FCPA Compliance and Ethics Blog

March 3, 2015

The Parameters of the Attorney/Client Privilege and Grinding it out with Anthony Mason

Filed under: Attorney-Client Privilege,PetroTiger — tfoxlaw @ 12:01 am

Anthony MasonThere were two notable deaths over the weekend from the sports world. The first was Anthony Mason and the second Minnie Minoso. Today, we celebrate the life of Anthony Mason. Mason was a part of the Patrick Ewing-led New York Knicks who played against the Houston Rockets for the 1994 National Basketball Association (NBA) Championship. Mason was not the star but for me, he was the workhorse of a grind-it-out style of basketball popular in those days. Mason was not fancy or flashy or the most talented player on the team. But he always seemed to be the guy who got the job down, doing the spadework of slogging away in Pat Riley’s offense. He died way too young at only 48 of congestive heart failure but he symbolized a Knicks team that was on the verge of greatness, largely because of the size of his defective heart. I am sure he is banging way, getting rebounds in the Basketball Court of Dreams wherever he is now.

Mason’s style of play seems to be a good introduction to my topic today –attorney/client privilege. The upcoming trial of former PetroTiger co-Chief Executive Officer (co-CEO) Joel Sigelman has brought this issue to the fore again recently. As part of its undercover operation the FBI wired up the PetroTiger General Counsel (GC), Gregory Weisman, and instructed him to go meet with Sigelman to discuss the payments by the company to the wife of an official of the Columbian state owned energy company Ecopetrol.

Sigelman’s counsel sought to have the video and audio recordings of this meeting suppressed based upon the attorney-client privilege that generally protects open communications between lawyer’s and their clients, where legal advice is sought by the client. To determine whether Sigelman has a valid claim, it is encumbent to understand the parameters of the attorney/client privilege. In an article, entitled “The Evolving Attorney-Client Privilege: Business Entities”, David E. Keltner wrote that under US federal law, the attorney/client applies when the following are present:

  1. A client is seeking legal advice or a lawyer’s services;
  2. The person to whom the communication is made is a lawyer or his or her representative;
  3. The communication relates to a fact disclosed from a client (a representative) to a lawyer (a representative);
  4. Strangers are not present;
  5. A client requires confidentiality.

The significance of meeting each of these five prongs is critical. If they are met, “Absent privilege, once the attorney-client privilege is properly invoked – the privilege is absolute.” However the failure to meet Prong 1 is what doomed former co-CEO Sigelman’s efforts; he was not seeking legal advice. It was former GC Weisman who flew to Sigelman’s home to confront him over the fact that the FBI had come to his house asking questions about the payments made in Columbia. Finally, it is important to note that the attorney/client privilege belongs to the corporation and not to any one individual.

Neither Sigelman nor Weisman tried to claim another related, yet different privilege; the attorney/work product privilege. In his article, Keltner noted, “The attorney-client privilege and the attorney work-product doctrine are often asserted interchangeably. While there is some overlap between the two, the attorney-client privilege is significantly different than the attorney work-product doctrine.” Moreover as “codified in Fed R.Civ. P. 26(b)(3), [the attorney/work product] provides a qualified protection to materials prepared by party’s counsel or other representative in the anticipation of litigation.” The doctrine exists “because it permits lawyers to “work with a certain degree of privacy, free from unnecessary intrusion by opposing parties . . .” Unlike the attorney-client privilege which belongs to a client, work-product immunity may be asserted either by the lawyer or the client. While the attorney-client privilege is included in the Rules of Evidence, the work-product doctrine is included in the Rules of Civil Procedure in the series relating to discovery.”

However the attorney/client privilege can be waived. While there is a general recognition that “only an authorized agent of a corporation may waive the privilege of the corporation” Keltner advises that the “most frequently encountered instances of losing the privilege through selective disclosure” are in responding to a government investigation; supplying information to a government agency; information disclosed in certain Securities and Exchange Commission (SEC) filings or other required financial disclosures; in certain circumstances disclosures to external corporate auditors or accounting responses; any disclosure made to a third party not affiliated with a lawyer; and insurance disclosures.

