When, Why and How to Conduct an Internal Investigation

Corporations and other organizations may find themselves in need of self-investigation for various purposes, such as maintaining compliance, addressing misconduct and safeguarding the organization’s reputation. The purpose of an internal investigation is to uncover the facts, determine whether any wrongdoing occurred and give the company the information it needs to take appropriate action. 

This investigation is critically important for two reasons: One, because you obviously want to know the facts. Two, because the plaintiff or government agency will “nail you” if you cannot say you did investigate and can produce a “report.” The investigation and report may be form over substance. It does not matter; just do it. Also, it is surprising how a thorough investigation of a claim, e.g. of sexual harassment, can reveal important facts which at a minimum provide context and may even defeat the claim. 

Several situations may warrant starting an internal investigation:

• Employee misconduct — There may be suspicions or allegations of theft, embezzlement or unethical behavior within the company.
• Regulatory violations — A company accused of violating industry regulations or laws must assess the validity of the claims and develop a responsive strategy to mitigate potential legal consequences.
• Discrimination or harassment claims — There may be complaints of widespread illegal discrimination or harassment in the workplace.
• Whistleblower allegations — Employees may bring attention to illegal or unethical practices within the company, reporting through managerial channels or publicly. 
• Data breaches or cybersecurity issues — Management needs to determine the cause, scope and impact of the breach and how to prevent future occurrences.

Internal investigations are typically conducted by lawyers outside the company who concentrate in corporate law or regulatory compliance. These attorneys have the expertise to ensure that the investigation is thorough and legally sound. External legal counsel are able to conduct the investigation with impartiality and independence.

The internal investigation process typically involves these key steps:

1. Initial inquiry — First and foremost, the company should immediately conduct private interviews with anyone who was involved or might have knowledge of the situation.
2. Decision to investigate — A formal decision is made by management or the board of directors to investigate the issue. This decision often involves consulting with legal counsel to determine the scope and objectives of the investigation.
3. Planning — The next step is to outline the investigation plan, which includes identifying the key individuals involved, the evidence needed, and the methodology for gathering and analyzing information.
4. Evidence collection — Investigators collect relevant documents, emails, financial records, and other evidence. Interviews with employees, witnesses, and other relevant parties are also conducted to gather firsthand accounts.
5. Analysis — The collected evidence is analyzed to determine the facts and establish whether any misconduct or violations occurred. Legal counsel plays a significant role in interpreting the findings and assessing potential legal ramifications.
6. Reporting — Once the investigation is complete, a report is prepared summarizing the findings, conclusions, and recommendations. This report is typically provided to senior management or the board of directors.

The outcomes of an internal investigation vary depending on the findings. If misconduct or violations are confirmed, management may take several actions, including disciplinary measures, termination of employment, reporting to regulatory authorities or implementing new policies and procedures to prevent future issues. If the investigation clears the accused parties, the company may take steps to restore their reputation and ensure that no further action is needed. 

The Law Offices of Donald W. Hudspeth, P.C. in Phoenix, Arizona has conducted many sensitive internal investigations for businesses and other organizations. To schedule a consultation, call our office at 866-696-2033 or contact us online.