In today’s environment of constantly changing regulations and the increasing drum beat of eliminating real or imagined “fraud and abuse,” businesses are often hyper-concerned about compliance issues. Once a company has identified a possible issue, the question becomes whether or not to conduct an investigation and, if so, what type of investigation to conduct.
The initial concerns often center on cost and secrecy. Can the investigation be done internally with current staff? Can the investigation be kept confidential? These are understandable questions and simple investigations can sometimes be handled internally with no adverse consequences. However, there are important reasons to consider hiring experienced outside counsel.
Privilege: Hiring of outside counsel creates an attorney client privilege and the privilege can be extended to experts or consultants hired by counsel to help with the investigation. Though the client may choose to ultimately share the findings of the investigation, those findings can be protected until that time.
Independence: Notwithstanding the great and honest intentions behind investigations conducted by a company’s employees, the relevant government agency will likely be suspicious of any investigation conducted by the entity suspected of improper activities. The company may end up hiring independent counsel later, and thereby incur the cost of a duplicate investigation.
Conflict Avoidance: Investigations often include conflicting interests. The business entity may have a different interest and goal that the individual at the heart of the activity leading to the issue being investigated. If there are potential criminal violations, the potential conflict ramifications are even more serious. Experienced counsel can sort out the potential conflicts and design the path to avoid the consequences.
Disclosures: The benefits of engaging experienced outside counsel to conduct internal investigations and evaluate the information gathered include expertise:
- Navigating the increasingly complex requirements and expectations of disclosure to overnment regulators, law enforcement agencies and customers;
- Weighing the pros and cons of voluntary disclosure from a global perspective including experience in evaluating less well from consequences of voluntary disclosure; and;
- Preparing written disclosure submissions.
Any time a company discovers a potential violation of law or regulation, it faces the decision of whether and how to conduct an internal investigation. Not surprisingly, decision makers’ initial impulse is often to go it alone — without the benefit of independent counsel to conduct the investigation. There are, however, significant reasons to resist that initial reaction. Wise companies make the decision with their head, not their gut.
William Powell and E.Leslie P. Hoffman are the attorneys responsible for the content of this article.