Internal Investigation Becoming Criminal.

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Which privilege and evidence safeguards must be set before employee interviews begin?

The Process of an Internal Investigation

In many cases, assessing the scope of a potential problem involves identifying all individuals, documents, and communications that are relevant to the issue at hand. Once this information is gathered and reviewed, the investigators can determine what questions they need to ask during witness and custodian interviews. After completing the interview process, investigators will then assess whether criminal violations have occurred or could potentially be charged. From here, they will work to determine what remedial or corrective action is necessary, and then they will generally work to finalize the findings in a report, proposed disclosure document, or other communications for the organization’s board, the government authorities, or external auditing partners.

Who Conducts or Initiates an Internal Investigation?

An internal investigation is typically commissioned by one of the organization’s key leaders, this may include the organization’s board, its audit committee, executive leadership, general counsel, or another appropriate party. In some instances, organizations may decide to put together a special litigation committee, which then retains defense counsel to serve as the investigating team. Depending on the organization’s board’s wishes, the internal investigation may also involve the organization’s employees and its outside consultants.

Other Contexts for Internal Investigations

Organizations may also conduct internal investigations in the wake of congressional committee inquiries, requests for information from external auditors, subpoenas issued by government agencies, or other outside efforts to scrutinize the organization’s internal operations or the individual actions of its executives, managers, or employees. In many of these cases, external oversight by the federal government is at least partially involved, even if it has not quite reached the level of an official inquiry or criminal investigation.

Government Inquiries and Individual Criminal Liability

Along with relying on organizations to police themselves, the government also has several tools available when it is interested in pursuing charges against individuals. For example, in some cases, the government will send out target letters. These letters generally notify individuals of their target status and rights; prosecutors may separately invite a target to provide information under a proffer or immunity agreement. This is an attempt to build a case against others, and it is an extremely important moment for target individuals. A target letter indicates that the government is investigating possible federal criminal violations, and individuals who receive target letters should engage experienced internal defense counsel as soon as possible.

Who decides whether to narrow, pause, disclose, or separate the investigation when interests split?

If an internal investigation reveals that employees committed violations, then, of course, the company’s counsel may advise with regard to the appropriate employment consequences and other remedial measures. Depending on the case, this could include anything from suspension to reprimand to termination. In tandem with addressing employees’ violations of the company’s policies, companies can also face civil and criminal enforcement regarding the same underlying conduct. This means that companies will need to work closely with their internal defense counsel to ensure that they are adequately prepared to protect themselves against all forms of exposure.

As a result, many companies may wish to avoid criminal and civil enforcement by proactively seeking a resolution from the relevant government authority through cooperation. In these cases, once a company has identified an internal wrongdoer, it may end up facilitating the government’s prosecution of that employee (and others). With this in mind, this could involve a whole array of different entities working with the company (and with each other) as they pursue appropriate enforcement action.

For example, state and federal authorities may pursue criminal, civil, and regulatory enforcement action in parallel. Alternatively, in some cases, state and federal prosecutors will work together to determine which system, federal or state, can best handle a given case. With this in mind, it should be no surprise that companies will need to work very closely with their internal defense counsel to effectively protect themselves in all of these scenarios as well.

As a final point, it should be noted that internal investigations are not automatically required whenever there is the possibility of criminal or regulatory exposure. While this may not be the case in all scenarios, it is certainly true in many. However, just because it is not mandatory doesn’t necessarily mean it is not the best option. With this in mind, when faced with potential criminal and/or civil exposure, companies should weigh their options, and make the informed decision that makes the most sense for the organization.

While conducting an internal investigation is not always mandatory, we think it often is in the best interest of organizations. This is why we emphasize making informed decisions about whether to launch an investigation and what to include in the scope of the investigation when one is conducted.

How do internal findings become an individual federal case rather than only corporate exposure?

How Federal Criminal Cases Begin

While we focus largely on the importance of a strong defense during internal investigations, here is how that process can ultimately lead to individual criminal charges. Federal criminal cases may begin with an indictment, information, criminal complaint, or, in a petty-offense case, a citation or violation notice. In cases of grand jury indictments, the government presents evidence to a grand jury, which then decides whether probable cause exists to believe that a crime was committed and that the defendant committed it. In cases of an information or criminal complaint, prosecutors file charges based on a law enforcement officer’s sworn statement. With this said, here is a deeper look at each of these scenarios.

The Federal Felony Indictment Process

With regard to federal felony indictments, the grand-jury proceeding is closed, and the defendant has no right to be present or to have counsel present. The federal prosecutor represents the U.S. government, and as such, the prosecutor is the party that decides what evidence to present to the grand jury. After the grand jury hears the government’s case, the grand jury then decides whether there is sufficient evidence to return a “true bill” and formalize the charges. This means that the issuance of a true bill is not an indictment of guilt, but it does signify the formalization of charges based upon probable cause.

U.S. Sentencing Guidelines and “Relevant Conduct”

In the United States, the severity of a sentence for most federal crimes is informed in part by the advisory U.S. Sentencing Guidelines and the statutory sentencing factors. This is in part based on “relevant conduct.” With regard to federal criminal cases, relevant conduct includes the criminal offense at hand. However, it can also include certain other criminal conduct committed before or during the offense, including conduct that was dismissed or uncharged, but relevant conduct does not include conduct for which the defendant was acquitted in federal court unless that conduct also establishes, in whole or in part, the offense of conviction.

Along with this, the defendant’s sentencing court can use sentencing guidelines to determine what sentence is most appropriate based on whether or not the court finds relevant conduct by a preponderance of the evidence. With that said, it is important to note that this is a different standard of proof than is required to convict a defendant of a criminal offense beyond a reasonable doubt. Therefore, a sentencing court may find contested facts by a preponderance of the evidence and impose a criminal sentence based on the result.

Talk to Spodek Law Group

Every case turns on its own facts, and general information is no substitute for advice about yours. Todd Spodek, managing partner of Spodek Law Group, and the firm's attorneys defend federal criminal and white collar matters nationwide. Reach the firm at 888 348 8028.