Taming Corporate Internal Investigations

It used to be that major corporations and their executives formed a united front against government prosecutorial authority.

That was then.

This is now.

Now, more often than not, corporations launch internal investigations, interview employees, and turn over the findings of the internal investigations to the government.

Corporations self-report any wrongdoing, hoping to dodge a corporate criminal guilty plea.

And more often than not, they do avoid such a plea, with either a declination, a deferred prosecution agreement or non prosecution agreement.

And more often than not, the government uses the corporate internal investigation to criminally prosecute the employee.

Or to put it in the vernacular of Wall Street — the corporation throws the employee under the prosecutorial bus.

Who’s going to stand with the individual employee against the coercive powers of both the federal government and the powerful corporation?

Well, Bruce Green and Ellen Podgor, to name two.

Green is a professor at Fordham University School of Law and Podgor is a professor at Stetson University College of Law.

They have just published a path breaking law review article titled Unregulated Corporate Internal Investigations: Achieving Fairness for Corporate Constituents.

In it, Green and Podgor argue that corporate employees should be protected from the prosecutorial bus.

Here’s the nutshell version.

Criminal procedure jurisprudence has developed for well over a century to establish limits on government investigators’ ability to extract confessions from individuals for use against them in criminal prosecutions.

But what about a corporation’s ability to extract confessions from individuals for use against them in criminal prosecutions?

The Supreme Court is pretty much silent on this.

In 1981, the Supreme Court did weigh in on the issue of corporate internal investigations.

“In Upjohn, the U.S. Supreme Court held that a corporation could claim the attorney-client privilege with respect to its lawyers’ confidential communications with corporate constituents in the context of an internal investigation,” Green and Podgor write. “The Court was not asked to consider, and did not address, whether the constituent also could claim the privilege or bar the corporation from waiving the privilege, and the Court has failed to address this question since. Lower courts have assumed, however, that except in exceptional circumstances, the privilege is exclusively for the corporation to assert or waive, without regard to the interests of the constituent who made the communications in question.”

But Upjohn was decided back in 1981 – back when corporate interests were generally aligned with that of their employees.

Today, corporate interests are often aligned with the federal government and adverse to those of their employees.

Or as Green and Podgor put it: “Upjohn addressed a corporation aligned with its constituents. This does not reflect the contemporary reality of internal investigations.”

Green and Podgor call on the Supreme Court to reconsider its ruling in Upjohn.

“To the extent that Upjohn implied that corporations have exclusive authority to assert the privilege or to barter the individual’s statements to the government, it should be reconsidered,” they write. “The standard for determining when a corporation may waive the privilege and disclose what its constituent communicated to corporate counsel should take into account whether, in eliciting the individual’s statements and then seeking to disclose them, the corporation would be violating its duty of fair dealing to the individual.”

If disclosure would violate fair dealing in light of a number of factors that Green and Podgor set out in the article, the company should not be permitted to disclose the employee’s statements without the employee’s authorization.

And those factors?

The guilt of the corporate employee, the culpability of the corporation, corporate willful blindness, whether the employee is a high ranking executive or a low level employee, an employee’s prior involvement with corporate counsel, the size and structure of the corporation, the expansiveness of the corporation, the crime involved, the corporation’s effort to dispel the perception that corporate counsel represents the individual, among others.

And their conclusion – stop throwing employees under the prosecutorial bus.

But not in those words.

Green and Podgor put it this way: “Courts need to expand upon the current attorney-client privilege jurisprudence to take account of a corporation’s duty to treat its employees fairly and not to exploit them.”

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