Internal Investigations Origin, History and Incentives

However, Investigations, as they are commonly referred to, are arranged in many US regulations or are assumed to be a typical compliance component. This applies in particular to the US Federal Sentencing Guidelines (USSG), which ia. for organizations (organizations) regulations on punitive measures for unlawful behavior include. For these fines are planned in
the tens of millions.

However, in the introductory notes to Chapter 8 of the USSG, reference is explicitly made to the possibility of mitigating the penalty provided that the company in question informs the offense itself, submits a complaint to the competent authority and then cooperates fully with it. This creates a special incentive for the Enlightenment.

This is further compounded by other factors: According to the so-called Thompson Memorandum of 2003, a law enforcement agency can refrain from indictment if the legal entity has informed the case, notified it to the authorities and is ready to co-operate with the authorities In particular, names the perpetrators, provides witnesses and makes the results
accessible to internal investigation. The principle of mitigating or refraining from a charge against cooperation is also confirmed in the following McNulty memorandum from 2006 and in the Filip memorandum of 2008. The exact clarification of the facts is essential to reach an agreement with the US authorities. Thus, conducting an investigation for the company can be crucial to obtaining impunity. Similar regulations to the aforementioned Memoranda exist at the level of the individual states.
For US listed companies, the Seaboard Report of the Securities and Exchange Commission (SEC) and the Enforcement Manual, also published by the SEC in January / March 2010, are significant. Criteria for determining a sanction are then, inter alia, the nature and duration of the maladministration, the question of how this has been clarified and what steps the company has taken to rule out the identified misconduct for the future. Explicitly it is asked whether the company has carried out a thorough investigation or investigation of the incident. This has a
sanction-reducing effect.

High-level investigations in a company disrupt regular business processes, tie up resources and, as a result, cause costs – not to mention negative publicity and the associated reputational damage. To avoid these effects, an internal investigation may be useful.

Despite the above rules, there are standards that, under certain circumstances, explicitly oblige companies to conduct internal investigations, only in a few cases. However, there are numerous rules and standards at the international and national levels that are discussed in
connection with investigations and compliance violations and – in part in conjunction with other standards – can make an investigation from the perspective of a company advantageous.

The UN Convention of 2005 also aims at combating corruption in the public and private sectors and includes the areas of corruption prevention, Member States’ obligation to create criminal offenses to sanction a wide range of corrupt behavior, international cooperation of the Contracting States, as well asasset recovery, that is to say, the removal or recovery of the damage caused by corruption. The Convention also obliges States Parties to establish measures to facilitate and promote cooperation between law enforcement agencies and the “relevant private institutions”. Member States should also ensure that companies have sufficient internal auditing controls, depending on their structure and size, to help prevent and detect incidents of corruption.

Depending on the extent and nature of the incident, Internal Investigations can certainly play a major role here. Article 37 of the Convention also obliges Member States to provide incentives to encourage persons to
report cases of corruption in which they themselves participated. As incentives, a possible mitigation or even a refusal from the prosecution (“immunity”) are called. Precisely because of such incentives
companies and their organs threatened by statements of employees, who are advised in the visa of the investigation authorities, to be charged; Internal investigations can help control what happens, as well as
investigations against the company.

US Federal Sentencing Guidelines

Chapter 8 of the US Federal Sentencing Guidelines regulates the sanctioning of companies (Sentencing of Organizations). Their sentences are generally calculated on the basis of the following penalizing and mitigating factors:

Strengthen the penalty:

• Entanglement in and tolerance of criminal behavior,
• a “negative history” of the company,
• Failure to comply with a judicial or administrative order or disposition;
• Obstruction of Justice (Obstruction of Justice).
Mitigating is considered:
• The existence of an effective compliance and ethics program and
• Self-reporting or cooperation to clarify or assume responsibility for the respective incident (self
reporting, cooperation or acceptance of responsibility).
Great importance is attached to an effective compliance and ethics program, which has at least the
following seven points:
• Procedures for the prevention and investigation of criminal behavior
• Company management must be familiar with the content and functionality of the compliance program
and monitor its implementation. Management must ensure that the company has an effective
compliance system. Individual managers are to be named who are responsible for the program and
report to the management
• No manager in management whose past is “in contradiction” to an effective compliance program
• Periodic communication and notification of the compliance system at all levels of the company
• Ensuring the company complies with the compliance program. These include monitoring and auditing
to detect criminal behavior. The effectiveness of the compliance program must be reviewed periodically.
Furthermore, reporting systems must be set up that allow employees to report suspected cases of
compliance violations anonymously and without fears of personal disadvantages (whistleblower hotline
or ombudsman).
• Consistent enforcement of the compliance program throughout the organization and appropriate
incentives for it. In addition, appropriate disciplinary measures must be established for criminal behavior
and for failing to take reasonable steps to prevent and detect criminal behavior
• Appropriate response to criminal behavior to prevent future misconduct; this involves adapting the
compliance system