In my next to last dispatch from the US Chamber’s Capital Markets Summit, I’d like to talk a bit about privilege. I’m not talking about the privilege some wish I didn’t have to discuss my opinions and experiences on this blog, especially as they relate to specific Big 4 and next tier firms.
Chamber Warns of Erosion of Attorney-Client Privilege
Seeks Congressional Action to Turn Back “Culture of Waiver”
Congress should take steps to protect the Constitutional right to attorney-client privilege, according to U.S. Chamber President and CEO Tom Donohue in testimony today before the House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security.
“The privilege to consult with an attorney freely, candidly, and confidentially is a fundamental Constitutional right that is under attack,” said Donohue. “Recent policy changes at the Department of Justice and the Securities and Exchange Commission have permitted and encouraged the government to demand or expect companies to waive their attorney-client privilege during an investigation.”
The DOJ, SEC, and other enforcement agencies routinely require or expect waivers of this privilege, creating an untenable situation for businesses, their employees, and attorneys. If people cannot trust the confidentiality of their legal advisors, they will be much less likely to raise and address problems, such as complying with laws—including Sarbanes-Oxley—and uncovering fraud.
Attorney-Client Privilege Waiver
N. Richard Janis, a Partner in Janis, Schuelke and Wechsler, LLP
Matthew Miner, Chief Crime Counsel, US Senate Committee on the Judiciary
Andrew Weissmann, a Partner at Jenner and Block (Mr. Weissmann recently testified before the Senate Judiciary Committee on this subject and used a great, big, lawyer word – amanuensis . Link to testimony here.)
This panel explained the legislative initiative noted above and elaborated on the issues and problems associated with the erosion of attorney-client privilege for corporations. Under current Administration policy, a corporation as a legal entity will get credit if it waives its right to attorney-client privilege for the results of internal investigations, for example. However, this panel felt that the corporation actually loses in a bigger way.
We have seen instances of this “hanging the employees out to dry” by the Big 4.
See my discussion of KPMG and Sidley and Austin partners left to their own devices in the tax shelter case as a result of this US Administration policy. There have been corporate cases, also, hence the attention by the US Chamber.
So my question to the panel was this:
“What about the opposite problem? What about the example of companies or firms putting everything possible under privilege or work product doctrine in order to protect the information from discovery, but then impeding the activities of the company’s or firm’s internal and external auditors? Can too much privilege impede the free sharing of information within an organization and with those responsible for protecting shareholders (external auditors)?”
All of the panelists responded that this was an excellent point and could present a problem. However, a prosecutor or plaintiff’s attorney can challenge the classification of information as privileged or work product doctrine. The proposed legislation does not address the conflict between a company and its external auditor with regard to disclosure of “privileged ” or “work product doctrine” information. It also does not address any contrived internal constraints on disclosure to internal audit or a compliance function.