CLE: 2007: Ethical Concerns of Deputized Counsel in Investigations

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CLE: 2007: Ethical Concerns of Deputized Counsel in Investigations

Creator

Colin Marks

Publisher

St. Mary's University School of Law San Antonio Texas Alumni Homecoming, St. Mary's University School of Law Alumni Homecoming

Date

2007-03-30

Relation

St. Mary's University School of Law Alumni Homecoming

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RFC3778

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English, en-US

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Text

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STMU_HomecomingCLE2007Marks

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Ethical Concerns of Deputized Counsel
i11 Investigations
Colin Marks, Assistant Professor of Law

Print Version II School ofLaw at St. Mary's University

Page 1 of2

School of Law at St. Mary's University

Colin P. Marks
ph: (210) 431-2248
email: cmarks@stmarytx.edu
Assistant Professor of Law
B.S. 1997, University of Missouri- Columbia
J.D., magna cum laude, 2001, University ofHouston
Law Center
Before St. Mary's

Professor Marks graduated magna cum laude from the University of Houston Law
Center in 2001 where he served as an Associate Editor on the Houston Law Review.
After law school, Professor Marks clerked for the Honorable Harold R. DeMoss, Jr.
on the United States Fifth Court of Appeals for two years. In the fall of 2003,
Professor Marks joined the law firm ofBaker Botts, L.L.P., in Houston, Texas where
he was an associate in the trial department. At Baker Botts, Professor Marks' practice
concentrated on commercial litigation, as well as some pro bono criminal work.
Professor Marks left Baker Botts in the summer of 2006 to join St. Mary's University
School of Law.
Highlights:

• Order of the Coif
• Order of the Barons
• Judicial Clerk to the Honorable Harold R. DeMoss, Jr., United States Court of
Appeals for the Fifth Circuit
Specialties:

Professor Marks joined the St. Mary's faculty in 2006. He teaches courses and writes
on:





Commercial Law
Sales
Secured Transactions
Attorney-Client Privilege

Publications:
• Thompson Memo Internal Investigations: Ethical Concerns of the Deputized
Counsel, _ _ ST. MARY'S L. J. __ (forthcoming)
• Corporate Investigations, Attorney-Client Privilege, and Selective Waiver: Is a
Half-Privilege Worth Having at All?, 30 SEATTLE U. L. REV. 155 (Fall
2006)
• Pre-Launch Litigation Audits: The Double-Edged Nature of the Work-Product
Doctrine, IADC NEWSLETTER, May 2006 (co-author)
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Print Version

II School of Law at St. Mary's University

Page 2 of2

• The Limits of Limiting Liability in the Battle of the Forms: U. C. C. Section 2207 and the "Material Alteration" Inquiry, 33 PEPP. L. REV . 50 1 (2006)
• Opening the Door to Business Methods: State Street Bank & Trust Co. v.
Signature Financial Group, Inc., 37 HOUS. L. REV. 923 (2000)

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School of Law at St. Mary's University
School of Law, St. Mary's University, One Camino Santa Maria, San Antonio, Texas
78228

http://www.stmarytx .edu/law/print.php?go=fac_marks&id=&print= l

3/26/2007

Thompson/McNulty Memo Internal
Investigations: Ethical Concerns of
the Deputized Counsel
Colin P. Marks
Assistant Professor of Law
St. Mary's University School of Law

Overview
• Evidence that waivers of attorneyclient privilege increasingly sought in
corporate investigations.
• "Culture of Waiver"
• "Deputation" of Outside Counsel

Overview
• Ethical Concerns:
-Warnings to em ployees
-Rights of employees
-Brady concerns

1

Overview
• Scope and purpose of investigation
and brief overview of A-C privilege
and W-P immunity
• Development of government policies
that encourage waiver
• Ethical concerns deputation raises
• Conclusion

The Investigation
• Assemble
investigation team
(attorneys)

'!

The Investigation
• Assemble
investigation team
(attorneys)
- Assess legal rights,
liabilities, etc.

2

The Investigation
• Assemble
investigation team
(attorneys)
- Assess legal rights,
liabilities, etc.
- Application of
attorney-client
privilege

Attorney-Client Privilege
• General Rule
• (1) a communication
• (2) made between privileged persons
• (3} in confidence
• (4) for th e purpose of seeking, obtaining,
or providing legal assistance to the client.

Attorney-Client Privilege
General Rule
(1) a communication
(2) made between privileged perso ns
(3) in confidence
(4) for the purpose of seeking , obtaining,
or providing legal assistance to the client.
• Though corporations do not enjoy Fifth
Amendment protections against selfincrimination, the A-C privilege does apply.






