How Do Internal Investigations Work?

What is an internal investigation and why would one occur?

An internal investigation is one that is carried out to investigate an allegation of fraud, corruption or any other violation of the company’s code of conduct. The reason for such an investigation may even be to identify statutory or regulatory concerns and take the necessary action and remedial measures. An internal investigation that is thoroughly conducted would generally assist the company in ensuring compliance with applicable legal requirements, whilst identifying the necessary remedial actions to be taken to avoid such situations, as well as to prepare for potential legal proceedings. The widening ambit of potential liabilities under the various statutes has increased the importance of ensuring that any allegation of wrongdoing is immediately investigated.

t is prudent to involve external legal counsel, who is covered by attorney-client privilege to an extent,  to ensure advice on consequences and legal action that may be taken by the company or against the company.

How can companies prepare for an internal investigation? How do you conduct an internal investigation?

Before commencing any investigation, the scope, nature and purpose of the investigation should be identified and formulated. The investigation plan would need to identify the specific work steps, phases and timelines based on the allegation and the information involved.  It is prudent to involve external legal counsel, who is covered by attorney-client privilege to an extent,  to ensure advice on consequences and legal action that may be taken by the company or against the company.  The need and timing of involving the board of directors/ relevant committee of the board, statutory auditors would also need to be kept in mind given the possibility of statutory reporting that might be triggered.  Identification of the steps to be taken prior to the investigation, including suspension of the relevant employees pending enquiry, taking custody of devices and documents which are to be reviewed.

Depending on the outcome of the investigation, the company would need to assess the next steps that would need to be taken including perhaps terminating the services of vendors or distributors.

Review of the data, relevant documents and preparation of the interview questions should be clearly identified before conducting the interviews. Strategizing the sequence of persons to be interviewed and ensuring that the interviews happen in a comfortable and non-threatening atmosphere is important. After each interview, it is important for the team to take stock of the responses and consider if any additional questions are to be raised or if other persons connected with the matter are to be interviewed. Recording of the interviews to ensure that they can be used as evidence if the matter is litigated is also important.

What are the next steps after an investigation is concluded?

Depending on the outcome of the investigation, the company would need to assess the next steps that would need to be taken including perhaps terminating the services of vendors or distributors. In addition to identifying and taking the necessary remedial measures to avoid a repeat, the company would also need to assess the kind of disciplinary action that would need to be taken against any involved employees ranging from a warning letter, holding back of promotions or even termination. Additionally, there could be reporting and filings that would need to be taken by the company under various statutes which could have ramifications for the company for which it should be prepared. A well thought through and well-strategized internal investigation should ensure that the company would be prepared for the consequences.

Nohid Nooreyezdan

AZB House | Peninsula Corporate Park | Ganpatrao Kadam Marg | Lower Parel | Mumbai 400 013
Tel: + 91 22 4072 9999 | Fax: + 91 22 6639 6888 | www.azbpartners.com

As a Senior Partner based out of Mumbai, I have been with the Firm since its inception and head up the Employment Law practice along with being a part of the Firm’s Compliance and Investigation practice team. Being in the profession for over 24 years, I have advised clients from various sectors on the rapidly evolving nuances of Indian employment law as well as the Indian anti-corruption laws and compliance requirements and conducted document review and interviews of custodians in relation to allegations of commercial and public corruption and bribery.

AZB & Partners is one of the few firms in India that has a formidable Compliance and Investigation team consisting of several individuals who are not only highly qualified but also possess extensive experience in the practice area.  The firm stands out as being one of the few that offers clients equal and seamless coverage of white-collar crime matters across national regions such as Delhi, Mumbai and Bangalore and internationally. AZB & Partners’ team of specialized lawyers and forensic investigators allows it to bring an integrated multi-disciplinary approach to white collar crime.