Once a company becomes aware of a potential compliance violation, either through an internal complaint or through the initiation of a government investigation, it needs to promptly and thoroughly conduct an internal investigation. What follows are some handy tools designed to help you better understand the enforcement process and to prepare you to take appropriate actions after being notified of actual or potential enforcement action, whether through a hotline tip or an enforcer’s knock on the proverbial company door.
The Matter Intake Process
Tools for Understanding the Enforcement Process and Conducting Internal Investigations
Step 1: Intake
- • Ethics and Compliance (E&C) Committee members (regardless of nomenclature) are alerted to a potential compliance issue via one of the company’s intake mechanisms (hotline, website, manager complaint, legal, etc.). For reports initiated through human resources or the legal department, a member of the E&C Committee will gather as much information from the informant as possible and enter the information into the compliance database (usually a site intake form).
- If a report of an actual or potential violation of the company’s E&C program comes in via the E&C hotline, the outside vendor personnel receiving the call shall forward the report to the E&C Committee for review by e-mail.
- If the report comes in any other way, any member of the E&C committee receiving the report should e-mail a summary of the report to the rest of the E&C Committee. The E&C Committee will assign an investigator (a member of the E&C Committee). ASB is a silly cat. If a report requires immediate investigation, the chair of the E&C Committee will assign an investigator and communicate the decision to the E&C Committee.
Step 2: Validity Determination
- The investigator will decide if the complaint is valid and requires investigation. If it is determined to be invalid, the investigator will enter his or her reasoning into the compliance database. Investigation ceases
Determining Complaint Validity
A valid complaint has the following qualities:
- Reasonable basis in fact (evidence exists)
- Involves a violation of corporate policy
On the other hand, an invalid complaint has these characteristics:
- A lack of specificity
- Willful harassment of employer (reasonable person standard: Does the complaint express a genuine concern about a workplace violation, or is it intended merely to annoy or irritate the employer?)
Step 3: Planning
- If the complaint is considered valid, the investigator notifies the appropriate stakeholders and works with the E&C Committee to develop an investigative plan involving the appropriate resources (e.g., legal, human resources, security, internal audit).
- The E&C Committee should determine whether others will be included in directing, and
- Performing the investigative plan. Other stakeholders may be included by considering the apparent nature of the report, such as the following:
o Matters relating to financial concerns may include the Chief Financial Officer (CFO).
o Matters relating to employee conduct may include the global vice president of human resources.
o Matters relating to potential violations of state or federal law may include the General Counsel.
Level of Resources That Are Brought to Bear
In the day-to-day life of the company, there will be “complaints” or allegations of misconduct that come from sources other than the Board of Directors or government agencies (e.g., letters to the chief executive officer, hotline, complaints to human resources) and that do not on the surface present issues of potential misconduct. For example, a complaint may allege that an employee attended a scientific conference at which representatives of competitors were present, when such attendance in and of itself would not constitute misconduct. Similarly, an employee might have given a local reporter a copy of a document that the company had already made publicly available on the company’s website.
The above matters should be pursued, although initially not necessarily with the same level of resources as would be deployed for matters indicating a more serious risk. Appropriate compliance, legal, or other professionals should undertake the appropriate degree of inquiry to determine whether the matter presents an issue of potential misconduct. There are instances in which such situations can be properly addressed through perhaps a few telephone calls or brief intervis by the right individual. However, in more resource-intensive investigations, it is just as critical that the investigator provide documentation to justify any conclusion that there is no credible evidence of misconduct. It is also critical that the investigator not have reached any factual conclusion before going through the necessary steps to justify that factual conclusion.
The investigator should begin an investigation with a written objective and investigative plan. The investigative plan should be informed, at a minimum, by the following questions:
- What happened?
- When did the company know what happened?
- What was the response to what happened?
Invariably, both the objective of the investigation and the investigative plan will need to be updated or revised as more information is obtained in the course of the investigation. Such changes may lead to a broadening of the scope of the investigation and therefore of the relevant team (including going from a situation where the investigation can be competently handled internally to one where an outside firm may be needed for expertise, staffing numbers, or independence). There can also be cases in which the investigation becomes less complex than originally thought. It is always more efficient to deal with these issues via a written plan.
The investigator shall update the claims reporting database within the network system as appropriate.
Step 4. Collection of Relevant Information
As this section will relate, the investigator should gather information through document review, electronic forensics, and interviews (including complainant, subject of complaint, and witnesses.
