Conducting Internal Investigations: Gathering Evidence and Protecting Your Company World Headquarters the gregor building 716 West Ave Austin, TX 78701-2727 USA
TABLE OF CONTENTS INTRODUCTION About This Course... 1 Kenneth Kemp... 3 Continuing Professional Education Credit... 4 I. PREPARING FOR AN INVESTIGATION When Is an Investigation Necessary?... 5 Employer s Duty to Investigate... 6 Statutory Disclosure Requirements... 8 Monitoring and Public Reporting Statutes... 8 Sarbanes-Oxley Act... 11 False Statement Statutes... 25 Civil Law Standard of Care/Duty to Company and Shareholders... 26 Accountants and Auditors Duties to Investigate... 31 External Auditors... 34 PCAOB Auditing Standard No. 5... 42 Planning the Investigation... 46 Selecting the Investigation Team... 46 Investigative Strategy: Fraud Examination Methodology... 48 Review Questions... 54 II. COLLECTING DOCUMENTARY EVIDENCE Introduction... 57 Laws Governing Public Record Information... 58 Freedom of Information Act... 58 Fair Credit Reporting Act... 59 Gramm-Leach-Bliley Act... 62 Telephone Records and Privacy Protection Act of 2006... 63 Right to Financial Privacy Act... 64 Driver s Privacy Protection Act... 64 Health Insurance Portability and Accountability Act... 65 Sources of Information... 65 Public Sources of Information... 66 City Government Records... 67 County Government Records... 68 State Government Records... 74 Federal Government Records... 80 Using Databases to Find Information... 89 Locating People Using Online Records... 89 Obtaining Financial Information and Locating Assets... 90 Finding Legal Records... 91 Conducting Background Checks... 92 Public Record Database Vendors... 94 Investigating with the Internet... 99 Pitfalls of the Internet... 99 i
II. COLLECTING DOCUMENTARY EVIDENCE (CONT.) Search Engines... 100 A Guide to Successful Searching... 101 Directories... 102 Meta-search Engines... 103 Useful Websites... 104 Review Questions... 118 III. WORKPLACE SEARCHES Introduction... 120 Constitutional Privacy Rights: The Fourth Amendment... 120 Public Employers Versus Private Employers... 121 Employee Privacy Rights Under the Fourth Amendment... 122 State Constitutions... 129 Effect of a Violation of an Employee s Constitutional Rights... 130 The Exclusionary Rule... 130 Civil Liability for Damages (42 U.S.C. 1983)... 130 Common Law Invasion of Privacy: Intrusion Upon Seclusion... 131 Reducing Employees Expectation of Privacy... 132 Balancing the Need to Search or Conduct Surveillance and the Employee s Privacy Rights... 133 Other Tort Liabilities in Connection with Searches and Surveillance... 133 Other Prohibitions Regarding Searches... 133 Searching an Employee s Mail... 133 Federal and State Nondiscrimination Statutes... 134 Monitoring Employee Phone Calls... 134 Pen Registers... 135 Monitoring Employees E-Mail... 136 Monitoring Employees Internet Activity... 137 Video Surveillance of Employees... 137 Searching Employees Trash... 138 Special Privacy Rights Under Collective Bargaining Agreements... 138 State Statutes... 138 Sample Workplace Policy for Workplace Searches... 139 Obtaining Evidence by Subpoena... 140 Review Questions... 142 IV. ANALYZING AND ORGANIZING EVIDENCE Forensic Examination of Documents... 145 Sources for Expert Document Examinations... 145 Types of Forensic Document Examinations... 146 Handling Documents as Physical Evidence... 147 Recognizing Phony Documents... 149 Photocopies... 150 Organizing Documentary Evidence... 150 Chronologies... 151 To-Do Lists... 151 Using Computer Software to Organize Documents and Other Data... 151 ii
