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What Is an Internal Investigation?

ESI storage

Learn how organizations assess allegations of misconduct and more

Generally speaking, an internal investigation is exactly what it sounds like: an inquiry into an organization’s internal operations. These frequently involve allegations of wrongdoing, such as embezzlement or sexual harassment. However, an internal investigation may also be conducted as part of a due diligence process before a merger or acquisition.

Internal investigations may be related to:

  • employee conduct, whether it’s an allegation of criminal misconduct like theft or a violation of company policy;
  • interpersonal or human resources claims, such as harassment, discrimination, or wrongful termination;
  • regulatory compliance concerns initiated by agencies like the U.S. Securities and Exchange Commission (SEC) or the U.S. Department of Justice (DOJ);
  • potential litigation that has not yet been formally filed; or
  • due diligence evaluations in advance of corporate restructuring.

The majority of this discussion focuses on allegations of wrongdoing, but the principles for completing an internal investigation apply to any type of investigation.

An investigation into potential misconduct begins with some form of complaint. This may be made by an employee, an anonymous whistleblower, a regulatory agency, or a potential litigant. In the case of employee complaints, companies should consider providing a neutral and accessible reporting mechanism, such as a hotline.

The goal of an internal investigation into potential misconduct is to either detect and respond to wrongdoing or dispel suspicions. Organizations should respond to investigations in a way that curtails any specific incident of wrongdoing and discourages similar future violations. The overarching goal is to create an open, productive work environment that is neither distracting nor discriminatory.

Successful investigations are quickly initiated, promptly completed, fairly evaluated, and as thorough as they need to be.

Internal investigations should be carefully documented, starting with the initial complaint. A detailed written complaint ensures that the allegations do not shift over time and that there is a clear endpoint for the investigation.

To determine whether there is any factual basis for the complaint, the investigator should gather relevant information, including any electronically stored information (ESI). Much of an internal investigation will mirror the ediscovery process, making the same tools useful in both settings. Using an ediscovery software platform, the investigator can search for relevant information and run data analytics to identify the most useful sources. Should the investigation uncover evidence of wrongdoing, ediscovery software supports the export and production of data for any necessary next steps.

Internal investigations do pose unique challenges. First, they should be completed as rapidly as possible, as they affect internal operations throughout their pendency. An early case assessment (ECA) process, as used in ediscovery, supports this rapid response and prompt corrective action, if needed. Additionally, investigations into allegations of wrongdoing should be conducted in a way that maintains privacy and protects reputations until and unless proof of misconduct is found. The use of familiar automated in-house ediscovery software allows an investigator to work independently, minimizing the involvement of IT or others in potentially sensitive investigations.

The outcome of an internal investigation depends on whether the investigation yields evidence to support an allegation. An organization may find that it needs to implement new policies, conduct additional staff training, or take action against specific perpetrators. A comprehensive, well-documented investigation lays the groundwork for any formal follow-up that it may necessitate.

Glossary definition

An internal investigation is an inquiry into an organization’s internal operations. It may be conducted in response to allegations of wrongdoing or as part of due diligence before an organizational restructuring.