Internal investigations: An alternative for law enforcement authorities?
Internal investigations conducted by enterprises in-house when irregularities are suspected offer many advantages to businesses compared to initiatives undertaken by public law enforcement authorities.
Internal investigations represent just a small segment of the legal and consulting services market in Poland, and in practice are used mainly in large companies whose corporate culture and internal organisation are derived from Western business culture or shaped by regulations from countries in Western Europe or North America.
Many lawyers practising in Poland would probably find it difficult to define what an internal investigation is. Some would seek analogies in disciplinary proceedings, while other might be unaware of the notion.
This is partly because internal investigations are not recognised in generally applicable legal regulations in Poland, and the procedures were developed through practices in Western countries.
So what is an internal investigation? Typically it is an initiative undertaken within the structure of an enterprise with the immediate purpose of clarifying suspected serious irregularities, evaluating the identified irregularities from a legal perspective, and drawing the relevant consequences. Such procedures can also help prevent further abuses and minimise the risk of liability on the part of the business.
Internal investigations for the most part involve commercial abuses, although investigations concerning sensitive areas such as employee mobbing and sexual harassment are more and more often observed.
Even though these investigations are “internal,” external advisers should be involved in them: lawyers, forensic accountants, and IT specialists commissioned by the enterprise to take actions to identify and clarify irregularities. The advisers who are retained will interview employees, analyse data, assess the legal consequences, and so on. This approach helps insure the impartiality and professionalism of the actions taken in the investigation.
One essential difference should be pointed out between internal investigations in Poland and those conducted in North America or certain countries of Western Europe. In Western legal systems there is an established legal framework and instruments enabling enterprises to limit their criminal responsibility. In Poland, because the criminal responsibility of enterprises does not function in practice, the main engine driving such investigations here is either instructions from the Western parent company or a corporate culture that demands explanations and condemns improprieties involving individual employees, managers and business partners. A less-frequent motivation is regulatory risk connected with administrative liability in proceedings conducted by regulators.
Legal conditions
Although, as mentioned, there are no generally applicable regulations in Poland governing internal investigations, such investigations clearly touch on a number of legal issues which must be complied with under existing regulations. These include for example authority to act within the corporate structure, protection of confidentiality, relations between employer and employee, professional secrecy and attorney-client privilege, data protection, trade secrets, and the ability to use the findings from the internal investigation, and the evidence gathered, in other proceedings, e.g. before the courts, the prosecutor’s office, and regulators.
Assuming that internal investigations in Poland are conducted chiefly with respect to commercial abuses qualifying as criminal offences, the following issues should be considered.
Competitive with criminal proceedings?
The great majority of offences, including commercial offences, are prosecuted publicly. This means that any reliable information demonstrating that an offence has been committed may serve as grounds for prosecutors to commence proceedings, regardless of the wishes of the injured party.
At the same time, the law requires notification of law enforcement authorities if a citizen has sufficient information to determine that a crime has been committed (i.e. a social obligation to provide notice of a crime). This may lead to a situation where law enforcement authorities begin an investigation, for example after receiving a private complaint, before a decision has been taken within the enterprise to commence an internal investigation.
A rational assumption in practice is that one of the main goals of an internal investigation is to determine the course of events—what actually happened. Only after the facts are determined can it be decided whether there is sufficient information to suspect that a crime has been committed and hence to notify law enforcement authorities, or there was merely employee misconduct which can be adequately dealt with using the measures available under employment law or civil law.
In many instances, notwithstanding circumstantial evidence of criminal dealings, firms do not decide to notify the public authorities but merely part ways with the offenders—for practical reasons, e.g. the small chance of actually repairing the harm or the high cost of further action. The matter then ends with firing of the employee, termination of the manager’s contract, or the like.
Internal investigations should be conducted by lawyers with professional support of internal auditors and specialists in analysis and securing of computer data. This should ensure respect for the rights of the parties, prevent corruption of the evidence, and maintain the confidentiality of the data.
It is hard not to notice that such a team of people may potentially duplicate the work of public law enforcement authorities. One of the main rules of criminal procedure in Poland is “immediacy,” meaning that evidence must be taken directly before the authority conducting the proceeding. Therefore it may easily be imagined that law enforcement authorities would be unhappy to find that actions are being taken in an internal investigation which—if done in an unprofessional manner—could potentially result in evidence tampering, improper influence over witnesses, or loss of the element of surprise which is so important in criminal cases.
Hence it is worth stressing the obviously essential task of the persons conducting an internal investigation to proceed cautiously, avoid interfering with the evidence, and rely on experienced forensics experts who know how to adequately secure electronic evidence.
Summary
An undoubted advantage of internal investigations is the speed with which reliable findings can be made using state-of-the-art methods for analysis of digital data. Compared to the realities of actions taken by the state law enforcement authorities, who are reluctant to take up matters involving the private sector, internal investigations allow enterprises to respond quickly to any irregularities that are uncovered, and moreover are conducted in the enterprise’s own interest and under its control, which colloquially speaking allows the enterprise to avoid airing its dirty linen in public. The company can put its own house in order without the interference of state authorities.
Although the immediate costs of internal investigations are undoubtedly higher for the enterprise than allowing the prosecutors and courts to handle matters in their own time, the results for the enterprise can be more advantageous. An internal investigation can also enable state criminal proceedings to be conducted much more effectively, because the evidence gathered in an internal investigation typically proves to be of great help in proceedings supervised by the prosecutor’s office. Internal investigations are therefore an important weapon in combating abuses and are becoming an alternative for state law enforcement authorities.
Janusz Tomczak, Business Crime Practice, Wardyński & Partners
