Conducting internal investigations: 8 important steps

Experts share tips and pitfalls for investigating misconduct.

Online Exclusive: Learn how to maintain objectivity in self-investigations

The corporate internal investigation has become increasingly commonplace since the post-Enron days, when Sarbanes-Oxley made good corporate governance a mandate. At the same time, government agencies and prosecutors have come to rely on self-investigations to carry out costly, intensive company probes. The Washington Post recently reported that an internal investigation into global bribery cost Siemens around $950 million—almost triple the budget of the Securities and Exchange Commission’s (SEC) entire enforcement division at the time the case was resolved in 2008.

1. Issue a Hold

Any number of events may launch an internal investigation at a company: a subpoena, a search warrant or a notice of investigation from federal prosecutors; a phone call from a regulatory agency; an employee complaint; a shareholder demand letter; concerns from auditors; or even a media report that makes management aware of a potential legal issue. Whatever the driver may be, a first step in carrying out an investigation is to ensure any potentially relevant documents are preserved by issuing a litigation hold that suspends any routine document-destruction practices and makes clear to all relevant parties that they must preserve documents or communications related to the investigation.

2. Define the Scope

Simultaneously, the client should begin working with outside counsel to determine the scope of the investigation going forward.

3. Focus the Investigation

Steven Tyrrell, a Weil, Gotshal & Manges partner who was chief of the DOJ’s fraud section from 2006 to 2009, says the most common pitfall in internal investigations is doing too much and lacking focus. The other extreme is another misstep: If prosecutors don’t think the investigation is thorough enough, he says, the company might not get any credit for it. “Strike the right balance and have a dialogue with the people to whom you’re reporting the results of the investigation,” he says.

4. Build a Team

A strong team experienced in internal and white-collar investigations can lend credibility to a company’s findings.

5. Collect and Review Documents

Once the investigation team lays the groundwork and deals with the most pressing initial issues, the meat of the investigation begins. The investigation team identifies search terms and custodians, and begins document production and review. It’s usually the costliest part of an internal investigation, but the assistance of the government agency or prosecutor can help make the process more manageable.

6. Interview Witnesses

Along with identifying search terms, investigators should identify potential witnesses. Deciding whether to interview witnesses before or after document review usually depends on the situation. If the investigation time frame is short and things are moving quickly, sometimes there’s not enough time to wait until after review. In other instances, the lawyer conducting the interview wants to go in with full knowledge of what documents were uncovered in discovery.

7. Mind the Privilege

8. Time Any Disclosures

For companies cooperating with government agencies or prosecutors, another decision is when in the investigation process to self-report to the government, either in real time or after the investigation’s completion. “It’s a real debate in the corporate community and the defense community,” says Pollack.

Associate Editor

Melissa Maleske

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