Corporate Miranda Warnings

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  • 1. Corporate Miranda Warnings Ashish Joshi, Esq. Sarah Vasquez, MPH
  • 2. Outline
    • What are Upjohn warnings?
    • What do they entail?
    • Examples
    • Top tips for in-house counsel conducting an internal investigation
  • 3. What are Upjohn Warnings?
    • Also known as CORPORATE MIRANDA Warnings, these clarify the loyalty of the lawyer conducting the internal investigation. Essentially, you are making it clear that:
    • I, the lawyer, owe my duty of loyalty to the company and not to you, an employee.
  • 4. What does a Corporate Miranda Entail?
    • At a bare minimum, the Warning admonishes the employee that:
    • Counsel represents the corporation and not the employee
    • Communications between the employee and counsel will be privileged
    • This privilege belongs to the corporation and the corporation alone can waive it
  • 5. Some Guideposts…
    • Undertake a thorough conflict check before accepting an internal investigation assignment from a corporation.
    • Does the investigation touch upon matters in which you have previously advised the corporation?
    • Do you represent any officer/employee of the company in another action?
    • If YES, then it is likely to be a conflict!
  • 6. Some Guideposts…
    • 2. Avoid dual representation at all costs
    • Any Upjohn warnings given after an attorney-client relationship is created are irrelevant
    • Dual representation could jeopardize a company’s purpose of an investigation – to avoid a criminal indictment
    • Dual representation causes unnecessary complexities regarding the roles and duties of counsel
  • 7. Some Guideposts…
    • 3. Inform employees of the purpose of the interviews – for example:
    • The government is conducting an investigation
    • The subject of the investigation is ______
    • Counsel has been retained to provide advice to the company in this matter
    • The interview is necessary for company counsel to get the info necessary to give appropriate advice to the company
  • 8. Some Guideposts…
    • 4. Give the Corporate Miranda warning
    • BEFORE
    • commencing the interview!
  • 9. Some Guideposts…
    • 5. Prepare a form containing the Corporate Miranda Warning
    • After orally delivering the warning, have the employee sign this form
    • If the employee is re-interviewed in future, redeliver the warning
    • This may appear to be overkill, but may serve to show the employee could not have had reasonable expectation that he was talking to his (not the company’s) laywer
  • 10. Some Guideposts…
    • 6. Advise employees that the content of the interview is likely to be disclosed to third parties – including the government
    • This may seem to be less than ideal, as it may cause employees to be less than forthcoming, but it may be necessary when a company has a statutory obligation to disclose the matter
  • 11. Some Guideposts…
    • 7. Before beginning the interview, offer to clarify any issues that may be subject to misinterpretation
    • If an employee does seek clarification, document the questions and your answers
    • This can go a long way toward demonstrating that the witness was not misled and could not have had the impression that you were his counsel
  • 12. Some Guideposts…
    • 8. If an employee asks if he or she needs their own counsel – tread with caution!
    • Best case scenario: have independent lawyers available to represent the employee
    • Of course, in the real world, this depends on a number of factors (size of company, circumstances surrounding investigation, etc.)
  • 13. Some Guideposts…
    • 9. Under NO circumstances should company counsel provide legal advice to the employee
    • Doing so may risk a later finding of dual representation
  • 14. Some Guideposts…
    • 10. After each interview, memorialize the substance of it
    • It should not resemble a transcript. It should have the following
      • Counsel’s standard introduction
      • Delivery of Corporate Miranda Warning
      • Any questions from witness and clarification by counsel
      • Closing remarks to witness
      • Counsel’s mental impressions of the witness
      • Mark this memo as attorney-client privileged and subject to work product doctrine
  • 15. Example: Broadcom
    • William J. Ruehle is a former CFO of Broadcom Corp.
    • There were allegations of improper practices of stock option granting
    • Broadcom retained law firm Irell & Manella (I & M) to conduct an internal investigation
    The facts, unless otherwise noted, are taken from the opinion of Judge Cormac J. Carney in USA v. Henry T. Nicholas III , (C.D. Cal., Case: SACR 08-139-CJC, April 1, 2009) and the underlying court filings.
