It’s a simple fact of government investigations: If a company cooperates with prosecutors and gives them the information they want, the prosecutors remember that when the time comes to decide on indictments, sentences, fines, or other penalties.
That gives companies powerful incentive to procure as much information about possible wrongdoings as possible, including information gleaned from interviews with employees—who may well put themselves in personal legal jeopardy by answering the company’s questions.
Enter the Upjohn Warning.
Also known as “corporate Miranda warnings,” corporate lawyers invoke the warning to remind employees that the lawyer works in the best interests of the company, not them. What that employee might say, including any incriminating statements, isn’t protected by attorney-client privilege and may well wind up in a memo to the local U.S. attorney’s office.
“The purpose is to make sure the company is free to use whatever information it gets from the employees, and that they don’t think it is covered by attorney-client privilege,” says David Brodsky, a former federal prosecutor and now a partner at the law firm of Cleary Gottlieb Steen & Hamilton.
The legal theory behind Upjohn Warnings is sound. The practice of delivering them at the right moment, however, is more art than science. Give the warning too soon, and spooked employees might clam up rather than give useful information. Give the warning too late, and the company might risk a lawsuit from the employee alleging that it should have warned him his statements weren’t protected.
The issue is especially critical these days given the soaring popularity of settlements between companies and the Department of Justice, Securities and Exchange Commission, and other enforcement agencies, rather than drawn-out prosecutions. Cooperating with regulators is much more in vogue, so getting information from employees—and having control over who gets to hear that information—is a much more vital task.
“In today’s enforcement climate, where a corporation may be compelled to make disclosures to the government, attorneys must approach employee interviews in a manner that protects the corporation’s control of the attorney-client privilege and the corporation’s control of the disclosure option,” notes a recent legal bulletin from the law firm King and Spalding.
“If you don’t give the warning, the courts under the right circumstances may recognize [the employee] shares in the privilege, and can therefore block the disclosure of the communication.”
— Tim Treanor,
Upjohn Warnings arose from the Supreme Court’s 1981 decision Upjohn v. United States
. The court ruled that the attorney-client privilege between a company and its counsel also protects communications between counsel and the company’s employees. The warnings are usually given when counsel speaks with an employee the first time about some questionable matter, to assure no misunderstanding that the privilege rests with the company, which might waive it at any time to placate regulators.
“When a company conducts an investigation, it wants control of all information,” says Tim Treanor, a partner at the law firm Sidley Austin who often handles internal corporate investigations.
Treanor says the warnings are often given orally, although he likes to present employees with a warning on paper. “It is harder to show you gave the warnings if they were not in writing,” he says.
An Upjohn Warning should state that the lawyer represents the corporation and not the individual employee; the interview is covered by the attorney-client privilege, which belongs to and is controlled by the company, not the individual employee; and only the company may decide whether to waive the privilege and disclose information from the interview to third parties, including the government.
“If you don’t give the warning, the courts under the right circumstances may recognize [the employee] shares in the privilege, and can therefore block the disclosure of the communication,” Treanor says. That, in turn, could leave regulators none too pleased that they don’t have the information they were expecting.
Such a scenario almost happened to AOL Time Warner earlier this decade. In 2001, AOL launched an internal investigation into its relationship with PurchasePro and interviewed at least three AOL employees. Both AOL’s outside counsel and its own top in-house lawyer, Randall Boe, warned the workers that while their conversations were privileged, AOL could waive the privilege at its discretion.
In several conversations, however, Boe also indicated to the employees that he and outside counsel “could” represent the employees as well, “as long as no conflict appeared.”
That was all the wiggle room necessary for a court fight. The three individuals tried to quash a subsequent grand jury subpoena for documents related to an internal investigation by AOL. They argued in federal court that the subpoenaed documents were protected by attorney-client privilege.
A district court judge ruled against the employees in 2005, and a federal appeals court upheld that decision later in the year. “The investigating attorneys’ statements to the appellants, read in their entirety, demonstrate that the attorneys’ loyalty was to the company,” the appeals court wrote. “That loyalty was never implicitly or explicitly divided.”
But the ruling came with a caveat. The court noted that its opinion should not be read as an implicit acceptance of what it said were “watered-down” Upjohn warnings that AOL’s attorneys gave to the employees. “It is a potential legal and ethical mine field,” the court added.
In recent years, corporate lawyers have also begun warning employees that if they provide false information, they could be prosecuted if the erroneous information is turned over to prosecutors. “It is like lying to the U.S. attorney,” Brodsky says.
That policy stems from a case in 2004, when the Justice Department charged two former executives of Computer Associates (now CA) with securities fraud conspiracy, obstruction of justice, and conspiracy to obstruct justice. The obstruction charges resulted from the government’s contention that the defendants purposefully misled investigating counsel, with the hope that Computer Associate’s lawyers would then give that false information to the government.
“As a result of the Computer Associates case, some attorneys have begun to include a statement in their Upjohn Warning that employees may be prosecuted for misleading an internal investigation,” according to the King & Spalding bulletin.
Of course, delivering an Upjohn Warning has its downside. It could increase the tension between the company and its employees, who may then become intimidated and say little or nothing. The employee may then ask that his own attorney be present for the discussion, which could further complicate the interview.
Even so, lawyers stress that delivering Upjohn Warnings are vital before each and every interview. “The consequences could be worse than not getting the information,” Treanor says.