Protecting the privilege: witness interview notes and memoranda in internal investigations
April 2018 | PROFESSIONAL INSIGHT | FRAUD & CORRUPTION
Financier Worldwide Magazine
April 2018 Issue
A recent case out of the Southern District of Florida, SEC v. Herrera, provides a stark reminder of the difficult tightrope that a company and its counsel must walk when providing information gleaned from an internal investigation to government enforcement authorities. When a company undertakes an internal investigation, either through counsel or on its own, there are typically two major components of its factual inquiry: document review and witness interviews. The latter are typically memorialised in notes taken contemporaneously and in more formal memoranda drafted after the interview has taken place. How those notes and memoranda are drafted and the manner in which the results of the interview are shared with government enforcement authorities can have significant consequences, as the Herrera case illustrates.
The decision to disclose to government authorities information obtained during witness interviews most often arises when a company is seeking cooperation credit. The decision to cooperate with a government investigation entails a complex legal and strategic calculus beyond the scope of this article. However, one discrete area that poses a particular challenge relates to issues of privilege and attorney work-product protection for materials generated during the course of the company’s internal investigation, including information derived from witness interviews.
On the one hand, the potential benefits of cooperation can be significant. For example, in the FCPA context, a company that self-discloses a potential violation and satisfies the requirements regarding cooperation and remediation set out by the Department of Justice (DOJ) enjoys a presumption in favour of receiving a declination. On the other hand, cooperation credit will only be bestowed on a company that proactively discloses all relevant facts. This creates potential pitfalls for the disclosing company in trying to provide the government with facts that are obtained through a privileged investigation. In the Foreign Corrupt Practices Act (FCPA) context, at least, the DOJ’s corporate enforcement policy mitigates these risks to a limited extent by clarifying that cooperation credit does not require the waiver of privileged material. It should be noted, however, that the policy does not explicitly extend that recognition to attorney work product.
Failure to successfully protect privileged materials has potential implications, not only for the government investigation, but also, and perhaps more importantly, for any related litigation, whether a civil action by the company’s shareholders or a prosecution by the government against culpable individuals. There is therefore a tension between the desire to cooperate with a government investigation and the need to protect the company in any future litigation. The Herrera case highlights the difficulties in trying to navigate this tension and the potential consequences of any missteps.
Herrera involved an accounting fraud investigation launched in 2012. In October 2012, General Cable Corporation (GCC) self-reported various fraud and FCPA issues to the Securities and Exchange Commission (SEC). Morgan Lewis represented GCC in the matter and conducted an extensive internal investigation. During the investigation, the SEC sought information from GCC, including “[a]n oral recitation of what each (relevant) witness stated during interviews”. In 2013, Morgan Lewis met with SEC staff and discussed the firm’s interviews of 12 GCC employees.
On 29 December 2016, the SEC issued a settled cease-and-desist order against GCC, which did not admit or deny the facts against it, and among other things, ordered GCC to pay a $6.5m civil monetary penalty. In resolving the matter, the SEC gave GCC credit for self-reporting, cooperating and remediating the alleged violations, noting, inter alia, that GCC had provided “detailed presentations on the key findings of the investigation”, and had promptly produced “all relevant documents and information (including thousands of documents translated into English), chronologies, key document binders, interview downloads, and forensic accounting analyses”.
The SEC then separately filed a civil complaint against Mathias Sandoval Herrera and Maria Cidre, two GCC executives allegedly involved in the fraud. During discovery, Mr Herrera and Ms Cidre sought interview notes and memoranda that Morgan Lewis summarised for the SEC. Although Mr Herrera and Ms Cidre acknowledged that the interview materials were subject to attorney work-product protection, they asserted that Morgan Lewis and GCC had waived that protection by giving ‘interview downloads’ to a potential adversary, the SEC.
Morgan Lewis argued against the waiver, asserting that it did not waive work-product protection because the firm never disclosed the actual interview notes or memoranda to the SEC, and “the oral conveyance of information derived from interviews does not waive work-product protection as to the underlying attorney notes and memoranda”. Morgan Lewis also argued that disclosure of work product only waives the protection as to “the actual materials disclosed, not other materials”.