  • 16. Broadcom
    • At the time of the investigation, both Broadcom and Ruehle himself had long standing relationships with I & M
    • Shortly after being retained to do the investigation, I & M represented Ruehle personally in a derivative action (related to the matter under investigation)
  • 17. Broadcom
    • In May 2006 Ruehle received emails from I & M regarding their representation of him in civil actions
    • In June 2006 I & M met with Ruehle to interview him regarding their investigation of Broadcom’s stock option granting practices
    • The lawyers did NOT clarify that in June they were acting solely in the best interests of Broadcom and that Ruehle may want to consult another lawyer
  • 18. Broadcom
    • In August, at Broadcom’s direction, I & M disclosed the substance of Ruehle’s interviews to the SEC and the US Attorney’s Office
    • Ruehle did not consent to the disclosures, and did not find out until 2008 when the FBI 302 memorandums were produced in the criminal case against him
  • 19. Broadcom
    • Ruehle promptly moved to suppress this evidence under the privileged communications doctrine
    • After a 3 day evidentiary hearing, Judge Carney of the US District Court for the Central District of California agreed with Ruehle
  • 20. Broadcom: the implications
    • Given that I & M were representing Ruehle in other matters during the time of the investigation, Ruehle was reasonable in believing he communicated with his attorneys.
    • Even if an Upjohn warning were given in this case, it would be “nonsensical at best and unethical at worst” according to the court
  • 21. Broadcom: the implications
    • I & M committed at least three clear violations of its duty of loyalty to Ruehle:
      • I & M had a duty to disclose the potential conflict of interest and obtain written consent
      • I & M breached its duty of loyalty to Ruehle by interrogating him to benefit another client
      • I & M disclosed privileged communication without his consent
  • 22. Broadcom: the upshot
    • Judge Carney referred the firm to the State Bar of California for appropriate discipline.
    • Don’t let this happen to YOU!
  • 23. Example: Stanford
    • Laura Pendergest-Holt is a former CIO of the Stanford Financial Group (SFG)
    • There were allegations of SFG defrauding investors of $8B in investments
    • SFG retained an attorney from the firm Proskauer Rose (P-R)
  • 24. Stanford
    • Pendergest-Holt was tapped to testify before the SEC, even though she had to learn about the top tier of investments in order to testify
    • This decision was made in consultation with the P-R attorney
  • 25. Stanford
    • Pendergest-Holt appeared at the SEC hearing. She was asked at the outset by an SEC lawyer if she had counsel.
    • She replied that she did (meaning P-R attorney)
    • SEC asked P-R attorney if he was her counsel. He replied that he was, insofar as she was CIO of Stanford
  • 26. Stanford
    • Several times during testimony, SEC lawyers asked her about conversations with P-R attorney but told her not to reveal the substance of the conversations
    • At times the P-R lawyer intervened, telling her not to answer certain questions
    • During her testimony, Pendergest-Holt conferred with the P-R attorney
  • 27. Stanford
    • The Crucial Moment :
    • During a break in questioning, the P-R attorney called his secretary to pull the engagement letter to be clear who he represented. He then clarified on the record that he was engaged by SFC.
    • At that moment, it should have been clear to all attorneys involved that Pendergest-Holt had walked into one of the trickiest situations possible for a high level official of a company under investigation: testifying before the SEC with only a company lawyer .
  • 28. Stanford
    • Following the testimony before the SEC, the P-R attorney wrote to the SEC and made a noisy withdrawal from the case
    • The government proceeded to file a criminal complaint, alleging that Pendergest-Holt had obstructed a federal investigation by lying and failing to reveal the truth
  • 29. Stanford: the implications
    • In a resulting 2009 civil malpractice suit, Pendergest-Holt alleged:
      • She had met with the P-R attorney on several occasions to prepare for her SEC testimony
      • She believed P-R was representing her best interests
      • When P-R learned during testimony that it was not authorized to represent her in her individual capacity, it took no action to protect her – despite an established attorney-client relationship
  • 30. Contact Information
    • Ashish S. Joshi
    • Lorandos & Associates
    • 214 N. Fourth Ave.
    • Ann Arbor, Michigan 48104
    • Direct: (734) 637-7112
    • [email_address]