© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Wildman Harrold | 225 West Wacker Drive | Chicago, IL 60606Levenfeld Pearlstein | 2 North LaSalle Street, Suite 1300 | Chicago, IL Complications of Attorney-Client Privilege in Government Investigations Beth L. Fancsali – Wildman Harrold Kurt Stitcher – Levenfeld Pearlstein IQPC Internal & Government Investigations Conference January 16, 2008

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference2 PART 1 Protecting the Attorney -Client Privilege During Investigations

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference3 Setting Up the Investigation to Protect Privilege  Authorizing  Structuring  Staffing

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference4 Role of Outside Counsel  Engagement by Board or authorized representative – “Regular” counsel vs. new “independent” counsel  Identification of client  Document scope, purpose and privileged nature of investigation  Determine reporting relationships and format  Determine sources of information within company  Limit access to investigation materials

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference5 Role of Outside Counsel  Document selection and analysis  Witness interviews  “Upjohn” warnings to employees – Company is client; law firm is not employee’s counsel – Employee must keep interview/investigation confidential – Attorney-Client Privilege belongs to the company – Company may decide to waive Attorney-Client Privilege  Legal analysis and reports

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference6 Role of In-House Counsel  Legal versus business hat  Recent “assault” on GCs as targets  Possible roles (each with implications/risks re: privilege): – Witness (legal or business advice on subject issues) – Direct or assist outside counsel – Fact investigator or gatherer for outside counsel – Gate-keeper for facts gathered by non-lawyers – Receive reports/opinions from outside counsel – Communications with Board or special committee – Provide legal or business advice based on investigation results

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference7 Identifying the Client  COMPANY  BOARD OF DIRECTORS  COMMITTEE  SLC (e.g., Derivative Suits)  OFFICERS AND DIRECTORS  EMPLOYEES

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference8 Determining Client Status  TARGET: Substantial evidence of criminal conduct  SUBJECT: “Within scope” of grand jury investigation  WITNESS: Everyone else

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference9 Determining Representation  SEPARATE REPRESENTATION – Individual is “Target” – Individual is “Subject”  JOINT REPRESENTATION – Individuals are “Mere Witnesses” – Individuals’ Interests are Aligned

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference10 Assessing Conflicts  Temporality of “Aligned Interests” – Disparity in Punishment Fines for Company Prison for Individual – Detrimental Conduct of Individual  Fifth Amendment Rights of Individuals  Constitutional Constraints: 6th Am.

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference11 Assessing Conflicts  Consequences of Conflicts for Company – Censoring of Disclosures to Government Privilege held jointly with individual Individual declines to waive Hampering of Cooperation Efforts – Disqualification of Counsel

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference12 Assessing Collaboration  SEPARATE REPRESENTATION, BUT  COMMON INTEREST DOCTRINE  JOINT DEFENSE AGREEMENTS

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference13 Common Interest Doctrine  Requirements – Common interest among targets – Confidentiality  Permits disclosure of: – Attorney-client communications – Work product  Precludes disclosure to adverse parties

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference14 Joint Defense Agreements  Requirements – Protected communications in course of joint defense effort – Designed to further joint effort – Made and kept in confidence  Assumes underlying privileges  Covers – Attorney-client communications – Work product

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference15 Joint Defense Agreements  Key Benefits – Collaboration/United Front – Reduced cost – Protects against turncoats  Key Problems – May hinder cooperation (but parties can exempt internal investigation) – Collateral litigation over turncoats

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference16 Cautionary Tales  Cooperation in internal investigation may lead to Club Fed – United States v. Reyes, No , verdict returned (N.D. Cal. Aug. 7, 2007) – Defendant cooperated in investigation – Company waived privilege to avoid indictment – Outside counsel testified against defendant – Incriminatory denials help seal the deal – $90 million mistake ($46M in fees)

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference17 Cautionary Tales  Investigation materials may be used to indict individuals for obstruction of justice – Several indictments returned against individuals for lying to company investigators – Considered obstruction of justice if known that there is a government investigation