How should we apply the above to the situation faced by former co-CEO Sigelman? Was he simply meeting with his lawyer or was he seeking legal advice? As reported by Joel Schectman in the Wall Street Journal (WSJ), in an article entitled “Secret Informant Recordings to be Allowed in PetroTiger Case”, the trial court distinguished between having an attorney/client relationship from the attorney/client privilege. Schectman reported, “a judge in U.S. District Court in Camden said last week that merely having an attorney-client relationship isn’t enough to make all conversations privileged–a client needs to be actively seeking legal advice. “I cannot find a shred of indication that Weisman is there with the intention of giving legal advice to Sigelman,” Judge Joseph Irenas said, “or the converse, that Sigelman was seeking legal advice from Weisman.””

Indeed it appeared to Judge Irenas that it was the attorney asking the co-CEO what to do. Schectman wrote, “But Judge Irenas ruled that in the recorded December 2012 conversation, Mr. Sigelman was not seeking counsel from Mr. Weisman–if anything he was offering it. The FBI had come knocking on Mr. Weisman’s door, according to court documents, asking about suspicious payments and he came to Mr. Sigelman’s Miami apartment in a panic, asking what he should do. Unbeknownst to Mr. Sigelman, the former company counsel was secretly wearing a hidden camera on his body. Mr. Sigelman advised Mr. Weisman to calm down “regroup, go on vacation, collect yourself, come out [expletive] strong,” according to court documents. “Weisman says,” the judge, said paraphrasing the recording,” ‘I made these payments because you asked me to and suddenly I find the FBI is on my doorstep and I’m scared. What do I do?’ It isn’t Sigelman asking Weisman for advice, it’s quite the reverse. It’s Weisman asking Sigelman for advice and Sigelman giving advice.””

Interestingly the trial court did not opine on the question on who was the client in this situation. My experience is that most CEO-types think of a GC as their personal lawyer. However that view is also misplaced as a GC works for a company and the client is the corporation. While he did not have to reach the question of who was the client in the Sigelman/Weisman meeting, the trial court might well have allowed the current corporate owners of PetroTiger to waive any privilege asserted by a former co-CEO. Schectman quoted G. Derek Andreson, a lawyer specializing in the Foreign Corrupt Practices Act, that “Attorney client privilege is often misinterpreted as broader than it is.”

Did the FBI take advantage of some special type of relationship between Sigelman and Weisman? As reported in the article, in his brief attempting to suppress the evidence, Sigelman’s counsel said, ““Messrs. Sigelman and Weisman had a “long standing attorney-client relationship, one that fostered candor and trust between them–as any good attorney-client relationship should. The government took advantage of this trust.”” However that would seem to be the nature of wiring up cooperating witnesses; if they cannot engender trust with those they are speaking to and surreptitiously taping; it would seem they are of little use to authorities.

I often say that bad cases make bad law. The Sigelman assertion of attorney/client privilege is not one of them. As Mike Volkov has written in a wider review of the assertion of the attorney/client privilege, “The courts have responded with real antagonism to this over-assertion, or slap-happy, privilege claims. The courts are frustrated when they look behind these broad claims and find no basis whatsoever for a privilege claim, especially when it comes to compliance-generated information. Defense counsel also have routinely claimed privilege over emails which have an attorney cc’d but the purpose of the communications had nothing to do with seeking legal advice. As can be seen from a number of important trial judge decisions, defense counsel are losing credibility rapidly with their broad privilege claims.”

Just as Mason did the hard work in Riley’s grind-it-out offense; for the attorney/client privilege to be of use to you, certain hard work must be done to establish the attorney/client privilege in the corporate context. The five prongs listed by Keltner must be fulfilled for the privilege to apply. Simply having a chat with your lawyer or even the company’s lawyer will not invoke the privilege or protect you.

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This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2015

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