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The Dutch lawyer-investigator is under fire

Joris Polman (FD)

5/04/2021

Accountants, trustees, members of parliament and judges are increasingly warning that deception is lurking in 'independent fraud investigations' by lawyers. Has the curtain come down on the lawyer-investigator? Can a biased advocate, the essential characteristic of a lawyer, carry out an independent and objective investigation into abuses committed by his client? There is increasing criticism of independent fraud investigations by lawyers. Accountants, trustees, members of parliament and even judges warn against the danger of deception. The objectivity of lawyers is said to be at odds with their partisan role as advocate for the interests of their clients.

In 2013, the listed installation company Imtech is desperate for money. The group had had to write off tens of millions on fraudulent building projects. And no one knew whether there were more skeletons in the closet. So how do you persuade investors to pump another €500 million into the group with a rights issue?

Imtech's Board of Management called in the very best lawyers they knew, had them carry out an investigation and shared the report with the market in order to 'account for itself publicly'. A fortnight ago former Imtech Board member Gerard van de Aast looked back on that turbulent period in court. It was his decision to hire the prestigious law firm De Brauw. That firm spent a hundred thousand man-hours on a 96-page report. Extremely expensive, but effective: the market was reassured and the rights issue was a success.

But two years later Imtech still went bankrupt. And De Brauw's 'Report to shareholders' is retrospectively extremely controversial. Imtech's trustees are investigating the bankruptcy and have labelled the report 'substantively incorrect, incomplete and too rosy'. They claim that the lawyers, who also earned millions of Euros as consultants at Imtech, chose 'not to reveal the real problems at Royal Imtech' in order to keep the tent running. The matter has resulted in disciplinary proceedings against two former lawyers of De Brauw.

Partisan advocate
The Imtech investigation is not the first lawyer's investigation to come under fire after the fact. Accountants, trustees, members of parliament and now judges too are issuing increasingly loud warnings that independent investigations by lawyers are lurking deceptively. The crux of the criticism: a biased advocate, the essential characteristic of a lawyer, cannot carry out an independent and objective investigation into abuses committed by his client.

Nevertheless, this does not stop the legal profession from getting a piece of the lucrative market of 'self-investigation'. It is estimated that companies spend around €70 million annually on investigating wrongdoing, such as fraud, corruption, industrial disputes and MeToo cases. Once, this market was firmly in the hands of accountants and detective agencies. But lawyers have the right to privilege, which allows them to keep sensitive information secret to protect a client's reputation. Large law firms such as De Brauw, Allen & Overy and NautaDutilh now have a flourishing investigation practice.

List of controversial investigations grows
But as the market grows, so do the lumps. The list of controversial studies is growing steadily. Notorious is the investigation by De Brauw into the role of NS in a public transport tender in Limburg, for which a partner was reprimanded. And NautaDutilh was under fire because of an investigation into 'fraudulent employees' at copyright organisation BumaStemra.

Meanwhile, judges are also increasingly turning their noses up at lawyer investigations. Aldo Verbruggen, who assists former top executive Gerrit Zalm in the money laundering case at ABN Amro, got a slap on the nose from the judge because of his fraud investigation at Dutch Solar Systems (DSS), the solar panel company of Quote 500 member Gerard Sanderink. According to Follow the Money, another judge recently cracked an investigation by De Brauw into a bribery scandal. SBM Offshore labelled that investigation as independent, but according to the judge it was 'potentially misleading and therefore undesirable'.

Practice father examines practice son
Independence also plays a role in several disciplinary complaints filed against lawyers of NautaDutilh. These include an investigation by the law firm commissioned by Baker Tilly into 'the Cyprus route', a construction to avoid tax. The Justice department had regarded Baker Tilly as a suspect in this case.

Shortly before, Baker Tilly had recruited tax expert Gijs Fibbe as a 'tax partner' to put its international tax practice on the map. A salient detail: his father Bert Fibbe was a partner at NautaDutilh at the time. As a criminal lawyer, he was a direct colleague of the lawyers who conducted an 'independent investigation' into the tax scandal on behalf of Baker Tilly - a fact that has since been reported to the Amsterdam dean.

Conflict of interest? Faced with this, Bert Fibbe states that he had 'no involvement whatsoever' in the investigation into the Cyprus route. That was in fact in the hands of Joost Italianer, according to Fibbe 'an excellent colleague' who is solid enough not to be influenced by third parties. That is all Fibbe would say on the matter.
This does not alter the fact that the Baker Tilly investigation has indeed resulted in a disciplinary tailspin for Italianer and his fellow investigator Leon Wijsman. In their report on the scandal, the lawyers are said to have shifted the blame onto an entrepreneur by distorting facts to the advantage of client Baker Tilly. These disciplinary cases are still ongoing.

Doubts have also been raised at Imtech about the reliability of the fraud investigation in Poland and Germany. A fortnight ago former CEO Van de Aast reminded the court what De Brauw's assignment was: 'Investigate as completely as possible what happened, what went wrong and let's account for this publicly.

Van de Aast asked Ruud Hermans and Jan Marten van Dijk, heavyweights in the service of De Brauw at the time, to do this. Van de Aast: 'Hermans and Van Dijk were completely autonomous in carrying out this investigation, without any restrictions.
Disciplinary complaints as means of pressure

This ruling must have been music to the ears of the eavesdropping curator Jeroen Princen. He wants a part of the €55 million that Imtech paid to De Brauw in the last years of its existence back. Disciplinary complaints against Hermans and Van Dijk serve as a means of applying pressure.

According to Princen the De Brauw report was incomplete and misleading. The lawyer-investigators had uncovered €370 million worth of fraud by mid-2013, but Imtech had to write off a further €230 million during the rest of that year because of disputes about which De Brauw did not report. According to the trustees at that time Imtech was 'already a sinking ship for quite some time', while the investigating lawyers 'painted too rosy a picture'.

De Brauw has always pushed away liability by marginalising the role of its lawyers. The firm argues that the Report to Shareholders consists of several parts that have been carried out by different researchers at home and abroad. De Brauw was only the 'penman' of a report that was owned and sent exclusively by the Board of Imtech.

Member of parliament is fed up with controversies
Meanwhile, MP Michiel van Nispen (SP) is fed up with the controversies, he says. At the instigation of the SP and D66, the Scientific Research and Documentation Centre launched a study last year into the practices of lawyer-investigators. If it is up to Van Nispen, a ban will be imposed.

Whether that will happen, however, is the question. The Public Prosecutor's Office wants to reward companies that report criminal offences after investigating their own lawyers. Last week, family concern SHV even received two 25% discounts on the settlement amount in a corruption case. That was a novelty: openness about such rewards is a long-cherished wish of the legal profession and in fact an extra boost for the market.

SHV had also engaged lawyers of De Brauw. According to prosecutor Tessa van Roomen, the Public Prosecutor was given access to their source material, such as financial documents and interview reports: 'The investigation was easily verifiable for us. SHV has cooperated in a way you rarely see.
Van Nispen is horrified by this and immediately posed new written questions to the Minister of Justice: 'Why does the Public Prosecutor work with discounts at all? Shouldn't there be an increase in fines for suspects who do not cooperate with investigations?
Minister Ferd Grapperhaus is himself a former Zuidas lawyer. The answer, Van Nispen fears, is therefore easy to guess.

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