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The Incredible Shrinking Privilege

By Laurence A. Urgenson and Audrey Harris

The headlines reporting multi-million dollar corporate guilty pleas often miss a point widely understood among white-collar practitioners: The driving force behind the corporate plea is often not the merits of the government's charge, but the corporation's need to reach a global settlement resolving administrative and criminal sanctions that could put the company out of business. Considering the role of prosecutorial discretion and the draconian consequences of a corporate conviction, corporations often have little choice but to plead guilty and cooperate with the government. Recently, the feds have raised the ante in this process by defining “cooperation” to include waiving the attorney-client privilege. Thus, corporations and counsel alike are forced into a Hobson's choice where at least partial waiver may be inevitable. Waiver law in the majority of circuits is stark – disclosure to the government is waiver as to third parties, at least as to the material disclosed. Therefore, the civil plaintiff that inevitably follows the government's investigative path finds fertile fodder in otherwise privileged, confidential, and often sensitive corporate documents that, but for the government's disclosure requirement, would be protected by privilege.

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