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How to Conduct Internal Investigations Efficiently and Effectively
A Roundtable Discussion

Internal investigations are becoming increasingly common in the modern workplace. But how, exactly, can companies conduct investigations efficiently and effectively, while still protecting innocent employees?

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Internal investigations are becoming increasingly common in the modern workplace. But how, exactly, can companies conduct investigations efficiently and effectively, while still protecting innocent employees? In this roundtable conversation, Katherine A. Lemire, President and Founder of Lemire, LLC; Jon Olson, Senior Vice President and General Counsel for Blackbaud; Sean Renshaw, former federal agent and currently Director of the Digital Forensics & Investigations Practice at Stout Risius Ross; and Andy Wilson, Chief Executive Officer and Co-Founder of Logikcull, share their advice for conducting internal investigations. Editor-in-Chief Adam Schlagman serves as the Moderator.

By way of background, Lemire, LLC assists businesses, government agencies, nonprofit organizations, and individuals in conducting complex investigations, compliance, due diligence, risk mitigation, and dispute resolution. Blackbaud, Inc. provides management software, services, expertise, and data intelligence for nonprofits, foundations, corporations, and educational institutions. Stout Risius Ross is a global advisory firm that specializes in investment banking, valuation and financial opinions, and dispute advisory and forensic services; and Logikcull is a cloud-based Legal Intelligence platform that automates e-discovery, internal investigations, and other data-intensive processes for enterprises, law firms, and governments.

Q. Government investigations can be broad and invasive to business operations. What can counsel for the organization under investigation do to work with investigators to narrow the scope of the information requested in such a way that prosecutors have access to the information they need to thoroughly investigate the case, but business disruption and cost associated with collecting, reviewing and producing information is kept in check?

A. Katherine Lemire: Remember that prosecutors are people too … they can be reasonable. If confronted with a very broad subpoena seeking, for example, a large swath of documents over the course of years, it may make sense to call the prosecutor and find out whether you may narrow the scope of responsive documents. Often, prosecutors will provide specifics regarding the target of the investigation, and work with you to produce documents in a time-efficient manner. Prosecutors typically have investigative priorities, and if you can provide a proposed schedule for document/materials production, they will often work with you so that they can get what they need the most in a rapid fashion. Relatedly, you may be able to spare yourself producing materials that are not within the actual scope of materials needed. While they are the “expert” in the investigation, you are the “expert” in your business — prosecutors may be asking for materials they do not actually need, and with some education from you, you may be able to narrow the scope of the investigation.

Jon Olson: By having a detailed and comprehensive understanding of the facts of the matter under investigation. Such an understanding will allow you to discuss the matter with prosecutors/agencies more credibly. Half answers and contradictory discussions will cause you to lose credibility with the investigating party and will prompt them to broaden their efforts to get the “true” story. The primary, and sometime conflicting, goals in conducting an internal investigation are to move with speed and thoroughness. Speed so that one can be responsive the internal and external audiences promptly, but with thoroughness, because you don’t want information to come out piecemeal.

Also, assemble your external advisers quickly — insurers, outside counsel, forensic experts, data discovery experts and the like. Develop a detailed project plan covering the gathering of documents, interviewing relevant parties and archiving information. Advance planning will help control costs.

Sean Renshaw: The best thing counsel can do is to have an established, consistent discovery process that can be leveraged with standard practices when an investigation begins. That said, counsel should involve outside counsel and digital forensic / e-discovery experts at the outset to help review the government request and work with C-suite, IT and counsel to develop a viable work plan. This should include identifying potentially relevant data, even if it is unlikely to be involved in the ultimate collection, review and production effort. Once you have a better understanding of the “worst case,” engage in negotiations with the government to refine what the final scope will be. Based on my experience, the government expects the company’s attorneys to negotiate the scope of the subpoena as well as document production dates. While the government has broad authority, the reality is they are often more short staffed than you, your counsel and your consultants. As a result, they are likely intent on getting to the real heart of the matter (which in turn reduces your burden … especially, if you are prepared in the normal course of business).

