An organization's talent pool is an important intangible asset, as it continuously injects innovation and creates an impetus for further development while generating substantial benefits and value to the enterprise. However, some employees in positions of authority are quietly "corrupting" and eroding the company's assets and interests through a range of fraudulent behavior, which can undermine the foundation of the company's management practices and future development. When handling employee fraud cases, companies usually need to investigate and collect certain evidence. One important method to obtain evidence is to interview employees and related personnel and to prepare investigative transcripts. However, with respect to civil litigation in China, especially as it relates to employee fraud cases, the nature of the investigative transcripts used as evidence has been controversial, which has led to a wide variance in the degree of acceptance of this type of evidence in different cases. This article will focus on analyzing the role and nature of investigative transcripts in employee fraud cases and provide practical suggestions on the pace of interviews and the production of normative interview transcripts for investigation.
I. The Role of Investigative Interviews and Transcripts in Employee Fraud Cases
1. The Process of Investigative Interviews Enables the Company to Better Determine the Facts and Obtain Evidence
In employee fraud cases, courts, and arbitration authorities are usually more cautious in determining the facts. If the investigation cannot accurately provide a full picture of the case, or if the facts are unclear due to omissions in key details, it may affect the court's judgment. Following an internal investigation, the company should have sufficient information to interview the persons involved in or related to the case. The company may leverage the information asymmetry in the interview to attempt to penetrate the psychological defenses of the individual under investigation and then persuade them to reveal important clues or evidence. This is important for determining the truth based on facts that are central to the case, obtaining more objective evidence and the approval of the judiciary.
2. Internal Investigative Interviews are Crucial to Strengthen Risk Management and Internal Controls and to Enhance Loss Prevention in a Timely Manner
In internal investigative interviews, companies are able to gain a more thorough understanding of the specific details relevant to employee fraud cases and identify gaps in their current management oversight as well as compliance risks pertaining to regulations, human resources, financial management and other aspects. Internal investigative interviews enable companies to improve their management style and operations in a more targeted manner, thereby promoting tighter corporate risk control capabilities and avoiding missteps that potentially create or exacerbate their losses.
3. Normative Investigative Transcripts Could Become an Important Basis for the Judicial Authorities to Determine the Facts
Investigative transcripts play a pivotal role in civil cases, administrative cases, and even criminal cases. Normative transcripts that display clear communication may be recognized by judicial authorities and become an important basis for their determination of facts. For example, in the case of (2019) Su 04 Min Zhong No.4243, the court ultimately decided to accept the contents recorded in the interview transcript because the transcript was created by the company in a more normative manner and included the signature of the party involved whose identification had been confirmed prior to signing.
II. Determination of the Nature of Interview Transcripts in Employee Fraud Cases
When conducting an investigative interview with an employee suspected of fraud, if the employee clearly admits to the violation and signs the interview transcript to confirm the relevant facts or, alternatively, signs a "letter of repentance" or has relinquished the funds derived from the illegal conduct, the judicial authority would generally consider that the relevant interview transcript may constitute a self-admission of the facts. This means that the judicial authority would formally recognize the normative interview transcripts and confirm the existence of facts that violate the company system accordingly. For example, in (2022) Yue 01 Min Zhong No.16911, the court held that in response to violation of internal policies alleged by the company, the employee subsequently admitted the relevant facts in the investigative interview according to the interview transcript submitted by the company. Because of this, the court upheld the company's proposed reasoning for terminating the employment relationship.
In employee fraud cases, companies usually need to conduct investigative interviews with other related persons. Judicial authorities tend to recognize these interview transcripts as witness testimony in nature, and the evidence would likely not be accepted by the court if the person under investigation fails to testify in court without a valid reason. For example, in the case of (2020) Zui Gao Fa Zhi Min Zhong No.425, the Supreme Court held that the attorney's investigative transcript formed part of the witness testimony, and Article 73 (now Article 76) of the Civil Procedure Law of the People's Republic of China provides that, "Upon notice by a people's court, a witness shall testify in court", but the related person involved in the case did not appear in court to testify upon notification, so the evidence does not have evidentiary effect.
Although the interview transcripts of the related persons in the case may be recognized as witness testimony in some cases, we still recommend that the company create the relevant transcripts and record the interviews. First, the company can learn the truth in a shorter time frame by conducting investigative interviews with the related persons immediately after the incident has occurred, and the process of audio and video recording can also be used as corroboration of witness testimony to influence the judges' free evaluation of evidence. It would also prevent the witnesses or parties from temporarily backtracking and placing the company in a reactive situation in court. Secondly, the interviewees may mention other facts that constitute valid objective evidence during the investigative interview process. Companies could combine the contents of the transcript, prepare the relevant evidence in advance, and broaden the types of evidence collected to support the credibility of the facts.
Finally, although the court may identify the interview transcripts of the related persons of the case as witness testimony, it may not be necessary for the witnesses to physically appear in court, as the judges may retain the option to investigate the relevant persons by way of telephone or field interviews. This would naturally influence the judges' free evaluation of evidence after reviewing and considering the authenticity of the contents within the interview transcripts. In this case, the company would be in a better position to fully seize the initiative in the investigation.
III. Suggestions for Drafting Normative Interview Transcripts for Investigations
1. Preliminary Preparation
(1) Determination of Schedule, Venue, and Interviewees
We recommend that companies avoid arranging interviews on an individual, one-on-one pairing, but rather that the interviews be conducted by at least two interviewers, one to lead the questioning and the other to assist and record the interview. This facilitates the flow of the interview and concurrently ensures the integrity of the record. Interviews should be conducted at the appropriate time and place, for example during regular business hours at the company's conference room. We recommend avoiding irregular schedules or unfamiliar locations when conducting the interview to minimize the likelihood that interviewees refuse to cooperate, which would also reduce suspicion from the judiciary as to the legitimacy of the interview.
