C&E programs, attorney-client privilege and a “virtuous circle”

C&E programs rely, of course, on transparency. But they also require confidentiality.  Most obviously, protecting confidentiality can be necessary for an effective system to receive and respond to employee C&E-related concerns.  Perhaps less obviously, confidentiality can be necessary to ensure that a company analyzes and mitigates its C&E risks in an effective manner.

For instance, in the course of a risk assessment I was conducting a few years ago, the client’s compliance officer informed an employee of the need to be interviewed and what the topics of the interview would be.  The prospective interviewee responded that this plan was utter madness, given that the results could be used, he thought, against the company by regulators and others.   However, the compliance officer replied that the risk assessment was being conducted to provide the company with legal advice so that the results were confidential  under the law – they could be used to help the company reduce C&E risks but would not provide aid and comfort to the company’s litigation adversaries. Based on this assurance, the interview went off without a hitch and the results were indeed helpful to the overall risk assessment – and the process had no adverse “side effects” (meaning unwanted disclosures).

However, the corporate attorney-client privilege is not a magic wand, and indeed an earlier post examined the issue of possible misuse of the privilege  – and the consequences of such misuse.  Today, we explore an approach to preventing problems of this sort – which, among other things, could leave a company’s sensitive information unprotected – from occurring.

First, to help create a foundation that will later support the assertion of the privilege, companies should (if they have not done so already) consider formally establishing and assigning the role of program counsel, i.e., designating an attorney to provide it with legal advice about the program. This assignment can be documented in an overall program charter (or what an earlier post referred to as a program “constitution”);  the C&E committee charter, for companies with such a committee; the attorney’s job description – if using an in-house approach for this role; or the engagement letter – if using an outside counsel.

Second, counsel’s role in providing legal advice should be documented on an ongoing basis, such as in investigations, self-assessments and C&E committee minutes and agenda.  With risk assessments, for example, at the initiation of the process the need for legal advice should be documented, as should the nature of the advice sought. Communications to interviewees should reflect this purpose, too.  So, of course, should the final report, and one should restrict distribution of the report in a manner consistent with the privilege.

Third, companies should occasionally conduct reviews  to ensure that the privilege is being protected appropriately. This might include reviewing investigation files and seeking to determine what legal advice C&E program counsel has in fact provided in connection with  investigations.

Of course, as discussed in the first post, attorneys must be mindful that they do not attempt to construct a privilege around communications that are not in fact related to legal advice.  For this reason, one should consider splitting C&E risk issues out of an Enterprise Risk Assessment, as the latter generally has little to do with legal advice.  Similarly, it could be a mistake to attempt to “privilege” all audits – as opposed to those where legal advice is indeed being sought.

Finally, counsel must in fact give legal advice regarding the communications at issue.  However, in light of the importance of law to C&E programs, doing so should not be a great challenge.

Indeed, by ensuring that  the privilege is maintained in this way, one increases the likelihood that a company is devoting sufficient attention to C&E law, which, in turn, should strengthen its C&E  program. That is, appropriate use of the attorney-client privilege can help to establish a “virtuous circle” in which the pursuit of confidentiality and program efficacy reinforce each other.

(As with the prior post on this topic, my discussion of attorney-client privilege is limited to US law – I don’t know enough about the privilege under nations’ laws to take a global approach to this tricky area.)

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