What’s My Case Worth?

  • Former Federal Agents
  • 100 Years of Combined Experience
  • Investigations, Compliance & Defense
Chris Quick

Former Special
Agent (FBI & IRS)

Roger Bach

Former Special
Agent (DOJ-OIG & DEA)

Timothy Altlen

Former Special Agent
(U.S. Secret Service & DOJ-OIG)

Ray Yuen

Former Special
Agent (FBI)

Michael S. Koslow

Former Special
Agent (DOD & OIG)

When is it Time to Conduct a Corporate Investigation?

If your company is at risk for facing substantial liability, conducting an internal investigation could save money and protect your company’s public image. But, how do you decide when it is time to move forward?

When contemplating whether to conduct an internal corporate investigation, “What’s my case worth?” might at first seem like an odd question. After all, an investigation isn’t a “case” at all, and in many cases the point of conducting an internal corporate investigation is to avoid litigation altogether.

But, while this is all true, the reality is that conducting internal corporate investigations is all about mitigating risk; and, in the corporate realm, this risk comes from the possibility of being sued or being targeted by federal authorities such as the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), the U.S. Department of Justice (DOJ), and the U.S. Securities and Exchange Commission (SEC). Thus, in order to determine whether it is worthwhile to conduct an internal corporate investigation, it is first necessary to determine what is at risk if an investigation is not conducted.

From this perspective, it is not hard to see why conducting internal investigations is an effective corporate risk management tool, and why internal audits and investigations are a staple of many large corporations’ risk management and compliance programs.

Understanding the Risks (and Costs) of Security Breaches, Compliance Failures, and Other Corporate Challenges

Internal corporate investigations can serve many different purposes. Fundamentally, these purposes are all the same—to gather the information required in order to make sound decisions regarding risk management and litigation strategy—but they are all unique in their own ways as well. As a result, when deciding whether to conduct an internal corporate investigation, it is necessary to consider the costs of the investigation in comparison to the potential risks and costs associated with the purpose for which the investigation is being considered.

While each situation is different, generally speaking, conducting an internal investigation will prove to be cost-effective in circumstances involving:

  • Cyber threats
  • Data security breaches
  • Government investigations
  • Infringement of corporate intellectual property (IP) assets
  • Litigation threats from competitors, employees, customers, and others
  • National security risks
  • Theft of trade secrets

What are the Risks in Civil Litigation with Employees, Clients, Customers, or Other Individuals?

Employment-related litigation, personal injury claims, product liability claims, and other civil lawsuits can create substantial liability exposure for companies as well. These lawsuits can involve all manner of issues, and assessing plaintiffs’ claims requires a thorough understanding of the facts on the ground. In many cases, this will necessitate an internal corporate investigation, and the information gathered during the investigation can then be used to formulate a litigation strategy designed to mitigate (or avoid) liability to the fullest extent possible.

Let’s consider an example: An employee has filed suit alleging hostile work environment sexual harassment. The employee is alleging that management fostered an environment where inappropriate conduct went overlooked, and complaints supported by clear evidence were ignored. The employee’s lawsuit suggests that more may be waiting in the wings; and, if the allegations are true, your company could be mired in costly and reputation-damaging employment litigation for years.

In this situation, an internal corporate investigation is not only necessary, but it needs to be conducted as soon as possible. If the employee’s allegations are true, then the conduct at issue needs to be addressed immediately in order to prevent additional liability. If the allegations are not true, then your company needs to have evidence in order to avoid settling a lawsuit that is without merit. Regardless of which of these turns out to be the case (or, as is often the case, reality is somewhere in between), you need to know the truth, and conducting an internal investigation will be a key first step toward achieving a positive and cost-effective outcome.

What are the Risks in Commercial Litigation Between Businesses?

