Nigel Farage, the outspoken former Brexit campaigner, prides himself on saying what others dare not. But when he labelled a regulation agency’s report into claims he was debanked by Coutts as a “whitewash”, he was not the primary to lift considerations about such investigations.
Corporate probes have been thrust into the highlight after a latest slew of high-profile circumstances of alleged misconduct or firm failings raised questions in regards to the high quality and independence of lawyer investigations, and the way firms use them to rebut criticism.
Red Bull mentioned this 12 months {that a} barrister had cleared its Formula One workforce boss Christian Horner of claims of inappropriate behaviour in the direction of a feminine worker, however refused to call the lawyer or publish their conclusions.
The Post Office this month exonerated its chief government, Nick Read, from misconduct allegations following a barrister probe, with out disclosing the report or its findings.
Such circumstances have underlined the fraught nature of inner investigations, which should steadiness a company’s crucial to point out it has correctly probed an allegation with its need to keep away from better disruption or reputational injury than crucial.
Some firms need to use a high-profile lawyer or agency with the intention to acquire an “air of respectability” however do probably not desire a sturdy probe, mentioned Lord David Gold, former senior companion of City regulation agency Herbert Smith Freehills and founding father of David Gold & Associates.
Increased scrutiny surrounding inner investigations comes because the solicitors’ watchdog for England and Wales is because of replace its steerage this summer time on how finest to conduct them, after legal professionals expressed considerations.
In the wake of worldwide scandals from Libor-rigging by banks to #MeToo, it has grow to be commonplace observe for firms going through claims of company failings — which may vary from suspected bribery to sexual misconduct — to name in exterior legal professionals to research. That rising demand has spurred City regulation companies to construct up investigations practices, making a cottage trade for specialist recommendation.
More work is coming their means, with the Bank of England’s Prudential Regulation Authority in January introducing a 50 per cent low cost on fines for firms that make early admissions and present full candour on probes, together with handing over stories and interview transcripts.
Allegations of a scarcity of independence and transparency have lengthy dogged inner investigations, which cope with high-stakes accusations and are typically carried out behind closed doorways. Lawyers’ findings can carry immense energy, probably heading off regulatory or reputational injury by drawing a line below misconduct.
But such probes face myriad hurdles: legal professionals’ entry to info and witnesses is usually impeded, in line with individuals who have labored on investigations, and their findings are generally stored non-public, or made public solely by means of selective summaries. The most typical dangers with these investigations are “whitewashing” of errors or “stonewalling” by the corporate, mentioned Peter Swabey, a director on the Chartered Governance Institute.
Companies typically flip to long-standing advisers who know the enterprise. In these circumstances, an actual or perceived lack of independence from a go-to agency can threat undermining the credibility of an investigation.
“If [an investigation] is about addressing external reputational concerns . . . independence becomes much more important,” mentioned Roger Barker, director of coverage and company governance on the Institute of Directors. An investigator’s findings can be “much more credible” if they’re genuinely unbiased, he added.
Linklaters, the magic circle regulation agency, was criticised in January by staff at its consumer, Endeavour Mining, after the gold producer used it to research ousted chief government Sébastien de Montessus. Critics argued that the agency’s relationship with Endeavour, which flourished below de Montessus, undermined its independence when it got here to probing his behaviour — a declare that Linklaters denied.
“If you want an independent investigation, you should not go to your pet lawyer,” mentioned Gold, whose agency specialises in working for firms going through regulatory or governance issues. “It may be fine [in substance] but it’s an own goal.”
To keep away from allegations of bias, firms below hearth generally flip to barristers as a substitute. Barristers, who’re self-employed and often don’t advise on different areas of an organization’s enterprise, may be seen as having an added degree of independence.
The appointment of senior counsel by itself doesn’t eradicate questions, nevertheless. Red Bull, which was unwilling to even identify the investigating barrister, was urged by F1 companion Ford to be “transparent” in its probe into Horner. The girl who made the allegations, and was suspended final month, has launched an attraction. Red Bull declined to remark.
Shortly after the Post Office investigation was revealed this month, Marianne Tutin, the barrister who led that probe, defended the work as “fair, thorough and proportionate”, saying it was for the Post Office to determine what was made public.
The circumstances are the most recent to throw up questions round a scarcity of transparency regarding how firm investigations are performed and their findings used.
The Financial Times reported in December that KPMG companions in Dubai had expressed considerations over the price and transparency of a $1.5mn assessment carried out in 2022 by Freshfields Bruckhaus Deringer, with board members involved they had been being stored at the hours of darkness.
Meanwhile Farage claimed Travers Smith was “trying to hide the truth” in its investigation of his debanking row with Coutts.
Companies generally decide in opposition to publishing the findings of a authorized assessment, and even sharing them internally, as a result of they need to assert authorized privilege — a confidential safety that applies in relation to authorized recommendation and potential litigation. Conclusions are generally given orally to an organization board quite than in writing to protect in opposition to making a doc which may be disclosable in a future authorized dispute.
Legal privilege is a long-established precept however counting on it carries reputational dangers and might frustrate exterior events corresponding to politicians. Australian authorities accused accounting agency PwC in February of “deliberately hiding” a report by Linklaters about how leaked authorities info was used exterior the nation. PwC has insisted the data is “privileged and confidential”, however later revealed a two-page abstract.
Linklaters referred to earlier statements relating to its investigations, saying it had complied with skilled obligations. Freshfields and Travers Smith declined to touch upon the criticisms they’ve confronted. The Post Office mentioned its report ought to stay confidential to guard its whistleblower coverage and fulfil its ‘duty of care’ to the individuals concerned.
While some firms attempt to hold investigation findings non-public, others intentionally search to restrict the scope of probes or safe a specific consequence, mentioned some legal professionals. Witnesses might also be reluctant to co-operate, both as a result of they’ve left the corporate or concern implicating themselves in wrongdoing.
“[Sometimes] you get a company who says ‘we’d like you to do this work and effectively we’d like you to come up with this answer and result for us’,” mentioned one regulation agency companion. “You’ve got to take it or leave it.”
Lawyers mentioned they often used completely different groups to these which often advise a consumer with the intention to enhance independence. And some mentioned they’d turned down requests to hold out company probes the place they believed they’d not be given the liberty to research correctly and to entry the paperwork and witnesses required.
In its draft steerage revealed final month, the Solicitors Regulation Authority mentioned it was involved that poorly performed investigations may undermine their consequence “on grounds of actual or perceived unfairness or bias . . . damaging public trust and confidence”.
“Best practice would be to use a law firm that has no prior business relations with the firm,” mentioned Henri Servaes, a professor of company governance at London Business School. “What is important here is not just that any conflicts of interest are avoided, but that even the remote appearance of any conflicts of interest is avoided.”