Internal Investigations: A primer

1. Internal Investigations: A primer Bob Cooper May 30, 2007

2. When do they occur? • OHS • Regulatory action • Employee misconduct • Whistleblower complaints • Media reports

3. What’s at stake? • Health and safety of employees • Risk of regulatory or criminal prosecution • Civil liability • Reputation

4. Example #1 • Forestry company operating on private land • Forestry operations being carried out by contractors and sub-contractors • A faller is critically injured in an accident and dies on-site before he can receive medical attention • Investigations are started by WCB, police and coroner’s office • The incident has a high media profile • Labour and industry groups use the incident to lobby for changes to the industry • Coroner announces public inquest • At issue for the company is the likelihood of regulatory sanctions, the risk of prosecution and significant reputational risk

5. Example #2 • Through a whistleblower hotline established by a major company, an anonymous complaint is made that certain key employees have engaged in insider trading • The employees named are members of senior management • The whistleblower provides few specifics • If true, the allegation has serious consequences for the company and individuals involved • At issue is the integrity and reputation of the company and individuals involved and the possibility of regulatory or civil action

6. Example #3 • A routine review raises a serious issue of misconduct by a long-time employee • The issue raises questions about the employee’s trustworthiness and calls into question the employee’s future with the company

7. What do you do? • Anticipate the event • Prepare the initial response • Assess the risks • Choose a process

8. Anticipate the event • Something bad will happen; it is only a matter of time • Decide who will be the point person • Decide who will respond to media • Know who your outside sources are

9. Initial response – Workplace accident • Secure accident site • Notify WCB • Inform employees of rights/obligations • Advise counsel • Understand the scope of the duty to cooperate • Document and record

10. Initial response - Regulatory Investigation • Protect privilege • Determine the purpose • Contact counsel • Search warrants • Requests for production

11. Initial Response – Employee Misconduct • Establish clear policies for conduct • Complaints procedure in place – whistleblower program? • Understand privacy and confidentiality obligations

12. Assess the risks • What are the legal consequences? • Closure • Fines • Prosecution • Civil actions • Distinguish between risks to the company and to the individuals involved • Is there an obligation to report or disclose? • Is the reputation of the company at stake?

13. Choose a process • The process must be gauged to the seriousness of the incident • Decide early if outside counsel is needed • Will the investigation remain internal or will the results be made known to outside bodies?

14. What to watch out for • Know your client • Manage internal and external communications • Maintain privilege • Understand the regulatory environment

15. Know your client • Decide who will provide instructions • Management • Directors • Committee • Make an early decision to go outside or stay home • To be credible, the investigation must be independent

16. Manage internal & external communications • It is easy to lose control over the investigation • Limit knowledge inside the company to those who need to know • Limit speculation and rumours by communicating what you can • Have one external spokesperson

17. Understand the regulatory environment • Know the regulator • Understand what matters to them • What are the current hot buttons? • Beware of overlapping jurisdictions • Kiss and make up or pistols at dawn

18. General considerations • Investigations are hard on people • The manner in which the investigation is carried out has the potential to cause more harm than the conduct under investigation • Serious incidents get the attention of senior management • There is increasing pressure from regulators to “cooperate” by disclosing the contents of the investigation • Done properly, they can allow a company to get ahead of the curve