Keith Krakaur and Ryan Junck, Skadden, Arps, Slate, Meagher & Flom (UK) LLP

This is an extract from the third edition of GIR's The Practitioner’s Guide to Global Investigations. The whole publication is available here

Upjohn warnings

Before any substantive questioning begins, interviewers should introduce themselves to the witness and provide a background on the general subject matter of the investigation. During this introduction, a lawyer interviewing witnesses in the United States or witnesses connected to an actual or potential proceeding in the United States should always provide an Upjohn warning.

In summary, an Upjohn warning should inform the interviewee of the following: that the interviewers have been retained by the company (or other engaging entity such as the audit committee) to provide legal advice to the company in connection with the matter under investigation and do not represent the witness individually; that the interviewers are gathering facts related to the topic of the investigation for the purpose of providing legal advice to the company; that the investigation is protected by the attorney–client privilege and the attorney work-product doctrine; that the witness should keep the conversation confidential to preserve these privileges by not disclosing the substance of the interview to any third party, whether inside or outside the company; that the privilege belongs to the company; and that the company can waive the privilege at any time and decide to disclose the privileged information to third parties without the consent of the interviewee.

The note-taker should carefully document the Upjohn warning and related statements given to the witness in both the interview notes and the interview memorandum. Counsel may consider using a written Upjohn warning to reduce the risk of later disputes; however, this is not a common practice as a written warning may have a chilling effect on the witness. Counsel should ensure that interviewees acknowledge that they understand what has been explained to them during the Upjohn warning.

Importantly, the Upjohn warning informs a witness that no personal attorney–client relationship exists between the interviewer and the witness. This distinction is important to avoid potential conflict of interest issues that may arise if the witness later claims that the interview created an attorney–client relationship resulting in a privilege that belongs to the witness. In some instances, it may be appropriate to further advise interviewees in an internal investigation about the possibility that false statements made in interviews with the company’s counsel could result in obstruction-of-justice charges.

Although Upjohn is not authoritative law outside the United States, providing an Upjohn warning at the start of witness interviews remains a best practice globally. For example, the Paris Bar Council has issued guidance instructing French counsel to inform interview witnesses before any interview that (1) the external counsel represents the legal entity, not the witness or any other individual and (2) the discussion is covered by the ‘client–attorney privilege’, which belongs exclusively to the legal entity, as opposed to the individual, and means that the entity can choose to share the substance of the interview with third parties, including regulators or prosecutors.

Use of confidentiality agreements

Confidentiality agreements may violate the whistleblower protection provisions of the Dodd-Frank Act regulations if they contain clauses that restrict employees from disclosing violations of law or regulations to the US government. This issue presented itself in a 2015 SEC enforcement action where the company required employees to agree to or, in some cases, sign a form confidentiality agreement during internal investigations that contained the following clause:

I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during the interview, without prior authorization of the Law Department. I understand that unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.

The SEC held that this provision violated SEC Rule 21F-17, which prohibits a company from taking ‘any action to impede a whistleblower from communicating directly’ with the SEC about a securities violation, ‘including enforcing, or threatening to enforce, a confidentiality agreement’. It was irrelevant to the SEC’s determination that it was unaware of any instance in which the confidentiality statement prevented any employee from reporting a possible securities law violation to the SEC or that it was unaware of any instance in which the company sought to enforce the confidentiality statement to prevent an employee from reporting an alleged violation. The cease-and-desist order made clear that the confidentiality statement alone constituted a violation of Rule 21F-17. As a consequence, the company agreed to pay a US$130,000 fine and it amended its confidentiality agreements to inform employees that nothing in the company’s confidentiality agreements prohibits them from reporting possible violations of laws or regulations.

Recently, the SEC found that a company improperly required employees to waive their claim to any incentives for reporting misconduct under Dodd-Frank as a precondition to receiving severance packages. Although the company voluntarily ended this practice prior to the SEC’s investigation, the SEC nonetheless levied a US$340,000 fine. In another matter, the SEC found that a company violated the whistleblower provisions by entering into a separation agreement with a former employee of a subsidiary, who had raised concerns about potential Foreign Corrupt Practices Act (FCPA) violations, which prevented the employee from communicating with the SEC by threatening a substantial fine for violating non-disclosure terms. To settle the SEC allegations related to FCPA and whistleblower protection violations, the company agreed to pay approximately US$3 million in disgorgement and interest, plus a penalty of just over US$3 million. The company also amended its separation agreements that imposed confidentiality restrictions to state:

I understand and acknowledge that notwithstanding any other provision in this Agreement, I am not prohibited or in any way restricted from reporting possible violations of law to a governmental agency or entity, and I am not required to inform the Company if I make such reports.

Preserving attorney–client privilege when non-attorneys or in-house counsel conduct witness interviews

When non-attorneys conduct witness interviews, those interviews are not, generally speaking, privileged. Some legal precedent in the United States, however, suggests that witness interviews conducted by non-attorneys may be protected by the attorney–client privilege where the interviews were authorised by and conducted under the direction of the company’s in-house or external counsel. Ideally, any witness interview would be conducted directly by an in-house or outside lawyer. If, however, in-house counsel direct non-attorneys to conduct witness interviews, they should ensure that they closely supervise the non-attorneys’ activities and document that their activities are performed for the purpose of providing legal advice to the company. In-house counsel should become involved early in the assessment and investigation of allegations to define the scope of the investigation and provide direction on the interviews and document reviews to be conducted.

