Companies today face increasingly complex regulatory frameworks globally and intense levels of corporate scrutiny from government enforcement agencies around the world. As government agencies embrace sophisticated crime-busting technology and the world shrinks through greater inter-agency cooperation, there are more ways than ever for governments to identify misconduct and hold companies to account through criminal prosecutions and steep fines. Accordingly, companies faced with a potential compliance issue need to be prepared to respond to these issues with an effective internal investigation.
An effective internal corporate investigation can benefit a company in a number of ways. Not only does it assist a company in uncovering compliance failures and putting remedial measures in place, it also assists the company, when faced with evidence or allegations of potential wrongdoing, to respond deliberately and thoughtfully, ensuring that it understands all the facts. Effective internal investigations can also benefit the company by influencing the amount of a criminal fine, the type of government resolution potentially available, and protecting the company’s reputation. To maximize these benefits, corporate defendants need to be able to show prosecutors that the internal investigation was independent, reliable, and credible.
In a previous article, we have outlined the unique challenges of conducting effective internal investigations in Africa. Here, we revisit some of the lessons learned from our investigations practice (in Africa and elsewhere), outlining five universal considerations for effectively handling sensitive internal corporate investigations.
- Define the Scope of the Investigation
Investigations can be initiated for a multitude of reasons, from allegations of wrongdoing by the media, civil litigation, whistleblower complaints, regulatory inquiries, or even findings in an unrelated investigation. The potential issues to probe can be just as varied. Defining the scope of the investigation is therefore a crucial step to be taken at the outset of the inquiry. Among the questions to ask in order to ensure that the investigation is appropriately scoped are the following:
- What are the specific allegations?
- What is the company’s potential legal exposure?
- Who are the potential perpetrators?
- What are the relevant timeframes?
- Who are the potential witnesses?
- Who may possess documentary evidence relevant to the inquiry and where can these documents be found?
A written investigation plan is a useful tool to outline the goals of the investigation and the investigative steps, and more generally to keep the investigation on track. The contents of the investigation plan and the proposed investigative steps will of course have to be determined on a case-by-case basis, but it should generally include at least a review of documents and interviews with key individuals and witnesses. Bearing in mind that it is never possible to predict the entire course of an investigation, from the outset, with mathematical precision, it is important to ensure that the investigation plan allows for a degree of flexibility, providing the investigation team the ability to adapt the plan as the investigation progresses and evidence is reviewed.
- Preserve All Potentially Relevant Data – Documents, Devices and Testimony
Document and data preservation is a vital consideration in any investigation. Generally, companies should consider issuing a document hold (sometimes called litigation hold) to all individuals who potentially have relevant documents. There are, however, sometimes strategic reasons for not publicizing an investigation through a document hold, such as where there are concerns that notice of the investigation may raise the risk that employees will make efforts to destroy relevant documents and data. In such cases, companies can mitigate this risk of spoliation through advanced imaging of employee devices, disabling deletion functionality on company platforms, and other preservation measures as may be appropriate.
To the extent that preserving witness accounts by interviews is concerned, there may be instances in which the investigation team is faced with the imminent departure of an employee from the company. In those instances, it will be important that the employee’s account is obtained as quickly as possible. If a government agency is or becomes involved in the investigation, the company is likely to be called upon to explain what steps it took to preserve potentially relevant data, and it is therefore essential that all steps taken to do so are well documented.
- Interview Witness At The Right Time
Companies need to be thoughtful about the appropriate timing of witness interviews. In an ideal world, interviews would not take place until a company has been able to review and digest all of the relevant documents necessary to have a full picture of the written record. Documents not only provide the interviewer with context to ask targeted questions, they also serve as a vital tool to jog forgetful interviewees’ memories, or to confront witnesses with facts they may be reluctant to acknowledge.
But investigations are often fast-moving, with real-time implications for the company and unique circumstances that merit accelerating certain witness interviews before a full document review can be completed. These situations include instances where an employee is imminently departing the company, where misconduct may be ongoing, or where they are necessary to meet the demands of government agencies.
Additionally, to account for circumstances where witnesses may speak to one another regarding the substance of the interviews (despite instructions not to do so), the company should consider the order and timing of interviews, including potentially conducting simultaneous interviews.
- Consider Whether To Voluntarily Disclose
Deciding whether or not to make a voluntary disclosure to prosecutors is often a vexing question for the company, with the potential for significant ramifications. Depending on the laws of the relevant jurisdiction, there may be significant incentives to making a voluntary disclosure in the form of a more favorable resolution of an enforcement action, or a declination from prosecution altogether.
While there is no magic formula to make these decisions, some of the factors a company should take into consideration include the likelihood that enforcement authorities will come to learn of the investigation findings in the absence of voluntary disclosure, the seriousness of the alleged conduct, and the risk posed to the company should the allegations come to light.
With the benefit of a credible and reliable investigation, a company will be well positioned to make effective decisions about how to remediate any issues identified.
The critical element of any remediation plan is that the actions taken be appropriate and proportional to the conduct identified. The appropriateness of the remedial steps taken by a company, including initiating disciplinary action against the responsible employees and potentially terminating their employment, and implementing and/or enhancing existing practices, policies and procedures, are critical factors taken into account by government agencies when assessing an appropriate resolution of potential civil or criminal charges.
Conducting an effective corporate internal investigation that is well-designed, with a specific work plan that addresses key elements such as document preservation, witness interviews, and prompt remediation, can yield many benefits for a company facing allegations of misconduct.
While no two investigations will ever be the same, building an investigation with these five building blocks in mind will provide companies with a solid foundation from which to move their organizations forward while minimizing disruption to the extent possible.