Advanced Topics in Corporate Attorney-Client Privilege and Confidentiality

PRESENTERS Relani Belous, Senior Vice President, General Counsel, Penthouse Global Media Inc. Mary Blatch, Director of Advocacy and Public Policy, Association of Corporate Counsel Todd Braunstein, Head of Legal Investigations, Willis Towers Watson Suzanne R. Folsom, General Counsel, Chief Compliance Officer, and Senior Vice President of Government Affairs

AGENDA Internal investigations Managing non-legal personnel Corporate board and outside auditor issues Cross-border privilege

Internal investigations Advanced Topics in Attorney-Client Privilege Internal investigations

Polling Question #1 How often do you conduct internal investigations within your company? (A) I am often involved in internal investigations of misconduct (B) I am aware of or supervise such investigations, but do not actually carry them out (C) Internal investigations are not my responsibility at all

Maintaining privilege in internal investigations Upjohn Co. v. U.S., 449 U.S. 383 (1981) Privilege applies to communications between company attorneys and company employees if: they concern conduct within the scope of employee’s corporate duties and employee was aware communication was to obtain information in order to provide legal advice

Maintaining privilege in internal investigations Privilege protects communications; not underlying facts Attorney work product may also apply where litigation is anticipated Privilege applicable outside of litigation context, especially where promoting compliance with the law Tension between investigations with a business purpose and those with a legal purpose

Maintaining privilege in internal investigations Upjohn warning: purpose of interview is to obtain information in order to provide legal advice to the company Counsel represents the company and not the employee Interview is protected by the attorney-client privilege Privilege belongs to the company and not the employee Company may choose to disclose information obtained during interview to third parties, including the government

Maintaining privilege in internal investigations Disclosure of internal investigation report may waive privilege protection for underlying materials For federal proceedings – Fed. R. Evid. 502(a) applies Intentional waiver in federal court or to federal agency, also waives undisclosed communications on same subject matter if “fairness” requires Intentional disclosure of a report less likely to waive privilege if report is more factual in nature

YES NO Polling Question #2 Your company, a well-known multinational corporation, recently received a tip on its fraud hotline that one of its employees may have bribed a foreign official to secure a business deal. You are tasked with responding to this allegation. Would you hire outside counsel for this investigation? YES NO

Somehow, the U.S. Attorney’s Office becomes aware of these allegations. You have pledged to investigate them and report back.  You soon discover that the underlying conduct could expose your company to civil liability as well.  When it comes time to report back to the prosecutor about your results, you want to be as cooperative as you can without abrogating any privileges that may attach to your investigation.  What steps should you take to preserve privilege?

Maintaining privilege in internal investigations Tips: Corporate policies should state that all internal investigations are to be conducted for the purpose of obtaining legal advice Deliver and document Upjohn warnings in connection with witness interviews Decide format and content of deliverables before investigation begins

Managing non-legal personnel Advanced Topics in Attorney-Client Privilege Managing non-legal personnel

Polling Question #3 Have you ever used a non-legal professional (accountant, PR professional, etc.) as a consultant to help you provide legal advice? A) Yes B) No

Managing Non-legal Personnel Privilege can extend to the activities of non-legal personnel only when they are supervised or directed by an attorney Legal department employees Other corporate employees Non-lawyer consultants/advisors Model Rule 5.3 – Responsibilities Regarding Non-Lawyer Assistance Model Rule 1.6 – Confidentiality

Managing Non-legal Personnel Employees of other corporate departments engaged in activities supporting legal work should regularly report to and consult with lawyers. For privilege to cover their activities, must be seen as acting as agents of the lawyers

Managing Non-legal Personnel Non-lawyer professionals or consultants Accountants, PR professionals, investment bankers, etc., may come under privilege protection if their services are used to facilitate the provision of legal advice Kovel rule increasingly applied outside of the accounting context Consultant is engaged by the attorney Services must help counsel provide legal advice

Polling Question #4 You are General Counsel of a company with operations in all 50 states, but attorneys in only 10 of them.  You receive a whistleblower complaint from one of your more remote locations, and the only employee on the ground who is in position to investigate is an HR representative.  You’re way over budget for the year and aren’t sure yet how serious the complaint is.  How would you proceed? Have HR representative conduct investigation under your close supervision. Fly in another in-house attorney to handle the investigation. Hire outside counsel to handle the investigation.

