YourABA July 2012 Masthead

Expert advice to better manage
internal investigations

Internal investigations have become a pervasive topic, particularly in the post-Enron era. They are a “growing part of life for those of us who are inside and outside counsel in pretty much any sector of the economy,” says William Horton, a partner at Johnston Barton Proctor and Rose LLP.

Horton moderated the American Bar Association's CLE, “Who Watches the Watchers?: Legal Ethics Challenges in Internal Investigations,” sponsored by the Criminal Justice Section and the Center for Professional Responsibility.

Internal investigations can pose difficult ethics challenges for lawyers, Horton says, including the question: Who is the client? For example, “Are you representing the parent or the subsidiary?” Horton asks. “What happens if you are representing one entity and you discover that there are issues with another corporate entity? Look to the rules in your state with respect to representing an organization as a client.”

And consult your engagement letter, Horton says. Perhaps in its terms, spell out that you also “represent the 300 entities listed on exhibit A” of the letter. Lisa Taylor, founding partner of Inglesino, Pearlman, Wyciskala & Taylor LLC, recommends handling a subsidiary in a separate engagement letter.

Another potential pitfall: when you learn about something your client did that violates your state's ethics rules, but you don't learn about it from your client. “If you got the information from someplace other than your client, it wouldn't be covered under attorney-client privilege,” Taylor says. “You as a lawyer have an obligation not to commit a fraud on the tribunal.” For instance, you can't present your client as injured if you have discovered that he or she is not.

A situation that arises frequently is that people talk to you about something they think is privileged when you haven't created the basic attorney-client privilege with them, Taylor says.

This occurs often in the context of internal investigations, Horton says. “If you're the lawyer conducting the investigation and the client is an organization for which you already do work, then you're going to be interviewing the people you interact with every day,” he says.

In that case, it's important to wear “your lawyer hat for the corporation and that you're not Lisa who helped Joe when he had some personal problems. This does have a chilling effect on Joe when you say ‘I'm not going to be representing you,' and anything you say could be used against you,” Taylor says. “Your efficacy as a lawyer in the investigation itself is very much tied to the willingness of the corporate constituents who talk to you.”

Many clients mistakenly believe that everything they say in a lawyer's presence is covered under attorney-client privilege, says Philip Pomerance, chief operating officer and general counsel of Best Practices Inpatient Care.

As a lawyer, your obligation is to give a corporate Miranda warning: a statement to the person saying that “I don't represent you,” and that the investigation will turn over results to the government, Horton says.

In practicality, “everybody should be advised to have a lawyer because the company will feel pressure to waive privilege and to tell the government who it thinks violated rules and regulations, and effectively throw people under the bus,” says Michael Clark, special counsel for the Houston office of Duane Morris LLP.

Access the CLE here.

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