Planning for successful internal investigations

Businesses that plan internal investigations in detail at the outset are best placed to uncover the truth fairly, withstand challenges to privilege and satisfy the demands of regulators. That's the view of Pinsent Masons partner Ann Henry who specialises in data privacy and intellectual property disputes.

“Most internal investigations go wrong because the investigation was not planned out with sufficient detail at the beginning,” she says. “Diligently focusing on the basics pays dividends in the end. The reality is that detailed planning helps thwart efforts to take the investigation off on a tangent and gives purpose to those involved to finish it in a timely matter.”

She says it is imperative that everyone involved in the investigation is conscious of and applies the principles of fair procedures and natural justice.

The first step is to identify who will conduct the investigation. “To ensure that legal professional privilege is preserved it is important for external lawyers to understand who the client is for the purposes of the investigation,” Henry points out. “This is vital because legal professional privilege belongs only to the client and can be lost or deemed waived if documents which would otherwise be deemed privileged are circulated to persons or third parties not considered to be the client.”

In these situations, the client will usually be the main personnel involved in seeking and receiving external legal advice for the company in the investigation.

“Explaining the fundamental principles around legal professional privilege, how it can be lost and how to ensure that does not happen is 30 minutes well spent, regardless of the level of experience of those involved in conducting the investigation,” she adds.

Fundamental importance

Selecting the right team is of fundamental importance. “Typically, the lead in any investigation team will be the in-house counsel, the head of compliance or another senior executive. Businesses will normally consider adding senior representatives from IT, internal audit, HR and the data privacy team to the team as well.”

The IT representative will help the investigation team fully understand the company’s IT systems, policies and procedures and how data can be preserved or gathered in a manner that is reasonable, proportionate and effective. “If the investigation involves a breach or other interference with the IT system, external IT support may be required in order to avoid any conflict,” she adds.

“Internal audit can advise on the collation of any financial records, their analysis and any accounting impact. HR will advise on employment issues that may arise in connection with the conduct of the investigation. The data privacy team representative or the data protection officer will ensure that immediate and due consideration is given to any data protection law issues that may arise in cases where personal data is involved, in particular the desirability for a data protection impact assessment prior to commencing any investigation.”

Reporting lines

Clear reporting lines are also required. “For privilege and for the orderly conduct of the investigation, the investigation team lead must establish at the outset precisely who they are reporting to within the company,” Henry says. “This may be the board, but where board members are potentially implicated or conflicted, the investigation team could instead report into the audit committee or a special investigation committee set up specifically to instruct and supervise the investigation.

“The board or committee will be responsible for giving instructions and liaising with the investigations team. The investigation should be kept confidential, with information restrictions in place to protect its integrity.”

Once finalised, the investigation plan should be committed to writing. “The plan should note the factual matrix leading to the investigation, the purpose of the investigation, the identity and role of each of the investigation team, the relevant material, the means for the preservation and collection of that material, the procedure for reviewing it, who will be interviewed, the timetable and the manner in which findings will be presented to the board or committee, and the timelines involved,” says Henry.

Maintain a log

“As the investigation progresses it is helpful for the investigation team lead to maintain a log of why important decisions were made such as why some people were interviewed and others not, or why a certain time period was chosen,” she adds. “This is particularly so if the internal investigation may be scrutinised subsequently by a regulator. A contemporaneous note explaining the reasoning behind a decision can prove vital in dimming what otherwise might be a spotlight from a regulator at a later point in time.”