The Process of Investigation
E. F. Ferraro
1.4 Elements of a Successful Investigation
1.4.1 Management Commitment
1.3.7 Misconduct and Malfeasance
In About the Author in the front matter of the book, you might recall that my experience includes “the investigation of employee dishonesty, substance abuse, and criminal activity in the workplace.” This claim is true. However, the reader will note that collectively my experience is in the area of investigating employee misconduct and malfeasance. Some of the things investigated are both employee misconduct (and malfeasance) and, at the same time, crimes. However, as we will discuss later, it is not the criminality that is investigated in these situations, but the misconduct and malfeasance of the wrongdoer. Furthermore, in the context of our discussion, all crimes involve misconduct, but not all misconduct constitutes a crime. Thus, the workplace fact finder is better off consistently describing that which he investigates as misconduct or malfeasance, not crimes.
options can the employer make decisions that are sound and appropriate. Anything less will diminish the return on investment and invite potential litigation.
Tip: Complex problems that have evolved over time cannot be solved in an after-noon. Employers and their decision makers must allow the fact finder the time she needs to properly conduct her investigation and bring it to a meaningful conclusion.
Time is a precious commodity. Each of us is allocated just so much; there-fore, how we use it, by and large, will determine what we produce and how much.
Because investigations are dynamic, the use of time and the allocation of it to any particular task is a critical aspect of project management. The project manager is responsible, among other things, for the establishment of the project’s objectives. In doing so, he will define milestones and deadlines. It is he who will ensure that the investigative team remains on course and the project is accomplished in a timely fashion.
A successful investigation also requires patience, a virtue few practitioners seem to have. The simple truth of the matter is that a proper investigation takes time. They frequently unfold in fascinating and often unexpected ways. Although the experienced project manager can influence the pace in which his or her inves-tigation unfolds, there are aspects of it that may be uncontrollable. Undercover investigations are a perfect example. Undercover investigations are extraordinarily complex. They involve the careful selection and placement of an investigator into an unsuspecting workforce. The investigator must then assimilate into that work-force and gain acceptance. This phase of the investigation is called the relationship-building phase. Once assimilated, the investigator moves into the proactive phase.
Once there, with the guiding assistance of his project manager, he begins to collect the information necessary to obtain the investigation’s objectives. This takes time, and often a lot of it. A four-month undercover investigation is not uncommon.
The effort cannot be forced or willed. Despite the anxiousness of the other parties involved (the employer client or law enforcement), the investigation must unfold at its own pace.
In the case of undercover, experience has shown that the relationship building phase is a four-to-six-week endeavor. The proactive phase of the investigation may require an additional 6 to 16 weeks. A whole host of variables will impact the length of the investigation, but in extreme situations, the case may need to be run six months or more. The lack of patience will make an otherwise routine undercover investigation a daunting and painful undertaking.
Additionally, there may be events that impact the pace of the investigation that are beyond the control of anyone. Things like illnesses, weather, holidays, sched-ules, and the unavailability of the players are all things that sometimes no one can
control. In the case of undercover, for example, the winter holiday season often creates challenges. In the aerospace and automotive industry, it is not uncommon for employers to shut their doors for the last two weeks of the year. It is precisely that time of year the undercover investigator can make her best headway. Holiday parties, dinners, and other seasonal events provide excellent opportunities to build relationships and gain confidences. The holiday spirit also increases complacency, making the gathering of otherwise useful information much easier. However, in the aerospace industry, as in several others, no sooner does the holiday spirit set in, then the organization shuts down and operations are not resumed until shortly after the New Year. All the while, the meter continues to run for the employer cli-ent. In order to endure such delays, the employer client, as well as the investigators, must have patience.
