Michael Volkov on the Art of the Corporate Internal Investigation

Michael Volkov has a new book out.

It’s titled — The Art of the Internal Investigation.


In the book,Volkov emphasizes the need for independence.

“The value of an internal investigation is premised on an independent and objective view of the evidence,” Volkov writes. “Government prosecutors will not credit an investigation that has been conducted by a biased party. It is easy to identify a slanted internal investigation when issues were ignored or downplayed or evidence was omitted. Credibility is the key to every investigation.”

Case in point — the independent investigation of the Chris Christie Bridgegate matter.

“A high-stakes internal investigation conducted by Governor Chris Christie concerning the bridge lane closings ordered in retribution for political purposes provided no value to the Governor because a close friend of the Governor at the law firm led the investigation,” Volkov writes. “It was received with a big dud, and quickly ignored because of the obvious bias.”

“The person who ran the investigation was Deborah Yang from Gibson Dunn,” Volkov told Corporate Crime Reporter in an interview last week. “She was a long time friend of Chris Christie. They were both U.S. Attorneys. That is a textbook example of what not to do when you are seeking credibility and independence. Gibson Dunn conducted the investigation. They made millions of dollars on it. They came out with a report — and you might as well have put it in the trash can. It was undermined by the perception among law enforcement officials, the U.S. Attorneys offices — they were not impressed with the document. They didn’t advance their cause with the internal investigation.”

Nor does he like the outcome of Jenner & Block partner Anton Valukas’ report on the General Motors ignition switch fiasco.

“I am critical of the internal investigation that was done in the General Motors case,” Volkov said. “It was done by a well renowned partner, who was supposedly independent. The investigation was thorough. But when it came down to going after some of the senior executives and holding them accountable, that report was unmistakably deficient. It was fantastic at the lower levels in bringing out the facts. But believing the general counsel’s testimony was incredible.The general counsel was ultimately pushed out.”

“They never got to the big issue. How could all of this be occurring and the general counsel was saying — I didn’t know? That’s just incredible. The report should have said — if the general counsel didn’t know, he should have known. Nobody was held accountable at the higher levels. They went after a senior attorney who was responsible. But no individuals were prosecuted. It is one of the more disreputable white collar prosecutions I’ve ever seen. You have 124 innocent consumers who died and no senior executives were criminally prosecuted.”

In his book, Volkov says the reason for the outsourcing is the government has no choice. There is a lack of resources. There is a budget constrained environment. Isn’t that a kind of corruption of the system?

Isn’t the more honest way to do this is to fund federal prosecutors so they wouldn’t have to rely on corporate law firms?

“If I were sitting in the Justice Department, that’s exactly the way I would feel,” Volkov says. “But because we live in a 24 hour news cycle, prosecutors and U.S. Attorneys advanced their own names by these hundred million dollar deferred prosecution agreements. And they get a press release and a press conference and boom — they are on to the next one.”

“What happens during that process is that many culpable individuals are not prosecuted. You are depending upon the integrity of outside counsel. How does a prosecutor ensure that every stone is turned over? You use the word corrupted. I wouldn’t use that term. But the system has become somewhat expedient. When I was a young prosecutor, we would work our way up the chain within a company, try to find wrongdoing and make a case. We didn’t need a memo to remind us to go after individuals. We wanted to get individuals, we wanted to get the CEO, the CFO. The higher we could go the better.”

“Right now, you have shareholders paying the brunt of the hundred million dollar settlement. The company then pays lawyers $50 million to $100 million to conduct the investigation. And then you have money being spent to enhance your compliance program, to rebuild your compliance program. This just doesn’t seem like the criminal justice system that I grew up in.”

In his book Volkov writes: “The selection of outside counsel is always a balancing act. On the one hand, outside counsel who is familiar with the company and has worked with the company before may be a good candidate because of his or her ability to navigate the company and quickly move the investigation. On the other hand, the existing relationship between outside counsel and the company will create the appearance of a potential conflict of interest – did outside counsel go soft on the company in order to curry favor for future work?”
“It comes down to the integrity of the leader on the outside investigation,” Volkov says. ”There are certain people who I know, if they are going to do the outside investigation, the most important thing to them is preserving their integrity.”

You are talking about partners at big firms who have integrity and don’t want to risk it?

“Exactly,” he says. “Let me give you an example. Patrick Fitzgerald. He will do internal investigations. On the other hand, his firm may have done work in the past for the company. He may have a deputy who knows the company inside and out, a person who can help him understand the company, the company’s culture, how to get documents. There is a balance in terms of bringing in efficiency and making sure the investigation works effectively. But you always have to be careful about your independence. The worry is that the investigators are going to color their findings in a way to preserve their relationship — even to promote their relationship — to get more work from that particular company.”

Criminal defense lawyers are being hired by the corporations to do these internal investigations. But I’m wondering whether their better angels come out and they become effectively private attorneys general?

“These are friends of mine,” Volkov says. “Former federal prosecutors. They are good lawyers. And they have integrity. I trust what they tell me. But it boils down to who it is and what the client has unleashed them to do. If the client says — I want you to go in there and find every wrongdoer. I want to clean this company up. This is part of my strategy. I want to refocus this company. And I want you to help me do this. That’s fantastic. It depends on the integrity of the client.”

“There are unstated messages. There are stated messages. If people are looking to wiggle out, they will wiggle out.”

[For the complete q/a format Interview with Mike Volkov, see 29 Corporate Crime Reporter 48(13), Monday, December 14, 2015, print edition only.]

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