Navigating the Modern Corporate Investigation
Today, an unprecedented level of scrutiny exposes businesses to increasing legal reputational risk. To be prepared, investigations into corporate practices must include several key capabilities.
November 26, 2019 at 04:58 PM
6 minute read
Corporate investigations have been revolutionized over the past 40 years, and the rate of change is accelerating. Like many professions, investigators have adapted to changes in economic, social and legal conditions. The industry saw its most important period of transformation in the 1970s, as forward-thinking professionals (the most prominent of these was Jules Kroll) founded sophisticated firms dedicated to corporate investigations and security. These investigators, often former federal agents, prosecutors and police detectives, tackled external and internal investigations by applying the techniques they had learned in government, including cultivating sources, conducting surveillance and occasionally searching the rudimentary databases of the day. Many combined field investigations and research projects, with intelligence from different sources that come together into polished, professional reports.
The 1990s and 2000s saw two broad revolutionary types of changes that shaped the investigations industry. First, new laws, and more strict enforcement of existing ones, made the demand for investigations explode. Corporate investigators helped companies address these new mandates, often in partnership with large corporate law firms whose own lawyers were tasked with handling large internal investigations.
Examples of these laws include the 2002 Sarbanes-Oxley Act, which often required thorough investigation to supplement the required work of auditors and accountants. And although both the Foreign Corrupt Practices Act (FCPA) and the International Emergency Economic Powers Act (IEEPA, which established the Office of Foreign Assets Control sanctions program that has become so crucial to U.S. foreign policy) were passed in 1977, enforcement did not kick into high gear until much later. Investigations firms began to hire forensic accountants familiar with fraud, corruption, and the government investigative process, and their work exploded.
The second advance of this era was the ubiquitous use of personal computers for word processing and email, which led to the emergence of e-discovery and computer forensics. In litigation, e-discovery produced both headaches and opportunities, but in investigations, the ability to sift through thousands of electronic communications quickly supercharged corporate inquiries. Whereas investigators of the 1970s and earlier would be thrilled to get their hands on a single letter or telegram between people of interest, now they were able to analyze hundreds or thousands of such communications. As such, these techniques became an increasingly central part of any investigation.
As we head into 2020, it is clear that a new revolution is upon us. Tomorrow's firm will not only be tasked with collecting information but critically sorting through massive amounts for the relevant kernels that clients need. Along with emails, video and audio, an incredible variety and complexity of media sources in multiple forms and languages all around the world must also be analyzed. It is impossibly expensive to use humans to sort through all this information, and even e-discovery is not enough. Today, data analytics professionals versed in artificial intelligence, teamed with lawyers, investigators and CPAs, are crucial to analyze countless gigabytes of data.
While investigations may vary in terms of the specific capabilities and industry knowledge required, the modern corporate investigation practice must include several key capabilities if it is to serve clients and their lawyers effectively:
1. Interdisciplinary teams: Regardless of whether a corporate investigations practice is part of a larger firm or is an exclusively-investigative firm, it should have a multi-disciplinary professional team. Effective firms will build a diverse lineup that will include young computer whizzes and researchers, former federal agents and police detectives, former prosecutors, and forensic accountants with Big Four and other relevant experience.
2. International reach: It is rare for an investigation these days to be confined to one jurisdiction. While corporate investigations practices don't need to have offices all over the world, it is crucial that they maintain a network of trusted investigative and research personnel that they can assign client tasks at a moment's notice.
3. Data analytics and machine learning: Technology allows businesses to easily capture and store structured and unstructured data such as financial records, customer information, and communications through a broad spectrum of tools. In investigations, this creates the challenge of sifting through the "white noise" of emails, invoices, and payments, to identify relevant information efficiently and accurately. To meet this challenge, modern investigative firms should be able to deploy machine learning technology to identify relevant content quickly, drastically reducing the cost of an investigation. Data analysts should be able to visualize data, detect statistical anomalies, and identify patterns to turn information into intelligence, evidence, and investigation leads.
4. Computer forensics: It is crucial for corporate investigators to harvest, forensically preserve, and analyze electronic evidence, including computer media, cellphones, tablets, and data from servers. This is a basic function that is necessary to investigate and respond to all kinds of malfeasance.
5. Forensic accounting: From accounting fraud to large-scale transnational bribery investigations, forensic accounting is an essential function of any corporate investigations firm. A strong forensic accounting function will not only unravel fraudulent schemes, it will also assist clients in implementing controls to prevent future breaches.
6. Investigative due diligence: The volume of available public records increases each year. An investigative firm is crucial in sifting through the myriad sources that are available in databases, on the open web, and on the deep web. Researchers should be able to conduct thorough and efficient investigative due diligence that goes beyond a prescriptive, rules-based "check the box" approach. It is critical that the approach can be customized to meet the specific needs of the client, ensuring that the resulting intelligence adds value to the client's particular needs.
7. Traditional investigative techniques and surveillance: Despite the growing need for technology solutions in investigations, traditional investigative techniques will not be obsolete in 2020. Specifically, corporate investigators must maintain experienced professionals to conduct field and office interviews that build on the intelligence gathered through electronic means and using effective and appropriate interview techniques that can only be honed from years of experience. Other techniques, such as physical surveillance and consensual recordings, may also be appropriate, depending on the case.
Today, an unprecedented level of scrutiny—with law enforcement agencies and private plaintiffs increasingly calling business conduct into question—exposes companies to increasing legal and reputational risk. Whether hired by in-house staff or outside counsel, corporate investigators are an invaluable part of addressing corporate crises, responding to whistleblowers, and providing efficient and reliable assistance when government investigators come knocking.
Mike Cherkasky is executive chairman of Exiger, and was formerly the CEO of Marsh & McLennan and Kroll Inc. Roy Pollitt, a veteran of the FBI's New York office, is the Americas Head of Exiger's corporate investigations practice.
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
© 2024 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 AllProtecting Attorney-Client Privilege in the Modern Age of Communications
6 minute readLingering Questions at Supreme Court About Climate Change Litigation Need Resolution
6 minute readTrending Stories
- 1Decision of the Day: Judge Denies Standing for Plaintiffs in Copyright Suit Over AI Training of ChatGPT
- 2LA Judge Anne Hwang Confirmed to the Federal Bench
- 3NY Court Leaders Ask for 10% Judiciary Budget Increase
- 4ClaimClam Wanted to Boost Class Action Claims Rates. But Judges and Attorneys Fought Back
- 5'We Will Sue ... Immediately': AG Bonta Says He's Ready to Spend $25M Battling Trump
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
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