When Does a Corporate Officer or Employee Need Separate Counsel?
It is a profound grasp of the obvious to state that internal investigations are risky. There are so many things that can go wrong when conducting an internal investigation. I am biased and believe that former federal prosecutors are fully capable of navigating these risks. They have experience in conducting investigations, interviewing witnesses, reviewing evidence and assessing the facts in a case.
The value of an internal investigation depends on avoiding serious risks. If a mistake is made, the internal investigation will have no value and provide no protection to the company. One key area of concern is demonstrating to the government (or other audience) that the investigation was conducted fairly and without any potential conflict of interest.
This issue comes up in one significant way when corporate investigators deal with officers and employees who are suspected of wrongdoing. Outside counsel are retained by the company to conduct an independent investigation of the facts. Counsel’s client is the company.
In most cases, there are individual board members, officers and/or employees who are the focus of the investigation. Company counsel cannot represent any of the individual board members, officers or employees without creating a significant risk. If a conflict develops where the interests of the individual are adverse to the company, counsel may have to withdraw from representing both the company and the individual.
Investigating counsel is required to inform each witness that the investigating counsel represents the company and does not represent the employee. This information is included as part of the so-called Upjohn warnings. An employee can then hire his or her own counsel. This is a straight-forward issue and is routinely handled when conducting interviews.
The situation becomes more difficult when a corporate counsel has information suggesting that an individual may have violated the law and/or company policy, or an individual may be the subject of allegations made by another person or whistleblower.
While knowing this information, can corporate counsel interview the individual and provide Upjohn warnings or should the corporate counsel advise the individual that he or she needs separate counsel (which the company may pay for)?
The answer may depend on the threshold “amount” of information known by corporate counsel. A suspicion or a mere allegation is not sufficient to trigger a referral. However, if corporate counsel already has substantial evidence of wrongdoing by the individual, corporate counsel may refer the individual to separate counsel.
Some corporate investigators would conduct an initial interview of the individual even when they have substantial information of wrongdoing. If the individual affirms some of the wrongdoing or significant facts of the wrongdoing, corporate investigators will advise the individual of the need for separate counsel after the interview. Some corporate investigators would not conduct the initial interview because of the substantial independent evidence of wrongdoing. This is a judgment call which depends on a number of factors including the role of the individual in the alleged misconduct, the likelihood that the investigation will lead to a disclosure to the government and review of the investigation.
The calculation is much different if the issue of joint representation comes up in the context of a government investigation. If the government issues a subpoena to an individual, corporate counsel should not represent the individual before the government because of the significant risk that such joint representation could lead to a conflict which requires corporate counsel to withdraw from representation of both the company and the individual.