Corporate Miranda Warnings

Ashish Joshi, Esq.Sarah Vasquez, MPH

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Outline

1. What are Upjohn warnings?

2. What do they entail?

3. Examples

4. Top tips for in-house counsel conducting an internal investigation

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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.

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What does a Corporate Miranda Entail?

At a bare minimum, the Warning admonishes the employee that:

1.Counsel represents the corporation and not the employee2.Communications between the employee and counsel will be privileged3.This privilege belongs to the corporation and the corporation alone can waive it

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Some Guideposts…

1. 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!

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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

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Some Guideposts…

3. Inform employees of the purpose of the interviews – for example:

a.The government is conducting an investigation

b.The subject of the investigation is ______

c.Counsel has been retained to provide advice to the company in this matter

d.The interview is necessary for company counsel to get the info necessary to give appropriate advice to the company

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Some Guideposts…

4. Give the Corporate Miranda warning BEFORE

commencing the interview!

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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

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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

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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

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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.)

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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

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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 14

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.

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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)

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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

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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

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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

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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

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Broadcom: the implications

• I & M committed at least three clear violations of its duty of loyalty to Ruehle:1. I & M had a duty to disclose the potential

conflict of interest and obtain written consent

2. I & M breached its duty of loyalty to Ruehle by interrogating him to benefit another client

3. I & M disclosed privileged communication without his consent

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Broadcom: the upshot

Judge Carney referred the firm to the State Bar of California for appropriate

discipline.

Don’t let this happen to YOU!

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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)

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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

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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

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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

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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.

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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

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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

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Contact Information

Ashish S. JoshiLorandos & Associates214 N. Fourth Ave.Ann Arbor, Michigan 48104Direct: (734) 637-7112a.joshi@lorandoslaw.com