Accounting
How to react when your company is the target of a government investigation
Theresa Mack, Cendrowski Corporate Advisors
By Troy Sympson
Smart Business Chicago | July 2010
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Theresa Mack, Senior manager, Cendrowski Corporate Advisors
British Petroleum (BP) has topped headlines for weeks as it continues to struggle with the oil spill in the Gulf of Mexico. However, in addition to destroying BP’s goodwill with the public, the spill has also made BP the focus of a government-originated criminal investigation.
Missteps in the days immediately following the launch of a governmental investigation can have costly and far-reaching consequences for any company, so you need to be prepared.
“Cooperate, be honest and forthcoming, have a complete and total understanding of your company and communicate with your employees,” says Theresa Mack, a senior manager at Cendrowski Corporate Advisors. “You need to have proper procedures and processes in place early on so you’re not scrambling.”
Smart Business spoke with Mack about what to do when your company becomes the focus of a government investigation.
If a company is facing a government investigation, what are the first steps it should take?
A firm often learns it is going to be the subject of an investigation when an agent either serves a search warrant or requests an employee interview. There’s no time to prepare, so firms need to have processes in place to handle these situations.
One of the most important steps after being informed of a governmental investigation is the preservation of documents. Once a firm has been notified of the investigation, its counsel should issue a written directive — a preservation memo — to everyone in the company, telling them not to destroy any documents. This goes for all offices and branches of the company worldwide, not just the physical location where the investigation started.
Do not destroy or delete anything that could be perceived as important to the investigation. If the investigation leads to a trial and the destruction of documents comes to light, there can be dire ramifications. And in these types of investigations, everything comes to light eventually.
Firms must be especially careful about the inadvertent destruction of documents. Many servers automatically delete stale e-mails or documents housed in electronic storage areas. If employees are leaving the company, their records should be maintained rather than deleted. This will likely require informing a firm’s IT staff about the investigation to ensure none of this happens. Firms can go one step further and have IT staff back up everyone’s data, so even if people delete documents on their machines, a copy has been preserved elsewhere.
