The Public Side of Private Investigations
Friday, October 13, 2006
Deception, personal surveillance and sting operations are commonplace tools for private investigators hired by companies to handle low-level security problems.
These also happen to be among the aggressive methods Hewlett-Packard contractors used to try to uncover the source of boardroom leaks to the media.
The resulting scandal at HP has drawn new attention to intrusive techniques available to private investigators and has raised questions about when and how they are used. Many companies, big and small, allow -- at least tacitly -- their security contractors to push the legal envelope on uncontroversial matters, like combating employee theft or counterfeiting.
But news that a big-name corporation would permit the use of such tactics for a sensitive, potentially high-profile investigation has surprised many in the corporate security field. They say most large, public companies are far more cautious when it comes to high-stakes matters involving top executives and regulatory scrutiny. Increasingly sensitive to privacy considerations and public appearances, lawyers for large corporations routinely limit the techniques they allow and are far less willing to let investigators take the initiative on tactics.
"We've evolved from more of a free rein to a punch list of what we want. Particularly in cultures we're not familiar with, we will set up strict instructions," said Regis Becker, director of global security and compliance at PPG Industries, a Pittsburgh manufacturer with facilities and affiliates in 23 countries. "We make it clear we don't want any information we are not legally entitled to."
Some firms are so concerned about the potential public-relations impact of hiring an investigator that they choose not to do it at all. Take Riggs Bank. Back in 2004, the District firm faced the same issue that eventually led to criminal charges against HP's former board chairman and general counsel: persistent leaks from inside its boardroom. Struggling to survive a money-laundering investigation and perhaps sell itself to another firm, the bank's directors considered hiring an outside investigator to find the source of the information.
After much discussion, the board rejected the idea. "The logic was if it was lawful, it was probably not going to be successful and . . . it would be highly embarrassing to have it known that the company was investigating its own board," according to a participant in the discussion who spoke on condition of anonymity because board deliberations are supposed to be confidential.
Companies that conduct corporate investigations vary widely in size and orientation. At one end are the solo practitioners who track down stolen laptops and debunk workers' compensation claims. Many investigators are former law enforcement officers accustomed to having access to subpoenas and search warrants to get the information they want. Discretion is rarely a crucial part of their assignments.
At the other end are the highly profitable multinational corporations that do background checks on top executives, conduct discreet witness interviews and provide assistance to lawyers doing corporate fraud investigations. These firms, by contract, promise to place just as high a priority on how the investigation reflects on the client as they do on getting results.
PI Magazine, the leading industry publication, estimates that there are 60,000 licensed investigation firms in the United States, but that understates the market because six states do not require investigators to be licensed and many states allow a single licensee to employ dozens if not hundreds of people, said Jimmie Mesis, the magazine's editor in chief .
With 3,900 employees and 2005 revenue of $946 million, the largest firm by far is Kroll Inc., which bills itself as a "risk consultant." A unit of financial conglomerate Marsh & McLennan Cos., Kroll tackles everything from crisis management to substance-abuse testing and business investigations.
Other large firms tend to have dozens of employees, or at most, a few hundred. The best known among them work almost exclusively for law firms and general counsels of large companies and pride themselves on their willingness to say no.