Making internal investigations effective, fair to employees

A recent, thoughtful law review
article by professors Ellen Podgor
and Bruce Green, “Unregulated
Internal Investigations: Achieving
Fairness for Corporate Constituents,” 93 B. U. L. Rev. 275 (2013),
explains that the law governing
corporate internal investigations
permits—indeed, incentivizes—
in-house counsel to promote the
interests of the company at the
expense of its employees. The authors argue that the law should be
changed to make internal investigations more fair to employees.
Practitioners can draw important
lessons from Green and Podgor's
critique of the law of internal investigations. Within the law as it
now stands, in-house counsel can
take steps to promote the fairness
and effectiveness of internal investigations, while providing a vigorous representation of the company.
A DIFFICULT POSITION
Internal investigations often put
in-house counsel in a difficult position. While company lawyers are
normally advisors to employees,
an internal investigation changes
counsel’s role in an important way:
During investigations, in-house
lawyers represent the company, not
employees. Unlike other situations
in which employees seek the advice of in-house counsel, in investigations employees may find their
motives and actions questioned—
and may wonder why their trusted
advisor is not on their side.
The relationship between inhouse counsel and employees is
further complicated by the risk of
corporate criminal liability. Under
the U.S. Department of Justice’s
Principles of Federal Prosecution
of Business Organizations, the
company’s “cooperation”—which
includes the company’s willingness
to disclose evidence of wrongdoing to the government—could be
critical to avoiding indictment.
To avoid the possibly severe consequences of an indictment, the
best course for the company may
be to find evidence of wrongdoing
by employees, secure admissions
from them, and then disclose the
evidence to the government in exchange for “cooperation” credit.
FAVORING THE COMPANY
OVER EMPLOYEES
Podgor and Green explain that
the law of attorney-client privilege
does not adequately account for potential adversity between the company and its employees during an
internal investigation. That body
of law is unfairly skewed in favor of
giving the company, not individual
employees, control over privileged
communications. In the authors’
view, the relationship between
in-house counsel and employees
during an internal investigation is
not straightforward and can easily
be misunderstood by employees.
Yet the law resolves all ambiguity
in favor of corporate control over
the privilege, which can have dire
consequences for employees.
For example, while it is common for company counsel to give
an Upjohn warning to employees,
stating that counsel represents only
the company and that information
gathered may be disclosed by the
company, the warning may not be
given or may be given unclearly. In
such cases, employees are often denied protection of the privilege unMaking Internal Investigations
Effective, Fair to Employees
Jonathan S. Sack and Curtis B. Leitner
Jonathan S. Sack Curtis B. Leitner
October 3, 2013
From the Expertsder a test weighted heavily in favor
of a company’s exclusive control
over the privilege.
Podgor and Green propose leveling the playing field between the
company and its employees by imposing a “duty of good faith and fair
dealing” on the company, which
would require in-house counsel to
treat employees fairly during investigations. Although the authors
provide a powerful argument for
changing the law, they do not explain why in-house counsel should
act in the way they recommend
given the existing state of the law.
THE COMPANY’S
INTEREST IN FAIRNESS
Putting aside the existence of a
corporate “duty of good faith and
fair dealing,” companies have important practical reasons to be
mindful of employee interests in
internal investigations. Most importantly, treating employees fairly
puts corporate counsel in a better
position to obtain an accurate and
nuanced understanding of the facts.
An effective internal investigation
needs to uncover all the facts, not
just incriminating ones. A complete understanding of exculpatory
facts, mitigating circumstances,
and weaknesses of potential claims
against the company, in addition
to inculpatory evidence, will help
counsel negotiate more effectively
with the government and often
limit the scope of a potential government investigation.
PRACTICAL ADVICE
Here are some practical steps
in-house counsel can take to facilitate both effective internal
investigations and the evenhanded treatment of employees.
• Absent exigent circumstances,
in-house counsel should permit,
and often encourage, employees to
prepare for investigative interviews.
If employees are given the opportunity to review relevant documents,
including inculpatory evidence, before interviews, their responses will
be better informed and well-considered. Interviewing unprepared employees can become a “gotcha” exercise, in which incorrect recollections are mistaken for genuine leads
or, conversely, evidence of wrongdoing. Unprepared interviews can
create a record of possible obstruction that may need to be disclosed
to the government before it can be
determined whether the particular
statements were intentionally false.
• In-house counsel should not discourage employees from retaining
their own counsel, and in many instances should recommend counsel
whose fees are paid by the company.
Providing employees with separate
counsel commonly facilitates their
preparation for interviews and helps
bring out useful facts. To save costs,
counsel should consider retaining
“pool counsel” for similarly situated employees or adopting other
arrangements to monitor spending
• Counsel’s report of the findings of an internal investigation,
especially a written report, should
sometimes be descriptive of the
facts rather than make ultimate
judgments that foreclose defenses
available to the company or employees. For example, if an employee’s intent is unclear, the report
can describe the employee’s mental state in terms of what she saw
and heard—withholding ultimate
judgment on the employee’s intent
because the facts permit more than
one reasonable inference. Also, it
may be quite helpful to share sections of a draft report with employees to increase accuracy and promote procedural fairness.
CONCLUSION
The Podgor and Green article
explores the structural advantages
that corporations have over employees and how this can lead to unfairness in internal investigations.
No doubt many companies already
conduct investigations in a manner that fully respects the interests
of employees. But tensions between
the interests of the company and its
employees will arise, and in-house
counsel need not wait for the law to
change to be sure to treat employees fairly. In many cases, the effective representation of the company
is reason enough.
Jonathan S. Sack is a principal and
Curtis B. Leitner is an associate at Morvillo
Abramowitz Grand Iason & Anello.
Reprinted with permission from the October 3, 2013 edition of
CORPORATE COUNSEL © 2013 ALM Media Properties, LLC. 
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October 3, 2013