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Event In Review: Navigating Internal Investigations At Nonprofits – Corporate and Company Law



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An allegation of misconduct or illegality can have very harmful
effects for an organization: it can hurt staff morale, violate an
organization’s mission, and, in extreme circumstances, can
threaten a nonprofit’s exempt status. During a recent luncheon
program, Venable partners George Constantine, Eric Berman, and Doreen Martin, along with Jesse Raben, general
counsel and COO of The Trust, discussed how nonprofits should
navigate internal investigations that can arise from whistleblower
complaints, government inquiries, or any other violation of the
organization’s policies. Drawing on their experience guiding
numerous nonprofit organizations through complex investigations,
the panelists also discussed the nuts and bolts of conducting such
investigations and the practices and policies organizations should
have in place to minimize risk.

Draft Written Standards of Conduct and Policies and
Procedures

In the event an allegation arises, it’s essential to take
appropriate and prompt action. But to do so effectively, an
organization will have to have laid the groundwork by implementing
written standards of conduct, policies and procedures, or a code of
ethics, applicable to all employees, volunteers, board members, and
even consultants, that can be enforced in the event of a violation.
Such policies and standards must be unambiguous, with key terms
clearly defined, and enforced uniformly and fairly across the
organization. This will help staff understand the
organization’s compliance expectations and enable the
organization to defend its policies against a challenge. Human
resources departments should ensure that new hires acknowledge that
they have read and understood the codes of conduct that apply to
them and ideally should refresh that understanding through periodic
training.

Know When to Conduct an Investigation

Upon receipt of a complaint, the organization must assess
whether the allegations contained in the complaint rise to such a
level that an investigation is required. The organization should
assess whether the behaviors alleged in the complaint pose a risk
(whether legal or otherwise) to the organization or its employees.
In making this assessment, the organization should also consider
how it has chosen to address similar complaints and should strive
to treat similar complaints consistently. An investigation should
be conducted upon receiving credible information regarding
potential wrongdoing. It is not necessary to have direct evidence
of wrongdoing to begin an investigation; circumstantial evidence
will suffice.

Assign an Investigator

Once a determination is made that an investigation is
appropriate, the organization needs to decide who will conduct the
investigation. When determining who will investigate, the
organization should consider the nature and size of the
investigation, the potential involvement of senior management, the
need for special expertise, potential conflicts of interest, the
involvement of any government agencies or departments, the ability
to defend the investigation to the government and auditors, and
privilege considerations, including the attorney-client privilege.
An organization should consider bringing in outside counsel to
conduct the investigation in order to avoid potential conflicts of
interest.

Plan the Investigation

When planning an investigation, the first thing to establish is
its scope. If that parameter is defined too narrowly, something
might be missed; if defined too broadly, the investigation could
lose focus. Once the scope has been determined, the organization
should:

  • Identify the key stakeholders in the investigation

  • Identify what evidence might exist

  • Identify what communications and documents are relevant, and
    where they can be found

  • Examine the organization’s policies and codes of conduct to
    assess what needs to be established in the investigation

  • Create a witness list that will lead the investigator to the
    facts they need to reach a determination

  • Examine personnel files of the stakeholders and witnesses to
    gather as much information as possible before questioning them

Identify and Preserve Evidence

When it comes to identifying and preserving relevant documents,
the organization should cast as wide a net as possible: this would
include any documents on the company’s server and
communications made over company devices. In general, any
communications on any platform that may be relevant evidence should
be preserved. An outside vendor may be enlisted to collect this
electronic evidence using targeted search terms to uncover only
relevant material and otherwise maintain the stakeholder’s
privacy. If the organization has received a subpoena, demand
letter, complaint, or any other trigger that would make it
reasonable to anticipate litigation, the investigator should draft
a litigation hold that the organization distributes to custodians
with instructions to preserve relevant documents.

Consider Interim Measures

If applicable, the organization should also initiate the steps
necessary to stop or limit the potentially problematic behavior
during the course of the investigation and notify the wrongdoer of
the complaint or allegations. For example, the organization may
consider whether to take steps to place an employee on
administrative leave pending the outcome of the investigation, or
to temporarily reassign an employee to another shift or department.
The organization should consult with legal counsel to ensure that
the interim measures are not perceived as retaliation.

Prepare Internal and External Communications

When it comes to internal communications about an investigation,
a general rule of thumb is “less is more” – inform
only those employees who need to know and tell them only
what they need to know. For instance, rather than sharing
that someone was fired for sexual harassment, it’s enough to
communicate that someone is simply no longer with the company. The
same principle applies to external communications – share
what needs to be known only with whoever needs to know
it.

Organizations should ideally consult legal counsel when drafting
codes of conduct and other policies, considering an investigation,
and navigating its stages. To learn more about Venable’s
Nonprofits Practice, please click here. Watch the full webinar here.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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