The phone rings and before you finish saying “hello,” the chief compliance officer of a Fortune 20 client is quickly relaying to you that an accounting manager has just filed an internal complaint of sexual harassment against the Chief Financial Officer. In addition to the harassment charge (which includes transcripts of voicemails of the CFO making lewd and suggestive comments), the manager also accuses the CFO of filing false expense reports.
As if that isn’t enough, the manager also alleges that in-house counsel, the CFO, and one Board member instructed her not to provide current information regarding certain transactions to the outside accountants during a recent audit. You send off the engagement letter, sit back and wonder where in the world to begin.
As investigators, our most important dictate is that we remain independent and objective as we interview witnesses, analyze documents, and render our findings. But are all investigations created equal? For the most part, yes. However, the reality is that conducting a high-level investigation is not the same in all respects as conducting an investigation into wrongdoing by a janitor or maybe even a mid-level employee. For example, we can all imagine the collective gasp when the folks at Hewlett Packard received a complaint of harassment against then-CEO Mark Hurd. Or, the same reaction when a complaint was made to a board member of the National Restaurant Association about alleged harassment by then-President of the Association Herman Cain. The simple fact that a high-level executive is accused adds to the complexity of conducting an investigation. This article explores some of the challenges of conducting investigations of high-level professionals. One Word: Power
The most obvious challenge when conducting a high-level investigation is that the alleged wrongdoers have, by virtue of their positions, considerable power. When we talk about someone in power, it can be someone who has the “Chief ” title, an attorney, a board member, a politician, a senior level human resources executive, a department head, a dean or a chancellor of a college or university.
Third parties who have significant financial relationships with the company or organization can be equally powerful as well as those we call “untouchables,” such as the owner or family members of a company, as well as significant rainmakers. These high-level professionals are often held to a higher standard of conduct due to fiduciary and ethical obligations to the entity. We expect people in the highest levels of an organization to be role models, to understand the rules, and policies, and to follow these rules, not be exempted from them.
In the scenario above, the power differential between the CFO and accounting manager is obvious. Yet, in all likelihood, the accounting manager does not directly report to the CFO although her boss, the controller, might. Does this matter? Absolutely. Not surprisingly, many witnesses in this situation may shutdown or refuse to participate in the investigation for fear of retaliation, not just from the alleged wrongdoer, but possibly from a boss, co-workers, or outsiders.
Many complainants and witnesses are convinced they will face repercussions when making a complaint against a senior executive. When the alleged wrongdoer is a high-level professional, the fear of retaliation is actually deeper and often more widespread than in a typical mid-level investigation. The fear is rational and cannot be discounted.
As investigators, we tell witnesses they are protected, but our assurances are viewed with little more than skepticism. Investigators must be sensitive to all witnesses and their potential reluctance to talk and provide all the information they possess because of retaliation fears. While the fear is typically present in most investigations, in high-level investigations the challenge is magnified.
One investigation I conducted provides a good example of the fear of retaliation. I was investigating a very senior level vice president whose sales group brought in over $50 million dollars in revenue each year. You can imagine the power he wielded. All the witnesses were at the vice president level or above and reported to the senior vice president. Several of the witnesses immediately stated that they would not talk to me for fear of retaliation. One specifically stated, “Here is my reason why I won’t talk to you without the promise of anonymity – I have three kids in college.” The company acknowledged the witnesses’ fears and also felt strongly each witness should be given the opportunity to participate in the investigation. In order to allay the witnesses’ concerns, the revised strategy involved me relaying “themes” to the senior executive without providing names or detailed information that could identify the witnesses. Was I uncomfortable not providing the alleged wrongdoer with detailed information? You bet. Many court decisions on investigations focus on the fairness of the process, and rightly so, as it is imperative to give alleged wrongdoers enough information so they can adequately and effectively respond to the allegations against them. While I would have preferred providing the names of witnesses as they related to specific allegations, providing the themes worked well. Through my questions, I was able to put the alleged wrongdoer on notice regarding his conduct and he was well aware of the various scenarios I relayed to him. I simply did not include situations that involved only a single witness and the executive. Ultimately, the client concluded the need for the information was greater than the need to provide names and I agreed as I was able to provide fairly detailed information about the key allegations.
