Take it Outside: The Benefits of Using Outside Counsel for Internal Investigations

General Motors has recently come under criticism for issues linked to the ignition systems in some of its vehicles. In response, the Company hired outside counsel to conduct an investigation into the matter.

General Motors is not alone. Facing increased governmental regulation and scrutiny, U.S. companies are regularly presented with a need to conduct internal investigations, and many of them are seeking the assistance of outside counsel. In fact, according to the Norton Rose Fulbright Annual Litigation Trends Survey, the number of U.S. companies reporting that they conducted at least one internal investigation requiring help from outside counsel rose to 55% in 2013, up from 42% the year before. This is no surprise, as companies can realize significant benefits by using outside counsel for internal investigations.

One of the most significant reasons for using outside counsel is credibility. An investigation may be questioned if it is not perceived to be fair and impartial. Indeed, if the parties reviewing the investigation findings question whether those involved were sufficiently independent to conduct a thorough and neutral inquiry, the outcome lacks credibility, and, therefore, the underlying allegation or problem will likely remain unresolved.

The reduced expenditure of time and resources can also be a valuable benefit to using outside counsel. Outside counsel can shoulder some of the burden and minimize workplace distraction. A company could also face a heightened level of suspicion or scrutiny on the part of the regulators, auditors, prosecutors, or anyone else reviewing the results of the investigation if it is conducted internally, and the decision to forgo the assistance of outside counsel may ultimately have drastic public relations consequences.

Of course, the use of outside counsel for internal investigations may not always be appropriate and should always be analyzed on a case-by-case basis. For example, potential conflicts in subsequent legal representation may result, and statutory and regulatory requirements, including those under the Fair Credit Reporting Act, must be considered. If you have questions or would like to discuss how we may be able to assist your company with internal investigations, please respond to this email or contact your Elarbee Thompson attorney.