Triaging, scoping and managing investigations

Hello, I’m Katie Stephen a Financial Services Partner based in London and I’m joined today by my colleagues Kevin Harnisch in Washington, Orlando Vidal in Dubai and Sharon Oded who divides his time between our global offices. Today we want to share our tips on triaging, scoping and managing investigations with a focus on the difficult decisions that you have to face in the course of an investigation, in terms of what you are trying to achieve, how best to investigate and when to stop. So I’m going to start by looking at triaging. When a matter first comes to your attention, how do you decide whether you are going to investigate and that decision is not always an easy one because it may be at a really early stage and you may have a very limited amount of information to go on. You need to think really carefully about what’s in the best interest of your organisation and weigh up the pros and cons, taking into account all the financial, regulatory and reputational considerations. So what other factors you might want to think about in weighing up that balance? Well, first of all, is this something that you are required to notify to the regulator or might there be advantages in self-reporting? For regulated entities in the UK, the obligations to notify the regulators are usually a really important factor and they can be triggered at an early stage before you have all the facts so you don’t necessarily have the luxury of waiting until you’ve investigated before contacting them and tied in with that, is the extent to which the regulators are already aware or whether they have been notified and whether they have powers to conduct their own investigations. One of the key advantages of conducting your own investigation is to get ahead of that process and you may also be able to get credit in terms of providing those findings to the regulator yourself rather than waiting to being subjected to that process over which you have very little control. Another factor is reputational considerations. If the issues are sensitive from a PR perspective and they might impact customers or the general public, they need to be carefully managed and conducting your own investigation might put you in a better position to do that. Finally, you need to take into account the nature of the issue itself. There could be really serious potential implications for the business and so that might be a good reason for wanting to get to the bottom of it even if initially the reaction is that the concerns are unfounded. Where you decide not to investigate you need to ensure that that decision is robust and can withstand any future scrutiny. So challenge and document your assumptions. If you decide not to investigate you might also want to think about whether there are any other steps you can take such as any remediation that could be carried out. If you decide you do want to go ahead and investigate you’re going to need to think about who is best placed to conduct that investigation and Kevin I wonder whether you might share some thoughts on that.

Thanks so much Katie and hello everyone. Once you’ve determined that an investigation is in the best interest of the company the logical next question is who should carry out that investigation and while that seems easy on its face in practice sometimes that could be a difficult question to answer. Frankly, there are often multiple realistic options, for example, the investigation could be run by an internal team, that’s something that might be led by the legal team, the compliance team or for larger firms there could be a specific investigations arm of the company but on the other hand, for some allegations and issues it may be more appropriate to have an external third party come in and carry out the investigation and that third party could be something like an accounting firm or, if you want to make sure you’re protecting privilege, a law firm like ours which is something that we do regularly. Now, like many things, deciding which option is best requires a balancing of various factors. Using internal resources is normally the least expensive but for sizeable and complex matters there may not be sufficient resources, either in terms of headcount or in terms of capacity to handle the matter expeditiously and there may not be sufficient subject matter expertise if you’re dealing with certain types of non-routine complicated issues. Also, and importantly, depending on the jurisdiction, courts may not recognise the existence of an attorney client privilege if only in-house counsel are doing the work. So, if the decision is made to use outside counsel the question quickly becomes whether to use the company’s regular counsel, who’s presumably familiar with the company’s business, processes and personnel or should you use independent counsel with no pre-existing ties to the company. For issues involving potential misconduct by senior management or involving widespread pervasive corporate fraud it’s often desirable to have independent counsel conducting the investigation. Determining what types of lawyers to use will be heavily dependent on the unique facts and circumstances of each case. Now, to move on a little bit, after deciding who will carry out the investigation, scoping the investigation becomes the next significant decision point.  In scoping, will often be significantly impacted by the purpose and goals of the investigation. Some investigations will be focused simply on establishing the facts of what happened, then who was involved. Others, will be focused on controls, failings, while others will be conducted in order to understand legal and regulatory risk. Maybe with a view to reporting to a regulator or prosecutor and potentially with a view to obtaining cooperation credit. Now the challenges, of course, that at the beginning of the investigation you are generally operating on limited and imperfect information. So the key is to be practical, focused and efficient. In most instances, you are not dealing with unlimited resources so you will need to allocate those limited resources, both internal and external, efficiently and effectively. Some initial considerations to help define investigations scope include what countries and areas of the business are involved, who are the potentially relevant stakeholders, for example, are we dealing with regulators, shareholders, customers, potential future buyers or some combination of all of the above. And, importantly, what is the governance framework applicable to the company, for example, is the company listed on a stock exchange, is it a regulated entity or subject to particular industry codes or guidelines?

