Internal Corporate Investigations and the Truth

63 Pages Posted: 2 Oct 2009 Last revised: 14 Jun 2010

Date Written: October 1, 2009

Abstract

In 2008, nearly half of all United States public companies commissioned outside counsel to conduct at least one internal investigation. The corporation, government officials, courts, shareholders and the public rely on investigative reports in assessing matters of unquestioned importance – allegations of material wrongdoing against the corporation. This article asks whether the internal-investigation entails a special commitment to the truth. There is reason for concern. While the American legal system has long presumed that the clash of adversaries is the best guarantor of truth, the investigator stands alone, implicitly asking us to accept her unilateral efforts as trustworthy. The investigator, however, is retained and compensated by the corporation that is the subject of the allegations – raising troubling questions about loyalty, accountability and conflicting objectives.

The article begins by asking which internal investigations pose special concerns about truth and reliability. From the attorney-ethics rules, corporation law and statutory obligations, it develops two categories of investigations that warrant the imposition of special truth standards: the reliance investigation – an investigation delivered to a third party; and a duty investigation – an investigation undertaken to satisfy a corporate duty of inquiry.

The article next identifies the core commitment of reliance and duty investigations: to provide as nearly as practicable an accurate account of the facts, the legal standards and their application. This, in turn, raises the question of what it means to be accurate in a legal inquiry, given the interpretative range of most legal matters. The article looks to philosophy, jurisprudence and historiography – disciplines that have struggled with questions about truth and objectivity – to explain and refine the accuracy standard. Accuracy, the article contends, is not only a viable standard to guide the investigation, it warrants commitment to a series of procedural truth standards proposed herein that substantially enhance the prospects of an accurate account – independence, sufficient inquiry, evidentiary reliability, and professional judgment.Despite the emphasis of lawmakers and courts, independence alone is not enough; it is only one of the procedural truth standards that serve the core substantive standard – accuracy. The truth standards require attention to: conflicts relating to investigator's role, client commitments that blur truth seeking and client protection, the scope and depth of the investigation, the reliability of the evidence gathered, questions of emphasis in developing a narrative account, adherence to professional standards of interpretation in forming legal conclusions, and client-imposed constraints on the reporting of investigation results. The standards also have important implications for the degree of certainty claimed by the report, the obligations of investigators when they cannot satisfy the truth standards, and the tort obligations of investigative counsel. Even more important, a deeper understanding of the investigative role will increase the prospects that those who receive and rely on investigative reports – the corporation, courts, shareholders, the government and the public – will have the benefit of an accurate account.

Keywords: Internal Corporate Investigations, Attorney Ethics, Truth, Objectivity

Suggested Citation

Michels, Kevin H., Internal Corporate Investigations and the Truth (October 1, 2009). Seton Hall Law Review, Vol. 40, January 2010. Available at SSRN: https://ssrn.com/abstract=1481412 or http://dx.doi.org/10.2139/ssrn.1481412

Kevin H. Michels (Contact Author)

The College of New Jersey ( email )

2000 Pennington Road
Ewing, NJ 08628
United States

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