Companies that are unfamiliar with Inspector General investigations and audits can find out the hard way that Inspectors General are among the most powerful officials in the US government. Housed inside nearly every federal agency as an internal watchdog, Inspectors General work to weed out waste, fraud, abuse, and mismanagement in the programs and operations of the agencies they oversee.
Companies that receive money from an agency pursuant to a contract, grant, or cooperative agreement thereby subject themselves to the authority of that agency’s Inspector General. To ensure that recipients are entitled to receive agency money and that the money disbursed is spent in accordance with applicable laws, regulations, and terms, Inspectors General have teams of auditors and investigators. When an audit or investigation results in a factual finding that a crime (typically, some kind of fraud) has (or may have) been committed, Inspectors General are statutorily required to refer the matter to the Department of Justice (DOJ) for a determination of whether criminal prosecution or civil litigation is warranted.
Inspector General inquiries can attract the attention of Congress and the press. In cases where the allegations are especially serious and/or the amount of money at issue is large, it is not uncommon for there to be congressional hearings, media stories, and DOJ involvement all at once – the proverbial “perfect storm” that, depending on the particulars, can significantly tarnish a company’s reputation and even lower its market value.
Inspectors General can also refer their findings to agency components that have the power to suspend or debar contractors and grantees. If a company derives a significant share of its revenue from government business, suspension or debarment can be its death knell.
Given the potential stakes, Inspector General inquiries, however innocuous they may seem at first, are not to be taken lightly. When an Inspector General’s office comes knocking, it pays to have counsel with the expertise, experience, and relationships needed to maximize the chances of the most favorable possible outcome.
Our Government Investigations & White Collar Practice Group, which includes a former Inspector General and several former federal prosecutors, has decades of experience successfully representing clients being investigated or audited by Inspectors General. Examples of that experience can be found in our Experience tab , and our lawyers have authored various publications on this topic, which can be found on our website and our Global Investigations & Compliance Review blog.