Andy Wilson: It’s often the case that government investigators do not have the time or resources to handle high volumes of discovery materials, so they may be open to negotiating scope of production. Depending on the importance of the investigation, it may be wise to hire third-party auditors to assist in preparing reports and responses that validate your positions. For instance, if you’re making the argument that certain data investigators are seeking is not reasonably accessible or overly burdensome to preserve and collect, have the auditor prepare a cost assessment to show that this is indeed the case. At a higher level, understanding what investigators are after and having the ability to give them a road map are critical to helping you minimize business disruption and keep costs down. Also, and this probably goes without saying, but you’d be surprised: Cooperation is king. The tit-for-tat, knife-fighting tactics that can characterize civil litigation just don’t fly when it comes to dealing with government investigators. It is in your best interest to be as accommodating as possible.

Finally, when performing their own investigation on the client’s behalf, it’s fairly common for a company’s outside counsel to pair a partner conducting witness interviews with an associate who is essentially just a notetaker and administrative assistant — a really, really expensive assistant. Depending on the volume and importance of investigations a company faces, it might be a good idea to hire internal staff to fill that second role. That person will know your business more intimately and will eliminate the need to spend on a high-priced associate. Teaming that “internal investigator” with the outside lawyer can produce better results and time- and cost-savings due to the additional guidance the internal person can offer.

Q. What tips do you have for working with investigators in a way that is transparent and forthcoming, but also protects information that is either subject to confidentiality and work product protections, or sensitive but otherwise irrelevant to the investigation?

A. Lemire: Materials protected by attorney-client privilege or some other form of confidentiality should not be disclosed without discussions with (outside) counsel well-versed in criminal litigation. Counsel may recommend, for example, withholding the documents, but creating a log of such documents, and turning over the log to the prosecutors. With regard to “sensitive but otherwise irrelevant” materials: If materials exist that are responsive to the subpoena, counsel should not arbitrarily decide to withhold these documents without notifying prosecutors with regard to the existence of the materials. At the same time, if sensitive documents are not relevant to the investigation, a reasonable prosecutor may understand the sensitivity of the situation and withdraw the request for those documents in particular. Again, outside counsel well-versed in criminal litigation should be able to navigate these issues without raising the ire of prosecutors and their investigators.

Olson: First, you have to clearly identify and segregate privileged communications from non-privileged factual matters. By carefully separating privileged materials and asserting privilege consistently, and not over-broadly, an organization builds credibility with investigators.

Renshaw: The first suggestion is to be forthcoming with communication and execution. While this sounds like common sense, there are often situations where people dig their heels in when it would be in their best interest to be collaborative. Recent changes in the Federal Rules of Civil Procedure and views expressed by the judiciary further highlight how cooperation is expected in today’s climate. Many government agencies are intimately aware of dealing with sensitive data. It is not uncommon for an agency to create a taint team or other ethical wall to compartmentalize information to protect privacy, or to perform an investigation within agreed upon parameters where the lead investigators only see the results of the taint team’s work.

Having a collaborative mindset will likely put you in a better position for asserting privilege or withholding information based on work product or trade secrets. If that effort fails, you always have the option of seeking relief from the court — but in my experience, it is best not to play that card unless absolutely necessary, and then to use it with discretion. Also understand that issues will happen, such as relevant data being inadvertently missed or overlooked. When an issue arises, be forthcoming with the government about what happened and how it was remediated. It is far better to be transparent and show that you are being proactive rather than embark on a path of obfuscation and be found out later. The resulting consequences will likely be far less painful if you are upfront and transparent than if you appear to be “playing games.”