3

Work Product
• To qualify as work product, information
must:
(1) be in the form of documents or tangible
things;
(2) be prepared in anticipation of litigation;
and
(3) be prepared by the party or its
representative, including an attorney.

The Investigation
• Assemble
investigation team
(attorneys)

The Investigation
• Assemble
investigation team
(attorneys)
Issue "do not destroy"
memo

4

The Investigation
• Assemble
investigation team
(attorneys)
• Issue "do not destroy"
memo
Collect and review
docum ents

The Investigation
• Assemble
investigation team
(attorneys)
Issue "do not destroy"
memo
• Collect and review
documents
• Employee Interviews

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Employee Interviews
• Often most insightful
and pivotal step in any
internal investigation
Best able to explain
critical events and
provide relevant
background information
Also the stage most
likely to raise ethical
issues

5

Interview Warnings
• Model Rule 1.13: "A lawyer employed or
retained by an organization represents the
organization acting through its duly
authorized constituents."

Interview Warnings
• Model Rule 1.13: "A lawyer employed or
retained by an organization represents the
organization acting through its duly
authorized constituents."
• To avoid confusion, and to meet ethical
obligations, interviewing counsel typically
issue pre-interview warnings

Interview Warnings
Three elements for pre-interview warnings:
1) that the investigating attorneys represent the
company and not any employee individually
2) that the company's attorney-client privilege
applies to the interviews and that the company
retains the right to waive the privilege; and
3) that the company wishes that the employee
keep the interviews confidential

6

Government Policies and Waiver
• Many corporations feel compelled to
disclose A-C privileged materials to avoid
indictment or to receive favorable
treatment under governmental policy
considerations.

Holder/Thompson Memos
1999 DOJ Holder Memo
In conducting an investigation, determining whether
to bring charges, and negotiating plea agreements,
prosecutors should consider the following factors in
reaching a decision as to the proper treatment of a
corporate target:

4) The corporation's timely and voluntary
disclosure of wrongdoing and its wil lingness to
cooperate in the investigation of its agents,
including, if necessary, the waiver of the
corporate attorney-client and work-product
privileges;

Holder/Thompson Memos
• 2003- DOJ reiterates with an added ninth
factor regarding the "adequacy of the
prosecution of individuals responsible for
the corporation 's malfeasance."
• Also provides that the advancing of
attorneys' fees to culpable employees may
be considered in evaluating whether a
corporation has cooperated

7

Some numbers to consider
• NACDLIACC survey- 75% of the 1,400
respondents reported that a "culture of
waiver" has evolved in which government
agencies expect corporations to waive
legal privileges

Some numbers to consider
• NACDL/ACC survey- 75% of the 1,400
respondents reported that a "culture of waiver"
has evolved in which government agencies
expect corporations to waive legal privileges
NACDL survey- 87% of respondents believed
the attorney-client and work-product privileges
were currently being challenged by various
entities including federal government agencies

Some numbers to consider
NACDLIACC survey- 75% of the 1,400
respondents reported that a "culture of waiver"
has evolved in which government agencies
expect corporations to waive legal privileges
NACDL survey- 87% of respondents believed
the attorney-client and work-product privileges
were currently being challenged by various
entities including federal government agencies
Finder/McConnell article- research revealed
that of the 30 post-Thompson Memo pretrial
agreements reviewed , 21 included pnvilege
waivers

8

"Culture of Waiver"
• "Culture of waiver" transforms the internal
investigation from one driven purely by the
corporation's interests, into one driven by
the DOJ's interests
• May go beyond simply collecting
information for DOJ
• Computer Associates case and United
States v. Singleton.

McNulty Memo
Response to pressure from such diverse groups such as
ACC, NACDL, ACLU, ABA and Chamber of Commerce
Makes two signifi cant changes to the Thompson Memo
First. states prosecutors generally should not take into
account advancing of attorneys' fees but does allow that
'[i]n extremely rare cases, the advancement of attorneys'
fees may be taken into account when the totality of the
circumstances show that it was intended to impede a
criminal investigation.'
Second, the McNulty Memo requires that prosecutors
obtain approval before seeking privilege waivers.

