Early Mistakes In An Internal Investigation Can Be Very Costly—Here’s How To Avoid Them

March 10th, 2017

An Article by Charles Hastie, Regulatory Head, co-authored by Jake McQuitty, entitled, “Early Mistakes In An Internal Investigation Can Be Very Costly—Here’s How To Avoid Them” has been published in Inside Counsel. An excerpt of the article can be found below. 

The article relates to Clutch’s upcoming publication, Guide to Conducting Internal Investigations to be released in six separate installments. It will provide best practices and guidance for those conducting or overseeing investigations. Share the link to sign up for the Guide.  

 

Early Mistakes In An Internal Investigation Can Be Very Costly—Here’s How To Avoid Them

In this age of transparency, internal investigations have proliferated across a wide range of industry sectors—financial services, automotive, pharmaceutical, retail and many others.

Charles Hastie & Jake McQuitty, Inside Counsel March 10, 2017

Volkswagen, email hacking, foreign exchange trading—organizations are focused on investigating issues or concerns that have major headlines. In this age of transparency, internal investigations have proliferated across a wide range of industry sectors—financial services, automotive, pharmaceutical, retail and many others.

We have seen multiple enforcement agencies competing to investigate the same matter, appearances before governmental committees, and trial by press. The stakes have never been higher and the importance of conducting an internal investigation in the right way has never been greater.

Yet there is a lack of practical guidance on how to run an investigation in-house.

What should the early phases of a good investigation look like? How to best support boards, general counsels, and corporate executives navigate the myriad, complex issues that arise? These questions often are unanswered.

Facing a Live Concern

The beginning can be the most stressful and perilous phase in an investigation, especially one you are faced with a ‘live’ concern involving allegations of misconduct that is serious, ongoing and unchecked.

In these situations, your first priority is to consider whether any employees present a significant and current risk to the business, its customers, or perhaps even the markets (think market abuse). If that’s the case, you may need to consider initiating a process to suspend them from employment immediately. This is a protective rather than a disciplinary measure, but will need to addressed in consultation with H.R. Typically, unless the evidence is overwhelming, an interview with the employee in question will be necessary first to give them the opportunity to respond to the allegations.

Investigators should also consider whether any employees present a risk to the investigation itself—such as destroying evidence, influencing witnesses or otherwise frustrating the investigation. Again, a suspension may be necessary to mitigate this risk, but alternative options, such as moving the individual to another role, can be discussed with H.R.

What are the immediate priorities for an investigation when there is a live concern?

There can be an overwhelming temptation when an investigation kicks off to dive immediately into the evidence. However, there are a number of serious regulatory, reputational and other risks that you need to consider first. Some key procedural steps early in the process will keep these at bay.

For further information on this and other topics on internal investigations, sign up to receive Clutch Group’s Guide to Conducting Internal Investigations.