Megan L. Harkins (mharkins@villagemd.com) is Associate General Counsel for VillageMD in Chicago, IL, USA. Sumaya M. Noush (sumaya.noush@faegredrinker.com) is Associate at Faegre Drinker Biddle & Reath LLP in Chicago, IL, USA.
Introduction
Organizations often uncover allegations of internal misconduct, such as violations of the law or the organization’s internal rules, policies, or procedures, from any number of sources within and outside of its four walls. Unfortunately, organizations often lack seasoned investigators and/or a well-documented internal investigation approach to reliably respond to the alleged misconduct. This often results in ineffective and inefficient investigations, which lead to a lack of meaningful lessons learned to prevent future misconduct. How an organization navigates alleged misconduct can affect its reputation and standing as much as, if not more than, the alleged misconduct itself. Increased federal and state law enforcement interest in corporate compliance across many industries warrants organizational leaders to evaluate their internal investigation approach (if any) and use it to help define the organization’s culture of compliance.
This article does not constitute legal advice; it should be used as a guide to conduct effective internal investigations. Every internal investigation will present unique issues, facts, and circumstances. Having a framework to operate within will provide an organization the flexibility to tailor the internal investigation strategy and proactively address common challenges to conducting internal investigations.
Know when to investigate
Investigations help demonstrate an organization’s ability to develop internal controls to monitor adherence to applicable statutes, regulations, and program requirements. An internal investigation is often warranted when there is a credible report of wrongdoing or misconduct. The depth and breadth of an investigation will vary depending on the allegation to judiciously use limited time and resources. An organization may have a statutory duty to investigate depending on the nature of the alleged misconduct. Even where there is no duty to investigate, it may be advantageous to do so to qualify for a “cooperation credit” when the inception of the investigation is due to a government inquiry. Additionally, the credibility of the information received and the type and history of the organization, such as those that are publicly traded or closely regulated, may help in deciding whether to investigate. Ultimately the decision to conduct an internal investigation should not be made in a vacuum, and all benefits should be weighed against the risks, including but not limited to the cost, business disruption, and discoverability of records related to the investigation.
Define the scope of the investigation
Scoping the investigation can be challenging. Arguably the greatest challenge is balancing limited resources while being thorough enough to demonstrate the credibility of the investigation. Some investigations may be defined by a third party, such as a billing audit by a health plan or the federal government. Other investigations are not defined, but the scope can be narrowed by considering trends from valuable information points, such as exit interviews, employee surveys, and hotline complaints. In general, the scope should be set forth in advance of conducting the investigation. At a minimum, investigations must be conducted promptly and thoroughly. A best practice to keep the investigation focused is to outline, in a single document, the work plan, budget, and parameters of the investigation. This document is not etched in stone but should be used as a north star. In contrast, an unfocused investigation can have the opposite effect by increasing the organization’s financial and reputational risk, in addition to raising doubts about the investigation’s credibility.
Standardize the internal investigation approach
Regardless of the reasons for why an internal investigation is pursued or its scope of review, an organization must have a universal approach for how to initiate, conduct, and conclude an investigation. Although there is no one-size-fits-all approach for all organizations, each organization’s leadership should decide between (1) a centralized approach or (2) a decentralized approach to investigating alleged misconduct. Although many practitioners often recommend the centralized approach as the best, organizations are encouraged to pursue the model that is best for the organization and allow that model to evolve, as appropriate, over time.
A centralized approach means that a single department handles all investigations across the organization. Typically, this is the organization’s compliance and ethics department. The main advantage to centralizing internal investigations is that there will be a single source of knowledge within the organization that is aware of all allegations of misconduct and can use that to prevent misconduct moving forward in a global manner across the entire organization. The main challenge is that this creates a lot of work for a single department that probably already has other day-to-day business objectives.