The court agreed with Mr Herrera and Ms Cidre, finding that the “SEC was the adversary” which, according to the court, resulted in a waiver of attorney work-product protection. (The court agreed with the parties that the materials were in fact protected attorney work product.) The court concluded that the waiver extended to the actual interview notes and memoranda because the ‘oral downloads’ were the “functional equivalent” of the notes and memoranda and ordered Morgan Lewis to provide the defendants with the interview notes and memoranda that were orally downloaded. Morgan Lewis objected to the magistrate judge’s decision, but Morgan Lewis and the defendants negotiated a resolution of the issue prior to any ruling by the district court. Although the Herrera decision has yet to be cited in other litigation, it highlights the growing risks of waiver for companies that cooperate with government investigations.
The Herrera Court did not take issue with the predicate assertion that the interview notes and memoranda were an attorney work product and thus protected from disclosure absent a waiver. Although this is likely settled law in US courts, other jurisdictions might take a different view, and given the international scope of many company’s operations and the increasing cooperation between various enforcement authorities, this becomes a valid concern.
For example, a recent decision in the UK, RBS Rights Issue Litigation, held that memoranda of employee interviews conducted by company counsel during the course of an internal investigation were not entitled to privilege as “lawyer’s working papers”. RBS had not argued that the investigations were conducted in contemplation of litigation, and therefore did not assert that the litigation privilege applied.
The UK court held that in order for the lawyers’ notes to constitute protected working papers, RBS would have to prove that the notes “have some attribute or addition such as to betray or at least give a clue as to the trend of the advice being given to the client by its lawyer”. In this regard, the court found unpersuasive RBS’ arguments that the notes were: (i) not verbatim transcripts, but would assist in the giving of legal advice to RBS; (ii) stated on their face that they reflected the lawyer’s mental impressions; (iii) did reflect the lawyer’s mental impressions to the extent they reflected work undertaken in preparation for the interview and the selection of points to be included; and (iv) recorded that the interviewee was informed that the interview was subject to privilege. These measures would likely have been enough to confer work-product protection in the US, assuming a credible argument could be made that the interviews were conducted in anticipation of litigation, but they did not pass muster with the RBS court.
The Herrera and RBS cases highlight the risks associated with the preparation of witness interview memoranda and the communication of information gained through these interviews to government enforcement authorities. The cases thus suggest practical steps that a company and its counsel should take when memorialising witness interviews and communicating the results of these interviews to government authorities.
First, counsel must ensure that the interview memoranda will be afforded the maximum amount of protection from disclosure, whether through attorney work-product protections or otherwise. This necessitates an analysis as to which jurisdiction’s privilege laws are likely to apply. Once this has been determined, it may become apparent that simply memorialising the interview, along with boilerplate disclaimer language asserting that the document contains the lawyer’s mental impressions and opinions, is insufficient to ensure maximum protections.
Second, if a company decides to cooperate with a government investigation, it should resist any requests to provide full “oral downloads” of an interview. Both the Herrera court and other courts have held that, when it comes to waiver of work-product protections, there is no meaningful distinction between providing detailed oral summaries of witness interviews and providing the interview notes or memoranda themselves. The better course is to limit disclosure to investigative facts uncovered during interviews, organised thematically, rather than providing a witness-by-witness recitation.
Third, judge Goodman’s opinion in Herrera seemed to suggest that the less detail provided to the government about the substance of the interviews, the less likely that waiver would be found. As such, providing the government with higher-level summaries might be preferable. However, this may not be a practical approach given the government’s desire to learn all the facts relevant to the investigation.
Finally, counsel must take care to avoid revealing mental impressions, findings or strategy. In this regard, counsel should not provide or read from interview memoranda that might contain such content. Instead, any factual information derived from witness interviews should be included in a separate document created expressly for the purpose of the government presentation.
Martin J. Weinstein is a partner at Willkie Farr & Gallagher LLP. He can be contacted on +1 (202) 303 1122 or by email: firstname.lastname@example.org.
© Financier Worldwide
Martin J. Weinstein
Willkie Farr & Gallagher LLP