Litigation: 5 tips for conducting high-value internal investigations
With the implementation of the Dodd-Frank Wall Street Reform and Protection Act, government oversight of public companies continues to increase; formal SEC investigations are up 160 percent since 2008.
May 24, 2012 at 06:15 AM
4 minute read
The original version of this story was published on Law.com
With the implementation of the Dodd-Frank Wall Street Reform and Protection Act, government oversight of public companies continues to increase; formal SEC investigations are up 160 percent since 2008. Privately held companies of all sizes also are under increased scrutiny by industry-specific regulators, as well as federal, state and local law enforcement agencies.
With all of this increased oversight comes increased legal fees. Government investigations appear out of the blue and have a tendency to shoot holes through carefully calculated legal department budgets. Certain well-known examples of investigatory costs (such as Avon Products' $240 million legal spend on its Foreign Corrupt Practices Act investigation and News Corp.'s payment of more than $100 million in legal fees on its internal investigation of telephone hacking) are eye-popping.
However, one need not look to such extreme examples to understand the importance of managing internal investigation costs. An unexpected expenditure of $500,000 or $1 million in investigatory legal fees can wreak havoc on the legal budgets of companies—public and private alike.
While some costs are unavoidable, there are certainly ways to limit them even in the high-stakes world of investigations.
1. Invest in compliance before an investigation arises
By investing in internal controls and creating an atmosphere in which employees are comfortable identifying and raising concerns, companies generate better business outcomes and often prevent differences of opinion from escalating into expensive misunderstandings.
2. If an investigation arises, clearly define its scope at the outset
Defining the scope of your investigation is a key cost containment exercise. In so doing, the investigative team will avoid spending countless hours with superfluous or irrelevant documents and witnesses.
3. Empower in-house personnel to support the investigative team
The individuals with greatest access to relevant data typically work for the company, including business people, accountants, IT staff and general counsel. These key employees must be empowered to make investigation support a top priority, and that message must come from the top. Full engagement by appropriate staff and counsel will result in quick and economically efficient information gathering and evaluation. Of course, the appropriate in-house representatives must be selected for each investigation as the facts warrant.
4. Utilize technology to drive efficiency
Consider using predictive coding technologies and other document review applications to cull down the universe of documents to be reviewed and to drive down costs. In addition, while video conference capabilities are not optimal for use in witness interviews, they can be extremely helpful in coordinating in-house representatives around the country or the globe to marshal resources quickly and efficiently.
5. Maintain credibility to avoid defending expansive external investigations
In our current regulatory environment, government agencies often expect companies to conduct internal investigations and report to the government with information gleaned from the investigation. It is imperative that the company (and outside counsel) develop and maintain credibility by conducting thorough internal investigations, making candid disclosures to the government and reaching reasonable conclusions.
If the company and its counsel are deemed credible, the government may heavily rely on the information from the company's internal investigation. The government may then conduct a more narrow review for the limited purpose of testing the reliability of the company's internal investigation, rather than commencing an expansive external investigation of its own. This dynamic will result in significant cost savings for the company—with respect to the investigation at issue, as well as with future investigations involving the company.
It's possible to conduct a thorough, credible investigation without breaking the bank, so be sure to engage experienced outside lawyers who understand that quality and cost-effectiveness can go hand-in-hand.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllTrending Stories
- 1Bar Groups Say IOLA Settlement Protects Civil Litigants' Fund From Future 'Raids'
- 2'Every MAGA Will Buy It:' Elon Musk Featured in Miami Crypto Lawsuit
- 3Pennsylvania Law Schools Are Seeing Double-Digit Boosts in 2025 Applications
- 4Meta’s New Content Guidelines May Result in Increased Defamation Lawsuits Among Users
- 5State Court Rejects Uber's Attempt to Move IP Suit to Latin America
Who Got The Work
J. Brugh Lower of Gibbons has entered an appearance for industrial equipment supplier Devco Corporation in a pending trademark infringement lawsuit. The suit, accusing the defendant of selling knock-off Graco products, was filed Dec. 18 in New Jersey District Court by Rivkin Radler on behalf of Graco Inc. and Graco Minnesota. The case, assigned to U.S. District Judge Zahid N. Quraishi, is 3:24-cv-11294, Graco Inc. et al v. Devco Corporation.
Who Got The Work
Rebecca Maller-Stein and Kent A. Yalowitz of Arnold & Porter Kaye Scholer have entered their appearances for Hanaco Venture Capital and its executives, Lior Prosor and David Frankel, in a pending securities lawsuit. The action, filed on Dec. 24 in New York Southern District Court by Zell, Aron & Co. on behalf of Goldeneye Advisors, accuses the defendants of negligently and fraudulently managing the plaintiff's $1 million investment. The case, assigned to U.S. District Judge Vernon S. Broderick, is 1:24-cv-09918, Goldeneye Advisors, LLC v. Hanaco Venture Capital, Ltd. et al.
Who Got The Work
Attorneys from A&O Shearman has stepped in as defense counsel for Toronto-Dominion Bank and other defendants in a pending securities class action. The suit, filed Dec. 11 in New York Southern District Court by Bleichmar Fonti & Auld, accuses the defendants of concealing the bank's 'pervasive' deficiencies in regards to its compliance with the Bank Secrecy Act and the quality of its anti-money laundering controls. The case, assigned to U.S. District Judge Arun Subramanian, is 1:24-cv-09445, Gonzalez v. The Toronto-Dominion Bank et al.
Who Got The Work
Crown Castle International, a Pennsylvania company providing shared communications infrastructure, has turned to Luke D. Wolf of Gordon Rees Scully Mansukhani to fend off a pending breach-of-contract lawsuit. The court action, filed Nov. 25 in Michigan Eastern District Court by Hooper Hathaway PC on behalf of The Town Residences LLC, accuses Crown Castle of failing to transfer approximately $30,000 in utility payments from T-Mobile in breach of a roof-top lease and assignment agreement. The case, assigned to U.S. District Judge Susan K. Declercq, is 2:24-cv-13131, The Town Residences LLC v. T-Mobile US, Inc. et al.
Who Got The Work
Wilfred P. Coronato and Daniel M. Schwartz of McCarter & English have stepped in as defense counsel to Electrolux Home Products Inc. in a pending product liability lawsuit. The court action, filed Nov. 26 in New York Eastern District Court by Poulos Lopiccolo PC and Nagel Rice LLP on behalf of David Stern, alleges that the defendant's refrigerators’ drawers and shelving repeatedly break and fall apart within months after purchase. The case, assigned to U.S. District Judge Joan M. Azrack, is 2:24-cv-08204, Stern v. Electrolux Home Products, Inc.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250