Comprehensive Guide to White-Collar Criminal Defense: Internal Investigations

Internal Investigations: A Guide for Businesses

When faced with allegations of misconduct, compliance concerns, or potential legal violations, conducting an internal investigation is essential. A well-executed internal investigation helps organizations address issues proactively, engage with law enforcement where appropriate, and reduce legal risks. The below guide outlines key considerations for conducting internal investigations and how to navigate the process effectively.

What is an Internal Investigation?

An internal investigation is a fact-finding process initiated by a company to uncover and address allegations of wrongdoing, non-compliance, or other issues. Common triggers for internal investigations include:

  • Allegations of fraud or embezzlement

  • Discrimination or harassment complaints

  • Regulatory violations or suspected violations

  • Whistleblower claims

  • Data breaches or cybersecurity incidents

Why Are Internal Investigations Important?

Conducting an internal investigation can:

  • Uncover the Facts: Most importantly, an internal investigation can determine whether misconduct or violations occurred.

  • Mitigate Risk: Address problems early to minimize legal, financial, and reputational damage.

  • Ensure Compliance: Demonstrate a commitment to compliance with laws and regulations.

  • Protect Against Litigation: Build a strong evidentiary foundation for a defense if legal action arises.

Key Steps in an Internal Investigation

1. Assemble the Right Team

The first step is forming an investigation team. Depending on the nature of the issue, this team may include:

  • In-house counsel or compliance officers

  • External legal counsel with expertise in white-collar criminal defense and other matters critical to the investigation

  • Human Resources professionals

  • Forensic accountants or IT specialists

Obviously, the proper “team” is determined by the facts at issue. However, it is critical that this team, whoever it is, be seen as impartial and fact-seeking. Conducting an internal investigation that merely serves to cover-up any misconduct or sweep allegations under the rug is worse than no investigation at all.

2. Define the Scope

Clearly outline the purpose and scope of the investigation. This includes identifying:

  • The allegations or issues that need to be reviewed;

  • Relevant laws and regulations that are alleged to have been broken or potentially been broken

  • All individuals and documents involved, including emails, text messages, Slack, Teams chats and any other forms of electronic communications.

3. Preserve Evidence

Preserving evidence is critical to the integrity of the investigation. Take steps to:

  • Secure relevant electronic data, emails, and documents.

  • Ensure compliance with federal laws on evidence preservation.

  • Prevent the destruction or alteration of materials.

4. Conduct Interviews

Interview key witnesses and employees to gather firsthand accounts. The quicker that these are performed the better. Best practices for interviews include:

  • Preparing for the interview in advance - this means gathering key documents, preparing an outline, and figuring out what questions to ask;

  • Recording or documenting the interviews accurately (this usually means more than one person in the interview);

  • Providing Upjohn warnings - it is critical for employees to know that counsel represents the company (and not them).

5. Analyze the Findings

Review all evidence and testimony to determine whether misconduct occurred. This is (obviously) a critical step and will generally involve:

  • Consulting with legal counsel to assess liability

  • Identifying potential violations of internal policies or laws

  • Preparing a comprehensive report summarizing the findings

  • Identifying next steps (i.e. removal of employees, provision of warnings, or reporting to authorities)

6. Take Appropriate Action

Based on the findings, take corrective actions, such as:

  • Disciplinary measures for individuals involved

  • Policy revisions to prevent future issues

  • Self-reporting to regulatory authorities if required

Legal Considerations During Internal Investigations

Attorney-Client Privilege

Maintain attorney-client privilege to protect communications and documents created during the investigation. Consulting with legal counsel is essential to ensure the privilege is preserved. Likewise, providing employees with so-called Upjohn warnings is also important to protecting the privilege.

Whistleblower Protections

Federal and state laws protect whistleblowers from retaliation. Familiarize yourself with whistleblower protections under federal law.

Privacy and Confidentiality

Ensure the investigation respects employee privacy and complies with applicable data protection laws, such as the General Data Protection Regulation (GDPR). Moreover, if employees have their own phones, the company will generally run into problems in accessing the data on those device. It is important to be proactive.

Common Mistakes to Avoid

  • Delaying the Investigation: Prompt action is critical to preserving evidence (and memories of witnesses) and addressing issues.

  • Failing to Define the Scope: A vague or overly broad investigation can waste resources and dilute focus.

  • Ignoring Employee Protections: Retaliation against whistleblowers or mishandling employee rights can lead to additional legal liabilities.

  • Neglecting Documentation: Comprehensive documentation is essential for demonstrating due diligence.

When to Involve External Counsel

Engaging experienced legal counsel skilled in fact-finding and internal investigations (such as Dynamis LLP) is critical for any investigations involving:

  • Potential criminal or regulatory misconduct

  • Potential misconduct which could trigger civil fines and penalties

  • Complex regulatory issues involving the SEC, CFTC or other government bodies

  • Conflicts of interest within the organization

  • Allegations that could lead to significant legal exposure

Outside counsel is expensive. However, the failure to hire outside counsel may be more expensive in the long-run (pennywise and pound foolish). This is because regulators often view internal investigations conducted entirely by internal employees with skepticism.

