Internal Investigations and the Specter of State Action

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Internal investigations by private attorneys into potential criminal violations are big business. Some have led to legal bills in the tens of millions of dollars; others, even higher.

In the United States at least, they appear effective as a tool for negotiating outcomes to alleged crimes by corporations. The Corporate Prosecution Registry tracks the large and growing number of corporations that reach some form of negotiated outcome—a guilty plea, a deferred or non-prosecution agreement, or a conditional declination or dismissal—and the very small number of corporations that go to trial on criminal matters. Many, probably most, of the negotiated outcomes involved some form of an internal investigation.

While successful and, for attorneys, profitable, internal investigations may be facing a threat. When prosecutorial involvement in them increases, the investigation may no longer be viewed as either “private” or “voluntary” and may be viewed instead as a form of state action. That carries significant consequences.