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference18 Cautionary Tales  Sharing investigation results within company may waive privilege – Ryan v. Gifford, 2007 WL (Del. Ch. Nov. 30, 2007) – Special committee investigating backdating cannot shield final report – Privilege waived by sharing results with the Board, considered third party with adverse interests

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference19 Cautionary Tales  Others may seek to use company investigation for their own legal issues.  GenRe Executives Criminal Trial, United States v. Ferguson, et al.; No. 06-CR-137 (D. Conn.) – Trial began January 15, 2008 – Defendants seek outside company counsel witness interview notes/memos re: government trial witnesses – Court has not determined privilege issue yet – Court to review in camera after witness testimony to see if proper impeachment material

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference20 Cautionary Tales  Former employees as targets/witnesses may raise waiver risk – Marvell former GC said company investigation was biased – Company claimed privilege in SEC investigation for former GC’s involvement

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference21 PART 2 Waiving The Attorney-Client Privilege In Government Investigations

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference22 KPMG/Stein Opinions  United States v. Stein, et al.; 435 F.Supp.2d 330 and 440 F. Supp.2d 315 (S.D.N.Y. 2006) – Gov’t interference with advancement of legal fees to employees – Gov’t attempt to condition fee advancement on privilege waiver – Portions of the Thompson Memorandum on charging decisions = unconstitutional  Some indictments thrown out

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference23 SEC Policy  “Seaboard Factors” for cooperation credit – Company making available review results is a factor – No explicit mention of privilege waiver as a factor – Footnote: waiver as a means to provide information – ABA has asked SEC to remove footnote – SEC Commissioner Atkins says waiver should not be viewed as a cooperation credit factor (Feb. 2007)

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference24 The McNulty Memorandum  DOJ position on charging companies and cooperation credit  Sets out standards and process – Whether DOJ will seek waiver of privilege – Whether company receives cooperation credit  Retreats on prior DOJ positions on waiver (Thompson and Holder memoranda)

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference25 McNulty Memorandum  McNulty instituted a formal procedure for seeking privilege waiver – AUSAs cannot do on their own – Must seek approval up the chain U.S. Attorney must approve, sign request Some requests must go farther up to Deputy AG  “Legitimate need” for waiver must exist  Must seek least intrusive waiver

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference26 McNulty Memorandum  Must phase requests by category – Category I information = factual information – Category II = legal advice, mental impressions  Concern by business and others that McNulty still does not give enough protection to privilege

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference27 Congressional Response to McNulty Memorandum  The Attorney-Client Protection Act of 2007  House passed H.R (Nov. 2007)  Senate bill (S. 186) in committee  Government cannot: – Demand privilege waiver – Condition charging decision on whether privilege is waived, among other things

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference28 Inadvertent Waiver  Seek Agreement with Government  Look to Case Law in Jurisdiction – Lenient Jurisdictions – Strict Jurisdictions – Modern Jurisdictions

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference29 Inadvertent Waiver  Modern Jurisdictions – Reasonable precautions to avoid disclosure – Timely notice to recipient – Extent of the disclosure – Fairness to privilege holder  Cautionary Note on Metadata  Proposed F.R.E. 502(b) – S. 2450: 12/11/07 – Protects against inadvertent waiver

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference30 Selective Waiver  Case Law: “It’s Not Looking Good”  In re Columbia/HCA Healthcare Corp. Billing Practices Litigation, 293 F.3d 289 (6th Cir. 2002) – Government was adverse – Waiver is not a litigation weapon – Privilege does not derive from contract – Government should not hinder truth-seeking

© 2008 Wildman, Harrold, Allen & Dixon LLP and Levenfeld Pearlstein, LLC. Internal & Government Investigations Conference31 Selective Waiver  Is A New Day Breaking?  SEC Request for Relief (5/03)  Proposed F.R.E. 502(d) – Permits selective waiver, with court order – Binds federal and state courts – Danger(?): Pressure to waive privilege