Internal Investigations: Preserving Independence

by Michael Volkov

independenceAn internal investigation is only as good as its independence.  Even if a matter is investigated with a fine-tooth comb, employing brilliant tactics, document reviews and witness interviews, it will all be a waste if there is a serious question as to the “independence” of the investigation itself.

There are a number of basic questions and affirmative steps which have to be taken.  If you find yourself unable to get the independence you need, then you should question whether to continue the investigation.

At the beginning, you need to be clear as to who is actually hiring you to conduct the investigation.  If it is a special committee of the board or the general counsel, you need to make sure that no one on the board or the general counsel or other counsel has exposure in the investigation.  If there is a potential exposure, then steps need to be taken to “wall off” the individuals or even an entire department, if necessary.

The question of independence is an issue which fluctuates as more evidence is gathered.  It is important to keep assessing the potential conflict and eliminate any danger.

When outside counsel reports on the status of an investigation, the board members who are present should be limited to those who are members of the special committee.  The minutes of the meeting must be kept separate from regular board minutes.investigator

If counsel is retained by corporate counsel, it is important to wall off any counsel who may be involved in the matter under investigation.  If the general counsel blessed the conduct which is now at issue, the general counsel should play no role in the investigation and should not be the official who hires you for your investigation.  The tricky issue becomes how to keep the counsel’s office apprised of the investigation, without going into details which may undermine the investigation’s independence itself.  One solution is to wall off the counsel’s office but take down the wall once you have reached a conclusion exonerating the counsel’s office.

If the counsel’s office has conducted a preliminary review or a due diligence review, and outside counsel is retained to conduct an independence review, it may be difficult to report to the general counsel’s office given its conflict of interest.  In such case, the general counsel’s office should have nothing to do with the hiring and supervision of the investigation.  If the legal office is under investigation or under a conflict, you may have to report to the board, a committee, or a special committee.

The preservation of independence is critical in those cases where your investigation includes recommended remedial measures.  If there is a government investigation or your internal investigation is being reported to the government, then the value of your remedial recommendations has to be preserved through independence.

justiceIf the government questions your impartiality or independence, your remedial recommendations will fall on deaf ears, and the company could face more severe sanctions and remediation requirements.

From day one of an internal investigation, you must take steps to ensure that the reporting relationship is free of any real or potential conflict.  When reporting on the status of the investigation, the question for each person present is:  Does this person have a real reason to be here listening and providing input or could someone later claim that this person had a conflict, and wanted to influence the direction of the investigation?

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

The Volkov Law Group on:

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