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Do you sincerely want to be rich?” was Bernie Cornfeld’s signature question. It’s a serious question, the answer to which depends on what sacrifices of other values are packed into the word “sincerely.” Do you sincerely support the attorney-client privilege? Do you believe it serves the public interest that “sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer’s being fully informed by the client,” and that the privilege “is founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure,” Upjohn v. United States, 449 U.S. 383, 389 (1981) (internal quotation omitted)? These, too, are serious questions, particularly now that prosecutors increasingly demand waiver of the privilege as an element of organizational cooperation. A matter of incentives for companies, employees Consider the incentives of a corporation and its employees faced with a preliminary indication of possible serious wrongdoing. Disregard initially the prospect of a waiver of the privilege. For both legal and prudential reasons, the corporation must conduct an investigation-although it knows at the outset that, if it finds serious criminal wrongdoing, it will almost certainly have to disclose it to enforcement authorities, and that some enforcement action may follow. The incentive for a corporation and its management to investigate flows from the fundamental need to conduct the business lawfully, from the criminal-law prohibitions of coverups and misprison, from marketplace expectations and from the risk that uninvestigated wrongdoing may continue and expand, and thereby create even worse problems. An employee’s incentive to answer questions flows from an explicit or implicit threat of discharge or other adverse action for refusing to cooperate. The power of that threat may vary depending on each employee’s sense of personal culpability and consequent exposure to prosecution and/or other adverse consequences. An employee with nothing to hide or fear almost certainly will cooperate. One with substantial involvement but no sense of personal culpability probably will cooperate. One who fears truthful answers will lead to discharge or prosecution may refuse to answer or may lie. The prospect of a waiver through a disclosure to prosecutors changes these incentive structures. The waiver may not be limited to the prosecutors, but may extend to regulatory bodies, plaintiffs’ lawyers and others. Moreover, the waiver may be held to cover the disclosure’s subject matter (however it may later be defined), not merely the particular information disclosed. For the corporation, the strong incentive to investigate and report serious criminality remains. Almost always, the risks from failing to do so are unacceptable. The prospect of a waiver, however, may well affect the character of the investigation. The Upjohn court believed that corporate investigations protected by the privilege are likely to be more thorough and to produce more reliable results than unprotected investigations. A corporation investigating its own possible wrongdoing has an interest in an effective investigation because it needs to take appropriate corrective measures. The prospect of waiver, however, introduces a countervailing interest in avoiding the creation of information likely to be used against it and its people. Why create new incriminating information to turn over to prosecutors, plaintiffs and others? Differently situated corporations may weigh these competing interests differently. Human nature being what it is, the costs added by a waiver to a finding of adverse information may temper the zeal to find it and/or the completeness of its recordation (if and when found) in corporate counsel’s notes and memoranda. Recognition of this effect underlies the legal protection given in some contexts to the confidentiality of self-critical-analysis materials. A corporation may decide to conduct only a cursory investigation and report quickly to enforcement authorities. Although no one likes to invite a government investigation, informing the government early eliminates the risk of a cover-up and misprison, the government presumably won’t complain about early reporting, and the corporation minimizes its own creation of new adverse information as to which the privilege would be waived. Even if prosecutors develop the same information the corporation would have developed, the corporation can maintain its distance from it. And, in government hands and minds, it will be less available to third parties than it would have been in corporate hands and minds after a waiver. Plainly, what may be lost in the process is a thorough, well-documented corporate investigation. At least part of the initial investigatory burden may be shifted from the corporation to the government, and the corporation may have to choose either to defer all or some of its corrective actions until it learns the results of the government’s investigation or to implement such actions without the full information it would have had from its own thorough investigation. In this scenario, the operation of the corporation’s self-corrective mechanisms may be seriously impaired. If, after reporting to prosecutors, the corporation does investigate-at their request, or for its own business reasons-the prior report may add to the investigation an increased degree of formality and tension and an express risk of prosecution that before would have been only implicit. The result may be an impaired investigation. For employees, the prospect of waiver increases the risks that flow from participation in a corporate investigation. What they say to corporate counsel is likely to be memorialized to some extent, to be reported to the government, to become available to others and, if adverse to the employees, may be used against them. Increasing employees’ risks from cooperation may reduce their willingness to answer questions at all or to answer truthfully and fully. Consider an employee who has violated no law and has no relevant moral culpability, but who has been involved in matters from which criminal charges may emerge. Suppose that despite being innocent, the employee has a reasonable fear of prosecution, and expects that answers to corporate counsel’s questions would link him or her to the matters under investigation in ways that otherwise might remain undiscovered. Suppose, further, that the employee fears that some culpable co-workers may seek to implicate him or her to obtain leniency. This is a core case for invocation of the Fifth Amendment privilege and refusal to “cooperate.” Yet if the employee answers counsel’s questions, a future invocation of the Fifth Amendment might be too late. As awareness that talking to corporate counsel may amount to talking to prosecutors spreads through corporate America, it will become more likely that employees asked to cooperate in a corporate investigation will consult personal counsel. As a practical matter, in the kind of investigation under discussion, employees do not have the assured option of providing information to the company for its business purposes but not to prosecutors and others. Counseled employees who have any real exposure to prosecution are more likely to refuse to cooperate, even at the cost of losing their jobs. Reduced effectiveness of corporate counsel One probable result of these changes in incentive structures is less effective internal corporate investigations (whether by inside or outside counsel). To the extent prosecutors also seek waivers as to preconduct communications in which corporate employees sought legal advice, similar changes will occur in the incentive structures governing such communications, with a consequent reduction in their frequency, candor and/or documentation, and therefore of the effectiveness of corporate counsel in advising employees on the lawfulness of contemplated conduct. These matters warrant serious concern. Waivers give prosecutors potentially useful information, with minimal expenditure of prosecutorial resources; though, over time, as the changes in incentives erode the effectiveness of corporate investigations and counseling, the quality and quantity of such information may diminish. Thus, an aggressive prosecutorial tactic (demanding waivers) may lead to increased wrongdoing (by eroding the effectiveness of corporate counsel) and may not save prosecutorial resources (to the extent corporations report early). Although, despite obvious difficulties, social scientists may study the effects of prosecutorial demands for waivers on the quality of corporate investigations and counseling, it seems unlikely, at least in the short term, that there will be independent empirical evidence one way or the other as to such effects. Debate about them probably will have to rely on theoretical analyses and possibly anecdotes. For prosecutorial policymakers, the theoretical and therefore somewhat uncertain societal costs of waivers probably are outweighed by the fairly clear and immediate benefits of disclosed formerly privileged information in pending criminal investigations. For others, the uncertain and incalculable, but potentially widespread and huge, costs that may flow from the reduced effectiveness of corporate counsel probably outweigh the prosecutorial benefits of waivers. All or much of the information prosecutors can obtain through waivers they can also obtain through their own or their agents’ interviews or through grand jury questioning. One’s ultimate assessment may depend on one’s fundamental view of the privilege. Is its societal value in encouraging effective corporate investigations and counseling worth the societal cost of denying prosecutors information employees communicate to corporate counsel under the protection of the privilege? Do you sincerely support the privilege? Richard M. Cooper is a partner at Williams & Connolly LLP of Washington. He can be reached via e-mail at [email protected].

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