Conclusion

Internal investigations are an important step for addressing potential misconduct and maintaining a culture of compliance. But to be effective companies must act swiftly and strategically. Companies must interview the right people, collect the right evidence, and develop a detailed and factually correct chronology of events. Finally, companies must take action - the termination of employees or the reporting of issues to regulators may be necessary.

If your organization is facing a situation requiring an internal investigation, contact attorneys at Dynamis LLP or email whitecollar@dynamisllp.com today. Our experienced attorneys provide comprehensive guidance to ensure investigations are thorough, compliant, and effective.

Further Resources on White-Collar Criminal Defense

  • Money laundering is the process of disguising illegally obtained funds to make them appear legitimate, often through complex financial transactions across multiple jurisdictions. It is a federal crime frequently prosecuted under laws like the Bank Secrecy Act and Anti-Money Laundering statutes.

  • Government investigations involve inquiries by agencies like the Department of Justice, SEC, or FBI into potential violations of laws, often targeting white-collar crimes, fraud, or regulatory breaches. These investigations can result in civil penalties, criminal charges, or negotiated settlements.

  • Hiring a white-collar defense attorney is crucial for individuals or businesses facing allegations of financial crimes, fraud, or regulatory violations. An experienced attorney provides strategic guidance, protects your rights during investigations, and builds a strong defense to mitigate potential penalties or resolve the case favorably.

  • Federal criminal defense involves representing individuals or entities accused of violating federal laws, such as fraud, tax evasion, or drug trafficking. Defense attorneys navigate complex federal statutes and procedural rules to protect clients' rights and achieve favorable outcomes.

  • Insider trading involves buying or selling securities based on material, non-public information in violation of trust or fiduciary duty. It is prosecuted as a serious offense under federal securities laws, often resulting in civil penalties, criminal charges, and imprisonment.

  • Securities fraud occurs when individuals or entities deceive investors by misrepresenting or omitting material facts about financial instruments. Common examples include Ponzi schemes, misleading financial disclosures, and pump-and-dump schemes, which undermine market integrity and investor trust.

  • Mail and wire fraud are federal offenses involving schemes to defraud using mail services or electronic communications, such as emails or phone calls. These charges are broadly applied in white-collar crime cases, often carrying severe penalties due to their wide-reaching impact.

  • Crypto regulatory enforcement involves actions by agencies like the SEC and CFTC to address fraud, unregistered securities offerings, and market manipulation in the cryptocurrency industry. With increased scrutiny, companies and individuals in the crypto space face complex compliance requirements and significant penalties for violations.

  • White-collar defense involves representing individuals and businesses accused of financial crimes such as fraud, embezzlement, or money laundering. New York City prosecutors have long been at the forefront of prosecuting white-collar cases nationwide.

  • White-collar defense in Boston involves navigating complex legal issues related to financial crimes, regulatory violations, and corporate misconduct. With a strong business environment, cases often involve fraud, embezzlement, insider trading, and money laundering. Defending clients requires a deep understanding of criminal law and regulatory frameworks. Skilled attorneys analyze evidence, develop robust defense strategies, and advocate for clients' rights, mitigating serious charges. As Boston grows as a hub for finance and innovation, the demand for sophisticated and aggressive white-collar defense continues to be crucial.

  • Health care fraud includes schemes to defraud government programs, insurers, or patients through false billing, kickbacks, or unnecessary medical services. It is aggressively prosecuted under statutes like the False Claims Act, often resulting in significant fines, criminal charges, and exclusion from federal programs.

  • White-collar crime enforcement has increasingly focused on emerging areas like crypto fraud, pump and dump schemes, securities fraud and cybersecurity breaches. Regulatory agencies are leveraging advanced data analytics and global cooperation to target sophisticated financial crimes and corporate misconduct.

  • An effective white-collar defense strategy starts with a thorough investigation of the facts, understanding the applicable laws, and assessing potential weaknesses in the prosecution’s case. Collaboration with experts, proactive communication with regulators, and pursuing favorable resolutions, such as settlements, are key components of a robust defense.

  • Corporate compliance programs are internal policies and procedures designed to ensure adherence to laws, regulations, and ethical standards. Effective programs not only reduce the risk of violations but can also serve as mitigating factors in enforcement actions if issues arise.

  • Understanding how state and federal investigations work, as well as their differences, is critical. The federal criminal process involves investigation and prosecution under federal laws by agencies like the FBI or DOJ, with cases heard in federal courts. State processes deal with violations of state laws and are typically less complex, though penalties and procedures vary significantly between jurisdictions.

  • Responding to a subpoena requires careful compliance with the legal request for documents, testimony, or evidence while protecting privileged or confidential information. Consulting an attorney is crucial to navigate the process and avoid legal risks associated with non-compliance or over-disclosure.

  • The federal grand jury process is used to determine whether sufficient evidence exists to indict a person for a federal crime. It involves secret proceedings where prosecutors present evidence, and the grand jury votes on whether to issue an indictment.

  • Internal investigations are conducted to uncover potential wrongdoing within an organization, often triggered by whistleblower reports or regulatory inquiries. These investigations are essential for assessing legal risks, taking corrective action, and demonstrating corporate accountability to regulators.