Accountability at the Apex: Investigating Misconduct in the C-Suite

When one of your executive colleagues is suspected of improper conduct, the investigation might involve considerations above and beyond a typical workplace investigation. There can be much more at stake regarding the integrity of the company, public perception, customer and vendor relationships, competitive risks, and regulatory considerations. That is why retaining experienced outside legal counsel to oversee and direct the investigative process would be a prudent first step.

Having outside counsel investigate potential executive misconduct provides a level of independence and objectivity that augments the integrity of the investigation. Internal counsel, particularly one who reports to or works closely with the executive(s) under scrutiny, may be subject to allegations of having a conflict of interest, undermining the credibility of the investigation. By retaining external counsel to conduct the investigation, businesses can demonstrate a commitment to thoroughness and objectivity, thereby safeguarding the perceived integrity of the investigative process.

A good private investigator can help navigate the complexities and sensitivities involved with investigating alleged executive misconduct. Private investigators can identify witnesses, targets, accomplices and allies. They can also be invaluable in helping to obtain witness or character statements and evidence that would pass muster in court, including computer forensic information. Moreover, private investigators with certified fraud examiner credentials can also assist counsel with analysing financial information for proof of fraud. These skills are particularly useful when investigating executives who have access to and control over the business’ records. The New York Court of Appeals has observed, and common sense tells us, that “[m]isrepresenters have not been known to keep elaborate diaries of their fraud for the use of the defrauded in court.” (Pludeman v N. Leasing Sys., Inc., 10 N.Y.3d 486, 492 (2008).) Accordingly, having outside counsel use a certified fraud examiner to assist with identifying useful evidence is advisable when investigating executives.

Investigations of alleged workplace misconduct or fraud by an executive might engender interest by the media, clients, competitors or your workforce. Confidentiality can also further the integrity of the investigation. Having outside counsel properly oversee and direct the investigation will give your company the opportunity to preserve this confidentiality under attorney–client privilege and/or as attorney work product. Moreover, if you engage a private investigator to assist counsel with the investigation, your counsel should direct that engagement under the principles outlined in United States v Kovel to protect the confidentiality of the work undertaken at your counsel’s direction. The decision of whether to publicly release information about the investigation or the ultimate findings is a decision that should be made by the business. Maintaining confidentiality throughout the investigative process decreases the chances that information is released without the business’ knowledge and explicit permission or that incorrect or incomplete information is released.

Despite being given much more latitude than law enforcement, outside counsel and the investigators they supervise are still constrained by certain legal and ethical rules. For example, in some jurisdictions, investigators may not record a witness statement without consent. Outside counsel and private investigators, however, have more leeway than state actors when interviewing witnesses and gathering evidence.

It depends on the law in your jurisdiction and whether proper notice has been given to the executive, as to whether you can monitor emails and phone calls. In New York, employers who monitor or otherwise intercept their employees’ telephone conversations, email, internet access or usage of electronic devices (eg, computer, telephone, wire, radio, or electromagnetic, photoelectronic or photo-optical systems) must provide prior notice of such monitoring upon hiring of all employees who are subject to electronic monitoring and must also post the notice of electronic monitoring in a conspicuous place which is readily available for viewing by its employees who are subject to such monitoring. (N.Y. Civil Rights Law, Section 52-c (2)(a) – because the N.Y. Civil Rights Law, Section 52-c leaves many terms undefined, be alert for potential updates to the law.) Hopefully, that notice was given long before the need to investigate, so the notice itself does not prompt suspicion, undermining the investigation.

If the harm to your business warrants criminal prosecution, turning the matter over to law enforcement may be the right move. If it involves risk or threats to person or property, then it should be an immediate first move. Prosecutors, however, do not represent your business and may not share the goal of maintaining the confidentiality of the investigation and alleged misconduct. Although prosecutors and law enforcement do great work, their first duty is to prosecute the criminal and protect the commonwealth, not necessarily to represent your business’ interests. Your attorney represents your interests – which should certainly include protecting the confidentiality of your investigation.

Investigations involving executives demand a detail-oriented and strategic approach. Retaining experienced, independent outside counsel is advisable to maintain the perception of objectivity and the integrity and confidentiality of the investigation. Moreover, the strategic integration of private investigators further enhances the investigation’s effectiveness by providing expertise in evidence collection. Working alongside experienced outside counsel, businesses can navigate the complexities of investigating high-level executives with greater confidence.