How Government Agencies Begin Investigations

Business leaders and team members should understand how government agencies begin investigations. As discussed in earlier modules, at the start of most investigations, neither business leaders nor front-line staff know that agencies have taken an interest. Despite a lack of knowledge on the company’s part, investigators may be gathering evidence to build a case against the company.

For more insight, we can turn to an article that Mark Eichorn published. In his article, If the FTC Comes to Call, Mr. Eichorn, an FTC administrator, wrote:

“All of our investigations are nonpublic. That means we can’t disclose whether anyone is the subject of an investigation… FTC staff typically begins with an informal investigation, usually by reviewing publicly available information or even reaching out to the company directly… What we learn may lead us to conduct a full investigation….”

https://www.ftc.gov/news-events/blogs/business-blog/2015/05/if-ftc-comes-call

Mr. Eichorn’s statements, taken directly from the FTC website, confirm that government agencies begin their investigations in secret. 

Other readily accessible information lets us know that all government agencies operate in the same, clandestine way. The agencies gather information until they choose to file a case. By the time an agency files a case, the investigators have an abundance of evidence that they believe will allow them to prevail in a lawsuit. They may sue the company, or they may bring charges against people that work in the company.

Leaders of the Securities and Exchange Commission reveal that they begin investigations in the same way as the FTC. SEC investigators may notice unusual trading activity on public exchanges, or something in the media may perk their interest. Another pathway to an investigation may start with a whistleblower-type complaint from a customer or from an employee who wants to cash in on a reward that follows a settlement. 

Any of those scenarios could lead to a government investigation. The target of the investigation may not know about the investigation until the day of a subpoena, raid, or arrest. By that time, the agency will have gathered mountains of evidence.

If an investigative agent or officer of a government agency gets a hint of potential illegal activity, either by a whistle-blower, via another active case, or through various data mining techniques, the agent will begin to investigate further. Once an investigation begins, investigators within the agency, together with government attorneys, will decide whether or not to proceed. If they choose to proceed, they may identify witnesses, subjects, or targets. None of those people will typically be aware that government officials have begun making inquiries.

Business owners would be wise to remember that government investigators advance their careers by bringing people or businesses down. An investigator’s motivation may influence the way he or she perceives business operations. Investigators tend to view evidence from a light that is unfavorable to the business or target.

Once government investigators identify a potential witness, subject, or target, they accumulate evidence that will sustain a finding of guilt. They do not look for evidence that will exonerate a person. Our team at Compliance Mitigation has come to experience that when investigators find evidence that would weaken an investigator’s case, the agents may seek to overlook it. For these reasons, we encourage people to keep accurate records that will exonerate them, or mitigate the charges that may come.

Like sales leaders train their teams to overcome objections, investigative teams train their staff to look at all evidence with a suspicious eye. Unethical government investigators may even try to hide exculpatory evidence. As we’ve stated previously, all business leaders should remember the perspective, or framework that investigators bring to their work:

• A government investigator prepares for promotions by identifying deception, or noncompliance with regulations. With the growth of our government, legislators and administrative agencies have many laws and regulations that lead to fines, injunctions, disgorgement, and potentially criminal prosecutions. Investigators advance their careers when they find wrongdoing.

For these reasons, every team member grows stronger with a better understanding of how to comply with regulations. That compliance training will help a business save the enormous expenditure of defending against a government investigation.

Further, the investment of time and energy into compliance training will help all team members become more profitable. When they communicate with coherent messaging, every person becomes “unconsciously conscious” about how to define excellence within every role in the company; they inherently know how to do the right thing, every time.

Good compliance brings numerous benefits to business owners. On the surface, comprehensive compliance leads to more effective internal fraud-prevention systems. Compliance systems can, however, also greatly improve document retention, thereby protecting the business in the event of a government investigation. Effective mitigation strategies should also help to shield business owners and team members from legal scrutiny.