What to do when you are subject to an investigation or calls for an investigation
This article looks at the issues faced by organisations and individuals who are facing calls for an investigation, for example from a regulator or official bodies, or who find themselves being pursued by those investigations.
If you only have 60 seconds, here’s what you need to know
- Once calls for an investigation begin you have to take control or there is a strong risk matters will escalate
- Take matters seriously from the start – both in understanding the substance of allegations and understanding what information exists
- Ignoring the issue never improves the situation
- A good overall outcome is directly linked to how you deal with the issue from the outset
Where do investigations come from?
Of all the reputation threats we help clients with, the more serious ones are those that could be subject of review or investigation by external bodies. This can range from governmental reviews through to regulatory and even criminal investigations. Our experience is that investigations can follow two tracks:
The first is where a serious or high profile incident occurs and an official body announces immediate investigations, for example a major newsworthy health and safety failing will immediately lead into investigation.
The second kind has a slower burn to begin with. It will often start with chatter, perhaps from employees or other stakeholders, about a failing or a misdeed in a business. It could be an historic issue from some time ago, such as the way in which contractual rights were obtained. This can then escalate to blogs, campaigners and investigative journalists. At this point mainstream media and politicians may take an interest and more detailed investigative journalism may take place, alongside calls for senate, parliamentary or regulatory investigation. For more serious issues matters can escalate further from here, with calls for regulators with penal sanctions or external bodies like the US Department of Justice, Serious Fraud Office or National Crime Agency in the UK or other investigative forces taking matters forward.
The impacts in the middle and latter stages are the same for each route into investigation, but for the second there is a longer lead time to identify an emergent issue and prepare for its consequences.
Often whistleblowers play a significant role in either triggering high profile investigations, or speaking out during a slow burning controversy. Having robust and effective policies around whistleblowing can have a serious impact on what opportunities a business has to identify an issue at an early stage – and likewise mishandling whistleblowers can make matters a great deal worse. The emerging trend towards deferred prosecution agreements can often work alongside self-reporting of an issue, and in considering how to handle an issue having the opportunity to investigate and self-report can have a substantial material impact, as well as reputation impact, compared to being reactive.
What can make a formal investigation less likely?
The second type of investigation stems from a crescendo of pressure to take action, and is the scenario where you have most opportunity to advocate your position to deter steps from being taken. Because of the substantive crossover with any future investigation it is vital that it is carefully co-ordinated in a broader legal team. A good approach in the situation will usually feature:
- Appoint legal counsel to co-ordinate the management of the issue [link to issue management], including a team of specialists based on the subject matter – likely regulatory or white collar lawyers in the relevant territories
- Under privilege your counsel evaluate the merits of arguments and gather relevant information, details of interested parties and prepare your narrative
- Your legal team may engage with other interested parties on a ‘common interest’ basis to gather information about how others are proceeding
- The lawyers identify a strategy for how to deploy this in active defence of your position, either reactively in legal arguments against accusers, or proactively by engaging PR support to frame and make the arguments publicly.
- The same process can also be used to guard against any knock-on effects of the allegations, for example compliance problems [link to compliance issues doc]
- It remains a legal-led process to do the utmost to protect privilege and confidentiality in case of further developments, mindful of the challenges the courts raise to privilege in these areas
How those techniques and information are deployed depends to a large extent on the substantive information discovered in the process, but their aim is to demonstrate that there is a forceful counter-narrative to allegations being made, not only to quell calls for investigation and show legitimate explanations, but to make it clear to authorities that you will fight back strongly in the event you are pursued.
How do you know if you are under investigation?
Usually, early stages of investigations are conducted internally and not publicly announced unless the investigation results from a public scandal and the body wants to publicise that it is doing something. There can be indicators of investigative steps from steps to obtain information from other parties or it can be picked up by your legal team in the course of the common interest lines of communication. How and when an investigation becomes public depends on the investigating body and the stage in the process they are at. Once on board a legal team will be able to plan the likely scenarios in more detail.
Can I avoid the fact of an investigation being disclosed?
Even the taint of being linked to an investigation is problematic for individuals and businesses. There is an emerging line of caselaw to suggest that in some circumstances the balance of rights in the early stages of an investigation recognises the public interest in disclosing details can be outweighed by avoiding harm to those being investigated. Up until there is a formal announcement by an investigatory body it is a grey area where your rights can be asserted, and if you are aware an investigative body is set to act you can assert your rights against them too. However for listed businesses the obligations of disclosure will often mean that the markets need to be told.
What can I say during an investigation?
There is no obvious restriction unless legal proceedings are on foot, but how you deal with reputation and commentary during an investigation or an assessment whether to investigate is very dependent on the strategy and the circumstances in the process at the time. We would always recommend that decisions are taken as part of a wider strategy and achieving objectives rather than on a reactive basis.
Can I continue operating?
Unless there are restrictions from interim actions by a Court or investigator, yes, but you may face issues with the reaction of some counter-parties or banks as to reputation risk or source of funds. Part of planning your strategy with the wider legal team will include being prepared for these situations so that you can explain, or give appropriate comfort to avoid problems.
How do we handle compliance problems from allegations?
See our article on what to do when facing compliance red flags.
How do I recover afterwards?
It depends on the outcome, but as part of the work with your wider team a strategy should be put in place to identify how and with whom your reputation has been harmed, what steps will counter the ill effects and what strategy will rebuild your ability to operate.