Should We Do a Corporate Internal Investigation or Notify the Government?

Use these links to jump to different sections:

• Do You Have a Legal Obligation to Investigate?
• Who Should Actually Conduct the Investigation?
• What Is Your Plan Moving Forward?

Indiana businesses need to comply with a dizzying array of federal and state regulations and government agencies. Indeed, even the best-run business will eventually face some allegation of wrongdoing or failure to comply with a particular regulation.

Oftentimes, these allegations come from within the business itself (that is, from an employee or whistleblower filing a complaint).

The question is: What should be the company’s response to such complaints? Should the company open an immediate internal investigation to verify or discredit the employee’s alleged misconduct? Or is it best to immediately self-report and notify the applicable federal or state regulator and let them handle any investigation?

As with any legal matter, it is always best to get legal advice from a qualified Indiana white collar criminal law attorney with respect to your particular situation. Here are some general guidelines your business should consider when handling allegations of wrongdoing.

Do You Have a Legal Obligation to Investigate?

In some scenarios, the laws governing a particular industry may actually require you to conduct an internal investigation.

For example, federal securities law, regulated by the Securities and Exchange Commission (SEC), requires public accounting firms to investigate potentially illegal acts discovered in the course of an audit.

There are also scenarios where an investigation may be prompted by outside legal action, such as a subpoena from a state prosecutor or a civil lawsuit. Indeed, if there is an active government investigation into your corporate entity—or you expect one is imminent—then it is usually in your best interest to initiate your own corporate investigation into the underlying issue.

Who Should Actually Conduct the Investigation?

Certain company employee complaints can be properly investigated by existing staff, such as human resources or the general counsel’s legal department.

But an “internal” investigation does not necessarily mean that someone inside the company should actually take the lead.

For instance, if a potential violation or allegation of wrongdoing is leveled against senior management or the board of directors, or the legal issues involved are beyond the normal competency of in-house counsel, it often makes sense to delegate the investigation to a experienced Indiana white collar criminal law attorney.

Also keep in mind that if your business is under active government investigation, the results and relevant information of an internal review conducted by an outside firm may carry more weight than one handled entirely by employees and may provide cooperation credit or leniency.

What Is Your Plan Moving Forward?

Regardless of how you decide to conduct an internal investigation–or even if you simply decide to let the government conduct its own investigation—it is important to have a plan in place. Among the minimum requirements of such a plan:

• How will you receive any employee complaints? Will you conduct immediate individual employee interviews and other potential witnesses?
• How will you preserve any potentially relevant evidence, such as emails, document review, chat logs, or records of video calls?
• How will you preserve any key legal privileges, such as attorney-client privilege, conflicts of interest, attorney work product and privileged documents in the event of an outside investigation?
• If your internal investigation reveals there is evidence of wrongdoing, how will you respond and implement corrective action?

This last item is especially critical when dealing with a government or regulatory investigation.

Companies that take the time to conduct a proper internal investigation and “come clean” with the government can often escape the most serious legal penalties—provided the company presents a plan of action to address and remediate the illegal activities or participate in a compliance program or a change in company policy.