Where corporate entities face allegations of criminal, civil, or administrative violations, at least some form of internal investigation is required.
After all, the company one way or another must determine whether the allegations being made are true or false – and if true, who or what is to blame, what remedial steps may be required, and what can be done to prevent a recurrence. The contexts in which such internal inquiry is necessary span the gamut, from routine human resources issues to serious allegations of environmental or regulatory non-compliance. Every scenario is different, and a full-scale internal investigation is impractical and unwarranted in many instances. Still, for those allegations raising the specter of significant consequences of whatever kind, seasoned corporate managers understand that the best course of action is the engagement of outside counsel to conduct a formal internal investigation.
The purpose of any internal investigation is simple: to unearth the truth. Nothing more, nothing less. The company’s reaction to whatever issue confronts it must necessarily be determined from a position of knowledge. Absent knowledge of the underlying facts, the company cannot make intelligent decisions and chart its course.
The advantages of engaging outside counsel to conduct a formal internal investigation – as opposed to attempting to handle the matter internally – are two-fold. First, an investigation conducted by credible outside counsel (like Mr. Dusing’s team at Faruki) is inherently more credible than the most thorough investigation conducted by a company’s officers and employees, some of whom may themselves be implicated in the alleged wrongdoing. This credibility only attaches, however, if outside counsel is known to and has credibility with law enforcement; otherwise, the perception can be that outside counsel is being paid to sanction the conduct under investigation. As a former federal prosecutor with strong law enforcement relationships, Mr. Dusing and the Faruki team bring the necessary credibility to the table. Second, having outside counsel perform the investigation insures that – if performed the right way – any and all investigative findings enjoy attorney-client privilege and work-product protection and are thus not subject to third-party disclosure. This, of course, is critical. Whether the facts are good or bad, the company must learn the facts. But if the facts turn out to be bad, and investigative findings are subject to disclosure, the company, through its internal investigation, has essentially tied a noose around its neck. Private litigants and governmental investigators alike can prove their case simply by subpoenaing the substance of the target company’s internal investigation.
The importance of the attorney-client and work-product protection afforded the investigative findings of outside counsel cannot be overstated. While in some instances the findings of inside counsel may be deemed protected, the bottom line is that the findings and work product of internal investigations conducted by inside counsel are not, like those of outside counsel, per se protected. For this reason, while resource limitations require that in-house counsel investigate routine matters themselves, it is absolutely essential that large-scale and more significant investigations be spearheaded by outside counsel. Given that investigations conducted by in-house counsel are often perceived as less-than-impartial, the need for outside counsel to investigate the more serious matters is that much more important.
Just as important as protecting against involuntary disclosure of information obtained through an internal investigation is the decision what to do with that information if it uncovers violations. The “should we disclose?” decision is, of course, all important. The answer to this question is necessarily situation-specific, but in every case it involves a fundamental understanding of not only the legal, regulatory, and administrative landscape, but also of the “players” operating within. In both of these respects, Mr. Dusing’s prior experience – and existing relationships – serve as invaluable assets.
In the final analysis, internal investigations are very much an art. Internally investigating serious allegations of corporate wrongdoing is a necessary exercise but one fraught with peril. In virtually every circumstance, delicate questions are sure to arise. For example, who in the corporation should participate in the investigation? What is the proper role, if any, of third-party experts such as accountants? How can the corporation ensure that the statements of individual employees are not subject to disclosure? What issues are in play if an employee is represented by separate counsel? Does the corporation have a duty to advise a corporate officer it suspects of wrongdoing?