How Do I Keep My Business Going if I Am Being Investigated?

Lesley Brovner & Mark Peters
August 7, 2024

Government investigations are serious business and require a serious response. To begin with, they can lead to fines and penalties that can affect the very viability of a company or nonprofit. Even if the investigation ends without a finding of liability, the process itself can be debilitating to some companies and nonprofits, in terms of cost to defend against the investigation, time taken away from core business activities and reputational risk.

How Government Investigations Can Affect Your Business

A finding of liability can result in serious fines and other penalties including loss of licensure. However, as noted above, the very process of being investigated (and responding to the government and defending the investigation) can have serious consequences. For example:

• Investigations are expensive: Not only do you need to hire a law firm with experience handling these matters, but, if the government is demanding large quantities of documents, you may need to hire an eDiscovery vendor to collect, manage and produce those documents to the government. Depending on the volume of documents, this can be very expensive.
• Investigations are time consuming: The government may seek to interview (or even examine under oath) various employees and this will take time both for the interview itself and for the careful preparation that takes place before such interviews. Even beyond such interviews, the government will have detailed factual questions that your lawyers will need to consult with you about in order to craft fully accurate and complete answers that avoid revealing privileged information.
• Investigations impact a company or nonprofit’s reputation. While not all investigations are public, many do become public at some point. And while an investigation does not, itself, indicate that the company/nonprofit has done anything wrong, the mere cloud that will hang over the entity’s head can require rapid and nimble crisis management and PR strategies.
• Investigations will take away focus from your primary business purpose. Your job is to run your company or nonprofit in a way that delivers results and satisfies clients, investors and other stakeholders. Investigations are time consuming and take away time otherwise devoted to your primary role.

Best Advice Regarding your company’s response to an Investigation

The most important advice is to get a team in place to respond to the investigation and then respond to the government in a timely manner – the investigators won’t go away if you ignore them, they will only become more aggressive in assuming wrongdoing.

Another important step is to quickly hire counsel who can advise you on the investigation and interact with the investigators. This is not something you should do on your own. The first thing counsel will do is to reach out to the investigators to determine the scope of the investigation and whether your company or nonprofit is a target of that investigation or merely considered a third-party witness. Counsel will also conduct an internal investigation to determine if there are any violations of laws, regulations or rules and, if so, how to fix them and prevent them from happening going forward.

A third important step is to immediately preserve all documents, emails texts etc. The destruction of such documents, after learning of the investigation, can result in an inference of improper conduct in many proceedings. Your attorney should help you coordinate this with a “document preservation notice” that goes to all employees instructing them to preserve their documents. Further, as part of the document hold process, you should work with your IT department to make sure that any automatic deletion functions are turned off.

How Different Agencies Investigate Businesses

Different agencies may approach their investigations in different ways, which is why it’s important to have lawyers familiar with the particular agency in question. Some agencies have criminal law enforcement powers while others have only civil regulatory authority; some can only start an investigation when there is some reason to believe there is wrong-doing while others have general authority to enforce a set of laws, rules and regulations and therefore can do routine audits without any prior proof of bad actions. Either way, however, the agencies main concern will be: First, gathering essential documents that can show both the general operations of the company/nonprofit and whether there has been a violation of any laws, regulations or rules; Second, after the documents have been reviewed, gathering verbal information (either through informal interviews or sworn depositions) to further explain the documents and fill out gaps in knowledge from the document review.

Figure Out You’re Company’s Response Plan

It is important to quickly determine a response plan once a government investigation starts. The first step is an review of the company/nonprofit’s internal practices and policies to see if the government may have a viable case that laws, rules or regulations were violated. If there are potential violations, you should move to fix them quickly, and take action to ensure that the relevant rules are complied with going forward. If you are reasonably confident – after your lawyers have done a thorough review – that there are no violations, you can take a somewhat more aggressive position.

Unless the investigative agency is acting completely outside the scope of their authority (which is rare) you will need to cooperate with the investigation. Again, experienced attorneys – who know the agency and also know how to do internal investigations – can help you make this decision.

Dealing with Public Disclosure

Public disclosure comes in many forms and has both legal and practical consequences. To begin with, publicly traded companies, depending on the nature of the inquiry, may be obligated by SEC rules to make a disclosure of the investigation. On the other hand, some subpoenas come with a request that the recipient of the subpoena not disclose its contents. A lawyer familiar with these issues can help you navigate these various requirements.

There is also a practical side to public disclosure. Since staff and stakeholders will eventually learn about the investigation – from the document preservation notices discussed above, to the need to gather information from these staff and stakeholders – you will want to carefully manage this and perhaps consider some formal notice to staff and stakeholders so that they are not caught by surprise and so that the work of the company is not disrupted by confusion and speculation.

Finally, there is disclosure to the public at large. Most (though not all) investigative agencies do not comment publicly on investigations until they are complete, but their investigation may involve search warrants and interviews with past and present employees, some of whom may be disgruntled and may therefore disclose the investigation. Thus, it while it may be possible to prevent disclosure to the public at large during the duration of the investigation that is by no means certain. As such, and at the very outset it is important to consider how you will respond if the investigation does become public and the pros and cons to affirmatively getting ahead of any such disclosure.

Look for Outside Counsel

You need to find outside counsel who are familiar with the agency conducting the investigation. Not all agencies are alike and so, for example, if you are being investigated by the State Attorney General or a City regulator, it is important to have counsel who come out of that background and are familiar with state and local issues.

Contact Peters Brovner Today!

If you are someone you know has a company or nonprofit that is under investigation, contact the lawyers at Peters Brovner for a consultation to see how we can help you navigate this difficult process.