I also want to emphasis that taking the time to craft a thoughtful investigation plan, or terms of reference, is a very smart investment. This is especially true in larger matters where it is important for internal stakeholders to help exercise oversight on the matter, and for lawyers or other investigators to be able to easily track progress on open issues. Of course, investigation plans cannot be purely static documents, they need to be periodically revisited and updated as appropriate as new information is learned.

When scoping investigations that involve or are likely to involve regulators or prosecutors, it is important to understand that increasingly regulators and  prosecutors are expecting more of an investigation, expecting more out of investigations the bar being raised. The regulators want to see root cause analysis and remediation of controls, authorities are also increasingly assessing companies compliance programmes, companies own internal culture of compliance, they are evaluating all of those things and of course in their own investigations.  So these considerations need to be appropriately factored in to the scoping determinations.

Ultimately, whatever the particular drivers of the investigation, the focus should be on conducting a proportionate and defensible investigation that protects the interest of the company by ascertaining whether inappropriate activity occurred and what can be done to minimise the chances that such conduct will not be repeated.

Thank you Kevin

In my experience of approaching the investigation in stages is likely to yield the best results and help keep the investigation focused. At a high level the key stages of an investigation are, scoping which Kevin has just been talking to you about, then once that has been done data gathering and review, witness interviews, reporting and remedial steps.

In terms of the data gathering and review stage, this is often one of the most time consuming and costly faces of any investigation. Small decisions in relation to documents and data can have a big impact on the cost of an investigation over all. The current working environment where a number of us, who are colleagues around the world are working from home, can present challenges both from a data preservation and a data review perspective and therefore at the moment extra time should be built, built in for this stage of the investigation. In my experience, data review should usually be done before interviews, however there may be circumstances where you may want to conduct interviews first.  For example in some cases, it may be useful to talk to certain individuals upfront to identify key documents.

Before taking any positive actions to collect data, you need to think about any data privacy, in particular in the context of where your reviewers are physically located and any employment considerations that may be applicable. Key word searches can significantly reduce the number of documents to be produced, I would recommend having an earlier assessment of the search terms. Through this you can identify for example if certain terms, were giving you a high number of false positives. You can then refine the terms and safe time and cost by limiting the number of documents for the review that need to be uploaded to the review platform.

For the same reason, the use of date ranges should be considered, if you are not planning on reviewing everything think about how you can preserve the status quo to ensure information in documents are not destroyed or deleted for example in the litigation hold behind the scenes.

Sharon can you give us your thoughts on scoping and managing interviews, in investigations?

Thank you Orlando

Indeed next to data review, interviews are at the heart of most internal investigations, conducting interviews right could make a huge difference in the outcome of the investigation. Thinking of the goals of the interview, obviously when we come to interview interviewees the main goal is to gather the relevant information from the interviewee relating to the investigation. Whether this interviewee was part of the investigated scheme or is just familiar with some relevant information that could bring us forward in the understanding of what has happened.

We had already tried to obtain more colour or explanation on data that we already hold and information and documents that we are able to identify as part of the data review. Interviews can of course also direct us into additional relevant information that we need to consider as part of the investigation. Now when looking into investigations we could divide them into at least two types. The first would be scoping interviews, in many occasions the general information about how for instance the business unit is operating locally is just  unknown to us and also not to the client organisation conducting the interviews, at least not sufficiently. In these cases we would try to speak with individuals that are potentially not familiar with the concrete set of events that are being investigated. But could give us a necessary background information about the business unit about the matter of things that could be assisting us to direct our investigation to the right direction and save on costs and efforts. Those could be for instance individuals that were part of that relevant business unit or the team in the past and meanwhile they have relocated to another business unit within the organisation.