(2) Preparation of an Outline Prior to the Interview
To the greatest extent possible, the outline should reflect the documentary and other evidence that the company has collected in relation to the matters to be investigated. This includes the range of facts that need to be corroborated with the interviewee's statements, and whether there are other violations that the company has not yet discovered. In addition, we suggest that the interviewer anticipate what the possible feedback from the interviewee might be and prepare follow-up questions in advance to avoid missing the opportunity to obtain key facts and evidence due to a lack of preparation.
(3) Audio Recording of the Interview Process
It is important to arrange an audio recording of the interviews. Audio recordings of interviews are often used in practice as key supporting evidence to corroborate the contents of the transcript. If the transcript does not accurately correspond to the recording, it may result in the transcript in question not being accepted by the court. We recommend that companies arrange a dedicated professional with the relevant technical capabilities to focus exclusively on managing the audio and video recording during the interview to ensure that the entire recording process is uninterrupted. In addition, the recorded audio and video files should not be altered or selectively redacted. Any audio and video recordings that have been redacted at a later stage, as well as any audio and video recordings that differ materially from the content of the transcript, would directly affect the court's determination of the validity of the interview transcript for investigation.
2. Interview Process
The recommended interview should be conducted in-person and on a face-to-face basis. By meeting face-to-face with the interviewee, the interviewer could objectively observe any emotional or non-verbal changes in the interviewee and adjust the interview strategy according to the actual situation. We suggest that interviews should be conducted mainly in person and aim to find opportunities to break through the psychological defenses of the interviewees to obtain more clues and evidence during the interview.
The interview process should focus on conveying emotions. The interviewer should try to convey sincerity and should slow down the pace of speech, control the volume, and be calm. At the same time, the interviewer should try to create a relaxed atmosphere, avoid shouting, and avoid conveying too many negative and aggressive emotions to the interviewee, which may cause resistance and resentment from the interviewee.
During the interview, the interviewee may not be willing to cooperate with the investigation due to a possible fear of serious consequences or fear of implicating themselves. In this regard, the interviewer should establish a rapport with the interviewee and engage them in a dialog. When conversing with employees who are under investigation, the interviewer should be firm but engaging, informing them of their obligation to cooperate with the investigation and the consequences of not doing so. Interviewers should also try to guide their conversation to determine the truth. For those familiar with the case, the interviewer should inform them of the gravity of the situation, while reaffirming that the company will continue to enforce confidentiality requirements and provide appropriate protection to address their concerns.
3. Production of Transcripts
Interview transcripts should be clear and accurate to avoid ambiguity. They should be recorded accurately and specifically, written factually, especially if the interviewee admits to participating in the incident under investigation. The time, place, motive, purpose, means, circumstances, and results related to the incident should be accurately recorded according to the content of their statements, avoiding any omissions or distortion of the account provided by the interviewee. If the interviewee answers ‘yes' or ‘no' questions regarding their involvement in the negative, or otherwise refuses to admit involvement in the relevant case, we recommend that the reasons, available clues and evidence, etc. should be clearly recorded for timely verification after the interview has concluded.
The content of the interview transcript should be verified by ensuring the inclusion of the interviewee's signature at the end of the document. At the conclusion of the interview, and after the transcript has been completed, the interviewer should provide the contents of the transcript to the interviewee for review and verification. If the interviewee does not object to the content of the transcript, he or she should be required to sign each individual page, and a statement should be included on the final page stating "I have read the above transcript and it is consistent with what I have said during the interview". The advantage of adding and confirming this statement is to prevent the interviewees from challenging the content of the interview transcript in court or claiming that their statements have been manipulated, altered, or selectively edited. In addition, all persons involved in the interview process, including the primary interviewer, the person who transcribed the content of the transcript, and the person who recorded the audio and video, should also sign the interview transcript following confirmation by the interviewee. After all of the above steps have been taken to ensure accuracy and alignment with the court's requirements, the interviewee should be asked to affix his or her signature to confirm the time and date on the transcript expeditiously. We recommend that the interviewer ask the interviewee to sign the transcript on-site after confirming the relevant details, rather than permitting the interviewee to physically remove the document for review and signing it at a later date. If the time of signing is not consistent with the time stamps reflected on the audio and video recording or the interview time recorded on the interview transcript, it may cause the court to doubt the validity of the transcript.
In particular, when reviewing the interview transcript, it is important to note that if the interviewees find that the content does not match what they have disclosed or if they find that the interviewer has misunderstood their account of what has transpired, etc., the interviewees could request that the relevant content be amended. However, the interviewer should ask the interviewees to sign and seal the amended content, so that the judicial authorities will not assume that the transcript was artificially altered at a later stage.
With the understanding that judicial authorities are growing more prudent in determining the facts behind employee fraud cases, and because they now maintain stricter evidentiary requirements, companies should pay specific attention to the investigation process, as well as the evidence gathered during employee fraud cases involving human resources and employment-related issues. Additionally, they should ensure the normative practice discussed to prevent the circumstances surrounding a case developing in a manner that would place the organization in a disadvantageous situation. The investigative interviews and the production of relevant transcripts remain critical aspects of the investigation of employee fraud cases. Only by taking the initiative to proactively manage the investigation, accurately grasping the pace of the investigation and interviews, creating normative investigative transcripts and following due process to submit them to judicial authorities would the company successfully achieve its objective of mitigating the risk from fraudulent employees in a timely and legitimate manner and reducing corporate losses.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.