Corporate Miranda Warnings

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Corporate Miranda Warnings

  1. 1. Corporate Miranda Warnings Ashish Joshi, Esq. Sarah Vasquez, MPH
  2. 2. Outline <ul><li>What are Upjohn warnings? </li></ul><ul><li>What do they entail? </li></ul><ul><li>Examples </li></ul><ul><li>Top tips for in-house counsel conducting an internal investigation </li></ul>
  3. 3. What are Upjohn Warnings? <ul><li>Also known as CORPORATE MIRANDA Warnings, these clarify the loyalty of the lawyer conducting the internal investigation. Essentially, you are making it clear that: </li></ul><ul><li>I, the lawyer, owe my duty of loyalty to the company and not to you, an employee. </li></ul>
  4. 4. What does a Corporate Miranda Entail? <ul><li>At a bare minimum, the Warning admonishes the employee that: </li></ul><ul><li>Counsel represents the corporation and not the employee </li></ul><ul><li>Communications between the employee and counsel will be privileged </li></ul><ul><li>This privilege belongs to the corporation and the corporation alone can waive it </li></ul>
  5. 5. Some Guideposts… <ul><li>Undertake a thorough conflict check before accepting an internal investigation assignment from a corporation. </li></ul><ul><li>Does the investigation touch upon matters in which you have previously advised the corporation? </li></ul><ul><li>Do you represent any officer/employee of the company in another action? </li></ul><ul><li>If YES, then it is likely to be a conflict! </li></ul>
  6. 6. Some Guideposts… <ul><li>2. Avoid dual representation at all costs </li></ul><ul><li>Any Upjohn warnings given after an attorney-client relationship is created are irrelevant </li></ul><ul><li>Dual representation could jeopardize a company’s purpose of an investigation – to avoid a criminal indictment </li></ul><ul><li>Dual representation causes unnecessary complexities regarding the roles and duties of counsel </li></ul>
  7. 7. Some Guideposts… <ul><li>3. Inform employees of the purpose of the interviews – for example: </li></ul><ul><li>The government is conducting an investigation </li></ul><ul><li>The subject of the investigation is ______ </li></ul><ul><li>Counsel has been retained to provide advice to the company in this matter </li></ul><ul><li>The interview is necessary for company counsel to get the info necessary to give appropriate advice to the company </li></ul>
  8. 8. Some Guideposts… <ul><li>4. Give the Corporate Miranda warning </li></ul><ul><li>BEFORE </li></ul><ul><li>commencing the interview! </li></ul>
  9. 9. Some Guideposts… <ul><li>5. Prepare a form containing the Corporate Miranda Warning </li></ul><ul><li>After orally delivering the warning, have the employee sign this form </li></ul><ul><li>If the employee is re-interviewed in future, redeliver the warning </li></ul><ul><li>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 </li></ul>
  10. 10. Some Guideposts… <ul><li>6. Advise employees that the content of the interview is likely to be disclosed to third parties – including the government </li></ul><ul><li>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 </li></ul>
  11. 11. Some Guideposts… <ul><li>7. Before beginning the interview, offer to clarify any issues that may be subject to misinterpretation </li></ul><ul><li>If an employee does seek clarification, document the questions and your answers </li></ul><ul><li>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 </li></ul>
  12. 12. Some Guideposts… <ul><li>8. If an employee asks if he or she needs their own counsel – tread with caution! </li></ul><ul><li>Best case scenario: have independent lawyers available to represent the employee </li></ul><ul><li>Of course, in the real world, this depends on a number of factors (size of company, circumstances surrounding investigation, etc.) </li></ul>
  13. 13. Some Guideposts… <ul><li>9. Under NO circumstances should company counsel provide legal advice to the employee </li></ul><ul><li>Doing so may risk a later finding of dual representation </li></ul>
  14. 14. Some Guideposts… <ul><li>10. After each interview, memorialize the substance of it </li></ul><ul><li>It should not resemble a transcript. It should have the following </li></ul><ul><ul><li>Counsel’s standard introduction </li></ul></ul><ul><ul><li>Delivery of Corporate Miranda Warning </li></ul></ul><ul><ul><li>Any questions from witness and clarification by counsel </li></ul></ul><ul><ul><li>Closing remarks to witness </li></ul></ul><ul><ul><li>Counsel’s mental impressions of the witness </li></ul></ul><ul><ul><li>Mark this memo as attorney-client privileged and subject to work product doctrine </li></ul></ul>
