In the post-Sarbanes-Oxley world, internal investigations are a reality for all companies and other institutions.  While high profile and significant internal investigations have occurred in the context of major public company scandals, they may also be appropriate in many other situations.  Allegations of ethical lapses, whistleblower complaints, governmental inquiries, negative media stories, and abuses in an industry or by competitors can be reasons to conduct an internal investigation.  Failure to do so can have severe negative repercussions for the Board and senior management of a company. 

The growth in investigations has been fueled in part by the statements by the Department of Justice, the Securities and Exchange Commission and other law enforcement agencies noting that credit may be given to organizations that conduct internal investigations.  Failure to conduct an internal investigation when there is a credible indication of wrongdoing or other precipitating event could give rise to claims that the Board breached its fiduciary duties.  The stakes have never been higher as regulatory fines and sanctions have increased dramatically and reputational costs can be staggering.

K&L Gates has successfully conducted scores of internal investigations for public and private companies, not-for-profit institutions, governmental entities and other organizations.  While an internal investigation can provide great benefits to a company and its Board and senior management, it can cause serious harm if it is not conducted properly.  K&L Gates’ significant experience and overall reputation in conducting internal investigations can help make them highly effective with minimal disruptions to the organization. 

The lawyers at K&L Gates who conduct internal investigations have noteworthy credentials.  They include a former United States Attorney General, a former United States Senator, a former President of the American Bar Association, and former senior officials at the Department of Justice and the Securities and Exchange Commission.  K&L Gates also has the resources and experience to handle an internal investigation of any size or issue.

While every internal investigation will have unique circumstances, dimensions, challenges and outcomes, they must meet a number of objectives to be successful.  These principles include:

1. Accuracy
2. Timeliness
3. Credibility
4. Thoroughness
5. Fairness

K&L Gates lawyers know how to achieve these objectives.  In addition, their experience in conducting internal investigations gives them a unique perspective to answer some of the difficult questions that arise in this context, such as when to conduct an internal investigation, who should conduct it, who should control it, whether it needs to be disclosed publicly, how should it be organized, how do you best protect privileges, how do you best preserve information, how do you minimize disruptions to the company and should a written report be prepared. 

The following list highlights some of the recent internal investigations conducted by K&L Gates lawyers:

• New Century Financial Corporation, the second largest subprime lender, for the Bankruptcy Court for the District of Delaware.  The issues covered included various accounting issues, loan origination practices, the role of the Audit Committee and Internal Audit Department and the adequacy of the work of the outside auditors.  Prepared a report that was unsealed on March 26, 2008. 
  
  
• WorldCom for the U.S. Bankruptcy Court for the Southern District of New York concerning numerous issues, including accounting fraud, acquisitions, corporate governance, securities offerings, IPO allocations, internal audit, loans to senior officers and executive compensation.  Download the first interim report, the second interim report, and the final report .
  
  
• CBS News concerning the September 8, 2004 60 Minutes Wednesday segment concerning President Bush’s Texas Air National Guard duty. 
  
  
• SAIC concerning the contract to build a security system for the 2004 Athens Olympic games. 
  
  
• Thomas Jefferson University concerning the sale of The Gross Clinic by Thomas Eakins.
  
  
• An international bank concerning the adequacy of internal controls and procedures under Financial Accounting Standards.
  
  
• A Fortune 500 company concerning potential cost overruns of major construction projects.
  
  
• A Fortune 500 company concerning potential violations of the Foreign Corrupt Practices Act by its international subsidiaries and joint ventures.