G White Collar Criminal Defense Alert October 2002 Plugging The Leaks: Guidelines For Conducting Internal Corporate Investigations Involving Disclosure Of Confidential Information By R. Scott Thompson, Esq. and Matthew M. Oliver, Esq. Consider the following scenarios: Preliminary Considerations In Investigating Improper Disclosures of You get a call from a reporter who reads Corporate Information � to you from a confidential memorandum A company considering initiating an internal about your company’s strategic plans investigation into leaks of confidential corporate that you prepared last week. information to the media and/ or competitors must first and foremost come to grips with the reality An article appears in the financial press � that such investigations rarely reveal the identity identifying the company with whom of the individual or individuals responsible. your Board favors a strategic alliance, out of several under active Certainly, some investigations do yield the consideration. identity of the wrongdoers. In those instances, the A competitor issues a press release � result of the investigation may be that the touting a new product or service days company takes employment action adverse to the before your company had planned to employee or, depending upon the severity of the publicize its own most recent infraction and the evidence marshaled, refers the innovation. matter to the proper law enforcement authorities. However, the success of an internal investigation Corporate executives and their counsel are should not be measured by such a standard. confronted with increasing frequency by situations Rather, a successful internal investigation should in which internal, confidential corporate achieve the following goals: information improperly has been disclosed by a director, officer, executive, employee, or consultant (i) Narrow the potential sources of the leak to the company. This article presents an outline of to a specific target, whether that target the general considerations attendant to the is a limited number of individuals or a commencement of an internal investigation of certain group or unit of the company, so “leaks” of confidential corporate information, and that the company can more effectively also presents a preliminary plan of action for monitor future activity; undertaking such an investigation. (ii) Communicate to all employees that the company views the unauthorized disclosure of information as an extremely serious issue, and that the company will thoroughly investigate This document is published by Lowenstein Sandler PC to keep clients and friends informed about current issues. It is intended to provide general information only. L Roseland, New Jersey Telephone 973.597.2500 65 Livingston Avenue www.lowenstein.com 07068-1791 Fax 973.597.2400
G any and all suspected leaks or suspicious The investigating attorney and the corporation incidents; and should memorialize the reasons for the retention, documenting the legal focus of counsel’s (iii) Review and strengthen the company’s investigation to assist in refuting any later policies and procedures to minimize the argument that the attorney was hired to provide potential for future leaks. business advice as opposed to legal advice. Similarly, to facilitate application of the work- The focus should be on the prevention of product privilege, which applies only to written future leaks, a goal which, while obviously difficult materials prepared “in anticipation of litigation,” to measure, usually can be achieved. counsel should document the prospects of litigation for the company, including as many Structuring the Investigation specific details (type of anticipated action, names The first priority in structuring an internal of potential adversaries, etc. ) as possible. investigation is to ensure that the investigation Corporate management also should consider itself will not cause further embarrassment or harm sending a directive to all or certain employees to the company. Accordingly, the investigation stressing the confidential nature of the must be conducted in accordance with applicable investigation and requesting cooperation with company policies (and, of course, in accordance investigating counsel. Such a directive facilitates with applicable federal and state laws), regarding proof of the “confidential intent” requirement of employee privacy, electronic communications, and the attorney-client privilege, and can also help to related issues. The investigation also must be satisfy the factors set forth in Upjohn v. United conducted in such a way so as not to damage States , 449 U.S. 383, 394 (1981), for preserving employee morale. Furthermore, the investigation privilege in the context of communications with must not itself become the subject of further leaks. corporate employees. The specific steps that the investigation should If private investigators or other experts are to take include the following: be used by investigating counsel, it is advisable that counsel, and not the corporation, retain the Step 1: Retain Competent Professionals to services of those individuals so that they may be Conduct or Advise On the Investigation. considered attorney agents for purposes of the Retaining qualified and competent attorney-client privilege. Counsel and these professionals, such as outside counsel and/ or a agents should enter into a written agreement that private investigation firm, is the first and one of specifies that the agent’s help is being solicited in the most important steps in conducting any order to assist counsel in offering the client legal internal investigation. Employing outside counsel advice in anticipation of litigation. Moreover, is important to ensure that the three primary every document generated by an outside agent evidentiary privileges that may be invoked to should state that it was created at the request of protect the confidentiality of information adduced counsel. during internal corporate investigations -- (i) the attorney-client privilege; (ii) the attorney work- Step 2: Analyze the substance of the information product doctrine; and (iii) the self-critical analysis that was disclosed. privilege -- are most effectively invoked and The purpose of analyzing the disclosed preserved. information is to determine the range of
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