"You're looking for misconduct, you're developing interesting fact patterns, you're interviewing witnesses, you're assessing whether people are telling the truth, and you're looking for where the bodies are buried," said Barry Rashkover '86. "It can be a very exciting, interesting practice, but there are a lot of twists and turns and a lot of traps for the unwary."
Rashkover was speaking of the practice of conducting internal investigations as an outside counsel. He was addressing members of the Cornell Law community on February 21 in the Macdonald Moot Court Room as he delivered "Commencing and Conducting the Internal Investigation: What Must Be Considered?" presented by the Dean's Distinguished Lecture Series and sponsored by the Henry Korn Lecture Series.
Rashkover is one of two leaders of Sidley's Securities & Derivatives Enforcement and Regulatory practice, which recently received the 2016 Chambers USA Award for "Financial Services and Securities Regulation." He defends companies and individuals in investigations and enforcement cases brought by government agencies and other regulators. Before joining Sidley, Rashkover was a senior official in the U.S. Securities and Exchange Commission's Enforcement Division.
He began his lecture by covering some of the basics of internal investigations, which are a fairly common practice for companies handling potential misconduct brought up by a whistleblower, an auditor, a media report, or an enforcement agency. The company may respond to the results of the investigation by restating faulty financial reports, disciplining or firing employees involved in misconduct, and/or self-reporting findings to regulatory authorities.
Rashkover went on to explain some of the potential complications an investigator might face as they navigate reams of evidence, dozens of witnesses, and a variety of outside stakeholders. He noted that enforcement agencies like the SEC, along with the client company's external auditors and perhaps counsels involved in any parallel private litigation, will have demands and expectations that must be managed.
He added that an investigator may have to consider such issues as wire-tapping statutes and foreign privacy protections applying to the company's overseas offices. They must also practice finesse during interviews, making it clear that they represent the company, not the witness, but doing their best not to "freak out" the latter.
Once the investigation has been completed and a report has been written, the investigator could face requests for their findings from the SEC and the company's auditors, and possibly from shareholders as well. Responding to these requests requires care, observed Rashkover, because by disclosing information to these entities, the investigator may waive attorney-client privilege and, in some cases, work-product protections.
Rashkover wrapped up with a number of practical tips for future internal investigation attorneys, among them: be diligent and meticulous in your reporting, segregate your investigative files, check back with your initial to-do lists before finalizing your report, and appraise your client of all the potential complications.
He noted that, during the course of an investigation, a lawyer may encounter strong pressure or resistance from individuals within the client company who have their own ideas about whether and/or how misconduct occurred. Rashkover's concluding piece of advice: Be brave.