Another example of the need for patience are those matters involving the man-agement of workplace aggression and potential violence. Often, the employer, upon discovery of the misconduct, wants to immediately discipline or terminate the mal-feasant. This, of course, is a common outcome in these types of matters. However, more often than not, the employer has not conducted a thorough investigation and has not met the standard of proof necessary to discipline or discharge anyone. For organizations like mine, which specializes in managing these matters for employ-ers, the rush to judgment and termination of the suspected by our clients is a chal-lenge for us. In haste there is often waste and in these types of cases, haste can produce very dangerous outcomes. Often there is no immediate need to discipline or terminate. What is needed is a proper and thorough investigation. Facts need to be gathered, statements need to be taken, allegations need to be checked, and, most importantly, barring an immediate danger to human life, the alleged aggressor has rights that must be respected and protected. It has been my experience that lack of respect and rush to judgment has been an historical contributor to producing the very behaviors that the organization was attempting to prevent.
In addition to time and patience, a successful investigation requires the dedi-cation of resources—real money. Regardless of the simplicity or complexity of an investigation, some investment of money will be necessary. Like the free enterprise system, money is an essential fuel that in many ways powers the investigation.
My clients sometimes debate this. With all sincerity, they will sometimes con-tend that they can conduct the investigation under consideration cheaper and faster than me. In rare instances, this may be so. However, most often they have neither the skill nor the experience to conduct the investigation properly, no less materially achieve its specific objectives. The mere availability of manpower, equip-ment, and other resources does not assure success. The fact that the organization already employs a security director, human resource manager, or house counsel does not mean that they or the organization is capable, qualified, or even has the time to conduct a proper investigation. Even if capable and qualified, it may make more economic sense to outsource the effort. Consider your own organization
for a moment. Does it have the human resources, talent, and time necessary to undertake a complex internal investigation? Probably not.
Allow me to put a finer point on it. Regardless of who does the investigation and whose resources and equipment might be used, somebody has to pay for it.
Simply because the organization employs one or more of the professionals men-tioned above, does not mean that their services are free. The question the organiza-tion must ask is: Is it more economical to undertake the project itself or outsource it? In order to answer that question, some cost-benefit analysis should be done.
Cost-benefit analysis in this context is more than just running the numbers.
Integral to the process is estimating to the finest degree possible, the return on investment (ROI). ROI should be one of the objectives of almost every investi-gation. It should be intuitively obvious that the higher the ROI, the smaller the economic risk. What’s more, the properly engineered investigation will have estab-lished milestones by which those driving the project will be able to periodically measure results, thus enabling them to reassess their plan and modify their objec-tives dynamically. As such, experienced investigators know cost-benefit analysis is a necessary component of the preparation and preplanning phase of the project.
Thus, the more complex the contemplated project, the more critical cost-benefit analysis becomes. Following is a typical example.
Hypothetically, suppose “our” organization suffered what appeared to be a fairly significant loss involving a kickback scheme orchestrated by one of our pur-chasing agents. Preliminary information suggests that, as a result of the scheme, over a period of a couple of years our organization overpaid several vendors more than $300,000. Our security department is brought to bear and its preinvestigation fact-finding effort reveals the overpayment is closer to $750,000.5 Based on an orga-nizational pretax net of 5 percent, analysis suggests that, in order to have instead netted the $750,000, the organization would have had to increase sales by approxi-mately $15 million. Depending on the organization and industry, this may or may not even be possible. Our analysis also suggests that the organization’s inability to use that money elsewhere increased operating costs in the form of finding replace-ment capital. Taking other facts into consideration and rounding the numbers, the loss actually exceeds $1.2 million.
Given that such matters lend themselves to recoveries of not only the losses, but, in most instances the cost of the investigation, does it not make sense to look outside the organization for professional assistance?6 Considering the burden on the organization’s internal resources, manpower, and the distraction created by a complex investigation of this sort, the smart move is to engage a qualified external resource. The outcome is likely to be better and the organization can instead dedi-cate itself to what it does best—running its business. I make this point frequently when testifying as an expert witness in matters involving internal investigations.
