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Enforcement Edge
October 29, 2021

Caveat White Collar Lawyers—ABA White Collar Panel Explores Tricky Ethics Dangers In White Collar Cases

Enforcement Edge: Shining Light on Government Enforcement

Wrapping up the ABA’s White Collar Crime Conference was a rock-star panel of former prosecutors covering the latest thorny ethics issues in white collar investigations and defense. Sandy Weinberg led a lively discussion among Mary Jo White, Zach Terwilliger, Professor Lucian Dervan, Alice Fisher, and Rick Deane focused on attorney-client privilege, joint representation of a company and an executive, Upjohn warnings, pool counsel, and other issues that vex even sophisticated white collar lawyers.

The panel covered a lot of ground, but here is a summary of some of the main topics covered:

Jointly representing a company and a company executive? Beware—in fact, be very afraid. The panel devoted considerable time to dissecting the recent opinion in the Elizabeth Holmes prosecution, in which the court rejected Holmes’s assertion of privilege over communications with Theranos’s outside counsel, which also had represented Holmes personally on some matters until 2016. (Theranos had waived privilege, and the government wanted to use the documents at trial.) The court rejected Holmes’s argument that her subjective understanding that outside counsel represented her should carry the day. Applying the Ninth Circuit’s strict Graf test, the court found that Holmes had failed to establish that she was seeking legal advice in her personal capacity, as opposed to in her capacity as a Theranos executive. The court noted, among other things, that Holmes had no engagement letter with the outside lawyers, that she never personally paid for their services, and that the particular communications concerned company business and frequently included other company employees.

The Holmes decision is a clear warning shot for anyone considering whether to represent both a company and its individuals, especially if you don’t want to find yourself one day in court testifying against someone who claims you are her lawyer. Mary Jo White summed up the dynamic as essentially a “lose/lose situation.” Some important safety tips to avoid getting burned include:

  • It may not be advisable to represent a company and the CEO in the same investigation into the company’s actions, especially if the company decides to cooperate.
  • Be very clear with everyone involved about who your client is.
  • It’s always best to lay out your role and the scope of any representation in a clear engagement letter and to update or sign new engagement letters as the representation evolves.
  • Don’t forget the Upjohn warning—even with the top executives—and of course make sure that you document that you gave the warning and that the employee understood it.

Company’s general counsel representing company employees before a grand jury? Again, this is fraught with peril, as shown in the Pennsylvania Supreme Court’s 2019 decision in Office of Disciplinary Counsel v. Baldwin. In that case, which arose out of the Sandusky child abuse scandal, Penn State’s general counsel represented both Penn State and a number of employees in the grand jury investigation into sexual abuse allegations. The GC earlier had told the employees that she was Penn State’s GC and could not represent them personally, but then went ahead and represented the employees during interviews with law enforcement and when they appeared before the grand jury. The GC later testified in the grand jury against some of the employees, even though the employees claimed they thought that she represented them personally. While the trial court denied the employees’ motions to preclude the GC from testifying in their criminal trials, the Superior Court ruled that the GC had breached the attorney-client privilege and could not testify against the employees; the court threw out the pertinent charges. The GC was disciplined and publicly reprimanded by the Pennsylvania Supreme Court.

The ABA panel noted a few key takeaways from the Penn State case:

  • As with the Holmes matter, it is crucial for a lawyer to be clear about what her role is and who she represents. The Penn State GC’s statements when she brought the witnesses to the grand jury, as well as the witnesses’ testimony before the grand jury that she represented them, all seemed to confirm that the witnesses understood that the GC represented them before the grand jury.
  • As a practical matter, in the vast majority of cases, it may not be possible for a GC to represent a company employee in a grand jury investigation, at least not in an investigation that may implicate the company itself.
  • When employees are subpoenaed to the grand jury about matters pertaining to their employment, it is crucial that they have competent criminal counsel.

Navigating the role of pool counsel? Once again, proceed with caution. The panel dove into some of the thorny issues that arise when a lawyer is asked to represent multiple witnesses in an investigation. While relying on pool counsel often brings significant advantages in efficiency and cost, it also raises tough and potentially perilous issues relating to (i) clear, written, and informed client consent to the joint representation; (ii) conflicts between the various clients; and (iii) use of confidential information gained from one client in the representation of the other client. The panel noted that required reading for everyone serving as pool counsel is the Bruce Green memo, more formally known as the New York City Bar Association’s Formal Opinion 2019-4: Representing Multiple Individuals in the Context of a Governmental or Internal Investigation. You should read the memo in full, but some of the key takeaways the panel emphasized include:

  • Because conflicts of interest must be addressed before undertaking a representation, a pool counsel must determine in advance — through preliminary interviews — whether conflicts exist among potential pool clients. As a general matter, a “target” of the investigation will need a separate lawyer and should not be represented by pool counsel.
  • Be transparent from the outset with each client about who the other clients are and about the potential for conflicts, and obtain informed consent (in writing) from each client.
  • Address up front what happens if a conflict develops between the various clients in the pool, and make sure to identify, and respond appropriately to, any conflicts of interest as they arise.
  • Try to get irrevocable consent from each client that information learned from one client can be used to the benefit of all clients in the pool, as it is impossible for an attorney to “un-know” information she has already learned.
  • Address with each client whether and under what circumstances confidential information can be disclosed to other clients in the pool.
  • And, most importantly, put all of these issues in writing in your engagement letter.

Needless to say, these and other tricky ethical issues are enough to keep a careful white collar lawyer up at night. If you want to discuss these issues, don’t hesitate to reach out to the authors or any of your trusted advisors at Arnold & Porter.

© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.