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Investigating Complaints, Theft, or Hotline Tips: Would You Know What to Do?

Almost every company will, at some point, have to conduct an internal investigation. Whether the trigger is an internal complaint of employee theft, hotline tip about discrimination, or government inquiry into regulatory compliance, internal investigations are inevitable in today’s world. Internal investigations, however, are not as straightforward as they may seem. Rather, they are full of twists and turns, and one step in the wrong direction may lead the unprepared down an unintended path. If you had to conduct an internal investigation, would you know what to do?

Here are three things that every company should consider when conducting an internal investigation:

#1: Retention of Documents – Your Trash May Be Another’s Treasure

It goes without saying that the immediate retrieval of relevant documents and electronically stored information (e.g. e-mails) is crucial to any internal investigation. Depending upon the scope and sensitivity of your investigation, employees who may have relevant information should be advised to retrieve and maintain all pertinent information. This is often done via a “do not destroy” memo. If possible, your IT department or personnel should also put controls in place to ensure that electronically stored information is not deleted by employees intentionally or in the normal course of business. Not only is the retention of these documents important for your investigation but the disposition of these documents may also be important in the future, especially if there is potential for civil litigation or a criminal investigation. In these instances, it is often what an employee or corporation does after they become aware of the wrongdoing that gets them in trouble (remember Martha Stewart?).

#2:  Advice of Counsel Warnings – What Are They And When To Give

Advice of counsel warnings are detailed warnings – akin to Miranda Rights – given to employees prior to being interviewed by a company lawyer. These warnings are given for the purpose of ensuring that the company will be able to protect what is said from future disclosure by the attorney-client privilege and to make sure that the right to determine if and when the conversation can be disclosed is maintained by the company – not by the employee. Many commentators recommend that in addition to giving these detailed warnings prior to any employees being interviewed, the company and counsel should also create a written record demonstrating that the warnings have been provided1.

Beware: As a practical matter, the giving of these advice of counsel warnings may very well have a chilling effect on the entire interview process and result in the employee refusing to talk or cooperate. Accordingly, before giving these detailed warnings, it is suggested that a company consider the following to determine what the company’s exposure to liability may be if the allegations being investigated are determined to be true, and whether it is appropriate to modify the warnings:

  • The probability, or lack thereof, of civil litigation;
  • The threat of a criminal or civil government investigation; and
  • The likelihood that sometime the company will want the opportunity to disclose the contents of the conversation.

#3: Use a Lawyer – It May Keep Your Investigation Confidential

Internal investigations often result in the discovery of information of interest to regulators but that a company would rather keep private. This is where the importance of having the investigation done under the direction of either in-house counsel or a retained outside lawyer comes in. By doing so not only will you have access to valuable legal insight but, more importantly, you will be able to assert that the internal investigation is privileged and not subject to discovery or disclosure to regulators. This provides management with the ability to be open and frank in its internal discussions of what may or may not have taken place and how to appropriately respond. Often times, this ability to be forthright in addressing internal issues is key in getting to the root of the allegations and discovering the truth.

Internal investigations are tricky and of a nature all their own. While these tips are, in no way, inclusive of all the matters that should be considered when conducting an internal investigation, they are important and should be kept in mind so you will not be caught off-guard when an internal investigation comes knocking at your door.


1American Bar Association WCCC Working Group, July 17, 2009.