Wilson: As I mentioned, you should always be as cooperative as possible, but when it comes to privilege issues, things can get a little tricky. Different government agencies have different policies when it comes to how they evaluate a company’s willingness to waive privilege as a factor in assessing how cooperative the company is being, and whether and how the company should be charged. So be sure to consult the appropriate authorities before an investigation gets underway. Some companies, depending on the context of the investigation and investigating agencies, may feel that it’s advantageous to waive privilege in good faith if they suspect it will contribute to lesser sanctions or charges. It really just depends.

More fundamentally, given the rise of corporate data volumes, you want to be as sure as possible that you’re not unintentionally disclosing privileged materials in the course of discovery. Again, this should go without saying, but companies have created existential problems for themselves in the past by not taking the proper steps to safeguard confidential information. Consider U.S. ex rel. Hendrix v. J-M Manufacturing Company, Inc., et al., where the defendant and its counsel accidentally turned over privileged documents to investigators repeatedly, to the point that relators in the case moved for a judicial order asking that privilege to those documents be waived, basically for carelessness. If you’re dealing with large volumes of data, at a minimum, consider using software or other tools that will automate privilege detection or flag documents that may be confidential by pinpointing common privilege identifiers.

Q. What potential challenges to maintaining attorney-client privilege should you consider at the onset of an investigation?

A. Lemire: A present hot topic in litigation is the nexus of attorney-client privilege and the crime fraud exception. Prosecutors may demand materials that would be otherwise covered by the attorney-client privilege but, they argue, are exempt from the privilege because the materials relate to a criminal fraud. Counsel should seek sound advice before simply turning over these materials based on this claim. A company could expose itself to liability if it erroneously decides to waive attorney-client privilege in this fashion.

Olson: The primary challenge is that the investigating organization will view a failure to waive attorney-client privilege as a failure to cooperate. The DOJ guidelines on this point have evolved over time to be a bit more tolerant of the privilege, but not every investigator or agency shares that perspective.

Renshaw: It is critically important to get outside counsel and core consultants involved on the front end of the investigation. This includes providing instructions to company personnel to avoid inadvertent spoliation of potentially responsive documents and electronic data as well as counsel being involved in each step of the document and information production process. Avoid communicating through non-legal intermediaries. Findings and communications should be kept confidential and only disclosed on a “need to know” basis. Documents should be labeled as “privileged and confidential,” including draft reports and findings, which should contain language indicating that the report has been undertaken at the request of outside counsel.

Wilson: Privilege issues are often case-specific, but it may in certain instances be appropriate to issue an Upjohn memo at the onset of an investigation. These documents essentially say, “This investigation is occurring under attorney-client privilege.” It’s one way to ensure that the company maintains attorney-client confidentiality, and that it does not unintentionally create an attorney-client relationship with the employee, or have the employee accidentally waive privilege on the company’s behalf.

Q. Once the scope of the investigation is sufficiently outlined and counsel works with investigators to determine what types of documents and data are relevant to the investigation, how do you efficiently determine where that information resides and how to capture it?

A. Lemire: See my answer to the next question [on page 6]. Also, the IT management within a company should be brought into the loop as soon as possible, to ensure that potentially responsive email and documents are preserved and not subject to automated deletions. At the same time, if an investigation is confidential in nature, discussions regarding the investigation should be limited to as few individuals as possible, including IT staff. To that end, consider alerting IT management, and then bringing in an outside investigative firm to gather and store potentially responsive materials.

Olson: At the outset of any investigation or claim, it is critical to involve the IT team. [This] team is indispensable for effectively managing legal holds, for running the latest search and other forensic tools. We have at our disposal very robust search and keyword tools, but a quality IT liaison with investigation experience is crucial to the effort.

Renshaw: This is the stage where your response team is critical. Hopefully, this team will have already outlined a work plan and identified at least the first level of documents and data that will likely be in scope. Once the scope is refined, the team will need to develop a final work plan to capture this data in such a way that meets judicial scrutiny by maintaining the appropriate chain of custody and preserving it in such a way that nothing is altered. That being said, the simple answer to this question is “it depends” — on the nature of the investigation (scope and duration) as well as the industry and associated regulatory requirements.