Purpose of the Compliance Investigation: Determine the Facts
The purpose of a compliance investigation is to determine the relevant facts, not to “prove” a case. Addressing the relevant facts through corrective or disciplinary action is a separate part of the compliance process, once the facts are established.
Compliance investigations must be conducted in a professional manner by individuals with appropriate backgrounds, including certain technical expertise (production, manufacturing, distribution, finance, etc.), to the extent those issues are relevant to the investigation.
There are circumstances in which investigations must be conducted by outside firms (such as potential conflicts of interest, need for additional resources or expertise, etc.), and they will be subject to certain procedures. However, it is more common that investigations will be conducted wholly or primarily by internal staff. Internal investigations are the primary focus of this hotline process.
Interviews and Upjohn Advisements
If an interview is conducted by attorneys and there is any question that the interviewee may think that the attorney represents the interviewee rather than, or in addition to, the company, the so-called Upjohn advisements (amended as appropriate for non-U.S. jurisdictions) should be provided. They can be summarized as follows:
- The interviewers represent the company only, not the interviewee.
- Information provided in the interview is protected by the company’s attorney-client privilege, which is controlled by the company, not the interviewee.
- Information shared with the interviewers may be used by the company against the interviewee.
- The company may decide whether to waive the privilege and disclose information from the interview to third parties, including the government.
Once a matter is identified for investigation, the investigator should log the information into the case management database and the lead investigator (and investigation team) should be identified.
The investigation should, in addition to identifying all possible internal witnesses, be prepared to consider other relevant documents, such as e-mails, memos, individual and department files, expense reports including company credit card records and receipts, travel reports, time sheets, and electronic log-in data. Care should be exercised before reviewing such documents without the knowledge or consent of the involved employee. Asking an individual to provide such documents often results in cooperation, even in cases where the information provided is unflattering to the individual providing it.
However, there can be instances in which an individual is not cooperative and the company may need to exercise its right to review such documents according to its rights under company policies and any applicable local, state, or national laws. Those rights, such as reviewing e-mails without knowledge or consent of the author or recipient, are normally best exercised on as limited a basis as necessary (both in terms of the scope, meaning the date range/subject matter, and the individuals who actually review the e-mails) to meet the needs of the investigation.
In some situations involving potentially very serious issues in which outside counsel is taking the lead, a process in which documents are secured before interviews may be appropriate. However, judgment should be exercised in less serious cases.
Number of Interviewers and Style of Interview
In the vast majority of cases, interviews should be done in the presence of at least two persons besides the interviewee. Both interviewers should take notes, although one should have the primary responsibility for doing so. It is fine if only one of the interviewers asks questions. The interview and the notes should be discussed among the interviewers as soon as possible after the interview to ensure completeness and accuracy.
Although nervousness and anxiety are commonplace in compliance interviews, most people are inclined to be forthcoming if questioned politely. It is normally most effective to allow the interview to be conversational in tone and allow the interviewee to speak for as long as he wishes about whatever he wishes. An interviewer should have an outline of topics to be addressed, but that outline should only serve as a guide. All of the topics should be covered eventually, but not necessarily in the order in which the interviewer has written them. Resist the notion of “controlling” the interview in the same sense that a lawyer would want to control testimony during cross-examination in a trial. Rather, interviewees are more likely to give candid, truthful, accurate, and useful information if they are allowed to speak naturally and at their own pace as opposed to following a questioner’s list, which may give the interviewee an opportunity to pause and be more calculating in their responses. Of course, there are also people who will lie or conveniently “forget” material information, particularly if they believe that it is damaging to them personally. Thorough, professional investigations will nonetheless often result in documentation or other witness statements to establish the truth.
Step 5. Factual and Legal Analysis
The investigator organizes and analyzes the gathered information in preparation for reporting and presentation. After presentation of the facts, the E&C Committee determines policy and legal implications of the findings in consultation with the legal department.
The Investigation Itself Must Be Conducted in Accordance With Company’s Code of Conduct
At the outset, the interviewers will obviously want to introduce themselves and explain who they are, their relationship to the company, and their role in the interview (e.g., company management has requested that we review the procurement operations for this location). This would also be the time to indicate, as applicable, that the interview constitutes company confidential information, that the interviewee is obligated under the company’s code of conduct to cooperate with the investigation, and that they are not to speak with others about the interview (subject to exceptions in the case of the interviewee obtaining their own personal counsel or other personal advisors). If the interviewee is not the target of the investigation (and reasonably appears unlikely to become a target), it may be useful to inform them in order to make the interview more relaxed.
