Preserving The Privilege Is Essential For Corporate Counsels' Compliance Role

Tuesday, November 1, 2005 - 01:00

Editor: In the post-scandal world corporate counsel play an essential role in corporate compliance. Why is it necessary for corporate counsel to protect the confidences of their clients in order to be effective in that role?

Ide: Corporate counsel are the first line of defense against violations of law by a company and its employees. Undermining the privilege and otherwise poisoning the relationship between corporate counsel and their clients is a terrible intrusion because it chills a corporation's ability to use its lawyers to uncover and deter potential compliance violations. Without the privilege, corporate officials will be less likely to review their practices with company lawyers. Voluntary disclosure to lawyers can head off a potential problem or prevent it from being repeated. We have done polling throughout corporate America that indicates that there is a chill and that clients are, in fact, more hesitant to speak with their lawyers.

Editor: What is the mission of the task force?

Ide: We have found, after a year of outreach within the profession, that there is a deep-seated concern not only about the growing attacks on the attorneyclient privilege and the work product doctrine but also about the use of other practices by the enforcement community that tend to undermine the confidential relationship between lawyers and their clients. That concern is becoming pervasive among lawyers regardless of the nature of their practices, whether they are involved in commercial litigation, criminal defense, dealing with auditors or representing government officials. We saw Attorney General Gonzalez claim the privilege on behalf of the government with regard to advice given by Judge John Roberts. Yet, it appears in some situations, the Justice Department is using the threat of prosecution to pressure corporate defendants to waive the privilege.

Members of the enforcement community who seek waiver of the privilege to gain advantage are compromising a basic tenet of our justice system, which is to encourage individuals to seek legal advice before taking action that might violate the law. The assurance of confidentiality is a critical component of a lawyer's ability to provide effective counsel. We have to awaken those who cherish the rights of all to have effective assistance of counsel to the reality that the privilege is under attack. We are ringing that bell on every front.

Editor: There seems to be concern on the part of the Task Force that the privilege is being undermined by the enforcement community. How would you define the enforcement community and what is the reason for concern that they are undermining the privilege?

Ide: We are looking at the enforcement community as a whole, both state and federal, both prosecutors and regulators. Our focus is not only the Department of Justice and state attorneys general, but also on inspectors general and regulatory agencies. The entire enforcement community looks to the Thompson memorandum and the Federal Sentencing Guidelines as the plan of action in approaching corporate targets. One criterion mentioned in both documents as to whether there should be an indictment of the corporation is waiver of the privilege. The Thompson memorandum has strong language stating that waiver should be sought "only in an extreme situation." However, prosecutors and regulators in the field are not according much weight to this qualifying language with the result that too often, it is becoming the practice to ask for a waiver without a showing of an "extreme situation." I have interviewed people who have provided examples from their personal experience that illustrate that unwarranted pressures are being brought to waive the privilege and work product protection.

Editor: The Model Rules make it clear that the lawyer represents the corporation. The prosecutor may believe that they are the "friends" of the corporation because they are trying to help it address a problem. Therefore, they may argue that the privilege does not apply.

Ide: Some prosecutors appear to be operating on this principle. However, the United States Supreme Court was clear in Upjohn that this is not right. Ours is an adversarial system. Employees who act on behalf of the corporation are entitled to legal counsel. Recently, a similar argument was made by the federal government in a Second Circuit case. The federal government argued that the privilege should be waived in the case of a state employee who acted as counsel to the Governor of Connecticut because the federal government represents the public which is the true client. The Second Circuit following the Upjohn rationale held that the Governor was entitled to effective assistance of counsel and that waiver of the privilege could not be forced on the state by the federal government. Upjohn held that the federal government could not force waiver under the claim of defending the rights of shareholders. Our adversarial system counts on lawyers and confidentiality to defend the rights of corporations against prosecutors if they so choose.

Editor: Tell us about efforts by prosecutors to turn corporate counsel into their agents.

Ide: Not only are the enforcement community's waiver demands weakening the privilege, but it appears there have been some instances where companies have been pressured to use their counsel to assist enforcement in a manner detrimental to the rights of employees. If members of the enforcement community have a corporate employee as a target, they would have to provide a Miranda warning if they confronted him or her. Situations have been reported where the prosecutor seeks to avoid the Miranda warning by requesting that corporate counsel interview the employee first and then provide the prosecutors with a verbatim copy of the interview. The interview is conducted under circumstances where the employee is forced to cooperate or be fired. There are both ethical and due process problems with this approach. One should not be able to do indirectly what you cannot do directly and corporate counsel should not be used in a way that undermines their ability to gain the confidence of their clients - thereby further weakening the relationship that the privilege was designed to build.

Editor: How widespread is that practice?

Ide: We have had numerous incidents reported to us. That is bad enough. However, if these inappropriate practices are not addressed and stopped, they could grow uncontrollably like a virus.

Editor: Countries whose legal systems are not derived from English common law generally do not recognize the privilege. Our corporations are expanding overseas. Shouldn't an effort be made to convince other countries in which our corporations may be present to adopt the privilege?

Ide: We in the U.S. pride ourselves on having the best justice system and believe that the privilege is a necessary part of the due process that is guaranteed by our constitution. Increasingly, our justice system principles are being exported abroad. Increasingly lawyers globally are discovering that we are all in this together. Our ability to convince the rest of the world of the importance of the privilege is weakened to the extent that it grows weaker in our country. Ultimately there will be efforts to harmonize the role of our profession through the WTO and we need to be in a position to argue strongly for inclusion of the privilege. Our Task Force is working with lawyers abroad to encourage them to strengthen the privilege and to resist the similar types of intrusion they are facing such as in the area of anti-money laundering.

Editor: What are the next steps by the Task Force?

Ide: The leadership of the enforcement community is in constructive dialogue with us and we are working to document the problems. Our Task Force, working with the Association of Corporate Counsel, is developing information to lay before them about abusive uses of waiver of the privilege and about other practices that destroy the relationship of trust and confidence with clients that make it possible for corporate counsel to play their role in assuring compliance. After we gather this material, we plan to commence a dialogue with the leaders of the enforcement community to seek solutions. We are hopeful that our fellow lawyers in the enforcement and regulatory community will have their agencies take action to clarify needed protections for the attorney-client and work product privileges. I encourage any lawyers that have observed unwarranted intrusions on the privilege to email (bide@mckennalong.com) or call me (404) 527-4650.

Mr. Ide will be speaking on this topic at the Membership Meeting of Lawyers for Civil Justice in New York City on December 12-13.