Internal investigations are often associated with a suspicion of 'misdemeanour' ie, health and safety violations, fraud or financial impropriety. Their prevalence in the private sector is influenced by prosecutorial and regulator encouragement and by compliance need.
The question for local government and the wider public sector is whether you too should embrace this trend.
Cost-cutting by prosecutors and regulators has encouraged private sector organisations to carry out their own internal investigations, with the expectation of more favourable sanctions when blowing the whistle. The government is keen to replicate the success of corporate internal investigations in the US to uncover fraud, bringing the facts and key perpetrators neatly gift wrapped to the prosecutors' door. Internal investigations are also perceived as advantageous to the organisation which might itself be the subject of investigation, prosecution and fine, showing that they have done everything in their power to uncover and investigate wrong-doing.
Government entities are not immune from sanction under the Corporate Manslaughter and Corporate Homicide Act 2007. If local government presents a problem to central government, they won't be thanked. If they present a problem with a solution, particularly a forensically credible one, it will negate the criticism.
Who should conduct an investigation?
In a recent American case, the company identified an internal compliance failure and fraud. They immediately brought in their Wall Street lawyers. A top-to-bottom internal investigation was advised. The company agreed but decided to use its own, internal resource, albeit supplemented.
Unfortunately, this did not appease the prosecutor. The credibility of all internal investigations relies on a substantial degree of independence. Had the corporation appointed external independent investigators from the outset, they would likely have been in a stronger position. Replace that private sector corporation with a local authority and it is easy to see how the media and political opponents might make a mockery of the investigation's findings.
The appropriate skill-set is crucial within the investigation team including criminal and regulatory, public law and employment law capability, often supplemented by civil litigation advice.
Understanding the public sector is critical. This is not a simple straight line read across from private sector internal investigations. It is essential that the investigations team can take account of the -hard' law issues arising from the general public law obligations, for example of fairness, and from the Human Rights Act 1998. The team also needs to understand, and anticipate, the disclosure issues than can arise under the Freedom of Information Act 2000. Perhaps most importantly, the investigators need to recognise the different governance and accountability issues that exist for publically-funded bodies.
- Who are the likely perpetrators and who knew about the matter? All tainted individuals and departments must be removed from the investigation process.
- Timing is key. Government bodies such as the police, HSE, UKBA or SFO may need to be contacted but the first port of call should be a lawyer. Part of their remit is to advise on when, and to whom, a report is made. Managing the early stages of an internal investigation is critical.
- Evidential preservation is everything, managed by a tight, small, confidential, specially formed group of independent senior managers.
- Internal and external communication is vital: lawyers frequently work with PR consultants to manage this process carefully.
Dealing with employees
An investigation is vital to establish that an employer followed a -fair process' in disciplining an employee. To avoid an unfair dismissal finding where misconduct is alleged, an employer does not have to prove that an offense was committed by the employee, but must instead show that it had a -reasonable belief' that the individual is guilty. Without conducting a full investigation it is impossible for an employer to prove at tribunal that the belief it holds in the employee's guilt is -reasonable'.
Furthermore, the ACAS Code of Practice on Disciplinary and Grievance Procedures explicitly states that employers -should carry out any necessary investigations' in disciplinary situations. Failure to comply with the Code can result in an uplift of up to 25% on any damages awarded to the employee.
Only the most ambitious in-house counsel would attempt to conduct an internal investigation themselves. The public sector is in the unenviable position of being at the crossroads of so many conflicting legal obligations that specialist advice is imperative.. Done properly, an internal investigation can pay for itself and provide its own structure for crisis management.