Conducting Internal Ivestigations - Part 2

IV. Gathering Documents

Documents are a key part of almost all internal investigations. Documents often contain important information. Government law enforcement officials tend to place great weight on the documents. Documents can assist counsel in obtaining information from witnesses by, for example, educating counsel so that counsel can ask more informed questions or refresh a witness's recollection.

As soon as the company becomes aware of allegations of wrongful conduct, it should consider suspending normal document retention procedures in order to ensure that company personnel do not destroy or otherwise dispose of documents relating to the transaction or the incident that is the subject of the investigation. For example, the legal department might circulate to appropriate personnel a memorandum instructing personnel not to destroy or discard specified categories of documents. Such a memorandum is especially appropriate where the company is aware that the government has already initiated an inquiry or investigation.7 While communicating the importance of not destroying relevant documents, the memorandum should disclose only as much information regarding the matter under investigation as the recipient needs to know. It is important to consider the possibility that the company may be discarding or overwriting computerized information in the ordinary course of business as back up media are rotated and reused, and tapes are recycled, electronic media storage devices are replaced, and new software is loaded.

A diligent search should be taken to locate and secure the documents that relate to the subject transaction or incident. Before designing the search for documents, it is important to learn the types of documents routinely generated by the corporation, to review the organization chart of the company and identify company personnel likely to possess relevant documents, and to learn the company's practices regarding document retention and storage. Consideration should also be given to obtaining copies of the calendars and message slips of appropriate personnel. Similarly, compliance manuals, training materials, personnel directories, and job descriptions for the period of time that is the subject of the internal investigation should be obtained.

In designing the search for documents, consideration must be given to information saved in electronic form, such as word-processing documents, reports generated by databases, e-mail, and spreadsheets. It may be necessary to search the hard drives of certain PC's. It may also be possible to recover "deleted" materials from the user's hard drive. In many investigations, a thorough search for documents can only be conducted through individual interviews of employees about their individual document retention practices.

In conducting its document search, the company must limit its reliance on individuals who might have participated in the suspected underlying misconduct. In some instances, it is best to have counsel show up at the critical locations and search for relevant documents without prior warning so that the individuals involved in the suspected underlying misconduct will not have an opportunity to destroy or discard significant documents.

There are several reasons why it is important to act promptly to secure relevant documents. The retained documents might contain exculpatory information that would assist in the company's defense. Regulators and law enforcement officials are more likely to take severe action against a company if they learn that relevant documents were destroyed or discarded once red flags had been identified. Under some circumstances, the destruction of evidence might result in an increase in the criminal penalty to be imposed on the company, see United States v. Grewal, 39 F.3d 1189, 1994 WL 587395 *3 (9th Cir. 1994)(imposing two-level adjustment for obstruction of justice), or might give rise to an adverse inference against the company, see Farrell v. Connetti Trailer Sales, Inc., 727 A.2d 183 (RI Sup. Ct. 1999) (advising the jury that it can draw an adverse inference against the plaintiffs because plaintiffs caused certain evidence to be unavailable to defendants).

The investigation team must organize the documents according to various criteria. Documents are generally classified in a spectrum ranging from irrelevant to crucial. In general, the relevant documents should be organized to facilitate preparation of a chronology, an analysis of key topics (e.g., a particular meeting with officials at which the prospective contract was discussed), and witness interviews. It usually is appropriate to maintain a file containing the crucial documents. This file is often referred to as the "hot document" file. In many instances, it is necessary to rely, at least in part, on a computerized system for organizing and storing documents.

A careful record should be maintained listing the locations that were searched in connection with the investigation and the individuals who were contacted in connection with the document search. A log should be created identifying the location from which each document was obtained. Where the relevant files are being actively used, consideration should be given to marking (or otherwise making a record of) the documents that were in the file at the time of the document search. The documents gathered should be numbered sequentially (e.g., bates labeled).

V. Interviewing Witnesses

Interviews are also a key aspect of the investigation process. Along with documents, interviews are the primary source of the information that will be gathered during the investigation. In addition, interviews present an important opportunity for the investigators to assess the credibility of the witness.

Counsel should interview all company personnel likely to have knowledge regarding the relevant transaction or the alleged violation. Before interviewing personnel, counsel should review the relevant documents and interviews, prepare an outline of topics to be covered with the witness, and select the documents that should be shown to the witness during the interview. Questioning witnesses regarding documents can serve several purposes. The author of a document might be able to explain what a document was intended to convey or why a document was drafted in a particular way. Other witnesses might be able to put important documents into context. The document might refresh a witness's recollection or persuade a witness to provide accurate information that the witness might otherwise have been reluctant or unwilling to provide. Counsel should be aware that showing a privileged document to a witness during the interview could result in a court later holding that the privilege has been waived.

Questionnaires should be used sparingly, if at all. In general, the use of questionnaires should be limited to soliciting objective information in order to screen for individuals who need not be interviewed. For example, in an investigation involving insider trading, it might be appropriate to circulate a questionnaire to company personnel asking them whether they were (or might have been ) privy to the material nonpublic information prior to a certain date and whether they are aware of anyone else - other than identified individuals - who was (or might have been) aware of that information prior to that date.

Other company personnel should be discouraged from attending employee interviews. The presence of senior officers at interviews could chill the candor of the witness and may undermine the protection of the attorney-client privilege. Additionally, the senior officer's presence can be misconstrued as part of an effort to compare and conform the witness's recollection with the version of the facts advocated by the executive.8

In some instances, counsel will need the assistance of experts from outside the company. In order to maximize the likelihood that the interviews will be protected by the attorney-client privilege and/or the work product doctrine, experts should be retained by counsel, and the engagement letter should contain provisions designed to preserve the confidentiality of information shared with and the work product of those experts.

At the outset of each interview, counsel should inform the witness that: (1) senior management (or the board of directors or a special committee of the board of directors) has authorized counsel to state that company employees should cooperate in the investigation; (2) counsel are attempting to determine the truth relating to the matter and the surrounding circumstances; (3) counsel are not asking the witness to provide untruthful or misleading information to any government investigators; and (4) the witness should not destroy or discard any documents relevant to the investigation. If the investigators are attorneys they should also: (1) identify their client, and state they do not represent the individual witness;9 (2) explain that they are seeking information to assist in providing legal advice and services to the company; (3) indicate that, in order to protect the privileged nature of the interview, it is important that the witness keep the...