McNulty Memo
Two tiered system for waivers
Category I, includes 'purely factual information - must
first obtain written authorization from the United States
Attorney who must consult with the Assistant Attorney
general for the Criminal Division before granting or
denying the request
Category II, includes attorney-client communications and
non-factual work-product- U.S . Attorney must obtain
written authorization from the Deputy Attorney General
and the written request must set forth the legitimate need
for the waiver as well as the scope of the waiver being
sought

9

Ethical Concerns

• Interview Warnings
• Fifth and Sixth Amendment
Concerns
• Brady concerns

Interview Warnings
• Under Model Rule 4.1 (a), "deputized"
counsel that know privilege will be waived
and handed over to the DOJ should make
the interviewees aware of that fact

Interview Warnings
Under Model Rule 4 .1(a). "deputized" counsel
that know privilege will be waived and handed
over to the DOJ should make the interviewees
aware of that fact
What about other duties such as to warn the
witness that statements could be used against
him or her, or to advise the witness to retain
separate counsel?
Prosecutors covered under Model Rule 3.8

10

Interview Warnings
For corporate counsel, Model Rules provide
bare guidance.
• Model Rules 1.13 and 4 .3 provide that corporate
counsel should advise the interviewee to obtain
his/her own counsel "if the lawyer knows or
reasonably should know that the interests of
such a person are or have a reasonable
possibility of being in conflict with the interests of
the client."

Interview Warnings
• Problems with full warnings?
• Example warnings

Interview Warnings
• Problems with full warnings?
• Example warnings
Employees may not want to talk which may bring
interview to a screeching halt.
Telling an employee that he can obtain outside
counsel, or stopping an interview where the
employee is revealing personally damaging
information, will likely hinder the attorney's ability
to gel information from the employee.

11

Legal Rights of Interviewees
• Thompson Memo allows for consideration
of advancing attorney's fees.
• McNulty Memo exception may swallow the
rule so for many this concern remains.
• Thompson/McNulty Memo both allow for
employees to be threatened with
termination for failure to speak with
interviewing counsel.

Legal Rights of Interviewees
• Legal fees

=Sixth Amendment concerns

• Coercion = Fifth Amendment concerns
• Both illustrated in United States v. Stein
case.

Legal Rights of Interviewees
• Legal fees = Sixth Amendment concerns
• Coercion = Fifth Amendment concerns
• Both illustrated in United States v. Stein
case.
• What are the ethical implications?

12

Legal Rights of Interviewees
• Legal fees= Sixth Amendment concerns
• Coercion = Fifth Amendment concerns
• Both illust rate d in United States v. Stein
case.
• What are the ethical implications?
• Model Rule 4.4 - are we violating the legal
rights of third parties?

Possible Brady Concerns
• Illustration : J. Smith is interviewed and
unknowingly implicates himself in fraud .

Possible Brady Concerns
• Illustration : J. Smith is interviewed and
unknowingly implicates himself in fraud.
• Two days later, M. Jones is interviewed
and exculpates Smith or mitigates his role.

13

Possible Brady Concerns
• Illustration: J. Smith is interviewed and
unknowingly implicates himself in fraud.
• Two days later, M. Jones is interviewed
and exculpates Smith or mitigates his role .
• Smith is later indicted for fraud.

Possible Brady Concerns
• Illustration: J. Smith is interviewed and
unknowingly implicates himself in fraud.
• Two days later, M. Jones is interviewed
and exculpates Smith or mitigates his role.
• Smith is later indicted for fraud.
• Does corporate counsel have duty to
reveal exculpatory evidence?

Possible Brady Concerns
• Prosecutors' duties:
• Legal duties under Brady v. Maryland- a
criminal defendant has a constitutional
right to disclosure of exculpatory evidence
that is material to guilt or punishment

14

Possible Brady Concerns
• Prosecutors' duties:
• Legal duties under Brady v. Maryland- a
criminal defendant has a constitutional
right to disclosure of exculpatory evidence
that is material to guilt or punishment
• Ethical duties under Model Rule 3.8(d).

Possible Brady Concerns
• Prosecutors' duties:
• Legal duties under Brady v. Maryland- a
criminal defendant has a constitutional
right to disclosure of exculpatory evidence
that is material to guilt or punishment
• Ethical duties under Model Rule 3.8(d).
• No equivalent rule for corporate counsel
AND disclosure may not be in
corporation's interest.

Summary
• Corporate counsel should use caution
• Model Rules give little guidance - role as
"deputy" probably not anticipated.
• Result- conflict between duties to
corporation and Model Rules or simply
what we feel is morally the right thing to
do.

15

If you like the topic

·EMAIL ME!
• cmarks@stmarytx.edu

16

Selected Model Rules of Professional Conduct
PREAMBLE: A LAWYER'S RESPONSIBILITIES
[ 1] A la·wyer, as a member of the legal profession, is a representative of clients, an officer
of the legal system and a public citizen having special responsibility for the quality of
justice.

Rule 1.13 Organization As Client
(a) A lawyer employed or retained by an organization represents the organization acting
through its duly authorized constituents.

