witness information may create credible evidence before every detail is known.

7. A disclosure must be substantially truthful, identify known participants and transactions, disclose material uncertainty, and commit to continuing cooperation. Speculation presented as fact may forfeit credit.

8. The company need not disclose privileged legal advice to receive credit, but it must disclose relevant facts and cannot use privilege to hide who, what, when, or how much.

9. When senior management may be involved, an independent board committee should direct the investigation and disclosure decision.

10. A company should not wait until day 30 to investigate a perishable record or a disclosure path that may close upon regulator contact.

## Facts

At 8:10 a.m. on Monday, August 2, Solstice's chief compliance officer opened an anonymous hotline submission alleging that regional vice president Cole Marr and distributor East Reach paid customs officials to clear rail-control equipment.

The report attaches:

* An East Reach invoice for $240,000 labeled “border facilitation and technical consulting.”
* A chat from Cole to East Reach's owner stating, “Use the consultant who makes the border problem disappear. Do not put government names in our file.”
* A spreadsheet showing that Solstice reimbursed the $240,000 in four installments.

The report does not identify the consultant, bank recipient, public official, or country account. East Reach also performs legitimate customs brokerage worth approximately $160,000 per year.

Solstice's messaging application deletes chats after seven days. Finance-system audit logs roll over after 21 days. Cole and the compliance officer use personal phones for some work messages. A quarterly server purge begins this weekend.

The chief financial officer proposes assigning internal audit, letting Cole explain, and waiting to preserve personal devices until “we know the complaint is real.” The general counsel wants outside counsel to direct a privileged investigation. Two directors are close business allies of Cole. No regulator has contacted Solstice.

The voluntary-disclosure program's 30-day clock begins only when rule 5's credible-evidence threshold is met. The current record does not establish whether the $240,000 reached an official, a legitimate broker, or another private recipient. Bank beneficiary data, East Reach's subledger, the consultant identity, and customs-entry records have not been obtained.

## Assignment

Provide an ordered plan addressing:

* Immediate preservation and suspension of deletion.
* Whether payments or relationships should be paused.
* Board and counsel structure.
* Privilege limits and employee interview warnings.
* The first custodians, devices, and records to collect.
* Nonretaliation and witness-contact controls.
* Whether the existing attachments themselves start the 30-day clock.
* The specific missing facts needed for the disclosure decision.
* A seven-day investigative plan and a decision date that does not wait until day 30.
* How to disclose material uncertainty without waiving privileged advice if covered payment evidence is confirmed.

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