The proactive internal investigation

If you received information that your organization was going to be the subject of an investigation by a regulator or law enforcement agency, what would be your first reaction? Sit back and wait for them to knock on the door with a search warrant? Blow it off, hoping it ultimately won’t go anywhere, or would you immediately start an internal investigation of your own?
Kristine Robidoux provides a great example of why it’s a good idea to get to the root of a matter early on before law enforcement gets too far ahead of you. Robidoux, a partner in the Calgary office of Gowling Lafleur Henderson LLP, spoke as part of a panel discussion called “Government and Internal Investigations” at the annual Canadian Bar Association conference. She was part of the team that assisted Calgary-based oil and gas company Niko Resources Ltd., in its 2009 investigation when the company learned it was the subject of an RCMP investigation into its activities in Bangladesh.

In June, Niko was hit with a $9.5-million fine for its actions in that country (see Robert Todd’s story on page 24). However, Robidoux says it could have ended much worse. Niko could have chosen to sit back and wait for the Mounties to arrive with a search warrant but it didn’t. Instead, after learning about the investigation by the RCMP, Niko’s audit committee authorized Gowlings to carry out an investigation so it could know in advance anything the RCMP was learning.

What transpired after that was a learning process for all involved. It was difficult and expensive for the company, but as Robidoux pointed out, everyone involved, including the company, as well as the Crown prosecutor and the authorities they worked with on the guilty plea, agrees the company wouldn’t have been dealt with as leniently if it wasn’t for the internal investigation that was conducted. It became a “significant mitigating factor in their favour.”

The internal investigation involved seizing computers with 10 terabytes of data that was drawn on by the company throughout the investigation. As information from the investigation came to light, the lawyers were able to go back and trace what were potential improper payments. The legal team could respond quickly.

So what should other companies that find themselves in a similar situation do? Robidoux’s advice is to mobilize quickly. As soon as it is known that there is an issue that puts individuals or the company at risk, an internal investigation should take place. Regulators will ask, “When did you learn about this and what did you do?” Be prepared to justify your actions after the fact.

Have good investigation protocols in place and identify beforehand the types of risks in your industry. Most in-house counsel won’t have to deal with foreign corruption, a securities regulator, or competition bureau investigation, but most will have to deal with situations like employee fraud, complaints from internal compliance, or sexual harassment. Knowing what the processes should be before you need to launch an investigation is just good management.

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