Attorney-client privilege in fraud suits at risk.

• Author: Fontana, James C.
• Position: Ethics Corner

Government contractors typically maintain ethics compliance programs, which are mandated by the Federal Acquisition Regulation and are part of the industry's best practices. Central to these programs are internal investigations to detect and determine the extent of unlawful conduct, to include fraud relative to a government contract, which may, if appropriate, require timely disclosure of improper conduct.

Strict confidentiality is essential to any effective internal investigation, to include all interview notes, witness statements, investigation reports and other communications between a contractor and its legal counsel. Generally speaking, the attorney-client privilege--protecting an attorney's communications providing legal advice to its client--and the attorney-work product doctrine, which protects attorney-generated documents prepared in anticipation of litigation, will allow a contractor to keep such documents confidential.

However, in March a federal judge found that because a contractor's internal investigation was led by in-house counsel and involved the use of non-lawyer personnel to conduct interviews, the attorney-client privilege did not apply. The good news is that in June a U.S. Court of Appeals completely rejected that judge's conclusion, thereby preserving the privilege.

The trial and appellate decisions illustrate the importance of conducting internal investigations and taking the correct steps to protect communications between attorney and client from disclosure.

By way of background, in U.S. ex rel. Barko v. Halliburton, Case No. l:05-CV-1276 (March 6, 2014), the federal district court for the District of Columbia ordered Kellogg Brown & Root to produce whistleblower plaintiff documents that the company generated during its internal investigations of the alleged fraudulent activity complained of by the whistleblower, ruling that these materials were not protected under either the attorney-client privilege or attorney-work product doctrine.

The court explained that KBR's investigations, although following its code of business conduct's procedures, "were undertaken pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice." Thus the attorney-client privilege did not apply. The court also viewed the investigation reports as generated in the ordinary course of business rather than for anticipated litigation, thereby rendering the work product doctrine also inapplicable. Critical to...