In the post-Enron era, the internal investigation has become a commonplace fact of life at most companies, regardless of the size of the company, whether the company is public or private, or even the nature of the company’s business. In-house counsel, as well as business owners, principals, officers and directors, CFOs and auditors, now must consider the costs of performing such investigations as a cost of doing business, even when the costs appear extreme. Take, for example, the amount reportedly spent by Avon Products to investigate potential violations of the Foreign Corrupt Practices Act (FCPA) between 2009 and 2011—a cool $247 million.1 Further, legal fees alone in an internal investigation can cross the $100 million dollar mark, particularly where companies are required to indemnify their officers and directors for their legal fees.2 Such extreme costs often do not even include the actual costs and penalties associated with the efforts a company may take to fix the problems that gave rise to the investigation. Volkswagen, for example, has set aside approximately $7.2 billion to address the costs and penalties arising from the recently reported manipulation of diesel emissions tests.3
Beyond the costs associated with the internal investigation lie complex questions concerning the disclosure of the results of an internal investigation to the government, as well as the benefits and risks associated with such disclosure. Even while the government has attempted to incentivize such disclosure, and cooperation, questions remain as to the how, why, and when to disclose.
What Triggers an Internal Investigation?
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