A poorly run internal investigation: the potential fallout

Conducting an internal investigation poorly can have serious financial and reputational implications on sports teams, organisations and club personnel. With the rising need for investigations in sport, industry players must carefully consider the potential impact of initial allegations of wrongdoing and poorly run internal investigations, and be aware of the common pitfalls to avoid. 

Financial consequences

Financial penalties can be imposed on professional sports clubs where an investigation has been poorly conducted and regulatory bodies have not shied away from imposing punishments for breaching regulations and club misconduct. 

In July 2021, following an independent investigation into the team’s culture, the Washington Commanders were issued a $10 million fine by the NFL, the largest financial penalty ever issued by the league. The investigation, brought to light by reports from The Washington Post, concluded that the club acted in a “highly unprofessional” manner,  which sanctioned bullying, intimidation, multiple allegations of sexual harassment and fostered an environment with a “general lack of respect”. This punishment highlights the NFL’s unwavering commitment to enforcing league regulations and should serve as a warning to other organisations to ensure its internal policies and behaviour are appropriately controlled.

Notwithstanding any financial penalty, an initial and ineffective investigation can cause clubs further financial issues. If an investigation is poorly handled or does not have a clear scope, an additional re-investigation may be required. Therefore, it can often be more cost effective to conduct an effective investigation in the first instance. Seeking external legal advice can assist with identifying the scope of an investigation and the key objectives of the investigation. 

Reputational consequences 

The public nature of the professional sports industry means any punishment imposed is likely to attract large press interest, and further reputational damage. 

This was recently seen in the British Gymnastics scandal, brought to light following an investigation by Anne Whyte KC. The investigation highlighted an “unacceptable culture”, where gymnasts were starved, body shamed and abused in the ruthless pursuit of success.

Going further, however, Whyte was heavily critical of British Gymnastics’ approach to internal investigations into misconduct and safeguarding concerns, saying: “the policies that did exist between 2008 and 2020 lacked adequate guidance and instruction about … how [British Gymnastics] would investigate especially in the context of conduct concerning children and young people”. 

Whyte’s investigation, and the subsequent press attention, has reflected badly on British Gymnastics, the sport as a whole and SportUK, the government body responsible for investing in elite sport; who admitted, in the course of the investigation, that until 2017, it failed to put athletes’ wellbeing at the “front seat”. 

The impact on a professional sports organisation can be wide-ranging and damaging to club personnel, business interests and even the sport itself. It is therefore essential that sports clubs conducting an investigation are aware of reputational consequences that can arise from a poorly managed investigation.   

Dealing with Governing bodies

Teams should consider the broad ranging powers of individual sporting bodies. If an (additional) investigation is undertaken by a statutory body, such as the police, SFO, FCA, or HMRC, their powers and penalties are limited by statute. However, if an organisation is investigated by a governing body, such as the Football Association, its powers can be less regulated, especially with regard to ‘on the pitch’ penalties. These wide-ranging powers were recently exercised against Derby County Football Club. The League One side entered into administration in September 2021 which resulted in an automatic 12-point penalty. The English Football League further implemented a 9-point penalty for breaches of profitability and sustainability rules.

It should also be noted that often a sports regulator or governing body maintains complete discretion over any penalties. For example, the English Rugby governing body, the Rugby Football Union, has the power to impose a complete bar on any grade rugby activity “for such period and on such terms … as the Legal Officer … considers necessary” as a result of any safeguarding breaches. 

With the power to impose serious sporting punishments, organisations should bear in mind the risks of conducting an investigation internally. The potential fallout of a poorly managed investigation on a club’s performance must be noted. Serious punishments, such as in the case of Derby County Football Club, should serve as a warning to other teams that internal failings can result in serious ‘on the pitch’ penalties. The broadly drafted regulations applied by regulators can result in punishments that can place a club in a (financially) vulnerable position. 

Doing things right 

From our experience, conducting an effective, thorough investigation can help to limit the fallout.

It is clear that sports regulatory bodies can impose several financial penalties. Whilst in some  circumstances, an effective investigation will not avoid  a financial penalty, an open, honest, and proper investigation can often mitigate the severity of any penalty imposed. 

An open and co-operative approach, especially when dealing with governing bodies, may prevent the need for unnecessarily detrimental ‘on the pitch’ penalties. Often a purely commercial issue should not need to interfere with a club’s performance, as seen in the Derby County Football Club case, points deductions can have a serious, long-lasting impact on a team’s prospects. 

Whilst this article focuses on the fallout of a poor investigation, and potential steps that can be taken to mitigate this, we have explored what an effective investigation may look like in a previous article, this can be viewed here. 

The authors would like to thank Jake Burke, Norton Rose Fulbright solicitor apprentice, for his assistance with this blog post and series.