Challenges to Privlege Examined by Panel

Mark A. Thornhill
mthornhill@spencerfane.com
Spencer Fane Britt & Browne LLP
Kansas City, Missouri

A whistle-blower appears at the United States Attorney's office ready to tell the story of his employer's environmental crimes and efforts to cover them up. However, there is a hitch: the whistle-blower has his scoop only because he served on an internal investigation team under the direction of the employer's counsel. The prosecutor is concerned that the whistle-blower's information is privileged and that any case built on the information could be in jeopardy. So, the prosecutor looks for a way around the privilege issue, including invoking the "crime-fraud exception" to erase any valid privilege claims the employer might present.

Prosecution and defense strategies based on this hypothetical were the focus of a program presented by the Environmental Crimes and Enforcement Committee at the 9th Section Fall Meeting in St. Louis in October. The program was moderated by former Committee Chair Jane Barrett, a partner at Dyer, Ellis and Joseph in Washington, D.C. The prosecution and defense issues were discussed by panelists Daniel Stewart, a veteran environmental crimes prosecutor and chief of the general crimes section of the United States Attorney's Office in Kansas City; Michael Levy, a partner at Washington, D.C.'s Swidler, Berlin, Shereff, Friedman, LLP; Robert Brager, a partner at Washington, D.C.'s Beveridge & Diamond, P.C.; and Mark Thornhill, a partner at Spencer Fane Britt & Browne LLP in Kansas City. The program was one of the most popular sessions offered at the Section Fall Meeting, attended by a standing-room-only crowd. Also, as part of the program, speakers presented a paper about the crime-fraud exception that described the law controlling the exception and practical aspects of litigating the exception.

Stewart led off the panel discussion. He said the crime-fraud exception should eliminate otherwise valid privilege claims related to any on-going criminal cover-up. Stewart claimed he could debrief the whistle-blower at least as to the cover-up and use that information as the spring-board in a grand jury investigation that would probably result in non-privileged information regarding the underlying crimes. In a spirited discussion, the defense lawyers challenged Stewart's position. They argued that the whistle-blower's story about a cover-up could not be divorced from the story of the underlying crimes and that the crime-fraud exception could not peel the privilege away from the whistle-blower's information about the underlying crimes. The defense lawyers also claimed that the prosecution would not be successful in efforts to subpoena the internal investigation report. According to the defense lawyers, the report was a privileged document which did not lose privileged status by virtue of its discussion of completed crimes.

The panelists also discussed circumstances in which lawyers, both inside counsel and outside counsel, could be named as witnesses or even indicted due to their environmental counseling activities. This last topic was not merely hypothetical: Levy and Brager were involved in last year's Koch Petroleum case where inside counsel was indicted and Thornhill represented outside lawyers in a long-standing grand jury investigation of a western United States gold mine. In the Koch Petroleum and grand jury matters, the government invoked the crime-fraud exception in an effort to discover otherwise attorney-client privileged information. The government increasingly invokes the crime-fraud exception as a basis for discovery of lawyers' files. Government lawyers have argued that the files are likely to contain valuable evidence, incriminating at least the lawyers' clients and, in some instances, the lawyers themselves. By invoking the crime-fraud exception, the government claims that a lawyer's files lose the protection of the attorney-client privilege and work product doctrine to the extent the files reflect that the client consulted the lawyer for assistance in committing a crime or covering up a past-crime. The panelists explained that the threat of a crime-fraud argument is particularly acute for lawyers who give ongoing advice to clients facing recurrent regulatory problems, such as environmental lawyers. Such advice can be construed by prosecutors as an act of conspiracy or cover up by the lawyer. From a prosecutor's perspective, Stewart explained that no Justice Department initiative exists to use the crime-fraud exception to target lawyers as criminal defendants. The defense lawyers, however, noted examples, including the Koch Petroleum case and a Medicare fraud case in Kansas, where the crime-fraud exception led to indictment of lawyers.