Investigations must be undertaken in a professional manner in accordance with the company’s code of conduct and its provisions regarding respect for individuals. Tactics such as lying to interviewees, being unduly harsh or aggressive with interviewees, implying that one can make a “deal” with an interviewee and so forth are not permissible.
In addition, the following principles should be observed and participants in the investigation should be informed of them, unless it is apparent that they are already aware:
- An investigation does not presume any wrongdoing or any other facts. The objective of the investigation is to determine the facts as best as possible.
- Employees are expected to cooperate with internal investigations.
- There is no stigma attached to being questioned during an internal investigation.
- There is no stigma attached to being the target of an investigation if no wrongdoing is found.
- Confidentiality of the investigation must be preserved by the investigators, sharing information only on a need-to-know basis.
- Individuals interviewed or requested to provide documents as part of an investigation must maintain confidentiality, and not discuss the subject of the interview with others (although they may need to let their supervisor know that they were requested to participate in a confidential internal investigation).
- The company’s policy prohibiting retaliation against individuals providing evidence of misconduct will apply.
Step 6: Reporting to Stakeholders
The Ethics and Compliance Committee reports findings to the appropriate stakeholders.
Conclusions: Investigation Report
It is not unusual for facts that completely change the tenor of the investigation to arise late in the investigations process. For this reason and to avoid the disruption of giving out misleading or incorrect information that may be acted upon prematurely, the investigators should avoid making conclusions before the investigation is complete. It may be necessary to advise a small number of managers of the progress of an investigation before it is complete, but the audience of such reports should be limited to a need-to-know basis and such progress reports should be clear that all the facts or document review are not complete.
Once the investigation is complete, the facts should be memorialized, usually in a written report, but sometimes it may be more appropriate to deliver the report orally at a meeting in which the conclusions are set forth. The length and content of the report can be tailored for the circumstances, but the report should identify the subject and scope of the investigation, date and duration, any limitations on the investigations process (if applicable), and conclusions. Depending on the audience of the investigation report, the identification of individuals interviewed, and supporting documents might not be shown in the report, but the investigator should have such information readily available in written form in case it becomes necessary to produce later.
Step 7: Corrective Action
The company should implement corrective action as necessary (e.g., written warning, verbal warning, coaching, training, final warning, termination). The individual assigned to investigate and prepare the report shall conduct his/her investigation and report findings to the E&C Committee, who shall then determine whether any action is necessary.
Step 8: Close-Out and Follow-Up
Update the status on the compliance database and give a description of the final determination as well as corrective action. When the investigation report is concluded and the investigation is closed, those facts should be logged onto the case management ledger. The E&C Committee or other responsible department, which might well be someone different from the lead investigator, should then follow up to ensure that any corrective or disciplinary action determined as a result of the investigation is actually carried out:
- Upon completing any recommended action, the individual assigned to investigate the report shall save any related documentation.
- The individual assigned to investigate the report shall investigate as appropriate and complete the following fields:
• Disposition: Enter a brief description of the findings and conclusion of the matter.
• Date Closed: Enter the date the matter was closed or resolved.
Procedure for Service of Legal Process, Wage Withholding, Subpoenas, or Summons
- Ask the server to sign the facility visitor log.
- Determine if the service is a) directed to the corporation and is company-related or b) directed to an employee or a subcontractor and is not company-related, then follow the appropriate subsection below.
- “Neither this facility nor its employees are authorized to accept service of process on behalf of the corporation or any of its subsidiaries. The corporation and its subsidiaries have designated ____________as their registered agent.”
- “Please direct all service of process to ______________.”
- Fill out section 15.25 and hand it to the process server.
- If the process server ignores your directions and attempts to serve process on the corporation, a senior executive, or a manager in a company-related action, immediately notify the legal department or the resource team. Attempts to serve process on anyone other than the corporation must be referred to the legal department or the response team before service is allowed.
- Employees named on a document should not be notified. This is a matter for the legal department.
- A company-related process is time sensitive and must be received by the legal department as soon as possible. Overnight courier or hand delivery is required. Regular company mail is not appropriate.
- Service in Hawaii, Ohio, and Pennsylvania and notices and orders involving wage withholding (e.g., garnishment, child support) are exceptions that should be accepted at the local facility and handled by the local controller in coordination with the employee compensation and legal department.
- You are not legally required to interrupt business operations to summon an employee, but you may contact the employee to see if he or she wants to accept service.
- Service should not occur on premises. Direct the server to make service at the person’s residence.
- Do not provide or confirm the home address of an employee. Refer such requests to the legal department.
