Cadwalader, Wickersham & Taft LLP
The pressure on in-house counsel to maintain effective and comprehensive compliance programs only intensified last year, with the U.K. Bribery Act and the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act taking effect. Companies must go to greater lengths than ever to prevent compliance violations, and to swiftly detect and respond to the breeches that inevitably occur. The Dodd-Frank whistleblower program, which offers monetary incentives for employees to report possible violations Read more…
Independent Advice is Critical Anytime Internal Roles are Unclear
A decade’s worth of corporate scandals and economic turmoil has made boards of directors more sensitive than ever to risk management and governance issues. A more proactive and engaged board, however, can cloud traditional roles and responsibilities for general counsel.
“The question arises of whom the general counsel really serves,” says Brent M. Buckley, managing partner of Buckley King LPA. “We know the niceties of who’s the paycheck and who’s the client, but in truth is corporate counsel answering to the board of directors that serves at the pleasure of the shareholders, or are they responding to senior management? Role confusion can easily occur.”
That confusion can result in liability in the event risk management or corporate governance problems arise. Buckley recommends in-house counsel tread lightly in these areas as a general practice, and rely on independent counsel whenever there’s any doubt.
“Obviously boards need to look to their general counsel for perspective, but inside counsel have career and internal relationship considerations,” he says. “That’s why you need independence. Outside counsel can give boards, audit committees and governance committees the straight message.”
That independence is important not just in critical areas such as internal investigations, but anytime a strictly unbiased view on the corporation’s risk considerations or legal exposure is required.
Flexibility Is Critical When Conducting Internal Investigations
Any situation requiring an internal investigation is inherently tense, but counsel should not let that affect the way they manage the investigation process, according to Latour “LT” Lafferty, who leads the white collar crime, government investigations, corporate compliance and ethics practice at Fowler White Boggs PA.
“An internal investigation should be a fluid process,” he says. “You must constantly reassess your plan, and be flexible enough to alter the investigative steps as necessary to accomplish your overriding goal.” Investigations are inherently crisis situations that require adaptability.
Perhaps the most common mistake counsel make is sticking to a rigid plan and script of questions during witness interviews. In that case, investigators are likely to find only the things they’re looking for, and those facts may not paint the full picture. Instead, investigators should try to structure a conversation that may go in unanticipated directions and reveal critical information.
“Experienced counsel will create a general topical outline, then engage the witness in a discussion of those topics in an open-ended manner to elicit factual information,” Lafferty says. “You should not be tied to a particular question.”
Experience and instinct often lead skilled investigators down unexpected paths. Going off the script frequently proves essential to uncovering the heart of a controversy. That can’t happen if interviews are rigid and rote.
“Sometimes you have to go with the flow of the investigation and see where it takes you,” Lafferty says. “You want to follow the evidence, rather than dictate the evidence, like water flowing in the river of life.”