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Internal Investigations and Privilege Waivers

Corporate Governance & Compliance Alert Edwin J. Broecker

In December and early January, Magistrate Judge Jonathan Goodman from the Southern District of Florida issued a series of discovery orders regarding the scope of privilege relating to the use of interviews conducted in connection with an internal investigation. The case highlights the difficult calculus companies and their external counsel must resolve when negotiating with the government enforcers. This is particularly relevant after the Guidance issued by Deputy Attorney General Rosenstein and the subsequent revisions to the U.S. Attorney’s Manual. As highlighted in a previous post, among the requirements outlined for a company to receive “cooperation credit” it must disclose “all facts relevant to the wrongdoing at issue, including: all relevant facts gathered during a company’s independent investigation.” 

The case involved two former executives of General Cable Corporation and Morgan Lewis & Bockius. Morgan Lewis represented General Cable in connection with the investigation and ultimate resolution of FCPA-related offenses. As part of the settlement presentation to the SEC, Morgan Lewis used “oral downloads” of many of the witness interviews instead of producing the interview summary itself.  Morgan Lewis made specific references to some of the interviews in its presentation materials and, in some instances, Morgan Lewis quoted verbatim from the interview summary.

Weeks after General Cable settled with the SEC and the DOJ and in furtherance of the DOJ’s push for individual accountability under the Yates Memo, the DOJ brought suit against the individuals. The individuals sought production of Morgan Lewis’ notes and memoranda generated during the internal investigation, including notes from the settlement meetings with the SEC and the attorney notes from the interviews. Because the content of the interviews were disclosed to the government, the attorney-client privilege was waived. The crux of the dispute was whether such disclosures also created a waiver of work-product which would then allow the defendants to get copies of the Morgan Lewis’ notes and memoranda regarding the interviews.

The Court ruled that the oral downloads of 12 of the investigation interviews as part of the settlement presentation created a waiver of the work-product privilege. The Court ruled that the oral downloads were functionally equivalent to the interviews themselves. The Court did rule, however, that general statements contained in the Powerpoint summary was privileged because it was prepared in connection with the settlement negotiations and did not include the substance of what any particular witness said. Ultimately the defendants and Morgan Lewis settled the discovery dispute.

This case highlights the importance of maintaining privilege during investigations and the need to be mindful of how company’s disclosures while seeking cooperation credit under the DOJ Guidelines and U.S. Attorney’s Manual can accidently create a waiver of the attorney-client and work product privileges. It also highlights the potential downstream conflict-of-interest that will likely arise between the company seeking cooperation credit and individual executive, who may later be charged. Making sure such executives have individual counsel or the opportunity for individual counsel during the investigation may have allowed under the common interest doctrine.