Bottom-Up: An Alternative Approach for Investigating Corporate Malfeasance

Susan Schwab Heyman

Roger Williams University School of Law

September 13, 2009

Cardozo Legal Studies Research Paper No. 266

At least since the Enron scandal, the government has focused intensive efforts on developing a strategy to investigate and prosecute corporate malfeasance. The prevailing method has been a “top-down” approach: government agents provide companies with incentives to conduct internal investigations, coerce employee cooperation, and disclose privileged information. Although many have expressed concern about violations of constitutional rights and erosions of privilege, the current system faces another critical problem: the top-down strategy will become less effective at unraveling corporate fraud as employees learn that it is not in their interest to cooperate. Further, the approach aims deterrence at the wrong people – it does not focus on high corporate officials who often orchestrate and tolerate the wrongdoing, but instead focuses on employees who participate in the unlawful acts. A “bottom-up” approach, long used by government agencies in rooting out criminal behavior in other areas, particularly drug enforcement, would encourage employee cooperation and focus enforcement on the appropriate actors. There is every reason to believe that a bottom-up strategy would be an effective supplement to the top-down approach that currently predominates in the corporate world. Indeed, the first and to date only internal investigation completed using an amnesty program which protected cooperating employees from adverse employment actions has proven successful in encouraging employee cooperation and unraveling the web of corporate fraud.

Number of Pages in PDF File: 72

Keywords: corporate fraud, corporate malfeasance, internal investigation, government investigation, Filip Memo, Thompson Memo, McNulty Memo, enforcement manual, seaboard report, attorney-client privilege protection act, Siemens investigation

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Date posted: September 14, 2009  

Suggested Citation

Heyman, Susan Schwab, Bottom-Up: An Alternative Approach for Investigating Corporate Malfeasance (September 13, 2009). Cardozo Legal Studies Research Paper No. 266. Available at SSRN: https://ssrn.com/abstract=1472705 or http://dx.doi.org/10.2139/ssrn.1472705

Contact Information

Susan Schwab Heyman (Contact Author)
Roger Williams University School of Law ( email )
10 Metacom Avenue
Bristol, RI 02809
United States
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