The second type of interview would be the interviews with the subjects of the investigation, so those are interviews with individuals that are potentially involved in the wrongdoing or have concrete knowledge about the wrongdoing.

For this type of interview it is very crucial to always consider the order in which those interviews will be conducted. In many cases we would start with the individuals that are the closest to the allegations subject to the investigation.  We try to get from them their understanding and the facts the way they see them with respect to the investigation and this will be followed by interviews with other individuals in order to corroborate those first interviews. When needed the first interviewees will be invited again for a follow up interview where we can clarify some of the facts that we have revealed as part of the investigation. Due to Covid-19 in many jurisdictions we are looking into remote interviews. Those provide good opportunity to save on cost and to speed up the entire process of the interviews. There are no travels required, for instance, but at the same time we find that conducting remote interviews are sometimes more challenging because it does not really allow us to have a good impression of body language, for instance, or the non-verbal signals of the interviewees, those would be crucial for us to understand the credibility of the information we receive. Therefore, from our experience there are a few things that you may consider. First, when possible it would be advisable to conduct the interview through a video conference and therefore allow us at least partially to observe those facial expressions and the non-verbal body language.  Second, is to make sure that sensitive information is not being just mailed or transferred to the interviewee him or herself but whenever possible and whenever those documents are needed for the purpose of the investigation we will do that by sharing screens with the interviewee. Also when possible we would hold the interview while the interviewee is present at the premises of the company, where possible with a local representative attending the interview. This would allow us to make sure that the interview is not tape-recorded because tape-recording in most jurisdictions would not be privileged. Now there are a few other things that one may consider to extract the best value of investigations, interview in investigations. The first would be to always have the scope of the investigation in mind when conducting interviews.  We should always make sure that we stay on track and avoid extending the investigation and of course also the cost and the time of the investigation unnecessarily. The second would be preparation. I cannot emphasise more the importance of being prepared to conduct an interview.  Being familiar with the information that is on file and that we are able to actually have a good conversation with the interviewee and lead the conversation to the topics that we find most relevant. Keeping a good structure of the investigation is something that can normally be done by preparing ourselves with an outline or even a questionnaire before the interviews, making sure where is it that we want to take this interview and allowing us also to make sure that at the end of the interview we cover all key topics that we want to have covered. Third is to stay flexible. We should avoid the tendency to simply follow our outline of questions without listening carefully to the interviewee. The interviewee shares with us information that may allow us to actually lead and direct the interview into the relevant topics in a different order than the one we originally thought of. So listen carefully and being flexible with the respect to the interview that will be a key element in conducting interviews. Perhaps another would be delay controversy. We see that most cases interviews can actually be conducted following a very friendly and cooperative approach but on certain topics when, for instance, there is some tension between the interest of the interviewee and the investigation, we may sometimes need to be a little bit more firm in the way that we put the questions to the interviewee. It is normally preferable to first gather all the relevant information we are able to gather from the interviewee and delay the moment of tension to a later stage of the investigation. Our experience shows that once this tension is already high it will be more challenging to obtain, sometimes at least, it will be more challenging to obtain the relevant information in the later stage and lastly and also related to that, is interviewers sometimes have the tendency to jump the ground and to show key documents or to present their theories and understandings of the facts. In fact, it would be always useful to start very small and to ask open questions so that we are able to nail the interviewee to a certain version of the story the way that he or she sees that and only then to actually present the relevant documents and to ask the response of the interviewee to those documents and sometimes that will certainly lead those into changing their original version opening up and sharing with us the relevant information whilst they understand that we actually hold some more information in what they thought of in advance. Concluding the investigation. When to stop the investigation is obviously a very important question and normally the way that we would consider doing that is using this outline we have prepared in advance to make sure that we covered all the key elements of the interviews that we wanted to cover in advance. We need to take into account that we never know whether we will have a second chance to speak with the interviewee. They may actually decide to become non cooperative at a certain stage of the investigation and therefore having the list of topics in advance prepared and knowing that you actually covered everything you wanted to cover would be of crucial value. This brings us to the end of today’s video. As you may be aware this is part of Norton Rose Fulbright’s videos dealing with internal investigation issues. If you have any other queries about any of the issues raised, please do not hesitate to reach out directly to us. Thank you for watching.