Organizations who realize that internal investigations can pose a tremendous risk of litigation are ahead of the Operational Risk Management curve. Being proactive about prudent strategy on how to address the potential internal employee fraud is imperative, especially if you plan to pursue litigation to try and recover the stolen assets.
The two primary areas of emphasis here for the purpose of what information is discoverable is the attorney-client privilege and the work product doctrine: This Texas case from the Texas Bar Journal article by Derek Lisk illustrates the point:
The status of H.R. 3013 in the US House of Representatives is unknown as it goes to be debated in committees:In yet another case in which one party sought to protect documents from an investigation on privilege grounds, the U.S. District Court for the Eastern District of Texas took a more expansive view of the privilege. In-house counsel for Electronic Data Systems (EDS) hired outside attorneys, who in turn hired a consulting firm, to independently analyze and report on alleged misuse and misappropriation of assets by an EDS employee, Mr. Steingraber. In the ensuing litigation, EDS objected to producing documents from the investigation.
Steingraber, like Seibu Corp., argued that the documents were not privileged “because they were made to facilitate a business decision rather than the rendition of professional legal services.” This court, however, sided with the party seeking to protect the documents, finding Steingraber’s interpretation of the privilege “unduly narrow” and disagreeing with Seibu Corporation to the extent it held otherwise. Among other things, the court said, “The fact that the attorneys may have been hired to facilitate a business decision does not mean that such a decision was devoid of legal consequences.” Because EDS hired the outside lawyers to contribute legal expertise, including contract interpretation, risk evaluation, witness interviews, and evidence evaluation, the communications between them were “for the rendition of legal services.”
The question on the table here is how much as a corporation do you want to cooperate to prosecute the employee? It may make sense as a corporation to waive some rights to help recover your losses. How you architect a process for engaging outside counsel, independent investigators and fraud examiners in order to mitigate Legal Risk is crucial. The information exchanged, obtained in the process and communicated between parties must be done correctly. Not only to protect the information under the new Federal Rules of Civil Procedure but to insure the integrity and trust of the information itself.7/12/2007--Introduced.Attorney-Client Privilege Protection Act of 2007 - Amends the federal criminal code to prohibit any U.S. agent or attorney, in any federal investigation or criminal or civil enforcement matter, from demanding, requesting, or conditioning treatment on the disclosure by an organization (or affiliated person) of any communication protected by the attorney-client privilege or any attorney work product.Prohibits a U.S. agent or attorney from conditioning a civil or criminal charging decision relating to an organization (or affiliated person) on one or more specified actions, or from using one or more such actions as a factor in determining whether an organization or affiliated person is cooperating with the government.
A Board of Directors that oversees the governance of hundreds or thousands of employees is going to be continuously subjected to corporate malfeasance and white collar crime matters. The rule of law within the halls of the organization must be clear and precise. The mechanisms for the company to cooperate with investigators may mean the difference between an employee that creates irreversible economic damage to the enterprise or even worse. Our national security.