(Bloomberg) — It's becoming a time-worn script. Company gets introuble. Public gets upset. Company hires former head ofthree-letter agency or former prosecutor to get to the bottom ofsaid trouble in thick report. Public forgives.

The National Football League's decision to hire former FBIDirector Robert Mueller to examine its handling of a player'sdomestic violence case mimics companies such as General Motors Co.and BP Plc in hiring high-profile outsiders to blunt criticism byairing their dirty laundry, said James Post, a professor at BostonUniversity School of Management.

“These cases have become full-employment pools for former FBIofficials,” he said in an interview. “The pattern has becomefamiliar. There's getting to be a kind of public fatigue as we'veseen this play run out again and again.”

Demand for such investigations has spawned a multi-millionbusiness as 55% of companies last year said they had at least oneinternal investigation requiring the assistance of outside counsel,according to an April report on litigation trends by Norton RoseFulbright. Hewlett-Packard Co., Chesapeake Energy Corp. andWal-Mart Stores Inc. are also among those where outside probes madeheadlines in recent years.

The question is how impartial these investigation can really be— or, more broadly, how much truth do they want to find?

Just the act of hiring an outside investigator introduces somelevel of bias into the outcome, said Max Bazerman, co- director ofthe Center for Public Leadership at the Harvard University KennedySchool, citing his own laboratory research on outside auditors anddozens of other studies. It leads to what is known as “motivatedblindness,” he said.

Blind Spots

“People have an incentive not to notice,” said Bazerman, authorof “Blind Spots: Why We Fail to Do What's Right and What to Doabout It.” “It's not just that they're corrupted or affected. Nicepeople who have the benefit of seeing the world a particular wayending up seeing a bias in that way. It's like asking a parent howsmart their child is.”

However, even if an outside investigator only validates what hasalready been alleged by the press or regulators, the reportsprovide a “pivot point” from which the company can make changes andattempt to recover, said Reid Schar, a former U.S. attorney whoco-chairs law firm Jenner & Block LLC's white- collar defenseand investigations practice.

'Ugly' Facts

“When I get hired, the typical direction I get is to find outwhat the facts are — if they're ugly, they're ugly,” said Schar,the outside investigator probing allegations that New JerseyGovernor Chris Christie's administration caused a traffic jam on akey bridge between New York and New Jersey to get even with a mayorwho didn't support Christie. As a U.S. prosecutor, he led thecorruption trials of former Illinois Governor Rod Blagojevich.

“It's not shocking to me that frequently there aren't somereally super, major, 180-degree revelations that come out when infact it's a fairly vetted topic by the time it gets to theinvestigators,” he said. “This is, in part, what the press and thepublic demand.'

The majority of such investigations remain private, said RandyNornes, executive vice president in Chicago with Aon RiskSolutions, the world's second-largest insurance broker.

''These things are happening all the time and you often neverknow,” said Nornes, who has tracked value losses related toreputational incidents. “Once you have a public investigation,you've lost control; you've already lost the battle. Once it blowsup, you're trying to minimize damage. It's just part of theplaybook now.”

Louis Freeh

Companies are essentially hiring the reputations of respectedformer law enforcement or intelligence officials with theassumption the public will perceive the investigators are unlikelyto squander their legitimacy for money. Former FBI Director LouisFreeh alone has recently been tapped to investigate allegedmisconduct involving London-based BP, Penn State University and aGuernsey, Channel Islands-based mining company.

In some cases the investigations find problems in line withexpectations; sometimes they clear the company and sometimes theygo beyond the original scope and find deeper problems, Schar said.He cited the example of the 148-page report released in February onallegations of bullying of a player in the NFL. The report startedthe focus on one player and ultimately determined that severalplayers were involved in a pattern of bullying.

GM Probe

GM fired 15 people after former U.S. prosecutor Anton Valukasinvestigated a delay of more than a decade in the recall of aflawed ignition switch that has been linked to more than 19 deaths.The report cleared current and past CEOs of wrongdoing.

Mark Hurd, who is now co-chief executive officer of softwaremaker Oracle Corp., resigned from Palo Alto, California-based HP inAugust 2010 after a company investigation determined he violatedits standards of business conduct. HP said it didn't find that Hurdhad violated the company's sexual- harassment policy. HP has foughtreleasing the report to the public in court.

An outside investigator hired by Chesapeake Energy in 2013exonerated co-founder and former CEO Aubrey McClendon for privatelyborrowing hundreds of millions of dollars from some of thecompany's biggest financiers. The findings came three weeks afterMcClendon agreed to resign from the company he led for almost aquarter century.

Public Investigation

Once an investigation is public, it's extremely difficult for aninvestigator to gloss over wrongdoing because employees or otherswill expose it, said Elaine Carey, managing director at FTIConsulting in Los Angeles and a member of FTI's Global Risk andInvestigations Practice.

“It would be naive to say there isn't a way for a company toinfluences these things, depending on their structure and theirculture,” she said. “But it's much harder these days to cover upthe trail.”

Even if a company manages to quash an internal report and ignorea problem, it will most likely return and can be much worse becauseof the past evidence, Carey said.

Whatever the weaknesses, companies are increasingly turning tosuch investigations, according to the Fulbright survey, now in its10th year, which mostly includes U.S. companies. The 55% of firmsthat had at least one outside investigation last year was up from42% in 2012 and 46% in 2011, according to the survey.

Outside Counsels

About 9% of companies said they hired outside counsel for six ormore internal investigations and some industries were higher, suchas healthcare with 19% and technology/communications with 17%,according to the Norton Rose Fulbright survey of 401 companies inlate 2013 and early 2014.

Detail on the costs for the reports is rare because they aren'trequired to be disclosed. GM, based in Detroit, hasn't said what itpaid Valukas for the 315-page report. His law firm, Jenner &Block, earned $54 million for more than a year's work producing a2,200-page report on what went wrong in the Lehman Brothersbankruptcy.

Paul, Weiss, Rifkind, Wharton & Garrison LLP received $3.56million in fees for its work on a nine-month internal audit of theNational Basketball Association Players Association, according topublic records. That review found that the union's former executivedirector, Billy Hunter, failed to manage conflicts of interest,lacked proper corporate governance and didn't disclose that his $3million-a-year contract wasn't properly ratified. Hunter was firedin February 2013.

Third Party

One solution for the question of independence might be to allowa reputable third party to pick the outside investigator, such asan environmental group picking the investigator for a companyaccused of toxic dumping, Harvard's Bazerman said. Or in the caseof the NFL, go to a reputable domestic-violence group, he said.

“The idea is to create a separation so that the party doing theinvestigating doesn't feel like they were hired by the firm beinginvestigated,” he said.

That kind of separation would also dispel the other commoncomplaint about outside investigators: that most of theinvestigators work for law firms that do business with companies inother defense or consulting work, Bazerman said.

Mueller, who headed the FBI from 2001 to 2013, was hired toconduct a probe into the NFL's handling of the Ray Rice domesticviolence case. His firm's previous work for the NFL and Jenner& Block's representation of GM in other cases were cited bycritics of those investigations. Brian McCarthy, an NFL spokesman,didn't return an e-mail seeking comment.

Corporations are caught between the dueling risks of doingnothing and facing criticism that they are tone-deaf to the publicdemand for information or having even worse offenses come to lightthat risk the financial future of the firm.

“It's always a challenge when you're trying to shine brightlights on what's going on in dark rooms,” said Davia Temin, head ofthe New York-based crisis management firm Temin & Co. “Thequestion always is, how far does the public blood- letting go?”

–With assistance from Ellen Rosen in New York.

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