When misconduct is identified, a key consideration is whether the investigation should be undertaken by internal resources or an independent, specialist investigator.
Key factors in making this determination are:
- The type of misconduct; i.e., is it something that can be appropriately handled internally, e.g., a breach of policy or procedure matter or a minor, straight forward allegation of fraud, or is it something requiring independence to show the transparency and objectivity of the investigation process, e.g., a complex fraud matter involving multiple parties, a matter that may incur the interest of a regulator, or sexual harassment allegations against a senior executive.
- Whether the organisation has adequately skilled and experienced investigators for the type of matter to be investigated. Even if it does, the need to show transparency may tip the scales in favour of engaging external resources.
Once the decision is made about who will investigate, there are a whole range of operational factors to be considered. For investigators with decades of experience undertaking a wide range of misconduct investigations, these considerations seem second nature. But for those with less experience, the way forward may seem daunting.
Some of the main considerations are:
- Whistleblower handling
- Preliminary investigation
- Investigation planning
- Execution of detailed investigation
- Reporting.
Whistleblower handling
Many of the matters we are asked to investigate originate from a report made by a whistleblower. Usually, the whistleblower has witnessed the misconduct or come by information that has led to their belief that misconduct has occurred and/or is ongoing. As such, it is imperative to cultivate a relationship of trust with the whistleblower, even if the matter has been reported anonymously.
Other considerations include whether the disclosure made by the whistleblower is a protected disclosure under the Corporations Act, but regardless of whether it is or not, confidentiality of the communications with the whistleblower and their safety is paramount. Managing these aspects can sometimes be difficult, so having someone experienced in managing whistleblowers and who is adept at interviewing is extremely important.
When a whistleblower feels safe and trusts the investigator, the quality of information received often leads to the identification of key evidence and successful resolution of the matter.
Preliminary investigation
The information initially received about a misconduct matter is often limited, so rather than instituting a full-blown investigation, the more prudent approach is to undertake a preliminary investigation. The purpose of doing so is to determine whether there appears to be any veracity to the allegations. If there is, then a more detailed investigation can be undertaken to determine whether the allegations are substantiated.
Investigation planning
Whether a preliminary investigation or a detailed investigation, action must be taken based on careful planning which should be documented in the form of an investigation plan. Careful planning involves consideration of:
- Consultation with relevant parties, e.g., Legal Counsel, Finance, HR, and other relevant parties, ensuring that all relevant factors are considered, including whether civil or criminal action, or both are to be pursued
- Should the investigation be undertaken under the protection of Legal Professional Privilege. This should be considered and decided right from the outset
- Sources and location of evidence, including:
- Hardcopy documents
- Softcopy information such as accounting data, including access log data and building access data. Consideration should be given to the use of data analysis where large amounts of data are relevant to the investigation
- Digital evidence obtained from personal computers, servers, mobile devices, the cloud etc., e.g., email. Where the period of review covers an extended time and consists of large amounts of data, using a suitable eDiscovery review platform should be considered
- Witnesses, e.g., employees, suppliers, banks, or any other party that may have relevant evidence
- Asset recovery – it is often possible to recover financial losses, and strategies should be put in place at the outset to ensure stolen assets are secured and a detailed forensic assessment of the quantum of any loss is made
- Overt or covert investigations – particularly in the preliminary stages of an investigation, covert activities are often preferable. These include the collection of electronic and other evidence and the use of mobile or static surveillance (we have used this at PKF in several matters, and it has been invaluable)
- Suspect employees – should the suspect employees be suspended pending the outcome of the investigation? HR and Legal should be involved in these deliberations
- Reporting protocols – who needs to know about the progress of the investigation and how often?
- Cost – particularly where an external party is used. How much will the agreed investigation activities cost. Consideration should also be given to the cost of the investigation being included in the amount of money that might be recovered from the offending party or covered by insurance.
Execution of detailed investigation
It is important to recognise at the planning stage that investigation actions are not something that should be set in stone. The nature of investigations is that they start with limited information. As they unfold and other information comes to hand, it may become apparent that other avenues of enquiry should be pursued. As such, flexibility and adaptability are important features of a successful investigation approach.
It also goes without saying that appropriate case management and record keeping are extremely important to protecting the integrity of the investigation, as is conducting the investigation objectively and with the principles of natural justice in mind.
Reporting
Once the investigation has been completed, a detailed investigation report should be completed. This should be succinct, clearly detailing the facts, the basis upon which findings are made and where required, provide instructive recommendations for process and control improvements or any next steps that should be considered, e.g., reporting to the police or the consideration of disciplinary action.
Conclusion
Most of the areas discussed above could be the subject of separate discussion. However, what this paper highlights is that misconduct investigations can be quite difficult to navigate if relevant factors and the consequences of actions are not properly considered.
Upon deciding a misconduct investigation is necessary, it should be properly planned and executed using appropriately skilled and experienced investigators. Because if it isn’t, an organisation leaves itself open to possible litigation, adverse publicity, and damage to its reputation.
At PKF Integrity, we offer a comprehensive solution that covers everything from policy development to training, an external Whistleblower and Complaints Platform and a national team of highly qualified investigators.
If you would like to learn more, please visit our website.
