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Corporate Intelligence & Investigations: Why, When & How to Take Action
Thursday, February 4, 2021

As a corporate officer, executive, or in-house lawyer, there is only so much that you can afford not to know. While you certainly do not need to be – and are not expected to be – knowledgeable about all aspects of your company’s inner workings, you do need to be confident that you know enough to lead your company in the right direction. Making uninformed decisions can lead to disastrous and costly consequences, and these are consequences that can – and should – be avoided. 

But, how do you avoid them? The key is to gather corporate intelligence and conduct internal investigations as and when necessary. This includes both: (i) gathering intelligence through routine internal (and external) audits and inspections; and, (ii) conducting targeted investigations when faced with potential civil allegations and/or government scrutiny. Of course, this is easier said than done, and making informed decisions requires knowledge of why, when, and how to conduct a corporate investigation. 

Why Conduct a Corporate Investigation 

Why are corporate investigations and other intelligence-gathering activities necessary? This question does not have a single, straightforward answer. Rather, there are five primary reasons why a corporate investigation may be necessary—all of which arise under different scenarios and involve very different sets of circumstances: 

1. Compliance Assessment 

All corporate entities should have a comprehensive and cohesive set of compliance policies and procedures. In order to ensure that these policies and procedures are sufficiently comprehensive and cohesive—and that this continues to be the case over the long term—it is necessary to assess the company’s compliance from time to time. 

Conducting routine compliance assessments should be a fundamental component of any company’s overall compliance program. These assessments should be scheduled, systematic, and structured, and they should be conducted by individuals who have no personal interest whatsoever in the outcome of the process. This could be the company’s Chief Compliance Officer (CCO), whose sole duty should be to gather corporate intelligence (and not to favor any particular outcome), or it could be an outside corporate intelligence firm. In many cases, companies will find it advantageous to engage an outside corporate intelligence firm, as this not only takes the administrative burden off of the company’s CCO, but also allows the firm’s personnel to build an in-depth understanding of the company’s operations so that they can efficiently conduct other investigative and intelligence-gathering efforts as necessary. 

2. Pre-Activity Intelligence 

From pursuing new research and development initiatives to bringing new products to market, various types of commercial activities require foresight and insights that can only be gained through investigative means. Before investing in a new product or service, an operational overhaul or corporate restructuring, or a corporate acquisition, it is imperative to gather the intelligence required in order to make a quantitative assessment of both general viability and the potential return on investment (ROI). 

Gathering pre-activity intelligence can involve a variety of different investigative techniques and strategies; and, by its nature, it will often require strict confidentiality. As a result, while these investigative efforts can be handled internally on a need-to-know basis, it is generally best to engage an outside corporate intelligence firm that can efficiently and confidentially gather the necessary intelligence without diverting resources from your company’s day-to-day operations. 

3. Response to Internal Allegations 

Many corporate investigations are spurred by internal allegations. This includes allegations of harassment and discrimination in employment as well as other allegations of corporate wrongdoing—such as misleading the public, misleading federal regulators, or causing environmental or other harm. 

When faced with internal allegations, it is important to take the allegations seriously, no matter how far-fetched or fabricated they may seem. In order to mitigate all potential risks, it is imperative to investigate, document the investigation, and reach a sound decision that is informed by the intelligence gathered through the investigative process. In the event that the employee (or employees) involved decides to pursue legal action despite your company’s determination, having documentation that demonstrates an appropriate corporate response can go a long way toward mitigating the company’s risk and reducing the costs of executing a defense. 

4. Response to External Threat 

External threats can run the gamut from consumer personal injury and product liability lawsuits to whistleblower allegations of securities fraud and other corporate offenses. In between, there are countless examples of potential commercial disputes, from allegations of contractual defaults to allegations of trademark, copyright, and patent infringement. When an external threat presents a risk for liability, it is essential to conduct a prompt and thorough investigation in order to determine both the nature and the scope of the response that is warranted. 

5. Government Audit, Inspection, or Investigation 

A particular type of external threat that requires prompt corporate action is a government audit, inspection, or investigation. These inquiries can take many forms, and they can target an extremely broad range of civil and criminal offenses. In all cases, however, a prompt and effective response is required, and this begins with conducting an internal investigation in order to assess the company’s risk and determine what defenses it has available. 

When conducting a corporate investigation in response to a government inquiry, it is essential to rely on the knowledge and insights of individuals who have experience on both sides of government law enforcement efforts. This means engaging a corporate intelligence firm that is staffed by former agents with the Federal Bureau of Investigation (FBI) and other government agencies who have decades of experience handling investigations in civil service and in the private sector. 

When To conduct a Corporate Investigation 

In terms of when to conduct a corporate investigation, the answer is deceptively simple: An investigation should be initiated as soon as it is determined that an investigation is (or may be) warranted. There is no reason to wait; and, in many cases – particularly those involving civil litigation and law enforcement threats – waiting can have significant negative ramifications. 

“When a corporate investigation is necessary, delays can have severe consequences. By promptly structuring an appropriate investigation, engaging the right personnel, gathering the necessary data, and documenting the entire process within the protections of the attorney-client privilege, companies can often drastically reduce their risk of facing civil liability or government enforcement action.” – Attorney Nick Oberheiden, Ph.D. 

In many cases, the point in time at which it becomes necessary to conduct a corporate investigation will not be entirely clear. When do allegations (or the threat of allegations) warrant devoting corporate resources to an intelligence-gathering exercise? When is a letter from a government agency cause for concern? How much preliminary work can (and should) be done before conducting due diligence in preparation for a corporate acquisition? These questions are not always easy to answer. As a rule of thumb, if you are considering a corporate investigation, it is probably time to get started, and you will want to consult with a corporate intelligence lawyer promptly in order to determine your company’s next steps. 

How To Conduct a Corporate Investigation 

Finally, when it comes to how to conduct a corporate investigation, the specific protocols and procedures involved will depend on the specific needs at hand. Conducting an internal compliance audit, conducting pre-activity due diligence, and investigating internal and external allegations of corporate wrongdoing are all very different matters. In order to determine what is both necessary and appropriate, your company’s leadership team and in-house counsel will need to consult with corporate investigation attorneys and former federal agents at an outside corporate intelligence attorney who can provide advice on the path forward. 

Broadly speaking, however, there are some hallmarks of an effective and attorney-client privileged corporate investigation. While a corporate investigation must necessarily take into account the circumstances presented, the general steps involved in conducting a corporate investigation include: 

  • Determining the nature and scope of the issue(s) that require investigation, and structuring an investigation strategy that is custom-tailored to the circumstances at hand. 

  • Assembling an investigation team, which may include appropriate (and carefully-selected) internal personnel, but which should generally be led by an outside corporate investigation lawyer. 

  • Developing an investigation strategy that takes into account the complexity of the issue(s) at hand, the capabilities of the investigation team and the technological resources that are available, and the potential risks of litigation or government enforcement action. 

  • Efficiently gathering all pertinent electronic data and hardcopy records from all available sources, systematically analyzing these data and records, and reaching an informed conclusion. 

  • Determining the company’s next steps based upon the intelligence gathered through the investigative process and the level of risk that has been identified. 

By taking a custom-tailored approach that incorporates these measures (among others), your company can gather the intelligence it needs in order to make informed decisions and plot its next steps with confidence. When your company’s only options are to either make assumptions or make informed decisions based on accurate and actionable intelligence, the choice is clear, and you need to make the right decision with your company’s (and its shareholders’) best interests in mind.

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