I thought I would take two posts to examine best practices for initial stages of internal investigations: Part I examines the launch of an internal investigation.  Part II examines initial internal investigation plans. 

The initial steps in handling an internal investigation are critical to the ultimate success of the inquiry.  Vast numbers of articles have been written on how to conduct internal investigations.  More attention needs to be paid to the initial steps – in some respects, if the initial steps are bungled, it is hard for the inquiry to succeed.

An internal investigation can be initiated in response to a number of events: (1) an employee complaint (anonymous or disclosed identity); (2) government subpoena or inquiry; (3) complaint from vendor or other third party business partner; (4) conflict of interest inquiry; (5) government search warrant; or (6) government or third party litigation.

In response to the need for an internal investigation, the company needs to assess how serious the initial allegation is, the source and credibility of the allegation(s) and then assign the required staff, or outside counsel, to address the issue.  This can be broken down into two basic questions:

1.  Does the issue require the investigation to start by preserving and reviewing relevant documents or should the initial steps be focused on interviews?

 2.  Given the preliminary assessment of the scope of the issue(s), who should be assigned to the matter and is outside counsel required?  

To answer these basic questions, the company needs to examine how senior the employees are in the organization and the specific role they played in the alleged misconduct.  In addition, the company needs to consider how big an investigative team is needed and if any specific knowledge is needed to investigate the particular issues.  For example, the company needs to assess whether team members should include employees with experience in information technology, forensic accountants, quality assurance, security, environmental health and safety, or internal audit.

In assembling an investigative team, the company needs to ensure that team members have interpersonal skills needed to conduct the investigation.  This skill is a critical factor in every investigation – the ability to conduct effective interviews depends on the ability to relate to the person being interviewed, to gain their confidence and to convince them that disclosure of the information is necessary.  The ability of the investigation team to present the results of the investigation to senior managers, the company’s board, and the government, if necessary, depends on the ability to understand personal motives, influences and persuasion techniques. 

Aside from this basic requirement, team members need to have investigative experience, objectivity, analytical skills, an understanding of corporate policies and procedures, and sensitivity and professional demeanor. 

In the initial stages, the more baseline information known by the team members, the quicker they can focus on the real issues relating to the investigation.  For example, if a quality assurance issue has been raised, then it will be important for a team member to be familiar with the company’s quality practices and controls; understand the specific quality requirement, how it works and who is responsible for the specific quality standard.

There are a few other significant issues which need to be carefully considered.  The investigative team should keep an open mind as to the facts and the focus of the investigation.  A pre-conceived determination can lead to a poor investigation which ignores potential issues and complications.  The ultimate success of an investigation depends on objectivity and fairness.  If a narrow investigation is conducted with a pre-determined result, then it is likely to be an ineffective investigation. 

In its initial focus, the investigative team has to protect against any involvement or influence by a senior manager who may be involved in the alleged misconduct.  If a senior manager is potentially involved or should have exercised supervisory responsibility over the conduct, the investigative team needs to freeze out those senior managers with potential involvement so that it can preserve the results from allegations of conflict of interest.

Finally, the investigative team needs to decide if the allegations require a response to ongoing misconduct or deficiencies, including: (1) suspension of an employee allegedly involved in the misconduct; (2) improper charging for goods and services; (3) harassment or threatening or violent behavior; and (4) procedures for handling of employee-whistleblower.