The Inquirer reports on a hearing I attended on Tuesday in The Inquirer’s bankruptcy:

In a scathing rebuke, the judge overseeing the bankruptcy of Philadelphia Newspapers L.L.C. yesterday described the investigation of an unauthorized taping of a meeting between the company and its senior lenders as a "fine mess."

The investigation of the taping, done by one of the officers of the largest creditor, was directed by a committee of the unsecured lenders, or second-tier creditors. By failing to take sworn depositions and seek key e-mails, the committee left its interim report on the taping open to questions and criticism, Superior [ed – I don’t know what they mean by "Superior," though he is the Chief] Bankruptcy Court Judge Stephen Raslavich said.

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[The investigation] stems from a meeting between the company’s senior lenders and its top managers at Philadelphia Newspapers’ offices at 400 N. Broad St. on Nov. 17, 2008. Vincent DeVito, a managing director of CIT Group Inc., was found taping the meeting without the knowledge or permission of everyone in the room, a violation of Pennsylvania law.

Philadelphia Newspapers, in court filings, contends that its relationship with its senior lenders deteriorated dramatically after its officials made an issue of the taping. The company has asked the court for permission to hire the firm of Elliott, Greenleaf & Siedzikowski P.C. to investigate the incident to see if its interests had suffered.

That request was initially rebuffed by the court, which appointed the committee of unsecured creditors to conduct the investigation. The company asked the court to reconsider, given what it contended were inadequacies in the investigation directed by former Pennsylvania Superior Court Judge Robert A. Graci, who now works for the firm that represents the unsecured creditors’ committee.

Yesterday, Raslavich made it clear that he shared those concerns, dressing down Graci for failing to take sworn depositions and issuing his interim report before seeing key e-mail files requested from DeVito.

An important piece of background that Graci himself brought up, albeit fairly late in his colloquy with Judge Raslavich: Graci’s background is in criminal work, specifically in representing the Commonwealth of Pennsylvania in appeals.

Civil litigators wouldn’t dream of conducting an investigation through unsworn interviews, and most litigators start with requests for important documents, like emails, then follow up with depositions. Typically, only one deposition is permitted for each witness, so you need to make it count. From that perspective, Graci’s investigation looks like a joke.

Yet, most criminal investigations are performed exactly the opposite way, through informal interviews followed by document requests and possibly more interviews. Typically, prosecutors don’t even get to talk to the defendant at all, given the defendant’s right to remain silent, much less depose them.

That’s what Graci’s used to. As he said at the hearing, he initially contemplated using depositions or sworn statements, then figured that would have added another layer to the proceedings (such as endless objections by the attorneys representing the witnesses) and would have delayed everything without providing any clear benefit. So he switched gears and conducted it like a criminal investigation.

That is to say, his technique was in no way evidence that the investigation was a sham, in bad faith, or the result of incompetence. Judge Raslavich told him as much.

But there’s a problem: Graci wasn’t there just to get to the bottom of what happened, but to ensure the appearance of propriety. As it stands now, Judge Raslavich has to grapple with the Inquirer’s legitimate complaint that, whatever the merits of the investigation, there’s no record for them and their lawyers to review, just the conclusions.

The odds of there being an inadequacy or impropriety in the investigation are slim, but they’re not zero, which may render the whole thing a nullity.

A good lesson and question for all lawyers — what does your paper trail look like?