How do Government Investigations Begin?

Agencies like the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) publish articles on their websites that offer information on how they begin investigations. Those agencies do not hide the fact that investigations begin in secret. Neither business owners, nor the people that work in the businesses, will know that they’re being investigated until the agencies are ready to reveal what they’re doing. An agency will not make its case public until the investigative team believes it has the evidence to prevail in the lawsuit or complaint.

Investigators may begin making inquiries for any number of reasons. They may receive a tip, or a complaint. That tip may come from a disgruntled consumer, from a whistleblower, or from a representative at a consumer-protection group, such as the Better Business Bureau. Once the complaint begins, the investigators start working to gather data. If the data suggests that the target has violated regulations, or engaged in corporate fraud, the agency may choose to handle the matter administratively, or it may file a lawsuit in court.

Business owners and employees protect themselves when they understand the power of government investigators. That means, if they’re talking over the phone, if they’re sending an email, if they’re sending a text message, they may want to think about how government investigators would construe their words. The more knowledge a person has about what could happen, the more cautious a person would be when communicating within the organization, or with prospective consumers.

For example, in a case that the Federal Trade Commission was making against a real estate developer that operated a call center, investigators conducted an undercover call. The undercover agents went through the company’s process:

• Step 1: They filled out a lead form on the company’s website.
• Step 2: They agreed to participate in a telephone pitch at a scheduled time.
• Step 3: They started a recording before the pitch, identifying themselves as agents of the FTC, stating the date, time, and stating that the purpose of the call was to investigate the real estate developer.
• Step 4: The agent’s spoke with the developer’s representative and asked questions with an intent of gathering evidence to build their case.
• Step 5: After the call, the agents marked the recording into evidence, without the representative ever knowing that she was speaking to a government agency, and that her voice had been recorded and would be used to further a government investigation.
• Step 6: Later, after the FTC filed its lawsuit, the telemarketing sales agent became subjected to a deposition under oath. If investigators believed that the telemarketer had lied, or misled consumers, they could threaten her with either civil or criminal charges.

What is the takeaway from the information above?

As business owners, it’s crucial to recognize that government investigators have many resources at their disposal. When they begin investigations, they have an interest in penalizing the company and the individuals that work with the company. Since the agents have authority to conduct their investigation in secret, they do not have a duty to let the person know that they’re being recorded.

Our team at Compliance Mitigation wants to help both business leaders and team members protect themselves. As citizens, we protect ourselves when we document every stage of our processes. We want to show that we’re acting in good faith, because government investigators will always view our decisions from a cynical perspective—exposing people and businesses to sanctions.

In the example of the real estate company, the business could have protected itself by publishing the scripts it creates for telemarketers. Each of those scripts should have been stored on a cloud-based system. Then, the business should invest in training, confirming that each of the telemarketers understood the corporate messaging—messaging that should have been vetted by an attorney who would be knowledgeable about the telemarketing sales rule.

Further, the telemarketers should confirm how often they’ve been trained to speak in accordance with corporate messaging—and the penalties associated with noncompliance.

Businesses should also train team members on the penalties that follow for those found to have violated agency regulations, rules, or laws.