Internal Investigations & Independence

by Michael Volkov
Contact

Ask any attorney if they can conduct an internal investigation and the answer is “Yes, of course.”  It is easier said than done. 

There is an “art” to conducting internal investigations.  A practitioner has to be able to establish a “vision” of the investigation.  I like to analogize the process to a painter starting with a large canvass and visualizing the end product.  The practitioner has to visualize the process, starting with a purpose, adding in document collection, interactions with the government (if applicable), and keeping the eye on the ball. 

Companies do not want to be surprised by the results of an internal investigation.  If the company has no idea what the results will be, then the company’s governance is seriously lacking.  A major disconnect can lead to a disaster, and an internal investigation will not fix the problem.  

There are a number of ways in which an internal investigation can be derailed.  There are a number of pitfalls along the way.  One critical issue that has to be addressed at the beginning is the independence of the internal investigation.  If there is a question as to the independence of the internal investigation, the entire investigation can be undermined.

The value of an internal investigation is premised on an independent and objective view of the evidence.  Government prosecutors will not credit an investigation which has been conducted by a biased party.  It is easy to identify a slanted internal investigation when issues were ignored or downplayed or evidence was omitted.  Credibility is the key to every investigation.

The selection of outside counsel is only one piece in the puzzle.  Independence does not start with the selection of outside counsel – it starts from day one: the company has to appoint a special committee consisting of independent directors to oversee the internal investigation.  If there is any question as to the “independence” of outside directors, the company’s board needs to appoint a special committee consisting of distinguished individuals, some of which may be non-board members.

Senior management, including the General Counsel or the Chief Compliance Officer, should play a limited supportive role in the internal investigation by facilitating outside counsel’s access to documents and personnel.  If the conduct of any senior manager may be investigated, they must be walled off from any role in the internal investigation. 

The independent special committee should facilitate outside counsel’s access to the company and should supervise the conduct of the investigation to make sure there are no barriers to access.  If outside counsel does not have unfettered access to the special committee, then the investigation will be threatened by interference from subjects of the investigation.  That is unacceptable and creates serious risks for the company.    

The selection of outside counsel is always a balancing act.  One the one hand, outside counsel who is familiar with the company and has worked with the company before may be a good candidate because of his or her ability to navigate the company and quickly move the investigation.  On the other hand, the existing relationship between outside counsel and the company will create the appearance of a potential conflict of interest – did outside counsel go soft on the company in order to curry favor for future work? 

My advice on this issue is to steer clear of any potential conflict of interest – if the stakes are high, independence is critical.  If the investigation is more routine in nature and deals with a more common occurrence (e.g employment issue, regulatory infraction), then existing outside counsel may be appropriate.

I subscribe to a straight-forward principle — the larger the stakes the more important the independence of the fact finder.  In the context of an FCPA internal investigation, I consistently recommend an independent outside counsel – the stakes are simply too high to cut corner on this fundamental requirement.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov
Contact
more
less

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!