If you’ve learned that a government investigation is underway, it’s natural to feel anxious and uncertain about what to expect. Understanding how government investigations begin can help you make informed decisions and prepare for what lies ahead—especially when potential violations of federal law, such as white-collar crime (e.g., securities fraud, mail fraud, wire fraud, money laundering), are at issue.
I’m Justin Paperny, and I know firsthand how overwhelming this process can feel. When the FBI first approached me, I didn’t fully grasp how or why their investigation began. Looking back, I wish I’d had a clearer understanding of the system:
- How did an investigation begin?
- What did investigators want to find?
- How could I position myself for a better outcome from the start?
To help you, let’s start with the basics: How do government investigations begin?
The Origins of a Government Investigation
Government investigations often start when law enforcement agencies suspect that someone—or some group of people—has committed a state or federal offense. These investigations strive to uncover evidence and, while collaborating with other stakeholders, determine whether to pursue criminal cases, civil penalties, or other enforcement actions. While each case is unique, state and federal government investigations typically begin in one of the following ways:
- Complaints or Tips
- Investigations frequently start with complaints from whistleblowers, disgruntled employees, or individuals who believe they’ve been wronged.
- Whistleblowers, particularly in cases involving financial fraud or health care fraud, may file complaints under statutes like the False Claims Act, which incentivize reporting by offering a share of recovered funds.
- These tips can trigger the issuance of a civil investigative demand or even lead to a grand jury subpoena if federal prosecutors believe there is probable cause for a federal crime.
- Routine Audits or Reviews
- Some investigations stem from routine audits by regulatory agencies such as the Internal Revenue Service (IRS), the Securities and Exchange Commission (SEC), or the Department of Labor.
- Irregularities flagged during these audits—like improper conduct or potential violations of securities laws—can trigger further scrutiny.
- In some cases, the Commodity Futures Trading Commission (CFTC) or Treasury Department may identify red flags, prompting the Justice Department or Attorney General to take a closer look.
- Law Enforcement Actions
- Federal agencies like the Federal Bureau of Investigation (FBI), Drug Enforcement Administration (DEA), or Secret Service may initiate investigations based on surveillance, undercover operations, or evidence collected in other cases.
- For instance, an unrelated investigation might uncover evidence of money laundering or insider trading, broadening the scope to include new suspects and potential charges like conspiracy or violations of the Foreign Corrupt Practices Act (FCPA).
- Media Reports or Public Disclosures
- Investigations can begin following reports in the media or disclosures in public filings that raise red flags. A journalist’s exposé, for example, might indicate improper conduct at a corporation, prompting a closer look by the SEC or other federal authorities.
- Financial restatements may trigger scrutiny under the Sarbanes-Oxley Act, leading to a joint investigation by multiple law enforcement agencies.
- Cooperation with Other Agencies
- Government officials often collaborate across different jurisdictions, sharing intelligence that leads to new investigations.
- For example, if a state crimes investigation reveals potential federal investigative issues, the United States Attorney’s Office may open a federal criminal justice process to examine potential charges.
- A tip from a state regulator might prompt federal investigators to launch an inquiry involving the Department of Justice, the SEC, or other federal government agencies.
How Government Investigations Begin: What Government Investigators Look For
Once an investigation begins, federal agents work methodically to gather evidence. Investigators often seek to establish:
- Intent: Was the suspected wrongdoing intentional or accidental? Did senior management know about it?
- Scope: How widespread is the alleged misconduct? Does it involve multiple individuals, entities, or jurisdictions, such as international business operations, that could trigger FCPA concerns or national security issues?
- Harm: What is the impact of the alleged offense? Did it result in financial loss, public harm, or violations of federal law or specific requirements from a regulatory standpoint?
Agencies use tools like search warrants, phone calls, subpoenas, interviews, and forensic analysis (including review of electronic documents) to build their case. Understanding the nature of the investigation can help you prepare and respond appropriately.
The Role of Stakeholders
When an investigation begins, several key stakeholders become involved, each with their own priorities:
- Investigators (such as FBI agents and special agents from other agencies): Collect evidence and relevant documents to build a case.
- Prosecutors (within the United States government, often from the United States Attorney’s Office or Justice Department): Decide whether to pursue charges based on the evidence. They may also consider a deferred prosecution agreement or a non-prosecution agreement if the target company or person cooperates.
- Regulators (e.g., SEC, CFTC, and other regulatory agencies): Ensure compliance with industry standards and laws; they can initiate civil investigations or impose civil penalties.
- You: Whether as a witness, subject, or target, your actions will influence how these stakeholders perceive your role in the investigation.
In corporate investigations, in-house counsel or outside counsel often conduct their own internal investigation as part of their Corporate Compliance Programs to gauge the company’s criminal liability and prepare a defense strategy. Maintaining attorney-client privilege is critical to protect sensitive information during these early stages.
Why Early Action Matter
During the early stages of an investigation, your decisions matter. Missteps—like providing false information or attempting to cover up wrongdoing—can escalate the situation and lead to additional charges (e.g., obstruction of justice). Moreover, false statements to federal law enforcement agents often constitute a federal offense in their own right that the investigating agency and judge will weigh against you in potential civil or criminal proceedings.
Proactive steps, on the other hand, can help:
- Demonstrate accountability: By cooperating appropriately and following the advice of experienced attorneys, you can show that you take potential consequences seriously.
- Build credibility with investigators and prosecutors: Engaging reputable federal criminal defense attorneys or legal counsel early can signal a willingness to resolve the matter.
- Lay the groundwork for more favorable outcomes: In some cases, demonstrating good faith can lead to significant benefits, such as reduced charges or the possibility of a plea agreement or non-prosecution agreement.
Next Steps
In upcoming articles, we’ll discuss the roles of a Witness, Subject, and Target in a government investigation. Understanding these distinctions can help you better navigate your circumstances and make informed decisions, whether you are under federal investigation for white-collar crime, facing a federal grand jury, or dealing with regulatory investigations that may include civil penalties.
Remember, the government’s priorities are not necessarily aligned with yours. Taking the right steps early—such as seeking legal guidance and understanding the federal criminal defense process—can protect your career, reputation, and liberty. If you’re unsure where to begin, join our next webinar or schedule a private consultation to get tailored legal advice.
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The sooner you start, the better prepared you’ll be. Whether you’re a target company or an individual facing a report of investigation, taking that first step now can help you navigate the federal court system and any potential criminal convictions. Let’s work together to move forward.