Internal Audit Team Lead – Timothy E. Allen | Former Special Agent (U.S. Secret Service & DOJ-OIG)
Corporations that conduct an internal investigation to determine their risks or potential liabilities after an allegation of misconduct or news of a violation have surfaced need to make broad use of the attorney-client privilege. Only by doing so can they shield the results of that investigation from the eye of the public, from law enforcement, and from potential plaintiffs.
The costs of failing to keep these investigations privileged is extreme. If legal action is taken against the corporation, the investigation will likely be divulged during the discovery process. This can provide law enforcement or civil claimants with all of the information that they need to build their own case against the company.
The corporate investigators at Corporate Investigation Consulting have conducted numerous internal audits and investigations for companies large and small across the United States. With their help, corporations have gotten to the bottom of serious allegations and pressing questions that carried the risk of significant legal liabilities, giving company executives and decision makers the information they need to make crucial judgments about the future of the company.
Put our highly experienced team on your side
Roger Bach
Former Special Agent (OIG)
Timothy E. Allen
Former Senior Special Agent U.S. Secret Service
Chris J. Quick
Former Special Agent (FBI & IRS-CI)
Maura Kelley
Former Special Agent (FBI)
Ray Yuen
Former Supervisory Special Agent (FBI)
Michael S. Koslow
Former Supervisory Special Agent (DOD-OIG)
Marquis D. Pickett
Special Agent U.S. Secret Service (ret.)
What is the Attorney-Client Privilege?
The attorney-client privilege is a great example of a legal concept that is very fundamentally simple, but that gets very complicated as soon as it gets delved into.
The simple part is that the attorney-client privilege protects confidential communications between an attorney and his or her client that were made in the provision of legal advice or assistance.
Nearly every word in that definition, though, can be pulled apart to expose nuance and extremely important details.
It is also important to remember that the burden of proving that the privilege applies lies with the party invoking it.
The Privilege Protects Against Subsequent Disclosure
The legal protection afforded by the attorney-client privilege is its most important aspect: The privileged information is protected from attempts to obtain it during the discovery phase of a subsequent criminal or civil case.
The importance of this is difficult to overstate.
It means that the contents of the internal investigation are immune from the usual evidence-gathering procedures that serve as the preamble to a court case. This forces the other side – whether it is a law enforcement agency or a private plaintiff – to find the information that the investigation uncovered on their own.
This protection applies to the client. For internal investigations, this is generally the corporation conducting it, usually in the form of its Board of Directors, not the individual people at the company, like its stakeholders or executives.
Communications Must Be Confidential
The attorney-client privilege, however, only covers communications that were confidential. This means that they were between the attorney, the client, and no one else. That confidentiality is broken if a third party is privy to the communication when it was made, or if the communication is later divulged to someone outside of the legal representation.
Communications Must Be Related to Legal Advice
Perhaps the most important aspect of the attorney-client privilege when it comes to internal corporate investigations is that communications are only privileged if they are made for the purpose of providing or obtaining legal advice.
This is legal advice, not business advice.
This trips up many corporations that are not careful with how they conduct the investigation. The scope and stated purpose of the internal investigation has to be to provide the company legal advice on how to proceed – not to ascertain the best business decision. That stated purpose needs to fall in line with its actual, primary purpose or else the judge ruling on the case may deem it unprivileged material.
Furthermore, it is not enough to trigger the privilege when one party is a lawyer and the other party is the lawyer’s client. Lawyers can still provide business or other non-legal advice. Courts look past the titles of the people involved to see whether the communications themselves should be privileged from discovery.
This also means that internal investigations that are required by state or federal regulations, like a workplace safety investigation after an on-site accident, or those that are conducted in the corporation’s regular course of business, are generally not done for the purpose of providing legal advice. They often cannot benefit from the attorney-client privilege.
What is the Purpose of the Privilege?
The attorney-client privilege is one of the oldest legal privileges used to protect information and potential evidence from being disclosed during a court case. All such privileges are grounded in policy concerns that are serious enough to warrant the insulation of what is often case-making or case-breaking information.
When it comes to the attorney-client privilege, that policy concern is as fundamental as ensuring that clients can communicate with their lawyer without worrying that what they say could be used against them later on. Because this candor is fundamental to the functioning of the justice system, those communications cannot be used to incriminate the person who makes them.
Are There Any Exceptions to the Attorney-Client Privilege?
The attorney-client privilege has some exceptions. When it comes to internal investigations, the two most important are:
- The fiduciary duty of the company to its shareholders, and
- The ongoing crime or fraud exception.
The first of these exceptions allows the corporation’s shareholders to pierce the privilege and access information that the privilege would have protected by invoking the company’s fiduciary duty to them, as its owners.
The second exception is for communications that either enable or assist the client’s ongoing crimes or that actively attempt to conceal those that have already been committed.
What Happens When It Does Not Apply to the Internal Investigation?
The value of ensuring that the internal investigation is privileged becomes apparent when the costs of it being left exposed to discovery is realized. Plaintiffs and law enforcement agencies that file lawsuits or criminal charges against your corporation have the burden of proving the allegations they are making. This can be a very difficult thing to do, as much of the information that they need to prove their case is held within the company. They can only pry it out with discovery requests, interrogatories, and depositions.
But if there is an internal investigation into the very allegations that are being made, and the results of that investigation is left unprivileged, it can be disclosable and will quickly become the very core of the case against the company. The internal investigation that you will have conducted in order to reduce the risks will then be used against the corporation, itself.
Some Frequently Asked Questions About the Attorney-Client Privilege and Corporate Investigation Consulting
Can an Investigation Be Partially Privileged?
Yes. While it is obviously a better practice to ensure that the entire investigation report and the process that produced it would be privileged from discovery, if that is not possible it is still essential to at least insulate some of the material. This is a key defense to make when, for example, some documents were revealed to a third party who is not a part of the attorney-client relationship. Claiming that the revelation only destroys the privilege for the documents that were revealed, and not to those that the third party still had no access to, can mitigate the damage.
What Incidents Can Trigger the Need to Conduct an Investigation?
Internal investigations can, and often should, be conducted whenever the corporation has come to notice a problem that carries the potential for significant legal liability. When little is known for sure about that problem, it is paramount for the company to get a quick, thorough, and concrete understanding of what happened before it can make informed decisions about how to proceed.
Some examples of the types of incidents that can trigger a corporate internal investigation include:
- Media reports of corporate wrongdoing or other shortfalls that could lead to lawsuits
- Allegations of workplace discrimination or harassment
- A whistleblower complaint has been filed
- A law enforcement agency has announced that it is investigating the company or will conduct an audit
- Someone within the company has filed an internal complaint that claims to reveal fraudulent activity by supervisors or coworkers
All of these incidents have two things in common: They can cause financial or reputational harm to the company and they require an immediate investigation to determine whether the allegations are true or not.
Why Doesn’t Corporate Investigation Consulting Call Itself the Preeminent Investigation Firm?
Because we would rather have our clients do that kind of talking for us. While we think that the experience and talent that we bring to the table far exceeds what other investigation firms can provide, it is the value that our clients put on our services that matter the most.
Effective Internal Investigations by Corporate Investigation Consulting
Maintaining the attorney-client privilege is one of the most important aspects of conducting an internal investigation. It ensures that the sensitive information that it finds are kept within the corporation and out of the hands that would use it to damage the company.
The professional corporate investigators at Corporate Investigation Consulting are adept at conducting these investigations in ways that are securely within the boundaries of the attorney-client privilege. Contact us online or call our office at (866) 352-9324 to get started on an effective, thorough, and privileged corporate investigation at your company.