Polling Question #5 Your company, a well-known multinational corporation, recently received a tip on its fraud hotline that one of its employees may have bribed a foreign official to secure a business deal. You are tasked with responding to this allegation and need to hire a forensic accountant to participate in the investigation. Can communications with the accountant be protected by attorney-client privilege? YES NO

Polling Question #6 Your company, an established chemical manufacturer, is engaged in an enterprise-wide risk assessment. The legal department has hired outside consultants to gather information that will aid in determining the potential scope of environmental liabilities. The outside consultants will gather and interpret soil data, prepare a report, and monitor subsequent remediation efforts. Can this work be protected by attorney-client privilege or work product? YES NO

Managing Non-legal Personnel Tips: Investigative work can be delegated to non-attorneys agents, as long as an attorney is directing and overseeing the related work and such direction is clear. When retaining outside experts or consultants to assist on legal matters, the engagement should be initiated and directed by in-house or outside counsel.

Corporate board and outside auditor issues Advanced Topics in Attorney-Client Privilege Corporate board and outside auditor issues

Polling Question #7 Have you ever had an auditor request privileged information from your company? (A) Yes (B) No

Corporate Board and Outside Auditor Issues Model Rule 1.13 – Organization as Client Communications with board of directors can be privileged Portions of board meetings where legal matters are discussed by counsel can be privileged Presence of third-parties outside the privileged relationship can waive privilege at board meetings

Corporate Board and Outside Auditor Issues Common requests from outside auditors: Descriptions and summaries of ongoing litigation Minutes of meetings of special litigation and other committees Tax opinions Reports regarding internal investigations Does disclosure = waiver?

Corporate Board and Outside Auditor Issues Disclosure to outside auditors is sometimes protected under the common interest doctrine Have auditor agree to keep information confidential Route communication and disclosure through the audit committee – has the most clear common interest with the auditor in terms of ensuring adequate internal controls and accurate financials Understand why the auditor is requesting the information and document the grounds for assertion of any privilege.

Corporate Board and Outside Auditor Issues Disclosure to outside auditors may also be protected under work product doctrine Material must have been created in anticipation of litigation Auditor must maintain client’s confidentiality Courts are split whether disclosure waives the protection

Polling Question #8 Company X is subject to criminal charges stemming from an executive’s theft of investor funds. In response, the company undertook an internal investigation (conducted by and under the supervision of in-house and outside counsel) which culminated in a report. After being informed that Company X had investigated the theft and produced a report, the company’s independent auditor requested and was provided the report to aid in the identification of potential internal control issues. Has the company waived privilege over the report? YES NO

Polling Question #9 You are the General Counsel of a publicly traded company and just received a call from a members of the Audit Committee. She has asked you to hire an outside law firm to assist the Audit Committee in conducting an internal investigation into possible accounting irregularities. You contact a prominent local lawyer and before you can fully explain the situation, he asks you who will be the outside law firm's client in this representation – The board member who called you (C) The corporation The Audit Committee (D) The Board

Corporate Board and Outside Auditor Issues Tips: Maintain separate minutes for portions of board meetings that are privileged Verbal disclosures to auditor instead of written Have auditor enter confidentiality agreement

Cross-border privilege Advanced Topics in Attorney-Client Privilege Cross-border privilege

Polling Question #10 Do you regularly work on international, cross-border issues? Yes No

Cross-Border Privilege Not all countries recognize attorney-client privilege to same extent as the US In common law countries like England (U.K.) the “privilege” is normally based on case law In civil law countries like France, “professional secrecy” is typically embodied in statutes Status of in-house counsel not always respected – often no privilege

Cross-Border Privilege Examples of variations: Some countries protect only written communications Some countries provide protection only for documents in lawyers’ possession In some countries, government may be able to seize attorney-client communications in a competition investigation Some countries allow for exceptions, in others, secrecy obligation is absolute

Cross-Border Privilege Legal Professional Privilege and Professional Secrecy European equivalent to U.S. attorney-client privilege Each EU member state has different national privilege rules In-house counsel are not treated as legal professionals for purpose of privilege in European Commission competition proceedings (Akzo Nobel) – LPP only if Communications made for purposes, and interests of, client’s right to defense; and Emanate from an independent lawyer (in-house counsel is not independent) who is entitled to practice in EU

Polling Question #9 You have been tasked with conducting a multi-national internal investigation of potential violations of both EU and national competition laws. The subsidiaries being investigated are located in Germany, the United Kingdom, and China. What’s the best way to structure the investigation? Have the investigation directed by US outside counsel, with help from local counsel as needed Have the investigation directed by UK team, with assistance from your US outside counsel and local EU counsel as needed Direct the investigation yourself with assistance from foreign in-house counsel

Cross-Border Privilege Tips: Understand the privilege rules for the relevant forums Determine whether and to what extent in-house counsel can exercise privilege in the jurisdiction Many jurisdictions have different rules for competition matters, and no privilege for in-house counsel in EU competition matters