In commercial litigation, companies can face liability exposure ranging from the tens of thousands to hundreds of millions of dollars. Thus, there is no simple, one-size-fits-all answer to the question of what is at risk if your company is being sued by a competitor or other commercial entity. However, one factor that is universal among virtually all commercial lawsuits is that moving forward without a comprehensive understanding of the relevant facts will put your company at a disadvantage, and it will likely increase the costs of the litigation both in terms of causing your company to give up ground unnecessarily and causing it to spend more in an effort to protect corporate information during the litigation process.

Let’s consider an example: Your company is being sued by a competitor. The competitor alleges that your company is using its copyrighted assets and proprietary information unlawfully, and it is further alleging that one of your company’s employees – who used to be one of its employees – stole these assets prior to leaving the company. Are the allegations valid? If so, what strategy should you pursue in the litigation? If not, how do you prove it and move on?

The dollar amounts involved in litigation involving registered copyrights and trade secrets can be substantial. The U.S. Copyright Act provides for statutory damages in cases of registered copyright infringement, and trade secrets can easily be worth seven or eight-figure sums. So, if the allegations are valid, your company could be facing an enormous judgment, perhaps more than it has the capacity to pay.

At this point, your company has virtually no choice but to conduct an internal investigation. As soon as possible, you need to know: Did the employee in question bring the competitor’s intangible assets to your company? If so, have they been used? Regardless, was the employee in question involved in the business activities that triggered the lawsuit? Or, did another employee independently create IP that your company has every right to use and protect? Once you know the answers to these questions, then you can formulate an informed litigation strategy—and you can execute this strategy with confidence.

What are the Risks in Federal Law Enforcement Matters?

Companies in all industries face federal compliance obligations. From consumer protection laws to antitrust laws, and from the SEC to the IRS, numerous federal statutes and federal agencies impose burdens for corporations for public and private companies of all sizes in all 50 states.

Adopting and implementing an effective compliance program is critical to avoiding unwanted federal scrutiny. Conducting periodic compliance audits or investigations can confirm that your company’s compliance program is serving its intended purpose, and it can also help to identify new compliance needs. If your company has come under scrutiny, then conducting a targeted internal investigation will be crucial to building a strategic defense that protects your company (and its officers and executives) against federal charges as well.

Let’s consider an example: Your company is in the healthcare industry, and it relies heavily on Medicare reimbursements as a source of revenue. You have recently learned that federal authorities are examining your company’s billings based on concerns about possible large-scale Medicare fraud.

When facing a federal audit or investigation, you need to know what federal agents are going to find before they find it. This means that you need to conduct an internal corporate investigation—and you need to do so immediately. In this specific scenario, while the costs of violating Medicare’s billing rules and regulations can be severe, there are also numerous potential defenses to allegations of Medicare billing fraud. By conducting an internal investigation, your company can discern whether any mistakes have been made, and your company can collect and generate the documentation it needs in order to achieve a favorable outcome in the government’s inquiry. In any case, moving forward with the information your company needs to execute a sound defense strategy will provide a substantial return on the cost of the investigation.

When is it Time to Conduct an Internal Corporate Investigation?

So, those are some examples of circumstances in which it will be worthwhile to conduct a targeted internal corporate investigation. Now, let’s say you believe an internal investigation might be necessary—when is it time to engage a corporate investigation firm to get started?

It is time to conduct an internal corporate investigation if:

  • Your company has been sued;
  • You have reason to believe that a lawsuit against your company is imminent;
  • You have been made aware of events or actions that could potentially trigger litigation;
  • Your company has received a subpoena, civil investigative demand (CID), target letter, or other inquiry from a federal agency; or,
  • You are unsure whether your company’s current compliance efforts are sufficient to adequately mitigate its risk of commercial, civil, or governmental litigation.
Speak with a Corporate Investigator at Corporate Investigation Consulting for Free

If you have questions about conducting an internal corporate investigation, we encourage you to get in touch. A senior member of our team will be happy to discuss your company’s circumstances in complete confidence. To speak with a corporate investigator at Corporate Investigation Consulting for free, call 866-352-9324 or tell us how we can reach you online now.

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