When Trouble Knocks

How To Handle an Internal Investigation with Integrity and Foresight

It’s a quiet Friday afternoon when HR gets a tip: an employee claims there’s misconduct on a remote team. Suddenly, the company faces a fork in the road. Do you put your head down and hope it fades? Or do you respond decisively, transparently, and with rigor?

When managed well, internal investigations reinforce trust and integrity. When mismanaged, they expose the company to even greater risk, having the potential to compound reputational, legal, and financial harm. In fact, according to Daniel Cotter of Aronberg Goldgehn, “The way a company conducts an internal investigation can be just as important as the misconduct itself.”

What Kicks Off an Investigation

An investigation rarely begins with a headline; it starts with a whisper. A single complaint, an odd accounting discrepancy, or a cybersecurity flag can be the first domino.

Common triggers include:

• Whistleblower hotline calls or anonymous letters
• Employee complaints or HR grievances
• Data breaches or IP theft
• Audit findings or missing assets
• Adverse media coverage or government inquiries

As Stephanie Bustamante of ChampionX notes, investigations often start small, but how they are handled in the first 48 hours can define a company’s credibility. Those early hours determine whether the company is viewed as transparent and proactive or evasive and negligent. Early inaction can worsen exposure, leading to potentially broader scrutiny and regulatory penalties. Every company should have a playbook that defines when and how to escalate potential issues.

Legal Framework: Privilege, Doctrine & Incentives

Before assigning tasks or reviewing emails, it’s critical to understand the legal guardrails governing internal investigations, including:

Attorney?Client Privilege: Attorney-client privilege protects communications made in confidence between attorneys and clients for the purpose of legal advice. To maintain privilege, legal counsel should oversee the process, not merely observe it. Meeting minutes and investigation reports should clearly reflect legal input, not just operational commentary.

Work Product Doctrine: Work product doctrine shields materials prepared in anticipation of litigation. However, the protection can be lost if materials are shared too broadly.

Joint Defense / Common Interest Agreements: When multiple parties are involved, such as executives or subsidiaries, joint defense and common interest agreements allow them to share information without waiving privilege. But they must be carefully drafted and formally acknowledged.

In 2015, the DOJ’s ‘Yates Memo’ shifted focus toward individual accountability for corporate misconduct. It established that cooperation credit, i.e., reduced penalties in exchange for transparency, depends on full disclosure of individual culpability.

“The DOJ’s carrot-and-stick approach means you can’t protect individuals while claiming full cooperation. Companies must choose transparency,” urges Braeden Anderson of Gesmer Updegrove LLP.

These developments underscore the need for consistency and caution in how companies communicate with regulators.

Planning the Investigation

A structured plan is the backbone of a defensible internal investigation. Without one, even well-intentioned inquiries can spiral.

When creating a plan, consider the following basic approach:

1. Define the problem and scope: Be clear about what’s being investigated and set limits to prevent ‘scope creep.’
2. Identify who needs to know: Limit disclosure to maintain confidentiality and privilege; involve General Counsel early.
3. Establish a timeline: Set milestones and deadlines. A prolonged investigation invites leaks and distrust.
4. Preserve and collect evidence: Secure electronic and physical evidence promptly; implement a litigation hold.
5. Document every step: Keep a contemporaneous record of decisions, interviews, and findings.

In the end, consistency, transparency, and diligence matter as much as the final findings. An investigation without a clear scope or documentation trail is a potential compliance disaster.

Who Leads: Inside, Outside, or Hybrid?

Selecting the right team defines credibility. Internal teams, like HR, compliance, or audit, know the company best, but may face perceived bias. External counsel or forensic experts offer independence and enhance trust with regulators. A hybrid approach, where external counsel supervises internal efforts, often works best, as external counsel can strengthen the integrity of the entire process.  Outside counsel also preserves privilege and helps manage complex multi-jurisdictional matters. Regulators often tend to give greater weight to reports prepared under independent oversight.

Conducting Interviews: The Heart of the Investigation

Interviewing employees is where fact-finding meets human nature. It requires empathy, preparation, and legal precision. Transparency is critical throughout the entire interview process.

Before each interview, counsel must provide an ‘Upjohn Warning’ informing employees that the lawyer represents the company, not them individually. The employee’s statements are privileged only as company property and may later be disclosed.

Key best practices for conducting interviews include:

• Preparing tailored questions
• Having two-person interview teams
• Avoiding leading or accusatory language
• Recording notes carefully but avoiding unnecessary editorializing
• Following up on inconsistencies

Analyzing and Reporting Findings

After gathering evidence, drafting a clear, factual, and balanced report is the next step. The report should address allegations, methods, findings, and recommendations.

A typical report structure includes:1. Allegation summary and background
2. Methodology and scope
3. Evidence and analysis
4. Conclusions
5. Recommendations and corrective actions

The final report should assign ownership for corrective actions and establish follow-up mechanisms. Companies should decide whether to disclose findings to regulators. Transparency may earn cooperation credit, but premature disclosure can waive privilege.

Prevention and Continuous Improvement

Bustamante reminds us that an investigation isn’t complete when the report is filed, but once its lessons are built into policy. Continuous improvement transforms lessons learned into operational resilience. An investigation can also be seen as a diagnostic test of sorts for the company’s ethics and compliance system.

To prevent recurrence:

• Review and update policies
• Train managers on ethical decision-making
• Automate document retention and monitoring
• Establish external expert relationships before crises
• Conduct post-investigation debriefs

Integrity as a Strategic Asset

An internal investigation tests the soul of an organization. It reveals whether leadership values transparency and accountability or simply damage control. Handled well, it builds credibility with regulators, investors, and employees.

Ultimately, the goal isn’t just to fix what went wrong, but to reinforce a culture that prevents recurrence.

To learn more about this topic, view Internal Investigations 101. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about HR.

This article was originally published on October 14, 2025.

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