Know the Mission: A Lawyer's Duty to a Nonprofit Entity during an Internal Investigation
Valenti, Joseph Anthony, St. Thomas Law Review
I. INTRODUCTION A. SCOPE AND DEFINITIONS B. PREVIEW OF SECTIONS II. INTERNAL INVESTIGATIONS GENERALLY AND ADDITIONAL NONPROFIT CONSIDERATIONS A. DECIDING TO OPEN AN INTERNAL INVESTIGATION B. CONSIDERING INDEPENDENT OUTSIDE COUNSEL C. INFLUENCING HOW THE ATTORNEY GATHERS EVIDENCE D. PRIVILEGES PROTECTING THE ATTORNEY'S WRITTEN REPORT E. DECIDING TO DISCLOSE THE RESULTS OF THE INVESTIGATION III. GENERAL DUTIES OWED TO NONPROFIT ENTITIES IV. CONCLUSION A. GUIDING PRINCIPLES FOR NONPROFITS CONSIDERING OR CONDUCTING AN INTERNAL INVESTIGATION B. GUIDING PRINCIPLES FOR ATTORNEYS CONDUCTING AN INTERNAL INVESTIGATION AT A NONPROFIT ENTITY C. BRINGING THEORY INTO PRACTICE: THE REALISTIC HYPOTHETICAL
Neither Black's Law Dictionary nor Merriam-Webster's Dictionary defines the term internal investigation. (2) Practitioners note that "[t]here is no standard definition of the term 'internal investigation.'" (3) Without knowing what an internal investigation is, how can one define who conducts them and where they are conducted?
A. SCOPE AND DEFINITIONS
For the purposes of this writing, an internal investigation is the nonpublic portion of any activities undertaken by any organization to mitigate any harm to that organization previously or currently being caused by one or more of that organization's fiduciaries. (4) While this broad definition would allow anyone to conduct the inquiries on behalf of the organization, this writing only addresses attorneys participating in these inquiries, as other professionals may be governed by different rules. (5) This writing addresses all possible attorney relationships with the organization, as the hypothesis found in this writing theorizes that all of any investigating attorney's duties flow from the same source. Thus, burdens upon in-house counsel are not differentiated from burdens on attorneys working out of regularly-consulted law firms or attorneys working out of any entirely independent association that is only related to the original organization by virtue of conducting the internal investigation of that organization.
Additionally, the focus herein will be on nonprofit entities. Nonprofit entities must be differentiated from tax-exempt organizations because the crux of this writing centers on the difference between protecting shareholders at for-profit corporations and the mission integrity of a nonprofit entity. "Not all nonprofit entities are tax exempt." (6) Thus, a wider net must be cast to include a nonprofit entity--with duties to a mission found in its charter or articles of incorporation, rather than shareholders--that has not pursued or otherwise qualified for tax-exempt status.
Some case law and other material addressing for-profit internal investigations will be included. (7) These materials are provided for comparison purposes and to illustrate differences. While some of the substantive law concerning duties owed to a corporation applies to nonprofit entities, most of that law needs to be reconsidered when those duties center upon the profit-seeking motivation of a corporation. To avoid clutter, a corporation in this writing should always be presumed to be a for-profit corporation. An entity (as well as a nonprofit and a nonprofit entity) is presently defined as one run for a purpose other than profit-making. As noted above, the tax code classification and the tax exempt status of these entities is irrelevant. When organization or association is used, the term includes both corporations and entities.
B. PREVIEW OF SECTIONS
Part II offers a general primer on internal investigations. (8) This primer steps through the various decisions that are made in initiating and conducting an internal investigation using the available guidance from practitioners that investigate for-profit corporations. …