Performance Thinking

Expert information and solutions for your business.

Summer 2012

When Bad Things Happen to Good Companies

What can you do to prepare your company for the possibility of a government investigation?

In the wake of the financial crisis, government involvement and heightened regulatory oversight in the private sector have increased exponentially. This trend will continue for the foreseeable future. Accordingly, it is important to take proactive steps so that your company possesses all of the necessary tools and experience to protect itself no matter the situation.

If a company becomes a target of a government investigation, it could have significant long-term consequences. Typically, these investigations arise from an inadvertent discovery of potential wrongdoing by an employee or by the company itself that could put the company at risk for liability to a governmental entity or private party. Discovery of this conduct can quickly give rise to federal or state prosecution, administrative actions, private litigation and an onslaught of negative media attention. These types of investigations can involve anything from tax fraud investigations and environmental compliance investigations to enforcement actions to assess penalties for failure to comply with government or industry standards or regulations.

So what can a company do to prepare for an investigation? Taking proactive measures to ensure compliance with regulations and industry standards is paramount. Preparing for, and budgeting for, potential investigations before an issue arises can help a company not only minimize the costs associated with an investigation, but also potentially alleviate painful and unnecessary steps in the process.

In many cases, an internal investigation is the vehicle by which the government builds a case. A company may, therefore, conduct its own internal investigation once wrongdoing is uncovered (or even suspected) and compile a report to submit to the government explaining the potential wrongdoing or exposure. This allows a company to self-assess the potential offense and present the facts to the government in a positive and persuasive light, showing that the company has taken its own measures to ensure that the wrong is remedied.