  15. 15. Example: Broadcom <ul><li>William J. Ruehle is a former CFO of Broadcom Corp. </li></ul><ul><li>There were allegations of improper practices of stock option granting </li></ul><ul><li>Broadcom retained law firm Irell & Manella (I & M) to conduct an internal investigation </li></ul>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. 16. Broadcom <ul><li>At the time of the investigation, both Broadcom and Ruehle himself had long standing relationships with I & M </li></ul><ul><li>Shortly after being retained to do the investigation, I & M represented Ruehle personally in a derivative action (related to the matter under investigation) </li></ul>
  17. 17. Broadcom <ul><li>In May 2006 Ruehle received emails from I & M regarding their representation of him in civil actions </li></ul><ul><li>In June 2006 I & M met with Ruehle to interview him regarding their investigation of Broadcom’s stock option granting practices </li></ul><ul><li>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 </li></ul>
  18. 18. Broadcom <ul><li>In August, at Broadcom’s direction, I & M disclosed the substance of Ruehle’s interviews to the SEC and the US Attorney’s Office </li></ul><ul><li>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 </li></ul>
  19. 19. Broadcom <ul><li>Ruehle promptly moved to suppress this evidence under the privileged communications doctrine </li></ul><ul><li>After a 3 day evidentiary hearing, Judge Carney of the US District Court for the Central District of California agreed with Ruehle </li></ul>
  20. 20. Broadcom: the implications <ul><li>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. </li></ul><ul><li>Even if an Upjohn warning were given in this case, it would be “nonsensical at best and unethical at worst” according to the court </li></ul>
  21. 21. Broadcom: the implications <ul><li>I & M committed at least three clear violations of its duty of loyalty to Ruehle: </li></ul><ul><ul><li>I & M had a duty to disclose the potential conflict of interest and obtain written consent </li></ul></ul><ul><ul><li>I & M breached its duty of loyalty to Ruehle by interrogating him to benefit another client </li></ul></ul><ul><ul><li>I & M disclosed privileged communication without his consent </li></ul></ul>
  22. 22. Broadcom: the upshot <ul><li>Judge Carney referred the firm to the State Bar of California for appropriate discipline. </li></ul><ul><li>Don’t let this happen to YOU! </li></ul>
  23. 23. Example: Stanford <ul><li>Laura Pendergest-Holt is a former CIO of the Stanford Financial Group (SFG) </li></ul><ul><li>There were allegations of SFG defrauding investors of $8B in investments </li></ul><ul><li>SFG retained an attorney from the firm Proskauer Rose (P-R) </li></ul>
  24. 24. Stanford <ul><li>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 </li></ul><ul><li>This decision was made in consultation with the P-R attorney </li></ul>
  25. 25. Stanford <ul><li>Pendergest-Holt appeared at the SEC hearing. She was asked at the outset by an SEC lawyer if she had counsel. </li></ul><ul><li>She replied that she did (meaning P-R attorney) </li></ul><ul><li>SEC asked P-R attorney if he was her counsel. He replied that he was, insofar as she was CIO of Stanford </li></ul>
  26. 26. Stanford <ul><li>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 </li></ul><ul><li>At times the P-R lawyer intervened, telling her not to answer certain questions </li></ul><ul><li>During her testimony, Pendergest-Holt conferred with the P-R attorney </li></ul>
  27. 27. Stanford <ul><li>The Crucial Moment : </li></ul><ul><li>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. </li></ul><ul><li>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 . </li></ul>
  28. 28. Stanford <ul><li>Following the testimony before the SEC, the P-R attorney wrote to the SEC and made a noisy withdrawal from the case </li></ul><ul><li>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 </li></ul>
  29. 29. Stanford: the implications <ul><li>In a resulting 2009 civil malpractice suit, Pendergest-Holt alleged: </li></ul><ul><ul><li>She had met with the P-R attorney on several occasions to prepare for her SEC testimony </li></ul></ul><ul><ul><li>She believed P-R was representing her best interests </li></ul></ul><ul><ul><li>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 </li></ul></ul>
  30. 30. Contact Information <ul><li>Ashish S. Joshi </li></ul><ul><li>Lorandos & Associates </li></ul><ul><li>214 N. Fourth Ave. </li></ul><ul><li>Ann Arbor, Michigan 48104 </li></ul><ul><li>Direct: (734) 637-7112 </li></ul><ul><li>[email_address] </li></ul>

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