Five Key Internal Investigation Considerations

Internal investigations are used by companies to learn the facts, identify legal and compliance issues, and resolve concerns across a number of areas, ranging from employment practices to health and safety to financial reporting.  When a company determines to conduct an internal investigation, thinking through these five key issues will help assure a thorough and objective investigation.

  1. Identify the right process owner. This is not the person who will conduct the investigation but the one who authorizes it, receives the report, and takes action on it. The process owner needs to be someone who is independent in the matter. For example, if the investigation involves alleged misconduct by an officer, a committee of the board of directors may need to authorize and oversee the investigation.
  2. Preserve evidence promptly. Take immediate steps to preserve obviously relevant documents and other evidence for the investigation. Making relevant evidence available to the investigator and preserving it for later review is a key step to gaining credibility for your investigation if regulators decide to review the same issues at a later date or if stakeholders question the neutrality of the investigation.
  3. Develop a plan of investigation. A well-thought-out plan of investigation helps establish a baseline understanding between the investigator and the process owner. The plan should establish an initial scope of the investigation, i.e., identify the issue(s) to be considered. The plan should also identify the types of documents that will need to be collected and reviewed and the witnesses who should be interviewed.  In some instances, the plan may identify experts that should be consulted. As the investigation progresses, the scope may need to be expanded, based on consultation between the investigator and the process owner, and additional witnesses or experts may be identified. 
  4. Consider the privilege. If the company wants to conduct an investigation that is protected by attorney-client privilege, steps should be taken from the outset to establish and protect the privilege. In many jurisdictions, the privilege is more likely to be upheld if outside counsel serves as the investigator. An engagement letter or memorandum to the file from the process owner or in-house counsel should be written at the outset and should state that the purpose of the investigation is to obtain legal advice. Witness interviews should include appropriate instructions about the privileged nature of the investigation and need for confidentiality. Potential waivers of privilege should be considered before they arise and discussed between the investigator and the process owner. Careful planning can allow the investigator to take steps to minimize or avoid the potential for privilege waiver.
  5. Decide on the form of report. Sometimes a written report is the best format. But finalizing a written report can take time. In some instances, e.g., an accounting restatement where investors have been told not to rely on the company’s existing financial statements, the need for prompt answers may be better served by an oral report or a simple slide show format. As with other key decisions, the investigator should advise and consult the process owner on the form of the final report.

By attending to these five key issues, the investigator and process owner help assure the integrity of the investigation and avoid costly “do-overs.”

Mary O'Connor | Farrow-Gillespie & Heath LLP | Dallas, TX

Mary L. O’Connor’s practice focuses on representing companies and their officers and directors in commercial litigation and arbitration, securities litigation, internal investigations, and regulatory investigations and enforcement proceedings. Mary is currently listed among the Best Lawyers in Dallas by D Magazine, and the Best Lawyers in America by US News and World Report.