Filtering Issues: Part of Internal Investigations for Control and Compliance Violations (2 of 5)

In a recent column, I illustrated the key components of a strong internal investigations capability to address compliance and internal control violations. In fact, I've done a number of these 11x17 illustrations and they can all be found on the OCEG site or on the Compliance Week site.

This is Part 1 of a 5-Part Series:

1. Capture
   
2. Filter <- THIS POST
3. Plan & Assign (future post)
4. Investigate (future post)
5. Resolve (future post)

Establishing a clearly defined investigations process helps management quickly respond to allegations of wrongdoing and actual violations in a rational, rather than ad hoc or crisis manner. In other disciplines such as software development, we know that a reactionary response to “bugs” can cost five times more versus a planned response. While a specific internal investigations process may comprise five or fifty steps, the following key phases should be present and clearly defined:

1. Capture
2. Filter
3. Plan & Assign
4. Investigate
5. Resolve

Filter
Once information about potential violations is captured, it must be filtered so that the investigations team can focus on what matters most. The goal of filtering is to discard allegations that are not specific and credible; and appropriately act on those that are. It is critical that the individuals charged with this determination are both competent and independent. Some issues may require a level of technical analysis to make this determination. It is wise to have these individuals available in the early stages of filtering. Key questions to answer include:
• How was the issue discovered?
• By whom?
• Is it specific and credible?

If there is not sufficient information captured about a violation, it will be extremely difficult to determine if it is specific and credible. As such, while it is not absolutely necessary, it is helpful if reporters and sources of allegations are able to be contacted for follow-up and clarification. It is also important to discern whether the source has a motive to lodge a frivolous allegation.

Even at this early stage, the team should attempt to determine if the issue should be handled under privilege. Every step not taken under privilege can introduce more risk to the organization as untrained individuals may capture facts and testimony that have no chance of being privileged later on. On the other hand, every issue cannot and should not be vetted and investigated under privilege. For some issues, privilege is simply overkill and, according to one enforcement official, “The obsessive compulsive assertion of privilege is one of the things I look for when I try to determine if an organization is sincere about its need to maintain privilege. It is statistically impossible that everything should require privilege and, thus, I treat organizations that have an ‘everything is privileged’ culture with increased skepticism.”

Another important consideration here is that, even as early as the filter stage, the clock begins to tick. Simply read the Federal Sentencing Guidelines for Organizations, the McNulty Memo and the often overlooked 21(a) Report of Investigation of Seaboard to understand the importance of a spry internal response to serious allegations. A quick response and, if appropriate, disclosure to the government is the only way that the organization can be spared the damage caused by the blunt tools available to the government should they become involved in a matter.