Home » Internal Investigation

Category Archives: Internal Investigation

Defamation, Another Company Concern in Conducting and Concluding Internal Investigations?

Through the normal course of business, it is not uncommon for a company to get wind of potential misconduct among its employees. Whether the issue is one of unlawful employment practices (e.g., discrimination or harassment), violations of securities laws, fraudulent conduct or corruption, the sound practice is often to conduct an internal investigation to get to the bottom of it. Once that investigation is complete and the company understands whether and to what extent its employees may have engaged in misconduct, it must decide how to proceed.

A company that determines its employees have engaged in misconduct, must respond accordingly. Many times, what seems to be the appropriate response includes self-reporting the misconduct to the governing/regulating entity (e.g., EEOC, SEC, Department of Justice). Indeed, companies are encouraged to self-report as a means by which to reduce the sanction that might otherwise be imposed on the company for engaging in the identified misconduct.

But in doing so, companies may also need to more closely consider potential defamation litigation by employees who are stated to have been involved in misconduct. In litigation involving Shell Oil Co., for example, an employee sued the oil company for defamation after its internal investigation report of FCPA violations to the Department of Justice included conclusions that the employee approved and facilitated the bribes at issue. The employee claims the assertions are not true and hurt his reputation.

Although the trial court initially agreed with Shell that its report was entitled to immunity as part of the government’s official investigation, the Houston appeals court reversed that decision, saying Shell issued the report voluntarily. Now the issue is before the Texas Supreme Court, which heard oral argument on the issue last month. Shell and other businesses contend that if there is no immunity for information provided in corruption investigations, companies will be less likely to voluntarily cooperate and self-report issues, thereby impeding investigations. Faced with the prospect of defamation litigation, companies may by necessity be less forthcoming in their reports.

Once the Texas Supreme Court renders its decision, companies in Texas should have a clearer sense of direction, at least with respect to FCPA claims. But a question may still remain as to internal investigations conducted as to other types of wrongdoing and reports to other agencies. Companies should tread carefully both in the conduct of internal investigations and with the preparation and dissemination of the ensuing reports.

Writt v. Shell Oil Co., Case No. 01-11-00201-CV