Independent investigations: pick your own judge

The FT contained a fascinating story on Freshfields investigation (£) into “the Reichelt affair” which it says “shows the inherent tension of compliance investigations — a system of corporate governance riddled with conflicts that is paid for, managed and communicated by a company itself.” I’m not going to analyse that in detail, not least because it relates to Germany (and there are some clear signs a good job was done in some respects). It does show the independence of investigations requires careful thought about the investigation itself; the judgements made as a result of that investigation (the evidential standards being applied for instance); and the way those judgements are communicated both by the lawyers themselves and those they regards as the client. When it comes to presenting the results searching questions have to be asked about who the client is, how to speak to them, and how to ensure, as far as possible, that work is summarised and communicated without misleading others.

It comes hard on the heels of the SRA dropping its investigations into a former Freshfields partner; Freshfields said she was “completely exonerated”. The SRA spokesperson said: ‘We have looked at all the available information and decided to close the matter with no further action. If further information is made available, we can look again at the issues.’ The case raised a lot of finely balanced issues (I wrote about it here). It was a mighty mess, and I pass no judgement on the lawyer, we rarely get to hear their side (and when we do they have had years usually to get ready). I am tempted too to say the SRA’s response sounds, at best, like exoneration lite. If it is an exoneration the SRA should be less mealy-mouthed about it and if it is not then the SRA should publicly and clearly correct Freshfields. After all misleading anyone is professional misconduct; law firms might get some leeway but not a free pass for press statements.

Meanwhile, the case that independent investigations are car crashes waiting to happen piles up. The YCCC debacle sticks in the memory. And today we hear that the SFO, in an attempt to shore itself up against concerns about its approach to disclosure has instructed a leading criminal QC to review decisions on the failed SERCO prosecutions. Mr Altman is by all accounts a highly experienced and competent criminal QC often conducting heavyweight prosecutions, but he is a rather surprising pick. He conducted a review of the Post Office’s disclosure in 2013/14 when one of many (and biggest) balloons went up on the Post Office’s prosecution of Sub-Post Masters. We don’t know much about Mr Altman’s review, but we can fairly say it was not effective in correcting the serious injustice exposed years later in the Court of Appeal. The prosecutions were found to be an affront to justice in 2021, with critical disclosure not being made until late 2020 and 2021. At least one of the critical documents (one of the Clarke advices, the one about potential perjury) was seen by Mr Altman in 2013/4. Questions remain to be answered about that; why were the Clarke advices disclosed so late? What form did his review take? How did that lead to such minimal disclosure? What lessons are to be learned from the review in the light of the Court of Appeal’s criticisms in the Hamilton case? I can see the case for an experienced prosecutor to help the SFO with the review but perhaps not one with recent experience of a case in which such serious disclosure failings occurred.

Am I right or wrong? If you would not mind can I pick my own judge to decide that? They can tell me what they think in draft; we can amend that draft; and then summarise the lessons for a report back to you. It may take a while. I’m sure you’ll agree that given my reputation is at stake they’ll have to be sure that my arguments are wrong beyond all reasonable doubt. Ok? OK?

2 thoughts on “Independent investigations: pick your own judge

  1. The essence of good management is to consider the available information and decide whether to obtain more (such as hearing the other side of an argument), before coming to a judgment on what are generally partial facts and beliefs. That is why chief executives with conflicting priorities and uncertain information sensibly keep a scapegoat. and why we lawyers speak of judgments and evidence, rather than facts. Unfortunately the press, politicians and public have the luxury of irresponsibly judging merely by results in hindsight,

    We hold decision-makers responsible whenever their judgment turns out to be wrong, even without any known fault, because normally we can never know whether their judgment was reasonable. The value at risk determines how much time and cost may be appropriate in taking any decision, and people who exercise delegated powers must take reasonable precautions against mistake and error, under pain of discredit. In the last resort, decisionmakers will sometimes get things wrong but should mostly get important things right, and must usually be judged on balance.

    These principles of good judgment and good management hold equally true in parliament, in a trial, in regulation, in corporate direction, in common management and daily office work, and in deciding whether to buy beans in a shop. The separation of powers of executive management, compliance and regulation is valuable if not indispensable, but inherently prone to conflict. Every lawyer understands this, as should everyone else, but the press glories in revelations of the obvious, and mob rule overtakes sense and the rule of law and justice. “Independent Investigations” can never be wholly independent of the pressures in the matters and decisions investigated, and in this regard regulators are in exactly the same position as everyone else.

    I hope Professor Moorehead may like my thesis in British Injustice!

  2. Long time no speak.

    You have touched on a raw nerve here.

    When I was a partner at an English firm, I fought against a client request that the firm did an investigation into alleged wrongdoing at a client I did a lot of work for. I was outvoted, the firm did the work and cleared the client, but as time went by it became very clear that the alleged wrongdoing had occurred. I cannot allocate responsibility, and it may be that the conclusions were supported by the available evidence (I doubt it).

    More recently, [I know well someone who] did a big review into an incident at an occasional client of her firm. It was a thorough piece of work, which the client publicly rejected and is now an ex client. She has used this example to talk to the general counsel of other clients, without improper disclosure, to explain to then why it is dangerous to get their own firms to review corporate behaviour.

    Doing this creates a difficult conflict of interest; the pressure to clear your client is significant and if you do not there is potential economic damage to the firm.

    US firms do this sort of thing a lot, but the outcomes seem to be very different. Clients (and keep in mind that US companies are much more lawyer driven) seem to accept that a major law firm will not pull its punches, and are much less resentful when the legal work shows major issues. So the Skadden white collar crime partners I discussed this with were very surprised when they encountered European corporates and were expected to clear the clients that they investigated.

    There are also regulatory issues. As I understand it, the general position of the FCA is to ignore the conclusions of own client investigations, unless the FCA is involved form the outset. In the US, the SEC and the DoJ try to require corporates to waive privilege when such reports are commissioned.

    Good for you (and I say that with no view at all of the specific matters you raised). I would have thought that this is a great subject for further work.

    Keep up the good work

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