Internal Investigation within a Company

By Dr. Julius Hagen, Attorney at Law

Internal investigation after a criminal-law concern

An internal report, unusual payment, audit or investigative measure may lead management to investigate a matter. The immediate issues are responsibility and method: management must appoint the review lead, identify the data to preserve, determine which employees should be approached and assess whether contacting the public prosecutor or police is consistent with the company’s interests.

An internal investigation is a company-led fact-finding exercise without state coercive powers. It does not replace a criminal investigation. Its findings may nevertheless affect the defence, employment decisions, a possible corporate fine and communications with the authorities. The mandate must therefore distinguish established facts, open issues and assumptions before the first interview.

The mandate and the actual evidence questions

The mandate must identify the risk the review is intended to address. A possible breach harming the company requires a different review from conduct that benefited the company or may expose it to a fine or confiscation. The classification determines the scope, report recipients and later communications.

A clear mandate identifies the facts, period and relevant roles. In a corruption review, one payment, its approval process and the commercial background may belong together. In an accounting or invoicing matter, booking logic, responsibility and later corrections may be decisive. An unusual document is not, by itself, proof of a criminal contribution.

Preserving, reviewing and documenting data

Email reviews, messenger data, accounting records, contract files and access logs should come from traceable sources. Record when the data was secured, its scope, the search parameters and who had access. Selecting only incriminating messages after the review has begun weakens the report. Exculpatory communications and alternative explanations must be considered within the same framework.

Data review commonly raises data-protection, employment-law and, where applicable, works-council issues. The label lawyer-led does not remove the need for those checks. Before the review begins, determine which data is necessary, who may access it and how personal content will be handled. If documents are later provided to prosecutors, the record should show whether they were disclosed voluntarily or produced following a measure.

Employee interviews and the risk of self-incrimination

Interviews can clarify responsibilities and processes that documents alone do not explain. The framework and the client commissioning the review must be clear. An employee first approached as an information source may become personally exposed through the answers given. The company must then reassess whether further internal questioning is appropriate and what legal representation is needed.

Before an interview, explain its subject, the person’s role, how interview information will be handled and possible later use. Preparation must not turn into a coordinated account; employees must not align their stories. Open questions, accurate records and a clear distinction between personal knowledge and later interpretation are central to evidential quality.

The company mandate and conflicts of interest

The review is usually conducted for the company. The instructed lawyer cannot therefore automatically represent management and the employees interviewed. Interests may diverge where the company disputes an organisational failure, a managing director presents a different account of personal responsibility or an employee may become a suspect.

Before the work starts, establish who the client is, who may receive interview information and draft reports, and which communications remain confidential. Where interests conflict, section 43a(4) of the German Federal Lawyers’ Act prohibits acting; the prohibition may also extend within the joint practice. Separate mandates and information boundaries belong in the investigation design.

Cooperation with prosecutors and police

Cooperation may help the company address a matter already known to the authorities and structure the next procedural steps. It may also provide new evidence, broaden the allegation or place the company and individuals in opposing positions. A general promise to cooperate fully leaves the timing, contact person and scope of any disclosure unresolved.

Before disclosure, assess the procedural stage, the available file, the investigation’s scope, the reliability of the report and the consequences for management and employees. The report may be disclosed in full, in part or not at that stage. A meeting requested by the authorities must leave the company’s procedural position and the rights of individuals clear.

Reports, disclosure and investigative measures

An investigation report should explain its method, the data reviewed and the limits of its findings. Documented events, witness accounts and legal assessments should be kept distinct. A report that states only conclusions without explaining source selection makes later correction more difficult and may look like a pre-formed company narrative.

If internal documents are secured or seized during a search, their later use is a separate procedural question. The search itself belongs on the dedicated company-search page. This page focuses on assessing internal findings and deciding whether to use them with the authorities. Special protection issues may arise for lawyer documents and communications and depend on the specific mandate and custody arrangements.

Remediation, corporate fines and parallel proceedings

After the report, the company may change controls, reallocate responsibilities, limit losses or consider employment and civil-law measures. These steps document the response to a concern; on their own, they do not establish whether an offence, supervisory failure or economic benefit already existed.

A criminal case against an individual, proceedings against the company, confiscation and employment measures may run in parallel. Statements and documents must not be transferred between proceedings without control. Asset freezing and confiscation can create separate financial and procedural risks. The corporate-fines page explains attribution and sanctions; this page focuses on a reliable internal review and the decision whether to cooperate.