Internal business investigations may become necessary for a variety of reasons. This article is the first in a series of three in which we will address what new in-house lawyers should know about internal investigations. This article will discuss what kind of concerns lead to internal investigations, how a business identifies such concerns, and whether an internal investigation is appropriate. The second in the series will describe the pros and cons of outsourcing an internal investigation. The third in the series will outline how to conduct an investigation.
Employee misconduct, data breaches, accounting discrepancies, and regulatory issues are common business challenges that give rise to internal business investigations. White-collar enforcement activities at the U.S. Securities and Exchange Commission (SEC), the U.S. Department of Justice (DOJ), and other federal and state agencies continue to be a focus of government resources. See SEC, Litigation Releases (modified Nov. 21, 2019); Assistant Attorney General Brian A. Benczkowski Delivers Remarks at the 33rd Annual ABA National Institute on White Collar Crime Conference, U.S. Dep’t of Justice (Mar. 8, 2019) (describing 2018 enforcement statistics). Accordingly, for the in-house lawyer, a sound understanding of when to initiate and how to conduct an internal investigation, including related responsibilities and pitfalls, is necessary. Increased regulatory focus and pursuit of individual wrongdoers, including by attorney “gatekeepers,” has become a key deterrent feature of enforcement programs that in-house lawyers must consider when faced with both civil and criminal investigations. If criminal liability is a possibility, the stakes are, of course, very high indeed.