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Broad notions of attorney-client privilege seemed to find a friend Monday in Judge Marilyn Hall Patel’s courtroom. The San Francisco federal judge expressed strong skepticism toward an attempt by former McAfee General Counsel Kent Roberts to obtain interview notes from the internal investigation of stock option backdating at the company. “What happens to privilege these days? Doesn’t this totally eviscerate it?” Patel asked. The Securities and Exchange Commission sued Roberts for securities fraud, and he is also under a criminal indictment related to backdating. Lawyers from Howrey, which performed the investigation, say their interview notes should remain confidential because they were never disclosed to the government. Roberts’ lawyers at Cooley Godward Kronish argue they should be turned over because McAfee relied on them in communicating with the feds, which constitutes a waiver. Turning over the notes would have strong public policy consequences, Patel said, because companies may end up being deprived of an internal mechanism to root out wrongdoing. “Opening the door by this broad waiver,” Patel said, her voice dripping with distaste, “really proves to be too much, I think.” The judge did not rule from the bench. William Freeman, the Cooley partner representing Roberts in his SEC case, declined to comment. During the hearing, though, Freeman argued that important public policy questions were in play from Roberts’ perspective as well — fairness in the way the company acted after its probe. “The company decided to share the results with everyone on the other side of the company, but him,” Freeman said. The Cooley partner challenged Howrey’s argument that it had not provided the actual interview notes to the government. Because the firm talked to the government about the investigation, the notes should be considered part of a broader subject matter waiver, he said. Howrey partner Robert Gooding Jr. acknowledged that financial auditors had asked whether certain employees were “clean” or “dirty” in terms of stock options backdating, and that Howrey had answered them. Freeman used that as part of his argument that the company had waived privilege by discussing the probe with outsiders. But Patel did not seem swayed. During the hearing, Gooding’s role appeared to be merely to encourage Patel’s lines of thinking. A waiver is going to have a “real impact on whether companies do these investigations in the future,” Gooding intoned.
Optional Reading

Read The Recorder‘s roundup of the stock-option backdating scandal. There won’t be a test later … but there might be a subpoena.

Patel also drew distinctions between Roberts’ case and other recent decisions holding that privilege had been waived as to internal investigations. In those cases, including one involving Maxim Integrated Products in Delaware, the judge ordered in camera review of the material. Freeman said he wouldn’t object to that route, but that he also didn’t think it would be necessary. Patel asked the parties for more briefs, in part focusing on why discovery in Roberts’ SEC case shouldn’t just be put on hold until after his criminal trial, which on Monday was pushed back to June. Such a move would deprive Roberts’ criminal defense team of using discovery obtained from the SEC case.

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