Interesting Article With Inviting Opening on Upjohn Warnings (5/17/13)

Professional and law student readers will likely know what "Upjohn warnings" are.  In the classic internal investigation, lawyers representing the entity may interview individuals within the entity.  In order to insure that the individuals are not confused about who the investigating lawyers represent -- they represent the entity and not the individual -- good form and ethics require that the lawyers give adequate notice to the individual.  The notice is commonly referred to as "Upjohn warnings."  See Upjohn Co. v. United States, 449 U.S. 383 (1981).  I previously wrote on the issue Upjohn Warnings in Entity Investigations (Federal Tax Crimes Blog 10/14/09), here.

The current New York Times Magazine has an interesting article which begins with an Upjohn warning.  Anita Raghavan, Rajat Gupta’s Lust for Zeros (NYT 5/17/13), here.  I excerpt that opening:

Late one Friday morning, Rajat Gupta was rushing through security at Philadelphia International Airport, carry-on in tow, when his cellphone rang. When Gupta heard from Goldman Sachs, on whose board he sat, it was often from its chief executive, Lloyd Blankfein. But on this morning, it was Gregory K. Palm, his old Harvard Business School classmate and the bank’s general counsel, on the line. Palm sounded unusually serious. So Gupta asked if he could call him back from the other side of security. 

When he did, Palm quickly made two odd disclosures. First, he told Gupta that he had arranged for a colleague to listen in on their conversation. Then he said, “We are representing the corporation, and not you.” Palm wanted to make sure that there was no doubt that this was not a privileged conversation. If the matter evolved into something bigger, their discussion could be handed over to law-enforcement officers.
As Gupta listened, Palm stuck to the script that he worked out beforehand. “What can you tell me about Raj Rajaratnam, and have you ever provided him with information about what we do?” he asked.

Upjohn Warnings in Entity Investigations (10/14/09)

In United States v. Ruehle, 583 F.3d 600 (9th Cir. 2009), a nontax criminal case, the Ninth Circuit rejected a corporate officer's claim that his interview by attorneys representing the corporation in an internal investigation and representing Ruehle in related civil litigation. There was a dispute between Ruehle and the attorneys as to whether the attorneys had given the so-called Upjohn or "corporate Miranda" warning. See Upjohn Co. v. United States, 449 U.S. 383 (1981). The attorneys, not surprisingly, claimed that they had given the warning. Ruehle testified he could not recall that they did. The district court "seems to have disbelieved the Irell lawyers who took no notes nor memorialized their conversation on this issue in writing, and it apparently credited Ruehle's testimony that no such warnings were given." (See n.3.)

The Court of Appeals held, however, that Ruehle's assertion of attorney-client privilege to the communications failed. The court repeated its version of the standard attorney-client privilege definition as follows:

(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) unless the protection be waived.

The party asserting the privilege must prove the existence of each element. Here, Ruehle failed to meed the fourth element -- that the communication be made in confidence. Ruehle understood that the fruits of the investigation would be made available to the accountants.

The salient point from a privilege perspective is that Ruehle readily admits his understanding that all factual information would be communicated to third parties, which undermines his claim of confidentiality to support invoking the privilege. Ruehle's subjective shock and surprise about the subsequent usage of the information he knew would be disclosed to third-party auditors--e.g., information subsequently shared with securities regulators and the Justice Department now used to support a criminal investigation and his prosecution--is frankly of no consequence here.

These issues of course arise in entity investigations arising from tax cases. Upjohn itself was a tax case, and the issue has arisen in other tax cases (e.g., the KPMG prosecution).