|
 |
| 2002 News and Press Releases |
|
|
HEADLINE ARCHIVED:
Preserving Privilege: Disclosure Of The Results Of An Internal Investigation
By: David B. Fein and William J. Kelleher III
White-Collar Crime Reporter, Vol. 16; No. 12; Pg. 1. November 2002
_________________________________________________________________________
EXCERPT: In this extraordinary business environment, more and more companies are encountering situations in which they should, or must, conduct internal investigations into allegations or suspicions of wrongdoing by their employees or executives. As reported in a recent Wall Street Journal article, it seems that "plenty of companies have gotten into plenty of trouble lately." 1 Indeed, the financial press has recently reported numerous instances of alleged corporate wrongdoing and significant, ongoing internal investigations at public companies. 2 Many of these internal investigations involve mismanagement at the highest levels of companies on a massive scale. Others involve malfeasance by mid-level managers or lower-level employees. Some misconduct is isolated while other wrongdoing is significantly more severe or widespread. Wherever it occurs and whatever the circumstances, an internal investigation is an increasingly common, and often crucially necessary, means by which companies seek to ferret out wrongdoing and, at the same time, protect investors, their corporations' welfare and their public image. In many ways, then, internal investigations are more high-profile than ever and are viewed as increasingly important by companies and government regulators alike. For example, in one ongoing case, government regulators reportedly sought to delay or curtail a company's internal probe in deference to the government's own investigation. 3 Especially in this atmosphere of continued revelations of corporate fraud, the preliminary and ultimate findings of an investigation raise significant issues for a company about the appropriate measures to take when wrongdoing is discovered. Such steps may include terminating or disciplining responsible employees or managers, implementing new compliance measures to avoid or detect similar problems in the future, and notifying appropriate regulators. These steps require sophisticated and complex considerations by a company's senior management and its counsel. Frequently, there also exists the need for the company to take proactive steps beyond finding out what happened and why, disciplining its personnel and taking corrective steps. From the company's viewpoint, " t he battles to avoid liability and to protect the brand must both be won." 4 With good reason, management may want to publicly release information about the findings of the investigation to calm investors' concerns, protect (or restore) the company's image, assure customers and employees, and demonstrate that it is serious about punishing those responsible. Or, it may want to voluntarily disclose the findings to the government to head off an investigation or convince regulators not to sanction the company or to limit the scope and severity of remedial or punitive measures. Companies may even need to decide whether executives or employees should testify before grand juries and regulatory or legislative bodies, and determine the attendant risks and concerns that entails. 5 The public use and disclosure to regulators of the results of an internal investigation raise important additional issues that companies and their counsel should consider, particularly because companies will be under intense scrutiny following the wave of corporate reforms and regulations enacted in the Sarbanes-Oxley Act of 2002 signed into law by President Bush on July 30, 2002. In this climate of corporate scandal, it is almost impossible for a significant public company or other regulated organization to keep private all findings of an internal investigation.
|
|
|
