Internal Investigations

Updated September 2004

Provided by the Association of Corporate Counsel
1025 Connecticut Avenue, Suite 200
Washington, D.C. 20036
Tel 202.293.4103
Fax 202.293.4107
www.acca.com

The following materials are intended to provide in-house counsel with information addressing issues related to conducting an internal investigation. This information should not be construed as legal advice or legal opinion on specific facts, or representative of the views of ACC or any of its lawyers, unless so stated. This is not intended as a definitive statement on the subject but a tool, providing practical information for the reader. We hope that you find this material useful. Thank you for contacting the Association of Corporate Counsel.

The information contained in this InfoPAK^SM was developed by the law firm of
Lindquist & Vennum, P.L.L.P.
at the direction of the Association of Corporate Counsel

Authors:
William Michael, Jr. Chair, White Collar and Regulatory Defense, Lindquist & Vennum, P.L.L.P., Minneapolis, MN; and
Mark D. Larsen, White Collar and Regulatory Defense, Lindquist & Vennum, P.L.L.P., Minneapolis, MN.

ACC wishes to acknowledge the following members for their contribution to the development of this InfoPAK^SM:

John Sabine DeGroote, Deputy General Counsel and Chief Litigation Counsel, BearingPoint, Inc.
&
Theos D. McKinney, Senior Counsel AstraZeneca LP

Table Of Contents

1. Introduction


2. The Need for Internal Investigations


3. The Duties and Responsibilities of Corporate
   1. Allegations of Misconduct
   2. Duties of Care, Obedience and Loyalty
   3. Personal Liability of Directors and Officers
      1. Criminal Liability
      2. Civil Liability
   4. Business Judgment Rule
      1. Application of the Business Judgment Rule
      2. Insulating Officers and Directors Under the Business Judgment Rule
   5. Corporate Criminal Liability
      1. Elements of Corporate Criminal Liability
      2. Practical Application of Corporate Liability
      1. Collective Knowledge
      3. Relevant Department of Justice Policies
         1. Thompson Memorandum
         2. Ashcroft Directive
         3. Practical Affects of these Policies and Corporations
      4. United States Sentencing Guidelines
   6. Corporate Civil Impact re: Securities and Exchange Commission
      1. Seaboard Doctrine
      2. Control Person Liability


4. The Process of Conducting an Internal Investigation
   1. Timing of the Investigation
   2. Scope of the Investigation
   3. Determining the Investigative Team Members
      1. Attorneys
         1. In-house or Outside Counsel
         2. Transactional or Specialized Outside Counsel
      2. Experienced Investigators
      3. Industry Specific Experts
   4. Investigative Methods
      1. Documents
      2. Electronic Evidence
      3. Personal Interviews
   5. Investigative Counsel Responsibility
      1. Conducting a Fair Internal Investigation
      2. Avoiding Negligence in Internal Investigations
      3. Practical Concerns for Investigative Counsel
   6. The Findings
      1. Limited by the Scope
      2. Oral Report
      3. Written Report


5. Protecting the Investigative Results and Findings
   1. Attorney-Client Privilege
      1. Corporate Counsel and Corporate Employees
      2. Corporate Counsel and Former Employees
      3. Corporate Counsel and Consultants
   2. Work Product Doctrine
   3. Self Evaluative Privilege
   4. Disclosure
      1. Deliberate Disclosure
         1. Limited Waiver
      2. Inadvertent Disclosure
      3. Mandatory Disclosure
      4. Crime-Fraud Exceptions to Privileges


6. Practice Tips
   1. Determine the Seriousness of the Allegation
   2. Board Authorization of the Investigation
   3. Advise Every Witness of the Role of Investigative Counsel
   4. Ensure Independence
   5. Establishing and Preserving Privileges


7. Internal Investigation Consideration Outline


8. Additional Resources


9. Relevant Material
   1. Sample Joint Defense Agreement
   2. Thompson Memorandum
   3. Arthur Anderson, LLP Indictment
10. About the Firm