Any approach that gives investigative authority within an organization across multiple departments would be considered a decentralized approach to internal investigations. One option is to have each department within an organization handle its own investigations and report their findings up to a single department. Although this approach frees up some of the centralized department’s time—it is not conducting the investigations but still availing itself of information about different allegations across the organization—there are concerns about internal bias when individual departments handle their own investigations without much oversight, as well as inconsistency in investigation implementation across the organization. Another approach is to outsource investigations entirely to third parties outside of the organization. The benefit to outsourcing is that it should ease any staffing-related resource constraints internally as well as reduce any internal bias that may exist, but a disadvantage is that internal investigations become a cost-center for the organization and may be limited when budgets are challenged.
Consult legal advisers
Why should lawyers be considered to assist in an internal investigation? Put simply, investigations conducted at the proper direction of legal counsel are subject to attorney-client privilege and work product immunity protection and therefore limit the investigation from discovery if litigation ensues. Furthermore, any additional third parties that legal counsel engages in the course of the investigation also fall within the attorney-client privilege and work product immunity protection if the requisite elements for those engagements are present. We recommend that you always contact your in-house legal team or outside counsel when you decide an internal investigation is warranted in an effort to determine whether the matter should involve legal counsel and apply the privileges and protections.
Interview witnesses
It is very important to decide on who to interview and the order of those interviews as soon as the scope of the investigation is understood. When possible, the key witnesses to interview are the complainant, parties with first- or second-hand knowledge of the underlying facts and circumstances, and anyone named in the allegation or whose name appears in written communications.
A key challenge to conducting witness interviews is making the most use out of your time. More often than not, interviewers only have one bite at the apple, so it is very important to prepare well for each interview. We recommend you start with general, non-leading questions, then ask more specific questions, and try to reserve unfriendly or embarrassing questions until the very end. Always conclude the interview with an open-ended question like, “Is there anything else you would like for us to now about this matter?” and leave the interviewee with your contact information in case they want to share anything further with you after the conclusion of the interview.
Report investigation findings
To demonstrate a thorough investigation was conducted, there are often two documents: one summarizing the investigation interviews and another summarizing the investigation findings and recommendations. The interview memos should neutrally describe the length of the interview, questions and answers, any contradictions/acknowledgement/admissions, and significant events or behaviors (e.g., crying, lost their temper). It is important to avoid making legal conclusions in the interview memos. A key practical tip is to discard any handwritten notes after the memo is prepared to avoid allegations that the memo and the handwritten notes contradict or that there are discrepancies between the “draft” and “final” versions.
The final report on the investigation findings may take a few different forms and should be discussed when scoping the investigation. Depending on several factors, the findings may be reported out orally, via short memo, or with a detailed report. Regardless of the form of the report, the content will likely include (1) a summary of the facts gathered via document review and interviews, (2) the results of the investigation, and (3) forward-looking recommendations if warranted. If the investigation is the organization’s defense, the preference may be to have a detailed report that is not protected by attorney-client privilege to demonstrate due care was taken to fully investigate a claim of wrongdoing and appropriate corrective action occurred.
Conclusion
There are many challenges to conducting internal investigations. Although there is no one-size-fits-all approach, there are many best practices that organizations can anchor their investigation framework to. Taking the time to engage key stakeholders both before the investigation need arises and at the time an investigation is warranted can pay dividends in the form of judicious use of limited time and resources while bringing intention to the overall process and reported findings following an investigation.
Takeaways
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There is no one-size-fits-all approach to internal investigations. They are equal parts art and science.
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Take the Goldilocks approach to scoping the investigation: narrowly tailor to credibly, timely, and thoroughly investigate alleged misconduct.
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Be flexible within an investigation framework (or policy) that is set forth in advance with the input of relevant stakeholders.
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Remember the 80:20 rule. Let the witness do the talking; you might be surprised with how much you will learn through the silence.
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Understand the intended audience when reporting the results of the investigation. Spoiler alert: A written report may not be the best reporting vehicle.