The Investigation Is the Thing

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

As highlighted in our earlier blog post, a company’s response to a whistleblower complaint is the key to how the company will fare going forward. How the company investigates the complaint will determine how the enforcement and investigatory agencies will approach the matter, as well as how the company manages the potential for whistleblower retaliation claims. Additionally, the company’s response to a whistleblower complaint will speak volumes to employees about the company’s commitment to compliance and whether they can trust the employer to walk the talk on compliance. Credibility is the currency of effective compliance programs.

Investigations must be prompt, thorough, and free from the taint of retaliation or cover-up. Time is of the essence, especially where there are parallel government investigations with tight timetables, as under the Sarbanes-Oxley Act of 2002. Most often, if not always, the way to accomplish these objectives is to engage expert outside counsel and appropriate subject matter experts to work with internal compliance personnel. The first order of business will then be to identify key individuals for interviews and preserve and gather all potentially-relevant documents and data. The investigators then need to follow the evidence where it leads them, within the clearly-defined scope of the investigation. A disciplined investigation, well-planned and executed, will produce a reliable conclusion, giving stakeholders and agencies confidence in the integrity of the process and the result. 

Early and often throughout the investigation the primary investigators need to communicate clearly with all stakeholders about what they can expect as the investigation progresses. Of particular importance is setting expectations about further communications to those stakeholders—who will be told what, when, and in what form. Any vagueness or over-promising can create suspicion about the investigation and compromise its effectiveness and credibility. 

For example, if there will be no written report, the investigators need to make that clear, especially to the audit committee or the Board of Directors, as the case may be. Likewise, it should be made clear to the whistleblower (if he or she is known) that the particulars of the investigation will not be reported back to him or her but that the conclusion of the investigation and its outcome will be. Finally, the company should explain to the whistleblower, if his or her identity is known, that the baton has been passed to the investigators on the matter of the complaint, that he or she can rely on the company’s non-retaliation commitment, and that he or she must continue to focus on his or her job. Importantly, under many statutes with whistleblower provisions the whistleblower is entitled to anonymity as far as internal investigations are concerned, and investigators need to ensure that their communications do not reveal the whistleblower’s identity.

As for the whistleblower employee’s situation going forward, how the company handles the investigation will determine substantially whether the company’s hands effectively are tied with regard to future employment actions involving the whistleblower. The company must have—and enforce—an effective anti-retaliation policy as a component of its compliance program, and the prudent employer embraces the “righteous” whistleblower. Blowing the whistle, however, should neither erase the past sins of the whistleblower nor give him or her carte blanche to violate company policies or fail to meet his or her employer’s expectations of performance and conduct. An employer can make a legitimate, non-retaliatory adverse employment decision when it is warranted by the facts. Retaliation cases typically arise from events in real time, and they can be avoided. It is thus important to keep separate the whistleblower’s participation in the compliance process and his performance of his job duties, and the bases for any proposed employment action should be well-documented, ideally by disinterested parties. In those circumstances, courts and regulatory agencies are far more likely to find no retaliation, no matter what the outcome of the underlying investigation.

The most elegantly-described compliance program is only as good as its execution in real life. A company’s credibility with its stakeholders—and with the investigatory and enforcement agencies—depends on how it investigates whistleblower complaints.

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.

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Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

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