Companies that offer confidential reporting options through internal or external ethics hotlines and then conduct thorough investigations of those reports are on track to achieve one of the hallmarks of an effective compliance program, as explained in A Resource Guide to the U.S. Foreign Corrupt Practices Act, published in November 2012.  See more about this in Ethical Advocate’s blog post on “Effective Compliance Programs”.

A report to an ethics or fraud hotline is often the first indication of potential wrongdoing. When a company has received a report of a potential unethical or fraudulent act, it is responsible to take appropriate action. It is natural for companies to want to begin an investigation quickly. However, because the circumstances of each ethics hotline report will differ, it is also essential that each investigation begin with careful planning.  While an ethics hotline report investigation is not really any different from ethics reports coming through the management chain, some organizations are new to ethics investigations when they implement their ethics hotline.

For these organizations, investigators should ask themselves the following questions:

• Do we have sufficient information to clearly understand the allegation?  If not, what questions should we ask the person who made the ethics hotline report?
• What kind of evidence will help us determine if the allegation is true, false, or somewhere in the middle?
• Where do we need to look for information that will either corroborate or refute the allegation?
• Who are all the people we should interview?
• Where are relevant documents likely to be found?
• How will we preserve electronic and print data and how will individual investigator’s records be stored?
• Are there internal policies related to either the behavior being reported or the form an investigation must take? If there are, what guidance do these policies offer?
• Are there related external laws or regulations? If there are, what guidance do these laws or regulations offer?
• Do we have the internal expertise needed to investigate this specific report?
• Who in the organization needs to be notified of this report, for example, does the audit committee need to be notified?
• Does the nature of the allegation warrant the use of external counsel or investigators?
• What investigation information may be shared with the ethics hotline reporter?  Information may be limited by confidentiality requirements, such is often the case in HR cases.

Investigators must be well informed about the legal implications of obtaining, reviewing, and using any of the potential sources of evidence identified in the steps above before interviewing anyone or obtaining evidence of any other kind. Laws vary by country and state. If investigators do not observe all legal and policy-related requirements, they could jeopardize the results of the investigation or even put the organization at risk of legal action.

After investigators have gathered and considered the preceding information, they will be able to prepare a preliminary investigation plan. A thoughtfully prepared plan will:

• Identify the goals and objectives of the investigation;
• Name the investigation team;
• Identify the intended approach;
• Establish timetables;
• Identify deliverables; and
• Develop a communication strategy.

The Ethical Advocate team believes strongly that when investigators take the time to plan for ethics hotline report investigations, they help to ensure a properly managed investigation that will protect the rights of employees, comply with internal and external requirements, minimize risk to the organization, lead to appropriate actions for substantiated allegations, and reinforce trust in the hotline process.