Who Should Handle That Crucial Internal Investigation?

By Pamela J. Bethel

When a company faces the necessary task of conducting a thorough internal investigation into some form of wrongdoing or questionable behavior that has been uncovered in the company’s past, to whom should it turn to handle the investigation?

The subject matter of the probe might be an allegation of illegal payments under the Foreign Corrupt Practices Act, an issue of improper classification of employees, a question of false statements to obtain a government contract, or, as in the current General Motors matter, a product defect that led to a significant number of accidents and deaths.

A recent article in Corporate Counsel magazine focused on GM’s decision to place its internal investigation of deadly ignition-switch failures in the hands of its general counsel, who has been with the company since 1977, and two major law firms that have long-standing ties to GM.

These investigators certainly know the company and its people and history very well, and they have excellent backgrounds in conducting sensitive investigations. Furthermore, they will have no incentive to hold back any criticism of GM’s past actions or inactions in the face of evidence that company engineers warned about the safety issues. After all, their report will be subject to the utmost scrutiny from legislators, regulators and the public, and legal ethics require them to work zealously to find and report the truth.

However, as the article points out, for reasons of appearance alone, it might have been better for GM to have put equally well-qualified attorneys with no history with the company in charge of the probe. An outsider is more likely to come up with novel and useful suggestions to make sure that this type of tragedy does not occur again. And, as the article points out:

If the primary goal is objectivity (and the appearance of objectivity), companies should strongly consider retaining an unaffiliated law firm (or, at the least, unaffiliated lawyers within a go-to law firm) to conduct the investigation to ensure the absence of both actual and perceived bias. Despite the understandable desire to hire familiar and trusted lawyers to handle a high-profile investigation like the GM recall, an “independent” law firm will likely be perceived as more objective because it will be less concerned about losing an existing valuable relationship.

In a matter of this type, perception is just as important as reality.

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