Corporate Internal Investigations Law Firm

7 Hypothetical Investigation Examples: Trigger, Response, and Outcome

The following are seven hypothetical examples of internal investigations. While our firm has represented clients in hundreds of investigations across the country, we have chosen to provide hypothetical examples here in order to illustrate specific concepts and principles. Each example includes:

• An explanation of the issue or allegations that triggered the investigation;
• An overview of key steps taken during the investigative process; and,
• A sample outcome based on the sufficiency (or insufficiency) of the hypothetical investigation.

Example #1: Employment Law – An Employee Accuses Her Supervisor of Sexual Harassment

Trigger: A mid-level female employee files a complaint with the company’s human resources (HR) department alleging that she has been the victim of persistent sexual harassment by her supervisor.

Response: All allegations of sexual harassment in the workplace need to be taken seriously, and a prompt investigation is required. The company quickly engages outside counsel, who meet with the company’s leadership and the HR manager who received the report in order to gather as much preliminary insight as possible. Outside counsel interview the employee, the supervisor, and other female employees in the department who confidentially state that they have also been harassed. Based upon the information gathered, it becomes clear that the supervisor has been engaging in inappropriate conduct for an extended period of time.

Outcome: Based on the credible information collected during the internal investigation, the company takes appropriate disciplinary action against the supervisor, conducts sexual harassment training for all supervisory employees, and ensures the affected employees that the company has done everything necessary to remedy the issue. No further legal action is taken.

Example #2: Securities Fraud – The SEC Raises Red Flags about the Company’s Public Filings

Trigger: The Securities and Exchange Commission (SEC) contacts the company’s in-house counsel regarding apparent inconsistencies between the company’s past and most-recent filings which suggest a potential securities law violation.

Response: Upon being contacted by the SEC, the company’s in-house lawyers engage outside counsel to oversee an independent review of the company’s accounting records and public filings for all of the years in question. In addition to working with executives in the company’s finance department to identify where, when, and how the discrepancies arose, outside counsel also maintains close contact with the SEC, ensuring the agency that the company is taking the matter seriously and doing everything possible to fix its public filings. After conducting a thorough review, outside counsel determine that a lower-level employee made an inadvertent mistake while making last-minute adjustments to the numbers in the most-recent filing.

Outcome: Oberheiden P.C.’s internal investigation attorneys explain the issue to the SEC and assure the agency that the error was the result of an unintentional error. The company promptly updates its filing and conducts internal training on the requirements of federal law and the importance of ensuring complete reporting accuracy and transparency. Based on the company’s prompt response and the information uncovered, the SEC decides not to pursue civil or criminal enforcement action.

Example #3: Healthcare Fraud – A CMS Audit Results in a Determination of Liability

Trigger: A healthcare provider allows a UPIC to conduct a “routine” audit unchecked, and the audit results in a determination that the provider has substantially overbilled Medicare by submitting incorrect billing codes.

Response: Upon receiving the UPIC’s audit determination, the healthcare provider promptly engages outside counsel to conduct an independent review. Outside counsel review the company’s Medicare billing records, interview physicians and billing personnel, and meticulously scrutinize the UPIC’s findings. The investigation reveals that some inadvertent billing errors were made, but the UPIC has also substantially overstated the provider’s liability due to a number of mistakes and flawed assumptions about the provider’s Medicare billings.

Outcome: Although it would have been better for the provider to engage counsel during the UPIC’s investigation, its decision to hire a law firm rather than simply accepting the UPIC’s determination was a good one. Outside counsel are able to successfully challenge many of the UPIC’s conclusions at the first stage of the audit appeals process; and, by demonstrating that the limited number of actual billing errors were unintentional, outside counsel are able to help the provider avoid enforcement action by the federal government.

Example #4: Government Contract Fraud – A Whistleblower has Accused the Company of Improper Billing

Trigger: An unidentified whistleblower files a complaint with the U.S. Department of Justice (DOJ) accusing the company of supplying substandard materials and falsifying quality inspection reports.

Response: Upon receiving a copy of the complaint, the company engages a law firm that handles federal whistleblower cases involving government contracts. Outside counsel review the complaint and then promptly assemble an investigation team to look into the allegations. In parallel with the substantive investigation, outside counsel also work to identify the whistleblower. Outside counsel (I.e. internal investigations lawyer) work with the appropriate internal personnel to examine the whistleblower’s allegations and build a proactive defense strategy focused on preventing government intervention.

Outcome: The investigation reveals that the whistleblower’s allegations are without merit, and outside counsel are also able to identify the whistleblower as a former employee who was recently terminated for cause. Based on the information uncovered during the internal investigation, the DOJ declines to intervene in the case.

Example #5: Corporate Fraud – An External Audit Reveals Evidence of Self-Dealing

Trigger: The company’s external auditors prepare a report that contains evidence of possible self-dealing between one of the company’s executives and another company with which she is affiliated.

Response: Internal investigation targeting company executives require particular care in order to avoid follow-on accusations of corporate complicity and efforts to cover up the allegations against the executive employee. Outside counsel are engaged to conduct a covert investigation that is thoroughly documented. The investigation reveals that the executive has in fact improperly diverted funds to another company. The executive must be terminated, and the company must disclose the issue to federal regulators.

Outcome: By promptly terminating the executive and contacting regulators before the issue becomes public, the company is able to avoid a public relations firestorm and a targeted federal investigation. Ultimately, the company’s outside counsel are able to resolve the issue at the federal level without any civil or criminal liability for the company.

Example #6: Corporate Theft – Funds from the Company’s Corporate Account Have Gone Missing

Trigger: The Chief Financial Officer calls an emergency meeting with the company’s leadership team and in-house counsel. Funds from the company’s corporate account have inexplicably gone missing.

Response: In cases of apparent corporate theft, immediate action will often be necessary in order to preserve any hopes of recovering the stolen funds. Outside counsel are engaged immediately to investigate. The company’s outside lawyers contact federal law enforcement and conduct a comprehensive internal investigation, interviewing employees, meeting with the institution where the funds were held, and meticulously examining all possible sources of unauthorized access to the company’s corporate account.

Outcome: The investigation reveals that foreign hackers intercepted a corporate transaction and gained access to the company’s bank account. The company’s outside internal investigation law firm assists with the implementation of updated security controls and handles the company’s theft insurance claim while the Federal Bureau of Investigation (FBI) tracks down the hackers for prosecution by the DOJ.

Example #7: Cybersecurity Law – The Company’s Client Database has been Hacked

Trigger: Hackers breach the company’s client database and access all personally identifying information (PII) and financial account data.

Response: Rather than hiring outside counsel to investigate immediately, the company’s leadership team makes the decision to keep the breach under wraps. If clients found out, the company would very likely be forced into bankruptcy. But, nonetheless, clients quickly discover that their identities have been stolen, and before long the issue is traced back to the company’s data security breach.

Outcome: Since the company chose not to confront the issue head-on, clients left en masse and federal authorities were left with little choice but to initiate enforcement litigation. Had the company investigated and complied with its breach notification obligations, both of these outcomes likely could have been avoided.

Contact an Internal Investigation Lawyer at Oberheiden P.C.

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