Determining whether or not something warrants an internal investigation is a tough job. When it comes to anti-corruption and compliance, there can be a fine line between conduct that is criminal and conduct that isn’t. Making that determination is hard for companies, because getting it wrong on either side can lead to all sorts of trouble.
Internal investigations are expensive and time-consuming. They involve sifting through what can be many years’ worth of electronic communications, interviewing witnesses and suspects, making reports, hiring lawyers, consultants and investigators, and committing a great deal of time and money to finding the truth. Most companies put a lot of thought into moving forward with an internal investigation. It’s a real shame, then, when mistakes made during the investigation cost them the benefit of making the disclosure to the government.
When a company first discovers the possibility of misconduct, there are some basic questions that must be answered. Who did it? Was it intentional? Was it criminal? Was it negligent? And most importantly, do we need to investigate and/or disclose the investigation to the government?
“There are way too many examples I’ve seen, even from the government perspective, where you have a company that hires an outside law firm to investigate. The law firm does the investigation, and then comes to the government to turn over the work product and there are gaping holes in the investigation plan, or instances where people – who arguably were involved in misconduct – were tipped off in advance that documents were going to be collected, that interviews were going to be conducted. It gave people the opportunity to manipulate documents, come up with stories. A lot of things can go really wrong when you investigate if you don’t really know what you’re doing,” says Walther.
This is the argument for going to the government early to inform them that an investigation is imminent or under way. If the company has a strong suspicion that something is going to have to be disclosed, particularly if the government has reached out to them, or if there’s been a whistleblower, Walther advises that they inform the government right away to maximize chances of getting full credit for self-disclosure.
“The worst possible scenario you can have as a company is when you are trying to do the right thing, you decide to turn it over to the government, but something happened in the course of the investigation,” says Walther. “Even though the company is trying to do the right thing, spends all this money, is being a responsible corporate citizen, the government looks at the mistakes made in the investigation.”
He gives the example of a company that finds out about problem, hires an outside law firm to do an investigation, but holds off going to the government. “In the meantime, your internal whistleblower, who may have triggered the investigation in the first place, has gone to government,” says Walther. “By the time you disclose, it’s no longer new to the government so it’s really not self-disclosure.”
Dialogue Reduces Errors
Not only does early disclosure get you the best benefit possible, but it also opens up a dialogue that allows you to make sure they aren’t going to say, after the investigation is complete, that you did things wrong and are not going to fully credit you, says Walther.
“Under the sentencing guidelines, the timing of the disclosure becomes very important,” says Walther. “And if you’re the first to disclose, ie the government doesn’t know about it and there’s nothing that’s been set in motion that’s going to lead them to find out about it, you can get the most credit for making the disclosure.”