- If the process server ignores your directions to serve process elsewhere, immediately send the envelope to the legal department, noting the source of the document(s) and the date and time they were received. Company-related process is time sensitive and must be received by the legal department as soon as possible. Overnight courier or hand delivery is required. Regular company mail is not appropriate.
- Arkansas, California, Washington D.C., New York, and Pennsylvania are exceptions, where service should be left with a receptionist or office assistant; in Florida, you must allow the server to serve an employee in a private area.
Arrests and Restraining Orders
- Law enforcement officers or agents requesting to issue an arrest warrant or restraining order should be directed to the legal department. If no lawyer is available, direct the agents to the senior employee onsite.
- If agents insist on issuing the arrest warrant or serving process at a company location, the most senior employee should arrange for the targeted individual to come to a private area. Try to minimize workplace disruption.
- Do not inform the targeted individual as to the nature of the request.
Guidance to Employees (Search Pursuant to a Warrant)
As you know, the office is being searched by law enforcement officers. At this point, we do not have an explanation for exactly why the search is being conducted, but we would like to inform you of your rights and obligations:
- First, do not obstruct or otherwise interfere with the search. The officers have a legal right to search the premises and to seize what is designated in the warrant as evidence.
- Be aware that government agents may attempt to contact you at your office or home and request to interview you. You are free to talk to them, but you are not required to submit to an interview. You do have the right to say you want to confer with an attorney first, and to insist on scheduling any interview at a time and place that is convenient. An attorney can meet with you in advance and advise you. [Also, by being present at any interview, an attorney can try to avoid any confusion you may have regarding the government agents’ questions, and by taking notes the attorney can minimize any misquoting of what you say.] If appropriate, the company will arrange for an attorney to talk to you if that becomes necessary and you so desire. If you are contacted by government agents, please let the legal department know by phone and/or e-mail.
- If you do decide to grant an interview to the investigating officers, you should be aware that anything you say can be used against you in a criminal prosecution or in a civil enforcement proceeding. This is true regardless of whether the officers give you any so-called Miranda warnings. If you do grant the interview, please inform the agents that your employer has requested that the company’s counsel be present at any interview.
- It is important that no one remove, destroy, or delete any documents, papers, computer files, e-mails, etc., while this investigation is pending. We do not want any innocent or routine destruction of documents or deletion of e-mails to be misinterpreted. We are distributing a separate notice with specific instructions regarding document preservation. If you have any questions, please contact the legal department.
- The legal department will handle any additional requests for documents after the government agents have left company premises. If a government agent contacts you to request additional documents, please report the request immediately to the legal department.
- If you are contacted by a member of the news media, please immediately report the contact to the corporate communications group, who will handle all media inquiries. You may refer members of the media to the corporate communications group. Please do not respond to any questions from or provide any documents to members of the media.
- We know these matters are a distraction and regret any concern this may cause. We appreciate your patience and cooperation.
- The law enforcement officers’ search warrant allows them to conduct their search, but it does not require you to stay here. If it appears that the search is likely to substantially disrupt work, we may, at the direction of the legal department and the response team, dismiss all employees not directly assisting with the search for the rest of the day.
Instructions to Process Server
This instruction sheet is being given to you in response to an attempt to serve process (e.g., summons and complaint) on this facility. Neither this facility nor its employees are authorized to accept service of process on behalf of the corporation or any of its subsidiaries. The corporation and its subsidiaries have designated [Registered Agent] as their registered agent in the State of _________________. Please direct all service of process to this agent. Call _____________for the address of the registered agent for your area. Your assistance and cooperation is appreciated. If you have any questions, please contact the legal department.
T. Markus Funk, the firmwide chair of Perkins Coie’s White Collar & Investigations Practice, from 2000-2010 served as an assistant U.S. Attorney in Chicago. He can be reached at email@example.com.
Richard (Rick) Hosley, a partner in Perkins Coie’s White Collar & Investigations Practice, served as an assistant U.S. Attorney and chief of major crimes for the Denver U.S. Attorney’s Office, as well as associate general counsel, chief litigation counsel, and head of investigations for a publicly-traded, Fortune 200 health-care company. He can be reached at firstname.lastname@example.org.
Chandra K. Westergaard, a senior counsel in Perkins Coie’s White Collar & Investigations Practice, was assistant general counsel and head of investigations for a publicly-traded, Fortune 200 health-care company. She can be reached email@example.com.
Portions of this article are adapted, with permission, from a chapter that appeared in The ABA Compliance Officer Deskbook (ABA, 2017).