Consider these scenarios:

  • An industrial accident results in a workplace fatality.
  • An anonymous whistleblower tip raises suspicion of a significant internal fraud.
  • A serious allegation of wrongdoing is made against a long-time employee.

Each situation will require an investigation, but each will require a different response:

  • Regulators and police will be involved in the investigation of a workplace fatality, and administrative or criminal proceedings may result. In addition, the investigation will, in part, gather information to be used in preparing for litigation, so preserving privilege will be important.
  • Investigation of an ongoing fraud will require the ability to move quickly to preserve evidence and assets.
  • Investigation of an allegation of misconduct will require a balance between the benefits of an open process and protection of the privacy rights of the individuals involved.

All investigations will need to be tailored to the circumstances giving rise to them and the investigative goals. Nonetheless, there are basics to follow. Here is a checklist of fundamental issues that you should consider before undertaking an internal investigation:

Expect the unexpected — Something bad will happen; it is only a matter of time. Identify the most likely risks to your business. Implement a structure that designates who will be responsible for directing the investigation, conducting the investigation and acting as company spokesperson.

Move quickly — Decide right away whether to involve outside counsel. Assess the risks. Who is the subject of the investigation? What is the risk of prosecution? Is the company’s reputation at stake? Are assets at risk of dissipating? Preserve the evidence before it is gone.

Establish a chain of command — Recognize the potential for conflict between the company and those affected by the investigation. Always remember who the client is. Have outside counsel lead the investigation and establish a clear claim for privilege. Make sure the investigation is independent and not a management tool.

Set investigative goals — Is this a fact-finding exercise? Will there be recommendations made to change existing practices? Will the report be disclosed to the public or to regulators? Is this mostly preparation for anticipated litigation?

Choose a process — Who needs to be interviewed? Can internal investigators conduct the interviews? Are external investigators needed to preserve objectivity and independence? Will the report be fault-finding or fact-finding? What level of due process is required?

Be credible — Only credible investigations are effective. Independence, fairness and rigour are the keys to credibility. An open process is the best choice, where possible.

Control timing — Effective investigations move quickly. Set time constraints at the outset. Balance the need for process with the need to get an answer.

Pitfalls — Investigations are hard on people. Ineffective investigations make the situation worse by failing to establish facts, causing dissent and prejudicing the company’s legal position. Regulators may see a weak investigation as an absence of due diligence.

McCarthy Tétrault Notes:

Investigations are required at critical times. They are strategic.

Done poorly, they will only make things worse. An inadequate investigation will, at best, lack credibility and, at worst, look like a cover up.

Done properly, they will anticipate risks, gather information quickly and ultimately allow for efficient, effective decision-making and the ability to influence regulatory action. An effective investigation will quickly identify the organizational risks to the company and commit enough resources, both personel and financial, to deliver the best result.