Representation in an Internal or Board Investigation

An email arrives from the general counsel or an outside law firm. The company is looking into a matter and would like to speak with you. It is described as routine, as a fact-finding exercise, as something they need your help with. You are a senior executive, you have nothing to hide, and declining feels like an admission. So you agree, and you go in alone.

That decision is frequently the most consequential one an executive makes in the entire matter. The Law Offices of Albert Goodwin represents individual officers and senior executives in New York City who are witnesses or subjects in internal, board, or special committee investigations.

The Lawyers in the Room Do Not Represent You

Counsel conducting a corporate internal investigation represents the company, or a board committee, not you. That is true of the general counsel you have worked beside for years, and true of the outside firm the board retained. Their obligation runs to the entity.

Competent investigators say so at the start, in what is commonly called an Upjohn warning, named for the Supreme Court decision establishing that the corporate privilege covers communications with employees. The warning typically conveys three things: that counsel represents the company and not you, that the conversation is protected by a privilege belonging to the company, and that the company may choose to waive that privilege and disclose what you say to a regulator, a prosecutor, an adversary, or the public.

Executives hear that warning and often do not absorb what it means. It means the company can decide, later and without your consent, to hand your interview memorandum to the government or produce it in litigation. It means nothing you say is confidential as to you. And it means the interviewers' goal may be to establish the company's good faith by locating individual responsibility, which is a legitimate goal for them and a serious problem for you.

When You Need Your Own Lawyer

Not every executive in every investigation needs separate counsel. You probably do if any of the following is true:

• You made, approved, or signed off on the decision being examined.
• Your name appears in the complaint, the tip, or the documents that prompted the review.
• The subject matter involves financial reporting, disclosure, government payments, regulatory filings, or anything that could interest a regulator or a prosecutor.
• The company has retained outside counsel rather than handling it internally, which usually signals seriousness.
• A board committee, rather than management, is directing the work.
• You have already been asked to preserve documents or turn over a device.
• You are being asked about conduct by someone above you, where the honest answer is not what the company wants.
• You are the general counsel or the chief financial officer, whose role makes you both an investigator and a potential subject.

Retaining your own counsel is not an accusation and is not treated as one by anyone experienced. It is ordinary in serious matters, and it usually improves the process for everyone, because a represented witness is a prepared witness.

What We Do

1. Establish the ground rules before you say anything. Who is investigating, on whose authority, what the scope is, whether you are a witness or a subject, whether the interview will be recorded or memorialized, and whether the company will share the memorandum externally.
2. Secure your fee protection first. Advancement of your legal fees is often available for investigation costs, and the time to establish that is before you incur them. See indemnification and advancement.
3. Review the record with you. Executives routinely misremember the sequence of events in ways the documents contradict. Reconstructing the timeline from emails, board materials, and calendars before the interview prevents the single worst outcome, which is an inaccurate statement that later looks like a lie.
4. Attend the interview. Presence changes the tone and the scope, allows objections to questions that stray, and produces a contemporaneous record from your side.
5. Address preservation and device issues. Company devices and accounts generally belong to the company. Personal devices used for work raise harder questions, and the answer is never to delete anything. Deletion converts a defensible position into an indefensible one faster than any other act.
6. Protect your parallel interests. Your compensation, equity, indemnification, and reputation are all in play simultaneously, and the investigation is frequently the predicate for a for cause termination that would forfeit all of them.

The Cause Determination Behind the Investigation

Investigations of senior executives often exist, at least in part, to build a record supporting a termination for cause. That matters enormously, because in most executive agreements cause is the switch that turns off severance, accelerates nothing, forfeits unvested equity, and can permit cancellation of vested equity as well.

Well-drafted agreements contain procedural protections around cause: written notice specifying the conduct, an opportunity to cure where the conduct is curable, a right to appear before the board with counsel, and a requirement that the board make the determination by a supermajority after that appearance. Those provisions are only useful if they are invoked in time. If you have an agreement with a cause definition, this is the moment to read it, not after the letter arrives. Our detailed treatment of cause and good reason is at the negotiated exit of an executive.

Privilege Questions That Come Up

• Your communications with company counsel are not yours. If you consulted the general counsel about the very issue under investigation, that privilege belongs to the company, and it can be waived without you.
• Joint defense and common interest arrangements can allow information sharing between your counsel and the company's while preserving privilege, but they should be documented and they can be terminated when interests diverge.
• Personal counsel communications are privileged and yours, which is one of the strongest practical reasons to have separate counsel early.
• Notes you take during or about the investigation may be discoverable. Executives who begin keeping a private file about workplace events should understand how that file is likely to be used.

If a Regulator or Prosecutor Is Involved

Where an investigation has a government dimension, the calculus changes. Companies receive credit for cooperation, and cooperation in practice means identifying the individuals involved and providing evidence about them. An executive whose interests were aligned with the company at the start of a matter can find them sharply adverse by the middle of it. Executives facing that situation need counsel whose only client is the executive, and, where criminal exposure is genuinely possible, defense counsel engaged for that purpose. We advise on the civil, employment, and corporate dimensions and coordinate with defense counsel where a matter requires it.

Being the Person Who Reported It

Not every executive in an investigation is a subject. Some are there because they raised the issue. That position carries its own risk, because the investigation's conclusion may be that the concern was unfounded, and the executive who raised it may find their standing quietly diminished afterward. New York's whistleblower statute protects employees who disclose activity they reasonably believe is unlawful or presents a substantial danger to public health or safety, and it protects the reasonable belief even where the underlying concern turns out to be wrong. Documenting what you reported, to whom, and when, at the time you report it, is the single most valuable thing you can do. See whistleblower retaliation.

You can contact us by phone at 212-233-1233 or by email at [email protected].