Internal Investigations: When do You Need One and What Should You do to Prepare?

Lesley Brovner & Mark Peters
June 23, 2022

In the current business environment, the way in which companies investigate potential misconduct can affect that company’s reputation almost as much as the alleged conduct itself.  Moreover, without understanding the full scope of the misconduct it is impossible to reckon with the issues that occurred, create a compliance program and prevent future problems.

Below are a number of issues that you should consider before undertaking an internal investigation.

When should you conduct an internal investigation?

  1. You become aware of employee misconduct. Examples of this include:
    • Failure to follow industry regulations
    • Failure to follow internal procedures
    • Other criminal actions taken on company time or using company resources
    • Sexual, physical, or verbal harassment
    • Threats or intimidation/bullying
    • Data leaks
    • Payroll abuse
    • Theft of company property
  1. Regulators are looking at a specific issue in your industry and you want to make sure you are in compliance.
  2. You become aware of a problem that has arisen at another company in your industry and you want to ensure that you don’t have that issue.

What are the benefits of an internal investigation?

  • Allows the company to learn the full scope of the problem
  • Allows the company to remedy internal problems and help prevent future problems
  • May allow the company to recover assets that were lost as a result of the misconduct
  • May allow the company to avoid a lengthy governmental investigation
  • May allow the company to take advantage of potential benefits of cooperation with regulators/prosecutors
  • May mitigate penalties from regulators/prosecutors
  • May insulate the company, Board, or management against allegations of complicity or of willful blindness to red flags
  • Allows the company to manage reputational risk
  • Helps the company prepare for civil & criminal litigation involving the company
  • Promotes a culture of transparency and compliance

How should you prepare for an internal investigation?

  • Preserve all relevant documents (paper and electronic)
  • Determine the scope of the investigation needed
  • Determine who can conduct such an investigation
  • Determine who will communicate for the company to the outside world if inquiries are received and set up a process for addressing those questions
  • Determine who will communicate with staff about the investigation and create a process for addressing internal inquiries.

Who should conduct the Investigation?

The investigation should be conducted by people with expertise in investigations who have established credibility with governmental regulators and prosecutors.

What can you expect from an Investigation?

  1. An investigative plan outlining the scope and methodology of the investigation.
  2. A full and comprehensive investigation including some or all of the following:
    • Research
    • Data analysis
    • Document review
    • Witness interviews
    • Forensic analysis
    • Risk Analysis
    • A final written report
    • A compliance plan going forward

If you need to conduct an internal investigation, please contact the lawyers at Peters Brovner who have decades of experience conducting investigations and creating compliance plans for a consultation.