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Malpractice: dealing with the investigation

Allegations of Malpractice (in their various forms) or crimes of a more overt nature - theft and fraud among them - can leave many organisations in a state of flux, wondering whether or not they should pursue criminal, commercial or civil litigation. Whatever the threat, it may well have serious repercussions. Negative publicity can damage a company's reputation, impacting on both shareholder and public confidence which, in turn, may have a direct effect on profitability.

Then there is the concern surrounding the ‘What if?' scenario. "If it proceeds to litigation, what happens if it goes wrong?" At this point, the consequences may not only include negative publicity but also costly employee settlements, legal fees and - potentially, at least - fines from regulatory bodies. And what of the individuals involved? The accused, the accuser and those tasked with investigating the alleged problem who may feel this could tarnish their reputation?

Doing nothing isn't really an option. A company must be seen - internally as well as externally - to be acting fairly, appropriately and within the law. With the stakes so high, managing an investigation in order to evidence malpractice becomes essential. If required, litigation may be the final step, but the moves leading up to that decision are crucial and often require considerable time, effort and skill.

Need for specialist skills

Human Resources (HR) professionals may be called upon to deal with the situation in the early stages, but their time is likely to be fully-booked with normal, day-to-day activities in the workplace. Although HR practitioners are experienced in handling disciplinary processes, specialist skills - among them document and IT analysis, tracing and tracking and forensics, etc - may be required in order to obtain the necessary proof to substantiate an allegation were it to finally go to Court or a Tribunal. If not available in-house, such expertise must be hired-in.

A successful investigation will minimise distraction away from the core business. It is critical to the project that speed and thoroughness are not compromised. Common weaknesses include a lack of preparation in investigating an allegation and prior to the investigative interviews taking place. A company's internal investigative team can sometimes fail to keep an open mind about potential perpetrators and show a reluctance to ask probing questions during the interview for fear of making an individual uncomfortable.

In some cases it's simply not possible for an internal investigation to be conducted without the help of specialist support. In fact, with many serious and complex cases now involving fraud, theft and/or the misuse of IT systems, malpractice can only be properly investigated with the constant assistance of professional investigators, forensic auditors, computer specialists and other kinds of experts.

Making the choice to engage an external specialist as the investigator of any malpractice can be an effective tool for determining the facts and credibility of those concerned. The use of an external investigator may be beneficial to the process as they might have some questions, lines of enquiry or resources at their disposal that may not have been thought of (or be available) internally (for example, relating to document analysis).

People have a tendency to be more open and willing to share information with an ‘outsider’, particularly when the allegations being made are directed against a senior manager or individual within the organisation

Good return on investment

According to a recent survey conducted by law firm Mishcon de Reya, almost 50% of those organisations questioned admitted they were not fully aware of how external investigators could add value to their business. Yet, of the companies that do use external investigators, 90% reported a reasonable or good return on their investment.

Any external investigative team will need to work in conjunction with the internal HR professionals. They provide a great insight to their company, its workforce, working practices, its environment and specific knowledge of the business. The internal HR professional will be sensitive to the dynamics of their company, and this knowledge will be vital to the external resource.

Witnesses may also be more forthcoming with someone not directly employed by the company. People have a tendency to be more open and willing to share information with an ‘outsider', particularly when the allegations being made are directed against a senior manager or individual within the organisation. This will minimise any concern that the information provided may, in time, become a source of general knowledge, and thereby have a negative impact on the individual concerned or the general working environment.

It is vital to employ the services of a specialist external investigative resource:

• where in-house resources do not have the available capacity;
• when the nature and scope of the investigation requires specialist skills, knowledge and investigatory techniques (such as forensics and IT research); where there is the risk that press awareness could severely damage the company's reputation and shareholder confidence;
• When the situation would benefit from an objective and external third party;
• Where the alleged malpractice was perpetrated by senior employees within the host company;
• If there is a conflict of interest or personal emotions regarding those involved which precludes any objective input; in cases involving legal compliance with Duty of Care obligations.

The selection of an external investigative team can be accomplished through the advice and guidance of the company's solicitors. A good investigative team will be working closely with its appointed legal team in any event, providing it with all the necessary documentary evidence required to ensure that any case proceeding towards litigation is won.

When compared to the potentially ruinous long-term impact on the business of a badly conducted investigation, the cost of any such external investigation team can easily be justified to the Board. Make the decision to outsource as early as you can for a greater chance of a successful outcome.