For companies that are in highly regulated industries (e.g., health care or financial services), the amount and breadth of available data will be large and widespread. It will also be more readily identifiable. For companies in other industries, it will be crucial to work with the legal team, IT and your consultants to map all of the data sources and put together a collection plan based on the agreed-upon terms. Also, for companies that are frequently involved in litigation or investigations, it is a good idea to create a repository for all relevant data with easy access by counsel and the team so data, coding and work-product can be reused if it was collected and reviewed in another matter. If an email or document has already been reviewed and identified as being privileged, then it is likely that item will be privileged for future matters. This will ultimately reduce the collection, review, and production effort required on subsequent investigations or related litigation.

Wilson: Once it becomes clear what information investigators are seeking, one of the first steps to take is to interview potential custodians of that information so you can start drawing a better picture of where that data may reside and how to collect it in a forensically sound manner. Also be sure to talk to your IT people in depth. They have the best handle on your company’s information infrastructure and will be able speak to potential repositories and issues you haven’t considered.

Q. In what ways has technology evolved to equip companies to respond more efficiently, diligently and thoroughly to investigations?

A. Lemire: Technology is now available that places a “hold” on all email and other documents that may be responsive to subpoenas. A multitude of good IT vendors are available to offer this service so that companies are not later accused of destruction of evidence.

Olson: Today’s search tools are so very accurate and easy to use, they allow the capture of key documents with amazing speed. These tools allow the accurately assembly of critical data for investigations and bolster legal defensibility of the discovery. Also, tools that detect fraudulent and altered documents also help ensure the integrity of the documents.

Renshaw: Consistency, speed, accuracy and spend are all positively impacted by positioning technology solutions for the present and future and to help companies efficiently respond to internal investigations. There is a cost and an associated return on investment consideration that many companies must face. If a company is in a highly regulated or litigious industry (e.g., big pharma, financial/investment, healthcare) then the return on investment will be much better if technology solutions are implemented to address recurring investigations and litigation. However, if the company is not frequently involved in an investigation or litigation, a more traditional approach might be more cost effective in the long run.

In terms of the technologies available, there are many solutions that will help to preserve and inventory data within an environment. This can include archiving all email that traverses the company’s system as well as identifying and indexing all user created files on user’s computers and the company’s network. As all of this data is aggregated, it is possible to perform a more strategic data collection by filtering data down to specific users and date ranges and by applying search terms. The resulting filtered data set can then be collected, reducing the overall impact to the company and its employees. This reduced data set also positively impacts the downstream review and production steps. Finally, it is also very important to track and document the steps undertaken through the entire process. The process, analysis and ultimate response, are all enhanced by the ongoing advances in the applicable technologies.

Wilson: It used to be the case that companies had to lean heavily on outside vendors or law firms to collect, make sense of, review and disclose information responsive to investigations. While some companies still prefer to do things this way, other, more nimble companies are realizing that the costs associated with outsourcing all of this work can both increase the cost of the investigation and slow it down. To be sure, in some instances, it absolutely makes sense to delegate all or some of this work — especially if the investigation is particularly large in scope and rich in data.

But in other cases, particularly small-volume matters, it is more appropriate for companies to do the bulk of the discovery-related work in-house. Cloud-based solutions tend to make this process more efficient because they are accessible 24/7 across the company, they eliminate the need to send data outside the company, and they automate the data processing component — meaning, instead of having to ship a hard drive of material out to a vendor to process, you may just drag and drop it into your system and have access to the full review set a few minutes later. One of the main benefits to doing the work in-house, besides the cost and risk reduction, is that inside counsel can get a better and quicker grasp of the issues of the investigation, the data that’s important, the exposure it might be creating, and the relative strength of the company’s positions. In discovery parlance, we call this “early case assessment”: essentially, the ability to boil down a large amount of data quickly and make sense of the stuff that really matters.

 

The views expressed in the article are those of the authors and not necessarily the views of their clients or other attorneys in their firm.

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