When the Game is Afoot – eDiscovery Investigations Series, Part 1

A multi-part series discussing the realities of eDiscovery in the context of investigations

“Come, Watson, come!” he cried.  “The game is afoot.  Not a word!  Into your clothes and come!”
– Arthur Conan Doyle, “The Adventure of the Abbey Grange”

The majority of eDiscovery work takes place in the context of litigation, but a significant amount of it takes place instead in the context of investigations.  Although the available ESI and the available eDiscovery technologies are the same, the realities of handling investigations are different in some ways worth discussing.

Common Types of Investigations

Broadly speaking, there are three main categories of investigations in which corporations commonly become involved outside of, or before, actual litigation: (1) internal conduct or compliance investigations; (2) due diligence investigations; and, (3) regulatory enforcement investigations.

Internal Conduct or Compliance Investigations

Any organization of sufficient size will find it periodically needs to conduct an internal investigation of employee conduct or organizational compliance.  Larger organizations and organizations in highly-regulated industries may find it to be a frequent occurrence.  For example:

• Investigating alleged misconduct by an employee or manager (e.g., fraud or theft, data exfiltration, interpersonal misconduct)
• Investigating the circumstances surrounding the termination of an employee (e.g., was a termination for proper reasons properly documented)
• Investigating potential legal or regulatory violations in the conduct of business (e.g., was a particular transaction an attempt to manipulate a market)

Due Diligence Investigations

In the investigations context, due diligence refers to the evaluation of an organization for potential merger, acquisition, or partnership.  Although financial aspects of such evaluations are generally the primary focus, evaluations of policies and procedures, of regulatory compliance, and of potential legal issues are of equal importance.  Due diligence in the mergers and acquisitions context is most common, but due diligence evaluations of prospective international partners have grown in frequency and importance as Foreign Corrupt Practices Act (FCPA) enforcement has accelerated in recent years.

Regulatory Enforcement Investigations

The third category is regulatory enforcement investigations initiated by governmental agencies.  These may result in no action, in settlements, in a regulatory hearing process, or in court, but before that, they are typically non-public investigations with discovery similar to that in litigation (though, one-sided in nature).  This category includes the FCPA enforcement actions referenced above, as well as fraud investigations, trading investigations, and countless more subtypes.  The DOJ, the SEC, the FTC, the CFTC, the FERC, the NRC, and more federal agencies all engage in such investigations, as do state agencies and the agencies of foreign governments.

ESI in Investigations

In each of the above scenarios, your organization will be faced with discovery needs similar to those you would face in litigation:

• ESI, including emails, electronic documents, and other materials, will almost certainly be relevant to your inquiry and necessary to meet your information needs
• As with litigation, those ESI materials are likely to be voluminous in scale and potentially to be diverse in type and source
• Those materials will need to be preserved, collected, processed, managed, analyzed, and reviewed in an efficient and effective way

Thus, investigations share most of the same eDiscovery challenges as litigation, but investigations also entail added challenges:

First, investigations typically function on even shorter timelines than litigation discovery, making speed essential.  Whether racing to assess internal risk or facing an agency-imposed deadline, time is of the essence.  As Sherlock Holmes says in the quote above: “The game is afoot.  Not a word!  Into your clothes and come!”

Second, because investigations potentially involve uncovering individuals’ misconduct, controlling the dissemination of information about the investigation is important to prevent bad actors from intentionally spoliating materials or coordinating their stories.

Third, investigations often require more nuanced analysis and review of ESI for the same reason: bad actors don’t always communicate about their bad actions in obvious and open language.

Finally, many investigation scenarios carry a strong possibility of formal litigation later, which means process decisions must balance investigation needs against being prepared for that potential litigation.

Upcoming in this Series

Over the coming weeks in this series, we will discuss in more detail the need for speed and secrecy, the challenges of nuanced analysis and review, and the importance of preparing for later litigation.