Another investigation where power influenced the way the investigation was handled involved a general counsel who had been accused of repeatedly talking about his sex life, creating “code” names for various sexual acts (for example, pointing to an attractive woman in the workplace and asking his legal assistant if the particular female was a “good sport, “meaning would the person have sex with him), and engaging in other inappropriate conduct. Interestingly, but not surprisingly, the legal assistant who was the recipient of the unwanted discussions never came forward to make a complaint.
The main reason why: the power of the general counsel and his retaliatory nature. The organization had known for a couple of years that something was wrong, but each time they spoke to the legal assistant, she said she did not want to discuss anything. Ultimately, a human resources manager experienced some of the inappropriate conduct and went back to the legal assistant to see if she would be willing to chat. The answer was finally, “yes,” but her fear of retaliation was palpable. The general counsel was immediately put on a leave of absence so the investigation interviews could commence. Although the general counsel denied many of the allegations, he also
claimed most of the conduct was not harassment because his conversations with his staff were “consensual.” I asked whether he thought a legal assistant could affirmatively consent to hearing about his sex life given his role as the general counsel. He replied, “absolutely.” At the end of the day, the president of the company, who had a long, friendly relationship with the general counsel, added the word “not” after hearing the general counsel’s reply of “absolutely” to my question about his power.
Investigative strategies vary from case to case, but in high-profile investigations the employer must be prepared for some additional, unique challenges that may arise: timeliness, possible compromised evidence, public relations issues, attorney involvement, communication flow, and privilege issues. The employer must make decisions about issues such as protecting the complainant and witnesses, keeping the alleged wrongdoer in place (or on leave), appointing someone to supervise the investigation and the role and involvement of the board of directors.
Timeliness of the Investigation
Time is always of the essence in every investigation. In high-level investigations the timing challenges are intensified when the allegations are against an executive. If any likelihood exists that a governmental entity might conduct an investigation, the internal investigation should be started, if at all possible, before the external investigation begins. Otherwise, if any unreasonable delay in getting started exists, a perception of bias and cover-up may taint the internal investigation. Take the scenario in the beginning of this article. Once the company is on notice of the alleged wrongdoing, any delay could be seen as giving the CFO and others an opportunity to manipulate documents related to the expense reports and audit documents.
The timeliness concerns also raise a related issue— when do you let the alleged wrongdoer know about the investigation? The typical answer isit depends on the facts, the relationship between the complainant, witnesses and alleged wrongdoer, and other practical considerations, such as concerns about retaliation, productivity, and safety.
When senior level executives are involved, all these factors play a role in determining when you inform them of the investigation.
In the scenario above, I would recommend not telling the alleged wrongdoers about the investigation until some preliminary investigation had begun. This allows the employer and investigator to preserve evidence and gather enough facts to determine if leaves of absence are necessary for any of the parties involved. When a delay occurs, critical evidence can be destroyed or otherwise compromised (see below for more on this topic).
The longer you wait to interview witnesses, the more their nervousness will increase and they may be less likely to participate in the investigation in a meaningful way or even at all. Additionally, delays in the investigation may potentially give the high-level executive time to intimidate witnesses before they are interviewed.
Concerns about protecting the complainant are often a complicated and thorny issue. The decision about whom to place on a leave of absence— the complainant or alleged wrongdoer— should be made by the employer, with input from counsel, not the investigator. The reasons are two-fold. First, the investigator is independent and placing someone on a leave is an employment decision that must be carefully weighed by the employer. Second, placing someone on a leave may have legal ramifications and the investigator should not be providing legal advice to the employer.
While the investigator may have an opinion or share insights into his or her concerns, good practice suggests the investigator not be involved in the ultimate decision.
The most important challenge is to make sure the investigator is given enough time to conduct a thorough investigation, even though there will be strong pressure from the investigation leader to finish quickly. Several courts have been critical of investigations where the investigator was not given sufficient time to adequately review documents, interview witnesses, and follow leads that might uncover additional information.
An interesting case involved InfoGroup, Inc. The former audit committee chair, Vasant Raval, was instructed by the Board to conduct an “in-depth” investigation by himself in approximately one month concerning the CEO’s alleged misuse of corporate funds over a four-year period of time. In the end, Raval issued a report eight business days after the investigation commenced. Because of the swiftness of the investigation, countless errors were made, and information was overlooked or was inaccurate because it was simply too much for one person to do in such a short period of time.
