Internal Investigations: Be in the Know

Shawn Wright, partner, Blank Rome LLP, moderated the panel discussion

More regulation and oversight for corporate America are on the forefront of congressional debates. In light of this, businesses should be knowledgeable about internal investigation protocol and how to be prepared in a world where communication channels seem endless, and are discoverable through E-discovery. Legal experts gathered recently to discuss “Nuts & Bolts: How to Conduct an Effective Ethical Internal Investigation,” during the American Bar Association’s Internal Corporate Investigations and Forum for In-House Counsel 2010 meeting.

Panelists discussed allegations that can trigger an investigation, how to structure and conduct an investigation, protocol on interviewing officers and employees, and more.

From whistleblowers, to shareholders, to subpoenas from government agencies, any number of situations can trigger an internal investigation. Depending on what triggers one may affect how you structure and conduct it. Regardless, according to panelists, the key tasks should first include: identifying the client; identifying the subject matter; defining the issue; identifying the investigators (are they external or internal?); setting and guiding the reporting system; and preserving all documents.

The choice to use internal or external counsel when conducting an investigation was the topic of much debate among panelists. Procedure may vary depending what triggered the investigation, but all panelists agreed that should the investigation spark from a government subpoena, external counsel is a must to ensure credibility.

For the interview process, you may use in-house counsel, said panelists. However, appropriate steps must be taken to ensure that all information collected is impartial. First, you want at least two people in the room so there is a witness to the Upjohn warning – a disclaimer issued by a company attorney to an employee of the company, advising him or her that the attorney does not represent them, but rather the company, as legal entity.  Note that if you use in-house interviewers make sure that none of them have any personal or professional relationship with the people they interview, thus ensuring that the information collected is not biased. Interviews should always be structured to protect attorney-client information and address any potential ethical issues. Also, depending on what information is found in the interviews, individual employees may need separate legal representation aside from the company’s hired counsel.

In finalizing a report make sure to include the following information: client identity, purpose of retention, how investigation was conducted, description and interpretation of evidence that was discovered, and legal conclusions and recommendations. Additionally, any voluntary disclosure should be communicated with the government, as well as any revised polices or corrective actions that have been taken to fix the subject matter under investigation.

While many corporate leaders may be tempted to proceed with the most cost-effective investigation and use in-house counsel, remember that an investigation will not be cost-effective if you have to start it over, due to questionable protocol in collecting or reporting the information. Credibility is everything when it comes to internal investigations, without it you may be putting your corporation at risk of serious damages.