An Internal Investigation Can Prevent Criminal Liability

how to conduct a corporate internal investigationIf you are a federal government contractor and currently doing business with the federal government, you more than likely have heard or read about companies or their executives being investigated or indicted for procurement fraud against the government, false claims or in many cases small businesses charged with violating the limitations on subcontracting regulations.

No federal contractor wants to have to investigate misconduct. However, conducting an internal investigation when there is evidence of misconduct or noncompliance can go a long way when being faced with suspension and debarment or federal criminal liability.

 Immediate Action is Needed to Save the Company

One of the common things that can save a company’s future is when a suspension and debarment official sees that your company immediately responded to evidence of noncompliance or information presented that can lead to criminal liability. It can certainly be a mitigating circumstance if other federal law enforcement agencies are considering fines or criminal liability.

From the moment an allegation of potential wrongdoing is reported, prompt action is vital to understanding the conduct at issue, preventing future misconduct, and promoting a culture of transparency and compliance within the company. This chapter outlines insights into conducting internal investigations, which seek to minimize risk and disruption to the business while observing the need for thoroughness and consistency with guidance from the U.S. Department of Justice

There is no doubt that federal law enforcement agencies such as the SBA IG and Department of Justice (DOJ) have increased the oversight and scrutiny over small businesses and larger DOD contractors. Yet, many of them are not planning ahead or conducting corporate internal investigations or prevent procurement fraud and to endure compliance with the Federal Acquisition Regulations (FAR).

Removal of Personnel

A common question comes up when conducting an internal corporate investigation concerning a federal government contracting matter? If there seems to evidence that points to a specific person or persons, can you remove that person? The first question to ask is whether your state is an  ‘at will state.” If it is, then you might be in a safer position when you decide to remove personnel.  Indeed, you are allowed to make business decisions to protect the company’s interest. Speak to your HR department or business attorney when making such a decision. 

  • Should you choose to remove personnel after conducting an internal investigation, make detailed notes for your records.
  • For purposes of government contract investigations, keep records of what exactly you have done to mitigate risk and correct problems

What is an Investigation in the Workplace?

This information is focused on small businesses and larger federal government contractors seeking to ensure compliance. A viable company investigation in the workplace will either focus on the existing problem to make sure that business practices measure up to a specific regulation that covers the potential problem. In the alternative, the investigation can also focus on preventing a serious problem or lack of compliance or pinpointing potential wrongdoing. As you conduct internal interviews, document any documents that the interviewee refers to. This includes emails from other coworkers, articles in the newspaper etc.

When questioning employees, be mindful of statements that can be considered hearsay and how such evidence may or may not be

  • An investigation should not always occur after there is a problem
  • Most successful federal contractors conduct inspections and revamp internal policies and controls on a set schedule.

How to Conduct an Internal Investigation

The first step in conducting a corporate internal investigation for a government contractor is to identify what goal you are trying to accomplish.  There are many contract clauses that you must be aware of such as mandatory disclosure, contractor code of ethics, limitations on subcontracting, and so on.

A thorough iinternal company investigation would focus on these things.

  • Limitations on subcontracting
  • Mandatory disclosure
  • Developing a contractor ethics program
  • Complying with subcontractor oversight
  • Making sure that contract materials meet specifications
  • Compliance with SBA affiliation guidelines
  • Making sure that joint ventures and teaming agreements are in compliance

When looking at how to conduct an internal investigation, you must also tailor the process to suit your specific company operations. If you become subject to a government contract investigation, you may be asked questions about how your specific company works through the day-to-day issues. Failure to produce or show that you have a viable plan in place can hurt the company in the long run.

Is the Attorney-Client Privilege Applicable to Corporate Internal Investigations?

This question often comes up. The best approach is to first understand who is the client. Normally, the company will be the client. This allows for more openness in communication.

The attorney-client privilege during a corporate internal investigation helps the company to prevent further violations, adopt better business practices that minimize risk and certainly allowing corporate management full access to information in order to make informed decisions.

All contractors should focus on minimizing business disruption, improving public relations and improving the government’s perception of you as a contractor. The most important aspect of developing company investigations is to avoid being charged with criminal liability or potential civil liability or fines.

When you conduct an inspection you should conduct it as though there was an actual government investigation taking place.

  • Taking proactive measures will almost always minimize liability in the long run
  • You always want to make sure that if there is an ongoing federal investigation against your company that your internal investigation does not tamper with witnesses or evidence.

Government Contract Investigations on the Rise

Internal corporate investigations allow you to conduct a self-assessment of managers, supervisors, and your Internal Corporate Investigations lawyersemployees to comply with state and federal laws in addition to your internal policies and controls.

When you conduct internal corporate investigations, you should be looking to gather facts so if the Department of Justice (DOJ), Security Exchange Commission (SEC) or another agency wants to investigate you to conduct witness interviews, the investigator can make a fair determination about what happened and whether a violation occurred. See information on responding to government investigations.

OIG is Active in Company Investigations: In its January 6, 2014 Semiannual Report to Congress, the office of Inspector General (OIG) stated that it “completed many more important audits and reviews covering many Department operations and programs.”For corporations involved in federal government contracts, this is especially true in suspension and debarment cases.

For medium-sized or large companies, you should be especially cognizant of allegations of employment discrimination, Service Disabled Veteran requirements (SDVOSB) or other employment law concerns. These are also situations where you might want to conduct corporate internal investigations.

Trends are showing that corporations are now left to conduct their own internal business corporate investigations. State and Federal Government agencies are increasing corporate investigations nationwide. For example, according to a Washington Post article, the U.S. government is stepping up investigations of corporations suspected of paying bribes overseas.  This is especially true for the Department of Justice and the Security Exchange Commission.

Conduct Routine Internal Corporate Investigations: Both small businesses and large corporations simply have to implement internal controls and policies, and conduct internal company investigations on a routine basis. They should not wait until the DOJ or SEC comes knocking on their doors.

As the U.S. government steps up investigations of companies suspected of paying bribes overseas, law enforcement officials are leaving much of the detective work to the very corporations under suspicion.

DOJ Conducting Contractor Investigations

The following show clear examples of how the federal government is cracking down on corporations and launching nationwide corporate investigations.

Former Federal Agent Charged with Embezzlement and Thirty Counts of Making False Statements, November 21, 2013

Correctional Institution Employee Sentenced on Bribery Related Offense, December 20, 2013

Seminole, Oklahoma Resident Sentenced for Committing Federal Program Theft, December 19, 2013

Former FBI Special Agent Pleads Guilty to Illegal Cash Deposits, December 17, 2013

Former FBI Assistant Director Who Violated Federal Criminal Ethics Law is Fined, December 17, 2013

Two Florida Residents Sentenced on Bribery Charges, November 25, 2013

Get Professional Help With Internal Corporate Internal Investigations

If you are a medium-sized company, small business or a large federal government contractor, you want to seriously consider developing periodic corporate internal investigations. Contact our federal contract lawyers for legal advice at 1-866-601-5518. Free Initial Consultation.

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