In the recent Walmart enforcement action, the DOJ’s NPA states that the company received “full credit” for its cooperation with the DOJ “into conduct in Brazil, China, and India and partial cooperation credit for its investigation into conduct in Mexico.”
The NPA further states: “the Company received partial credit for the conduct in Mexico because, in the view of the DOJ, Walmart did not timely provide documents and information to the DOJ in response to certain requests and did not deconflict with the DOJ’s request to interview one witness before the Company interviewed that witness.”
It would appear that the DOJ’s decision was based, in least in part, on this June 2018 Fourth Circuit decision in which the court, interpreting an agreement that the DOJ drafted, ruled against the DOJ. If true, it is disturbing that the DOJ would penalize a company for making legal arguments that were upheld by an appellate court.
The June 2018 Fourth Circuit decision begins as follows:
“Appellant corporation (“X Corp.”) and the Government dispute whether a written agreement between them preserved X Corp.’s attorney-client privilege and work-product protection for information that the General Counsel of an X Corp. subsidiary disclosed to the Government. We hold that it does.
Several years ago, the U.S. Attorney’s Office for the Eastern District of Virginia and the Fraud Section of the U.S. Department of Justice (collectively the “Government”) opened a grand jury investigation into whether X Corp. and its subsidiaries violated certain federal laws. To facilitate the investigation, X Corp. entered into a series of written agreements with the Government, permitting employees of X Corp. and its subsidiaries to share with the Government information protected by attorney-client privilege and work-product protection. The Department of Justice (DOJ) drafted the agreements, all of which are materially the same. Under these agreements, the Government obtained documents and interviewed eighteen current and former employees.
One such agreement (the “Agreement”), at issue here, specifically allowed the Government to interview the former General Counsel (“Doe”) of an X Corp. subsidiary. The Agreement acknowledged that during the interview, Doe “might disclose privileged or protected information . . . defined herein as `Protected Information.'” The Agreement’s three operative paragraphs read as follows:
Please be advised that, to the extent any Protected Information is provided to the Fraud Section or EDVa pursuant to this agreement, [X Corp. and its directors] do not intend to waive the protection of the attorney work product doctrine, attorney-client privilege, or any other privilege.
The Fraud Section and EDVa will maintain the confidentiality of any Protected Information provided to the Fraud Section and EDVa pursuant to this agreement and will not disclose such information to any third party, except to the extent that the Fraud Section or EDVa determines in its sole discretion that disclosure would be in furtherance of the Fraud Section’s or EDVa’s discharge of its duties and responsibilities or is otherwise required by law.
The Fraud Section and EDVa each agree that it will not assert that the disclosure of any Protected Information by [Doe] provides the Fraud Section or EDVa with additional grounds to subpoena other privileged materials from [X Corp. and its directors] or [Doe] although any grounds that exist apart from such disclosure shall remain unaffected by this agreement.
(We will refer to these paragraphs as “First Clause,” “Second Clause,” and “Third Clause” respectively.) Attached to the Agreement was a list of topics of “Protected Information” that Doe might disclose. The Government interviewed Doe pursuant to this Agreement, and Doe indeed disclosed privileged and protected information.
Years later, the Government subpoenaed Doe to testify before a grand jury about the same statements Doe made during the interview. X Corp. moved to intervene on the ground that the subpoena seeks privileged or protected information. The district court granted the intervention. X Corp. then moved for a protective order to quash the subpoena. Finding that the Agreement waived attorney-client privilege and work-product protection for Doe’s interview statements, the district court denied X Corp.’s motion. X Corp. timely appealed.”
As stated by the court: “the sole question is whether the Agreement here limited the effect that Doe’s disclosure otherwise would have had on X Corp.’s right to assert privilege against the Government, the other contracting party.” In pertinent part, the court held:
“Applying these principles, we conclude that the Agreement preserves X Corp.’s privileges as to the Government. Holding otherwise would require us to discount the plain language of the Agreement’s First Clause, which expressly reserves those privileges. The Government argues that, because the Agreement’s Second Clause permits the Government to share the information it received from Doe with third parties in carrying out its responsibilities, the First Clause cannot mean what it says. Instead, the Government contends, the First Clause provides a basis for X Corp. to assert privilege only against third parties. We find nothing in the Agreement or the law to support such a construction. While the Agreement permits the Government to use the information it obtained from Doe in its investigation of X Corp., it precludes the Government from compelling Doe to testify to that information in a judicial proceeding.”
The opinion concludes:
“Construing the Agreement to preserve X Corp.’s privileges also serves important policy considerations. Cooperation between private entities and the Government furthers the truth-finding process. Such negotiations “give potential defendants an opportunity to explain away suspicious circumstances, give the government an opportunity to avoid embarrassing and wasteful mistakes, and give the public a greater likelihood of a just result.” In re Keeper of Records, 348 F.3d 28 (1st Cir. 2003). Declining to hold the Government to the terms of an agreement it struck would discourage private entities from cooperating with the Government in the future.”
If the facts and circumstances described in the opinion are the reason, at least in part, that Walmart did not receive full cooperation credit, it is disturbing that the DOJ would penalize a company for making legal arguments that were upheld by an appellate court.
No doubt the DOJ would likely respond that it did not penalize Walmart, it merely declined to extend full cooperation credit. However, this is a distinction without a difference.
Incidentally, this is not the first time a court has ruled against the government as to an agreement relevant to an FCPA inquiry. As highlighted here, in dismissing the SEC’s FCPA (and related) charges against former Och-Ziff executives Michael Cohen and Vanja Baros a court ruled against the SEC as to the tolling agreements it drafted.
For an additional example of the DOJ penalizing a company in an FCPA inquiry for making legal arguments, see here.
FCPA Institute - Denver (May 4-5)
A unique two-day learning experience ideal for a diverse group of professionals seeking to elevate their FCPA knowledge and practical skills through active learning. Learn more, spend less. CLE credit is available.