(f) In dealing with an organization's directors, officers, employees, members,
shareholders or other constituents, a lawyer shall explain the identity of the client when
the lawyer knows or reasonably should know that the organization's interests are adverse
to those of the constituents with whom the lawyer is dealing.

Rule 1.13 Comments
Clarifying the Lawyer's Role
[1 OJ There are times when the organization's interest may be or become adverse to those

of one or more of its constituents. In such circumstances the lawyer should advise any
constituent, whose interest the lawyer finds adverse to that of the organization of the
conflict or potential conflict of interest, that the lawyer cannot represent such constituent,
and that such person may wish to obtain independent representation. Care must be taken
to assure that the individual understands that, when there is such adversity of interest, the
lawyer for the organization cannot provide legal representation for that constituent
individual, and that discussions between the lawyer for the organization and the
individual may not be privileged.
[ 11] Whether such a warning should be given by the lawyer for the organization to any
constituent individual may tum on the facts of each case.

Rule 3.8 Special Responsibilities Of A Prosecutor
The prosecutor in a criminal case shall:
(b) make reasonable eff011s to assure that the accused has been advised of the right to ,
and the procedure for obtaining, counsel and has been given reasonable opportunity to
obtain counsel;
(c) not seek to obtain from an unrepresented accused a waiver of important pretrial rights,
such as the right to a preliminary hearing;

(d) make timely disclosure to the defense of all evidence or information known to the
prosecutor that tends to negate the guilt of the accused or mitigates the offense, and, in
connection with sentencing, disclose to the defense and to the tribunal all unprivileged
mitigating information known to the prosecutor, except when the prosecutor is relieved of
this responsibility by a protective order of the tribunal;
Rule 4.1 Truthfulness In Statements To Others
In the course of representing a client a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third person;
Rule 4.1 Comments
Misrepresentation
[1] A lawyer is required to be truthful when dealing with others on a client's behalf, but
generally has no affirmative duty to inform an opposing party of relevant facts. A
misrepresentation can occur if the lawyer incorporates or affirms a statement of another
person that the lawyer knows is false. Misrepresentations can also occur by partially true
but misleading statements or omissions that are the equivalent of affirmative false
statements. For dishonest conduct that does not amount to a false statement or for
misrepresentations by a lawyer other than in the course of representing a client, see Rule
8.4.
Rule 4.3 Dealing With Unrepresented Person
In dealing on behalf of a client with a person who is not represented by counsel, a lawyer
shall not state or imply that the lawyer is disinterested. When the lawyer knows or
reasonably should know that the unrepresented person misunderstands the lawyer's role
in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.
The lawyer shall not give legal advice to an unrepresented person, other than the advice
to secure counsel, if the lawyer knows or reasonably should know that the interests of
such a person are or have a reasonable possibility of being in conflict with the interests of
the client.
Rule 4.3 Dealing With Unrepresented Person - Comment
[1] An unrepresented person, particularly one not experienced in dealing with legal
matters, might assume that a lawyer is disinterested in loyalties or is a disinterested
authority on the law even when the lawyer represents a client. In order to avoid a
misunderstanding, a lawyer will typically need to identify the lawyer's client and, where
necessary, explain that the client has interests opposed to those of the unrepresented
person. For misunderstandings that sometimes arise when a lawyer for an organization
deals with an unrepresented constituent, see Rule 1.13(f).

[2] The Rule distinguishes between situations involving unrepresented persons whose
interests may be adverse to those of the lawyer's client and those in which the person's
interests are not in conflict with the client's. In the former situation, the possibility that
the lawyer will compromise the unrepresented person's interests is so great that the Rul e
prohibits the giving of any advice, apart from the advice to obtain counsel. Whether a
lawyer is giving impermissible advice may depend on the experience and sophistication
of the unrepresented person, as well as the setting in which the behavior and comments
occur. This Rule does not prohibit a lawyer from negotiating the terms of a transaction or
settling a dispute with an unrepresented person. So long as the lawyer has explained that
the lawyer represents an adverse party and is not representing the person, the lawyer may
inform the person of the terms on which the lawyer's client will enter into an agreement
or settle a matter, prepare documents that require the person's signature and explain the
lawyer's own view of the meaning of the document or the lawyer's view of the underlying
legal obligations.
Rule 4.4 Respect For Rights Of Third Persons
(a) In representing a client, a lawyer shall not use means that have no substantial purpose
other than to embarrass, delay, or burden a third person, or use methods of obtaining
evidence that violate the legal rights of such a person.

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Citation

Colin Marks, “CLE: 2007: Ethical Concerns of Deputized Counsel in Investigations,” St. Mary's Law Digital Repository, accessed April 26, 2017, http://lawspace.stmarytx.edu/item/STMU_HomecomingCLE2007Marks.

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