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Internal Investigations & Independence

Ask any attorney if they can conduct an internal investigation and the answer is “Yes, of course.”  It is easier said than done. 

There is an “art” to conducting internal investigations.  A practitioner has to be able to establish a “vision” of the investigation.  I like to analogize the process to a painter starting with a large canvass and visualizing the end product.  The practitioner has to visualize the process, starting with a purpose, adding in document collection, interactions with the government (if applicable), and keeping the eye on the ball. 

Companies do not want to be surprised by the results of an internal investigation.  If the company has no idea what the results will be, then the company’s governance is seriously lacking.  A major disconnect can lead to a disaster, and an internal investigation will not fix the problem.  

There are a number of ways in which an internal investigation can be derailed.  There are a number of pitfalls along the way.  One critical issue that has to be addressed at the beginning is the independence of the internal investigation.  If there is a question as to the independence of the internal investigation, the entire investigation can be undermined.

The value of an internal investigation is premised on an independent and objective view of the evidence.  Government prosecutors will not credit an investigation which has been conducted by a biased party.  It is easy to identify a slanted internal investigation when issues were ignored or downplayed or evidence was omitted.  Credibility is the key to every investigation.

The selection of outside counsel is only one piece in the puzzle.  Independence does not start with the selection of outside counsel – it starts from day one: the company has to appoint a special committee consisting of independent directors to oversee the internal investigation.  If there is any question as to the “independence” of outside directors, the company’s board needs to appoint a special committee consisting of distinguished individuals, some of which may be non-board members.

Senior management, including the General Counsel or the Chief Compliance Officer, should play a limited supportive role in the internal investigation by facilitating outside counsel’s access to documents and personnel.  If the conduct of any senior manager may be investigated, they must be walled off from any role in the internal investigation. 

The independent special committee should facilitate outside counsel’s access to the company and should supervise the conduct of the investigation to make sure there are no barriers to access.  If outside counsel does not have unfettered access to the special committee, then the investigation will be threatened by interference from subjects of the investigation.  That is unacceptable and creates serious risks for the company.    

The selection of outside counsel is always a balancing act.  One the one hand, outside counsel who is familiar with the company and has worked with the company before may be a good candidate because of his or her ability to navigate the company and quickly move the investigation.  On the other hand, the existing relationship between outside counsel and the company will create the appearance of a potential conflict of interest – did outside counsel go soft on the company in order to curry favor for future work? 

My advice on this issue is to steer clear of any potential conflict of interest – if the stakes are high, independence is critical.  If the investigation is more routine in nature and deals with a more common occurrence (e.g employment issue, regulatory infraction), then existing outside counsel may be appropriate.

I subscribe to a straight-forward principle — the larger the stakes the more important the independence of the fact finder.  In the context of an FCPA internal investigation, I consistently recommend an independent outside counsel – the stakes are simply too high to cut corner on this fundamental requirement. 

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3 Responses

  1. Tzachi Weintraub says:

    When I am called in to conduct an internal investigation, I look at it as a large puzzle but without the complete picture on cover box. You have many pieces to put in place and you have no idea what will be the final picture. This way you can be objective and go where the evidence leads you and not your predeterminedopinion.


  2. Jon May says:


    What guidance do you have for the selection of outside counsel other than independence and knowledge of the industry. The default for many GCs is a name Big Law 100 firm, which will always provide cover for the GC if the investigation is screwed up. And many a GC will look to hire someone who resembles themselves (that's just human nature) but such a person will not necessarily be the best lawyer to feret out a crime. Paper credentials are no guarantee either. Not every former AUSA is a Louis Freeh and we both know former US Attorneys who were basically political appointees. With the stakes so high, you would think there would be some kind of criteria or process that could insure that candidates for outside counsel have the right combination of judgment and investigative experience necessary for this kind of task.


  3. Thanks for a well-written article. I agree that investigations are a bit of an art form and that it is critical investigators be (and as importantly be perceived to be) independent and objective. I also agree with the general premise that companies do not want to be surprised by the results of an internal investigation. With that said, I think it's important to add the caveat that investigators may at times find themselves in the situation where the facts/information gathered in their indepedent and objective investigation is contrary to what the company leadership had anticipated/hoped would be found. It is in anticipation of this circumstance that well-run companies select not just independent, objective investigators but have those investigators report to leaders inside the company who are not directly involved with the circumstances that are the subject of the investigation and where necessary appoint special committees consisting of independent directors to oversee the investigation.