Corporate Internal Investigations: Establishing a smart investigation strategy

For in-house counsel and their outside law firms, corporate internal investigations typically were prompted by some sort of employee misconduct that needed to be assessed, documented and quickly resolved. Those instances are still an occasional thorn in the side of a GC, but in today’s global economy, the underlying causes of an internal investigation are far more diverse: allegations of accounting fraud, whistleblower complaints and retaliation claims, just to name a few.

Whether an internal investigation is prompted by a subpoena from a government agency or is voluntarily launched by a company based on internal reports, it’s useful to learn from other corporate legal departments and leading outside law firms regarding the best practices for conducting a corporate investigation. We’ve collected some of these valuable insights and will be sharing them in a four-part series of blog posts in the weeks ahead.

In this post, we address Step One: the importance of establishing a smart investigation strategy.

“Any internal investigation carries with it a sense of urgency, but the experts we surveyed agreed that careful advance strategizing can help to reduce mistakes, ensure that investigatory standards are upheld and lay down a clear historical record to demonstrate to future audiences – such as regulatory agencies, judges and juries – that a thorough process was followed,” said Steve Ashbacher, vice president of litigation solutions with the LexisNexis software and technology business.

This strategizing begins with a thorough assessment of the investigation, asking foundational questions such as:

• Who is involved?
• What is the issue?
• What is the purpose of the investigation?
• What are the objectives?
• Who should conduct this investigation?
• Is litigation anticipated or can it be forestalled?
• Have there been similar issues and litigation in the past?
• Is there a risk of upsetting key relationships?

“Sometimes these issues can get away from you if, at the outset, you haven’t identified what needle you’re going to look for in the haystack,” Valecia McDowell, a member at Moore & Van Allen, said to InsideCounsel. “Circumstances and facts may present themselves over the course of the investigation that may alter your scope, but you want to make sure you’re ready at the beginning and that everybody understands where you’re starting.”

Another important matter to consider in establishing your investigation strategy is whether there is a pending government investigation. If so, it may be advisable – or even required – by the relevant government agency to coordinate the investigation alongside you. Also, you should explore whether there are potential self-reporting obligations and build those into your initial strategic plan.

One of the keys to a sound strategy is to find the right balance in the scope of the investigation. On one extreme, if the strategy is too ambitious, it may try to accomplish too much and lack the necessary focus to deliver specific findings. On the other extreme, if the strategy is too modest for the circumstances, it may accomplish too little and prosecutors or other outside observers might not find it to be thorough enough. Steven Tyrrell, a Weil, Gotshal & Manges partner who was chief of the DOJ’s fraud section from 2006 to 2009, says the goal should be to “strike the right balance and have a dialogue with the people to whom you’re reporting the results of the investigation.”

Once a smart investigation strategy has been put in place, the necessary steps, resources and timing can be determined. For the next post in this series, we’ll examine the importance of building a smart investigation team to do the hands-on work and process management.

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This post is by Daryn Teague, who provides support to the litigation software product line based in the LexisNexis Raleigh Technology Center.