IV. ANALYZING AND ORGANIZING EVIDENCE (CONT.) Digital Evidence... 152 Understanding Digital Evidence... 152 Hardware... 152 Considerations When Seizing Digital Evidence... 154 Defining the Parameters of the Expert s Search... 157 Reviewing the Evidence... 157 Review Questions... 159 V. INTERVIEWING WITNESSES Interview Mechanics... 161 Choosing a Venue for the Interview... 161 Establishing Proxemic Control Over the Interview... 162 Taking Notes... 162 Do Not Interview More Than One Person... 164 Do Not Promise Confidentiality... 164 Handle Negotiation Attempts... 164 Do Not Discuss the Source of Allegations... 164 Common Problems Arising During the Interview... 164 Types of Questions... 168 Introductory Questions... 168 Informational Questions... 171 Closing Questions... 174 Assessment Questions... 175 Admission-Seeking Questions... 184 Review Questions... 201 VI. LEGAL CONSIDERATIONS IN INTERVIEWS Employees Duty to Cooperate... 204 Employees Rights During the Investigation... 205 Employees Constitutional Rights... 205 Employees Contractual Rights... 213 Employees Statutory Rights... 213 Common Law Employee Rights and Protections... 216 Presence of Corporate Attorney During Witness Interviews... 223 Preserving the Confidentiality of the Investigation... 224 The Attorney-Client Privilege... 225 Attorney Work Product Doctrine... 230 The Self-Evaluation Privilege... 233 Avoiding Liability for Obstruction of Justice and Witness Tampering... 235 Witness Tampering... 236 Obstruction of Justice... 236 Spoliation of Evidence... 237 Perjury and Subornation of Perjury... 238 Misprision of a Felony... 239 Recording the Results of an Interview... 239 Protect the Company s Interests in Confidentiality... 239 iii
VI. LEGAL CONSIDERATIONS IN INTERVIEWS (CONT.) Factual Work Product Versus Opinion Work Product... 240 Identify the Record as Work Product... 241 Identify the Record as an Attorney-Client Communication... 241 Identify the Self-Evaluation Purpose of the Interview... 242 Identify and Treat the Record as Confidential... 242 Review Questions... 244 VII. WRITING REPORTS Introduction... 247 Characteristics of a Good Report... 247 Accuracy... 247 Clarity... 247 Impartiality and Relevance... 248 Timeliness... 248 Legal Considerations for Written Reports... 248 Libel... 248 Privacy... 249 Privileges... 250 Disclosing the Report to Government Personnel or Other Third Parties... 252 Review Questions... 254 VIII. DISCHARGING EMPLOYEES Introduction... 256 The Public Policy Exception... 256 Breach of Contract... 257 Types of Contracts... 258 Statutory Violations... 261 Common Law Causes of Action... 262 Defamation... 262 Intentional Infliction of Emotional Distress... 262 Public Disclosure of Private Facts... 263 False Imprisonment... 264 Whistleblower Statutes... 264 Other Considerations... 264 Prosecuting Employees... 264 Why Prosecute an Offending Employee?... 265 Recovery of Losses in Criminal Cases... 265 Aiding the Company s Civil Remedies and Litigation... 267 Malicious Prosecution... 268 Review Questions... 269 CONCLUSION... 271 PRACTICAL PROBLEMS Practical Problem 1... 273 Practical Problem 2... 274 iv
PRACTICAL PROBLEMS (CONT.) Practical Problem 3... 275 Practical Problem 4... 277 Practical Problem 5... 278 Practical Problem 6... 280 Practical Problem 7... 282 Practical Problem 8... 283 SOLUTIONS TO REVIEW QUESTIONS Preparing for an Investigation... 284 Collecting Documentary Evidence... 290 Workplace Searches... 294 Analyzing Documentary Evidence... 299 Interviewing Witnesses... 303 Legal Considerations in Interviews... 309 Writing Reports... 316 Discharging Employees... 320 SOLUTIONS TO PRACTICAL PROBLEMS Practical Problem 1... 324 Practical Problem 2... 326 Practical Problem 3... 328 Practical Problem 4... 332 Practical Problem 5... 333 Practical Problem 6... 336 Practical Problem 7... 338 Practical Problem 8... 340 FINAL EXAMINATION... E-1 v