February 06, 2019 Articles

Internal Investigations Best Practices, Part I: Protocols

Proper planning is critical to the success of a fraud investigation.

By Paul Rodrigues and Thomas Wagner

 “If you tell the truth, you don’t have to remember anything.” —Mark Twain

As fraud examiners, we are generally hired by attorneys to investigate a suspected fraud at a company. However, sometimes we are contacted directly by a business owner, management team, security manager, or human resources director. If an attorney does not initially contact the investigator, we suggest that the investigator include the client’s attorney in the loop before proceeding.

Best Practice: Lawyer Supervision

As a best practice, a fraud investigation should always be supervised by a lawyer:

  • This will preserve the attorney-client privilege.
  • This will protect the attorney work-product doctrine.
  • This will ensure that applicable employment and other laws are observed.

Establishing a good working relationship with the attorney will help set the foundation for making a case. This should facilitate developing a logical theory of what may have occurred, establishing an appropriate investigation plan, determining the legal burdens of proof needed, and setting the client’s expectations with regard to budget and timeline.

A substantive conversation with the client and attorney is necessary and invaluable to the investigator in understanding the situation at hand. This includes determining the client’s needs and goals, from a business perspective and a legal perspective, as they pertain to the investigation. It might seem incontrovertible that the client wants to determine who the perpetrator was and have that person prosecuted. In reality, this is not always what the client wants or needs. Many businesses have no intention of pursuing a prosecution for numerous reasons, including a fear of bad publicity. Many cases end with the termination of an employee, although sometimes the perpetrator had already been terminated for other reasons prior to the discovery of the fraud. Some clients really just want to understand how the fraud occurred and fix the situation by creating specific checks and balances to prevent, or at least mitigate, further fraud and losses. 

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