Uncover internal wrongdoing before regulators arrive

Alexander Cobb

Nov 2, 2015

Shannon Kari, Canadian Lawyer Magazine

While experienced lawyers agree that uncovering internal wrongdoings before such allegations reach law enforcement agencies and regulators is paramount, lessons learned from the problems at SNC-Lavalin serve as an instructive lesson for other large companies, especially organizations with operations in multiple countries. Effective, independent internal investigations are critical and can save companies money and their reputations, to say nothing about protecting the public brand of a company. Says Alexander Cobb, partner, Litigation, “There are potential problems with regulators and investors if there are public concerns raised about a company and it does not investigate the allegations fairly. My view is that the market will punish you mercilessly if they don’t think they can trust the information you have released publicly.”

In this November 2015 article, “Internal affairs” from Canadian Lawyer Magazine, writer Shannon Kari examines a number of cases using high-profile non-governmental organizations to illustrate the impact of investigations ranging from expense account fraud to allegations of insider trading, data breaches or foreign corruption.

What is certain is that having a plan in place to decide on what will be investigated and who will lead it – internally or externally – and the more rigour and resources put into the investigative process, the easier to respond and the likelihood that the probe will be more cost effective. While the specific scenario of any allegation will drive this decision, “if there is any doubt, err on the side of not using regular counsel, so the investigation is considered objective,” suggests Alexander.

Further complexities are involved when investigating cross-border allegations, “you have to know the law in all of the jurisdictions. You will likely need local help…different jurisdictions will have different rules in terms of what you can access and what you can do with employee information.” Cultural sensitivities, the rules and conventions around privilege, witness interviews, the subtleties of phrasing questions so as not to offend need to be considered. And while Canada and the U.S. are similar in terms of how allegations are handled when cross-border investigations are involved, how much information is disclosed, the level of cooperation with regulators and law enforcement agencies and the focus of the investigation must all be conducted in a thorough and fair manner. For example, in the case of whistleblowers who allege misconduct, it’s likely that the regulator has been apprised of the complaint at the same time that the complaint was lodged within the company. “It’s good practice to let the regulator know as soon as possible about the complaint and that the company is looking into the issue,” says Alexander Cobb.

For any reasonable outcome, there is a delicate balance between cooperating to reach a good resolution for the client and protecting privileged information.

Read the full article: Internal affairs.