Ultimately, Raval was charged with securities fraud and securities law violations because of the improperly conducted investigation that caused InfoGroup to file materially misstated financial reports. (See http://www.directorship.com/infogroup-internal/).
Not surprisingly, when a high-level executive is accused of wrongdoing, the investigation may impact both productivity and the organization’s bottom-line; the pressure to complete the process is understandable. Nevertheless, the investigator must be able to insist that adequate time is allowed to complete a thorough and objective investigation regardless of the pressure that is brought to bear.
Who’s In Charge of the Investigation?
The answer to this question is not as obvious as you may think. If the investigation involves someone with significant control or power, the individual or group responsible for overseeing the investigation must consider who will retain or appoint the investigator, handle communications, be the liaison coordinating witness interviews, provide documents, and assist with any other logistics or issues that arise. This person or group that oversees the investigation must determine the scope of the investigation, handle confidentiality issues, pay attention to trade secrets, place employees or the alleged wrongdoer on leave, and address a variety of other issues related to the investigation. When all these decisions are made the investigator must have a clear understanding about working and communicating with the leader and accessing logistical support.
The nature and scope of the investigation will often drive the selection of the investigation leader. In the scenario involving the CFO, the likely candidate could be the CEO, general counsel, and/or a special litigation committee (“SLC”), which is typically a subset of the board of directors or other governing body. The leader of the investigation must be mindful of issues relating to the retention of the investigator, who will sign the agreement, reporting requirements, and how invoicing will be handled.
The CFO could conceivably know when someone is reviewing invoices or looking through accounting documents, which could tip him off to the investigation, and the strategy and identity of witnesses who will be, or have been, interviewed before he is notified of the allegations. In a case like this, if allowed by company or agency policy, I recommend having the investigator consider preparing two versions of invoices— one with detail and one that simply provides the total hours and expenses without any names — and omitting the word “investigation” from the document. Submitting the invoice without detail to accounting helps to protect the identity of the witnesses and to ensure the confidentiality of the investigation.
At the same time, submitting the detailed invoice to the investigation leader provides documentation for auditing and accountability purposes. Additionally, when a high-level executive is accused of wrongdoing, the media (and possibly the government) is often keenly interested in what is happening. The leader of the investigation must be prepared to address the media and employee social media discussions, as well as legal issues involving defamation, breach of contract, and other fiduciary obligations of the alleged wrongdoer.
While these issues are not uncommon in lower level investigations, the damages for a defamation claim brought by a marketing assistant being investigated are negligible compared to a claim for damages brought by senior level executives who are fighting for their reputation, severance, and credibility.
Higher Scrutiny on Investigator Selection
Every investigation requires thought about who will actually conduct the investigation. In a high-level investigation, each decision will be scrutinized even more carefully than “typical” investigations.
Here are some issues to keep in mind:
Experience: Does the investigator have the requisite skill to handle the investigation? While a solid skillset is important in all investigations, it makes sense that a company would not select a human resources generalist to handle the investigation of the general counsel regardless of the generalist’s qualifications. A company should consider the investigator’s demeanor, expertise, and credibility, and the nature of the alleged wrongdoing when making a selection.
The investigator must be confident and strong enough to handle pushback from a high-level executive who may use his or her power to control the interview, manipulate data, make veiled threats, or act in an intimidating manner. Additionally, a high-level executive may request to have his or her attorney present during the interview. This can be helpful because the executive may be more forthcoming knowing he or she has counsel nearby to protect his or her interests. The downside is obvious— the attorney may try to control the interview, limit testimony, or try to intimidate the investigator into going easy on the witness. Whichever scenario exists, the investigator must ask questions with the same thoroughness she would ask any witness and must have both the experience and confidence to do so.
A few points of caution if the investigator is an attorney. When dealing with a high-level executive, be aware that the executive may think he or she has an attorney-client relationship with you because the employer hired you. Typically they do not — the investigator’s attorney-client relationship is with the employer. Attorney investigators need to be familiar with UpJohn warnings that require investigative counsel to state clearly that they represent the company and not the individual being interviewed.
2 Upjohn Co. v. U.S. (1981). A good practice is to have the executive sign written confirmation of the warning.
Reposted with permission. Originally published on the Association of Workplace Investigators quarterly newsletter.