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FCPA Blog Daily News

Entries in Attorney-Client Privilege (34)


Legal advice privilege survives UK test, with caveats

Undoubtedly, the most helpful decision this year for UK-based white collar crime lawyers was a tax related case in which the Supreme Court refused to extend legal advice privilege “LAP” to other professionals by reference to a legal function test. A copy of the decision is here (in pdf).

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In-house privilege shrinks again

A Dutch in-house lawyer with a law degree but no license isn't entitled to the attorney-client privilege, a recent federal case held.

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And we thought he liked whistleblowers

Photo courtesy of the White HouseOver the weekend, before Edward Snowden outed himself, a frantic hunt was on for the insider who leaked NSA phone and internet spying documents to the Guardian and the Washington Post.

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Congressmen: Documents show Wal-Mart CEO and execs told about Mexico bribe allegations in 2005

Two influential U.S. Congressmen have asked Wal-Mart CEO Michael Duke if he and other senior executives at the company knew about bribery allegations in its Mexico operations as early as 2005.

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Avon keeps no secrets from the feds

In its disclosure yesterday, Avon provided a glimpse into what it means to be cooperating with the DOJ and SEC.

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Steal This Form

We're not a big fan of the SEC's whistleblower rules. They let FCPA reward seekers go straight to the government -- without ever telling the boss, general counsel, chief compliance officer, internal auditors, or directors.

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Lauren Stevens Acquitted

The White Collar Crime Prof Blog reported the acquittal of the former associate general counsel of GlaxoSmithKline, Lauren Stevens.

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Angela Aguilar Alleges DOJ Misconduct

The Mexican woman held in a California jail since her arrest on FCPA charges in August has alleged that prosecutors tried to bury information about intercepted phone and email logs from her lawyers and violated her attorney-client and spousal privileges.

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For Company Counsel, Even More Complications

Two recent cases have focused attention on the hard choices faced by company counsel involved in criminal investigations and prosecutions.

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EU/US Cross Border Data Discovery – Mission Impossible?

EU data privacy laws often seem to be in direct conflict with U.S. regulatory requirements to produce documents for FCPA investigations. Can they be reconciled?

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Wanted, Dead Or Alive

What do we think, a friend asked a few days ago, about paying FCPA whistleblowers 10 to 30 percent of amounts recovered through SEC and DOJ enforcement actions? That idea is part of a financial reform bill introduced last month by Christopher Dodd, chairman of the Senate Banking Committee. It's well covered in Corporate Compliance Insights, with links to the bill itself.

We're in favor of enforcing the FCPA. And we generally admire the job the DOJ and SEC are doing to fight global public corruption -- and to enlist allies in the fight. But we have serious concerns about Senator Dodd's proposal. We explained our thinking to a Washington policy maker two months ago. Whether our comments made it to Senator Dodd's ear, we don't know.

Here's what we said. Under current U.S. law and the way it's applied to white collar criminal cases, including the FCPA, corporate defendants cannot defend themselves if any employee committed an offense. The legal doctrine of respondeat superior makes corporations vicariously liable for crimes committed by employees at any level acting within the scope of their employment, even for actions in direct violation of company policy. This strict liability leaves organizations defenseless -- completely naked when threatened with criminal prosecution.

What do companies accused of FCPA violations do? Instead of mounting a futile and potentially catastrophic defense (remember Arthur Andersen?), they settle. The corporations -- legal fictions that cannot think, plan, speak, chew bubblegum, or act apart from their people -- are "punished" with financial penalties, ultimately paid by completely innocent shareholders. Sometimes, though not always, people from the company are prosecuted as well. But their financial penalties are tiny compared to those paid by the corporations, and on which the whistleblower rewards would be based.

To make matters worse, a settling company may feel pressured to disclose to prosecutors documents and records about employees, usually without the employees' consent. Those records may even include the employees' conversations with the company's lawyers. The employees lose what they thought was the attorney-client privilege, and their right against self incrimination is history.

So let's rephrase the question: Should a whistleblower be rewarded for information leading to the government's extraction of money from a defenseless corporation through a coerced settlement that tramples its employees' expectation of legal privilege and 5th Amendment rights?

Whistleblower rewards would be great if respondeat superior were reformed. If corporations were given the chance to defend themselves, given the chance to prove they tried to prevent bribery but one or more employees went off the rails anyway. That would end shot-gun settlements. Corporate defendants could then make a reasoned decision -- go to trial or seek settlement. And with those on the losing end of a prosecution presumably guilty in a real sense of the crimes committed by their employees, punishing the companies would make more sense.

Under current U.S. law, however, FCPA whistleblower rewards are likely to hurt companies that act in good faith to prevent corruption and employees whose rights are stripped away.

The criminal justice system has a wheel loose and it's called respondeat superior. Let's fix it before we drive any faster.


Speaking Out

George Terwilliger -- formerly of the DOJ and now in private practice -- had some wise words about decisions to launch internal investigations. His article in included this tightly packed and well-mannered exhortation:

Most corporate decision-makers do not have the experience necessary to anticipate the judgments and proclivities of enforcement officials. Understanding how prosecutors think and what factors are important to them is essential to deciding whether and to what extent to conduct an internal investigation. Animated discussion, in the confines of privilege, with professionals who understand what prosecutors expect and why, is essential to sound analysis of an investigation's results and good decisions based on its results. This kind of analysis also is best broadened -- within the confines of privilege -- to include in-house personnel with financial, public relations and investor-relations expertise, as the decisions made will significantly affect the portfolios of each.

Great advice, with a serious reminder about the attorney-client privilege. It protects the normal give-and-take that's essential for sound decision-making.

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Who are we fighting for? Yemen's executive, judicial, and legislative accountability mechanisms are among the worst assessed in 2008. Although there are strong anti-corruption laws on the books, the anti-corruption agency is ineffective. Furthermore, political financing is generally unregulated, while civil society organizations are ineffective in fighting corruption. The media, which is subject to political interference, also receives poor ratings. Several journalists have been arrested, harassed, or imprisoned for their corruption-related investigative stories. Government control over private radio is among the most draconian in the world.

~ From a comment to Yemen's Grand Corruption on the Global Graft Report left by Jonathan Eyler-Werve at Global Integrity

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Kosmos Energy, Exxon Mobil, and Ghana. A huge oil find, a struggle for control, corruption allegations, and a Chinese subplot. Here.

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Words we like. From Justice Louis Brandeis, concurring in Charlotte Anna Whitney v. California, 274 U.S. 357 (1927) at 375:

Those who won our independence believed that the final end of the state was to make men free to develop their faculties, and that in its government the deliberative forces should prevail over the arbitrary. They valued liberty both as an end and as a means. They believed liberty to be the secret of happiness and courage to be the secret of liberty. They believed that freedom to think as you will and to speak as you think are means indispensable to the discovery and spread of political truth; that without free speech and assembly discussion would be futile; that with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people; that public discussion is a political duty; and that this should be a fundamental principle of the American government.