Even in instances where the organization has employees dedicated to such matters, it often makes sense to outsource the effort. Doing so conserves the scarce resource of personnel, while putting the project in the hands of experienced professionals
undistracted by other responsibilities. Additionally, outsourcing enables some of the legal liability to be shared. When things don’t go well, the opportunity to blame the vendor who provided the investigative services can be very useful.
The next question, of course, then is what is going to be the cost? The answer is not as simple as it may appear. In the case of undercover, which is typically billed by the week, the organization (the client) and the service provider (the investigative vendor) together can determine the estimated length of the project and do the math.
Other types of investigations require a little more analysis in order to determine the investment necessary to assure success. Let’s look at this process in a little more detail.
It is estimated that there are approximately 18,000 active private investigation firms in the United States.7 Although it is nearly impossible to know for sure, it is widely accepted that the private investigation industry in the United States employs something on the order of 40,000 individuals.8 Of those, only a small fraction is engaged in what has come to be called corporate investigations. Corporate investiga-tions are those that specifically involve workplace issues and problems as well as the investigation of crimes and offenses committed against the organization. Of those who claim to offer corporate investigative services, only a handful actually specialize in it. As such, the sample from which I am about to draw the follow-ing conclusions is relatively small and, thus, there is some inherent inaccuracy in which I am about to offer. That said, it is fairly safe to say the hourly fees charged by those offering corporate investigative services tend to be on the higher end of the scale for private investigation professionals. And, although fees and pricing practices vary across the country, with some high cost of living areas, such as San Francisco or New York skewing the data, most qualified corporate investigators who offer the service as their specialty, charge something on the order of $250 per hour. Some organizations actually exceed $450 per hour for their top investiga-tors. Associates and field investigator fees begin at about $150 per hour. On the whole, it is my experience that it is difficult, if not impossible to engage a qualified corporate investigator of any sophistication for less than $200 per hour. For those readers interested in pursuing this line of work, that should be very good news. For purchasers of these services, it is equally good news. Here’s why.
Because corporate investigations in practice involve an understanding and appreciation of criminal law, civil law, and employment/labor law, few professionals actually have the skills necessary to deliver quality services. Those who do know its value charge accordingly. Conversely, some general practitioners (criminal defense, insurance investigators, and the like) may charge as little as $75 per hour, and some as little as $35 per hour. These professionals find it difficult to even imagine charging $200 per hour for their services, no less someone actually paying it. This gives the consumer of corporate investigative services a decided advantage. Simply by knowing the fee structure of the service offerer, one can generally tell their level of sophistication and experience. This is not to say that by paying more, the client automatically gets more. However, the adage that one gets what one pays for, cer-tainly applies when choosing a corporate investigator.
The sophisticated vendor offers more. Professionals capable of delivering the type of services we are discussing also understand ROI. They have a fine appreciation for business and understand that a mutually beneficial engage-ment is only possible when the service provider is able to provide a reasonable ROI. Because most crimes against the business are property crimes, recovery is often possible. The professional corporate investigator knows this, and will typically engineer his investigation to facilitate a recovery, to include, if possi-ble, even his fees and expenses. Most private investigators have no appreciation for this opportunity. Many of them, particularly those with law enforcement background, will attempt to drive the process toward prosecution of the per-petrators. Such an effort or even the suggestion of prosecution, as an investiga-tive objecinvestiga-tive, should be a red flag to the consumer of such services. Unless it can be demonstrated to contribute to the desired ROI, prosecution should not be an objective and should not be pursued.
Tip: An organization’s decision to prosecute offending employees should be made for business reasons and no other.
In most instances, the pursuit of prosecution will consume unnecessary resources and contribute little to the outcome of the investigation. For reasons we will discuss later, employee prosecution can be expensive and often very disappointing.
Tip: Organizations intending to undertake an internal investigation of any size or complexity are generally better served seeking the services of an external resource to conduct the investigation. From the standpoint of time, money, and the best use of existing internal resources, it is more economical to outsource most internal investigations.