Inquiry Regarding the Procedures for Inquisitive undertakings by Your Governing Body
In the realm of corporate governance, the role of a Board of Directors becomes particularly crucial when a potential Foreign Corrupt Practices Act (FCPA) or other legal issue arises. The importance of objective, accurate, timely, and credible investigations cannot be overstated.
Objectivity is key, and using regular outside counsel may raise eyebrows, especially if the client is a high-volume client of the law firm. Conflicts of interest can undermine the investigation's credibility, and this is a risk to be mindful of.
Timeliness is another critical factor. Delays can be seen as part of document spoliation and can lead to problems with impending Securities and Exchange Commission (SEC) reports. Swift action is essential to maintain trust and avoid potential complications.
Whistleblower allegations require careful evaluation. Regulators are wary of Boards that do not satisfactorily evaluate a whistleblower's complaint based on the whistleblower's perceived character. It's important to focus on the substance of the complaint, rather than the character of the complainant.
To manage these issues, the authors suggest seven tangible considerations. First, a Board may consider the need for independent outside counsel. Second, an experienced investigator should be hired to lead the internal investigation. Third, outside experts should be retained as needed.
Regular updates from outside counsel should be requested throughout the investigation to maintain a balance between the cost of the investigation and its thoroughness and credibility. Flexibility is important in managing the scope of the investigation, as the scope may evolve as the investigation progresses.
The accuracy of the investigation's findings must be well-supported. An investigation open to collateral attack by skeptical prosecutors and regulators can result in wasted time and money. Preparing a written report may not always be the most efficient use of time, especially when an internal investigation must be conducted quickly.
However, an oral report has its advantages. It allows for retaining flexibility to change the findings if further information is later learned. The credibility of the investigation is important, as it will be reviewed after the fact by skeptical third parties and may be subject to post-event analysis.
It's also worth noting that companies should consult a qualified legal advisor before making any decision or taking any action that may affect their business. This publication contains general information only and is not a substitute for legal advice or services.
In the recent past, major corporate management in Germany reportedly set up an investigation committee regarding suspected violations of the Foreign Corrupt Practices Act or other laws, notably with companies like Volkswagen addressing compliance issues linked to the Dieselgate scandal. By following these prescriptions, a Board may be better prepared for the investigation and exercise good judgment throughout the review, potentially avoiding further disruption and costs associated with follow-on investigations by regulators.
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