Courts agree that bankruptcy trustees control bankrupt companies' attorney-client privilege. It is easy to underestimate this basic principle's strength.

In SEC v. Present, Civ. No. 14-14692-LTS, 2015 U.S. Dist. LEXIS 170245 (D. Mass. Dec. 21, 2015), the court dealt with the SEC's investigation of F-Squared and its co-founder and CEO Howard Present. When the SEC began investigating F-Squared in 2013, its CEO Present refused the SEC's request to waive the company's attorney-client privilege. Then the company went bankrupt, and the SEC sued Present himself. He pleaded advice of counsel as an affirmative defense, and subpoenaed supporting documents from the company he had founded and led. But now in the hands of a bankruptcy trustee, the company moved to quash Present's subpoena. The court granted the motion to quash, noting that "[b]oth as the CEO and a sophisticated businessman, [Present] necessarily understood that F-Squared, rather than he, personally held the keys to attorney-client privilege." Id. at *9. Adding insult to injury, the court noted that Present could have arranged for the company's waiver while he was CEO before the bankruptcy, but "[h]e chose not to do so." Id. at *10.

Corporations, their CEOs, and their lawyers should always keep their eye on the ball — and know who owns the corporation's privilege and when that ownership might change.