When a company suspects it has been involved in illegal activity, self-examination is essential. Airbus is a perfect example.

The aerospace giant is currently under investigation in the UK, US, France and Austria for suspected corruption. It has just paid 81M euros to settle a similar investigation in Germany. At the same time, the company has stated that it is conducting a sweeping internal investigation to identify what went wrong and who should be held accountable.

Companies face legal pitfalls ranging from bribery and tax evasion through to money laundering and fraud. No company can ignore the signs of possible wrongdoing. If signs of illegal activity exist, any company needs to conduct an internal investigation to determine if there is a problem, establish how it has happened and decide the best course of action.

An internal investigation can be the most efficient way of finding out if criminal activity has been carried out. It gives the company the chance to deal with the problem in-house, if this is possible. If it is not possible to manage the problem within the workplace, then the company can report the matter to the relevant authorities after it has conducted its own investigation. This may lead to more lenient treatment than if the authorities found out about the wrongdoing themselves. It also means the company is better prepared should investigations then be carried out by the likes of, for example, the police, Serious Fraud Office (SFO) or Financial Conduct Authority (FCA).

Expertise

Having conducted many internal investigations for a wide variety of organisations, we would emphasise the need to carry them out in a way that maximises the chances of obtaining the truth without alienating staff.

Such an investigation can be time consuming. A company’s senior figures need to consider whether they have the time, expertise and impartiality necessary to conduct an in-depth examination of its workings. An investigation can produce situations that require in-depth legal knowledge, forensic examination of accounts, data preservation and other materials, including an impressive awareness of personnel matters.

Conducting an internal investigation that may look at all aspects of a company can be a task that is too demanding for a company’s already-busy directors, in-house counsel, accountants or personnel staff. Which is why it is often appropriate for an internal investigation to be conducted by professionals with the relevant expertise, brought in from outside.

But whoever conducts an investigation, they must ensure that everyone questioned is aware of their duty of confidentiality and the need to retain (and certainly not destroy) all available documentation.

When an investigation begins, there is no obligation to report the matter to the police. It may be necessary at some point to open dialogue with the authorities. But doing so early on may mean that a company loses control over its investigation and relevant documentation. It may also make employees less cooperative, take up more company time and bring unwanted publicity.

The decision on if and when it is necessary to contact the authorities should only be taken after seeking advice from those with legal expertise in business crime. Great thought must also be given to if and when to inform customers, trading partners, third parties, investors, insurers and the banks that an internal investigation has commenced.

Procedures                                        

Once the decision to hold an investigation has been taken, those conducting it have to be methodical and consistent in their approach. Documents need to be requested and categorised for scrutiny, whether they are hard copies or digital files.

Minutes of meetings, personnel records, business reports, phone recordings, CCTV footage, laptops and any other resources need to be gathered, stored securely and copied or backed up if necessary.

But care must be taken to ensure any activity is lawful. For example, the Regulation of Investigatory Powers Act 2000 governs the police and other public bodies’ use of covert surveillance; including bugs, video surveillance and interception of phone calls and emails. As anyone conducting an internal investigation is unlikely to be such a public body, they must be careful not to overstep the mark.  The Telecommunications (Lawful Business Practice) (Interception of Communications) Regulations 2000 give businesses the right to monitor communications on their networks for reasons including checking work is being performed to the correct standard and the prevention or detection of criminal activity.

While these may seem obscure rules and regulations to the average company director, anyone conducting an investigation has to be aware of them and make sure they follow them.

Passwords to company computers may need to be changed and remote log-in privileges should be restricted – as should security passes, access to offices and use of company phones and other devices. The company’s policy regarding destruction of documentation will also require immediate examination and, if necessary, amending to reduce the risk of any material of importance being lost or destroyed. Any document created in the company’s time and / or using the company’s equipment is presumed to belong to it and can, therefore, form part of the investigation.

Interviews

We would always advise bringing in external Investigators supervised by the lawyers to carry out interviews.  But if, for whatever reason, a company decides against this, it must remember some important principles.

A heavy-handed approach to staff during interviews will damage morale and reduce the chances of cooperation. Staff need to be put at ease. It is always best to interview junior staff and work your way up the company structure.

These interviews should never be conducted by anyone who has any connection to the wrongdoing and, ideally, the same person or team should conduct all interviews. If a person will not be interviewed, they should be asked why they are refusing.

There are also other rules governing the right for the employee to be represented and stricter principles when interviewing suspects; including the right to independent legal advice and the right to silence.

Options

The options that arise during an investigation must be considered carefully.

The issue of amnesties may come up; with members of staff saying they will “tell all’’ if they are given a guarantee they will not be punished. But amnesties can be problematic.

An amnesty in an internal investigation may be a means to an end, with information gained and the staff member not being disciplined.  But that amnesty will count for nothing if the authorities become involved and look to prosecute that individual, as no internal investigator can offer an amnesty regarding the conduct of outside authorities. Granting an amnesty can also be a mistake if the investigation then discovers that that person was responsible for much worse wrongdoing than was originally thought. It can also create an unwanted precedent, with other staff members then seeking one before they will be interviewed.

Suspending a member of staff if the investigation identifies them as involved in the wrongdoing may seem logical. But will that person then become less cooperative? Or even destroy or withhold valuable evidence?

The issue of internal investigations is a huge one. This article has touched on some basic principles regarding what is a very sensitive and important matter. Legal privilege, the process of self-reporting, deferred prosecution agreements, reputation management and how to communicate and negotiate with the authorities are just a handful of issues worthy of examination.

But the important point we are making here is that an internal investigation can produce tensions and risk damaging internal relations. If not handled correctly, an investigation’s fact-finding value can be outweighed by the damage it does to workplace morale. For this reason alone, it is often best to have an investigation conducted by “outsiders’’ who have expertise in all relevant legal and personnel issues.

An internal investigation may reveal a clear need for the authorities to be notified so that a criminal investigation can begin. It may also highlight a desperate need for new procedures, controls and training to be introduced - and explained to staff in a way that ensures they see themselves as being a part of the solution rather than the cause of the problem. These are further reasons why senior company figures should think carefully before conducting their own internal investigation.