Government investigations can be complicated and require a myriad of stakeholders. The complexity of these investigations lies in understanding what the specific challenges are, how the rules are different compared to standard litigation, and properly identifying all of the necessary parties.
In an effort to illuminate this complexity, we decided to partner for a series on government investigations. In this first piece, we’ll lay out a fictional case study from which to base the series. The study will allow us to provide our different perspectives on important factors to consider, some lessons learned from the trenches and some rules to live by.
Our case begins with a state attorney general’s office beginning an investigation into the XYZ Corporation because they believed that there were fraudulent actions being perpetrated by the corporation and/or its directors and officers. This initial investigation leads to other states and individuals suing the company on behalf of the parties affected by these fraudulent actions. The case makes it to the Federal court system, and a class action is filed against the corporation on behalf of the persons affected by these practices within a certain time frame. Executive officers and directors are charged for violating federal laws. The XYZ Corporation is materially and adversely affected by the litigation, and they file for bankruptcy (which creates a whole set of new challenges with trustees, debtors and creditors). After years of litigations, negotiations, and agreements, the case is settled and the bankruptcy is finalized.
To recapitulate quickly:
1. The attorney general investigates XYZ Corporation.
2. Other parties sue the corporation.
3. The case reaches the Federal court system.
4. A class action is filed.
5. Officers are charged for violating laws.
6. XYZ Corporation files for bankruptcy.
7. Years later, the bankruptcy is finalized.
As you can see, this case has stakeholders across many disciplines and throughout each step of the investigation. As a corporation, one of the first steps is to identify them, such as the internal directors and officers, the attorney general’s office, the individual stakeholders who are suing and, of course, the Federal government. Identifying stakeholders and their associated needs allows the corporation to begin to understand what is at stake and focus their efforts in the appropriate way.
The second step is the development of a case project plan. For this particular example, consider the following questions:
1. Who does the corporation bring to the table to assist with the investigation?
2. What is the alleged wrongdoing and how widespread is it?
3. When is the affected timeframe, so that the corporation can determine the custodians and
data sources present at that time?
4. Where is the data that has to be gathered, how extensive is it, and how is the relevant data
going to be identified?
5. How does the corporation limit its exposure to the wrongdoings of the officers and directors?
6. What reorganization needs to be done to handle the bankruptcy proceedings?
7. What trusts and other financial vehicles need to be established?
As the above questions are answered, an implementation plan needs to be put into effect that begins to tackle each of these issues. Expert teams need to be hired, data needs to be gathered and associated workflows must occur in synchronicity, ensuring that the multi-disciplinary team communicates well and all dependent parts work toward the common goal.
In this particular example, there are multiple matters in different states and significantly different issues surrounding the litigation and the bankruptcy. Streamlining information and data is an essential step that mitigates costs and provides continuity. Corporation XYZ should implement workflows and data solutions to help organize information as quickly as possible and distribute it properly among stakeholders in a form consistent with their discipline.
Finally, this information and data must be used to win or settle the litigation, create a positive bankruptcy solution and allow for the conclusion of the matter across all disciplines.
It is difficult to properly discuss the complexity of investigations within the blog format, but this series will not try to conquer all aspects and will merely take a look at some of the important factors to consider when looking at a complex, big data matter.Editors’ note: This blog was coauthored by Vincenzo Toppi from CohnReznick and Todd Haley from eTERA Consulting. It is the first in a three-part series discussing some of the idiosyncrasies of investigations. In the following installments, Mr. Toppi will discuss some aspects of the below case that might require his accounting discipline and background and Mr. Haley will discuss data management requirements and solutions that may serve as an integral part of such a matter.