Even interviews by in-house counsel may be deemed non-privileged if such counsel are viewed as acting in a business rather than a legal capacity. Additionally, some US courts have not extended the attorney–client privilege to communications with non-US in-house counsel located in jurisdictions that do not require them to be licensed attorneys, or where local laws do not apply the attorney–client privilege to such communications.

When feasible and appropriate, a company should consider using external counsel to direct an investigation and conduct witness interviews. There is a greater likelihood of maintaining privilege protections in interviews conducted by external counsel because they are more likely to be viewed by courts as conducting an investigation for the primary purpose of providing legal advice, as opposed to in-house counsel, who often operate in a business capacity in their daily functions.

Addressing witness questions during the interview

It is common for witnesses to ask questions about the Upjohn warning, including whether they should retain a lawyer, whether they will be fired or disciplined if they do not co-operate and whether their employer will be informed of what they say during their interviews. Interviewers should anticipate such questions and consult with in-house counsel in advance of the interviews to develop a strategy for addressing these issues. In response to these questions, interviewers should explain that the employee is free to obtain personal legal advice but that the interviewer cannot advise the employee on whether to retain a lawyer since the interviewer does not represent the employee. Interviewers should also be prepared to explain the company’s policy on co-operation with internal investigations if the policy requires employees to co-operate. Lastly, where employees ask whether their employer will be informed, interviewers should explain that, as attorneys for the company, they are required to report their findings to the client. Interviewers should also be careful to explain that the information gathered during the interviews belongs to the company and can be shared by the company with third parties such as enforcement authorities.

Witnesses may also ask to obtain, review or revise any interview notes or memoranda summarising the interview, and local law in some jurisdictions outside the United States may require the interviewers to produce this information. Under US law, companies generally are not required to provide interviewees with copies of interview memoranda summarising their interview. Interviewees also do not have a right to revise or correct interview notes.

If interviewees request some form of employment or legal protection before agreeing to be interviewed, companies should consider the applicability of local laws, which may curb a company’s ability to grant protection or provide assurance that the interviewees will not be dismissed. Companies should not agree that an interviewee’s conduct or statements will not be reported to government authorities when deemed appropriate by the company. Neither should a company agree to give protection from disciplinary protection for conduct it does not know about or in relation to facts not yet fully investigated or understood.

Counsel for employees involved in government investigations may also seek to enter into a joint defence or common interest agreement with counsel for the company or other employees. Such agreements may help to protect information that counsel choose to communicate with each other and prevent disclosure of communications among the parties to the agreement.

Witnesses may also seek to rely on the privilege against self-incrimination and refuse to answer certain questions. In the United States, the Fifth Amendment’s protection against self-incrimination generally does not apply in employee interviews conducted by a private employer. A private employer is seen as a non-state actor when the interview is conducted in pursuit of the employer’s own duties or interests, and any sanction resulting from an employee’s failure to sit for the interview is imposed without government pressure. This means an employer can take disciplinary action against an at-will employee for refusing to co-operate with an internal investigation. However, in some jurisdictions outside the United States, employees may refuse to respond to questions if they believe the answers would incriminate them.

Protection for potential defendants may also be subject to differences in substantive laws and jurisdictional limitations. For example, in the recent United States v. Allen case, the US Court of Appeals for the Second Circuit reversed the convictions of two UK-based traders, Anthony Allen and Paul Conti, charged with manipulating the London Interbank Offered Rate (LIBOR) because the US government sought to use their testimony provided in compelled interviews with the UK Financial Conduct Authority in the US criminal case. In this case, the US Department of Justice (DOJ) and the UK Financial Conduct Authority (FCA) had carried out independent investigations of the LIBOR submissions process at Rabobank, where Allen and Conti worked. The FCA conducted compelled interviews of Allen and Conti, and a third trader without the DOJ’s involvement. Later, the FCA sent transcripts of the interviews to the third trader’s attorney. The third trader reviewed the testimony and later became a co-operating witness in the DOJ’s investigation. He told the DOJ a different story from the one he had previously told his FCA interviewers. The DOJ sought to rely on the third trader’s account to indict Allen and Conti. On appeal, the Second Circuit dismissed Allen and Conti’s convictions and remanded the case with instruction to dismiss their indictments. The court held that the Fifth Amendment’s protection against self-incrimination applies in American courtrooms ‘even when the defendant’s testimony was compelled by foreign officials.’ The court further emphasised that US authorities should ensure careful international coordination in multi-jurisdictional investigations to help avoid Fifth Amendment issues.

Practical considerations

After the interviewers have ensured the witness understands the implications of the Upjohn warning, interviewers may begin an interview by asking about the witness’s background and job responsibilities. In most cases, interviewers should take care to ask questions in a civil, courteous and non-threatening manner to maximise the chances of obtaining full co-operation and candour from the witness.

To best determine what the witness knows about the subject matters at issue in the investigation, it may be helpful to start the interview by asking open-ended questions regarding general issues related to the investigation. Subsequently, the interviewer can drill down on each topic and reference documents to develop the facts, clarify ambiguities or contradictions, or refresh the witness’s recollection. During the interview, interviewers should also ask questions to identify additional witnesses with relevant knowledge.

At the end of the interview, interviewers should reiterate the importance of keeping the interview confidential. Interviewers may also ask the witness to contact the interviewer should they later remember any additional information.

Where there is a risk of losing the witness’s co-operation in the future, interviewers may consider asking the witness to sign a written statement.

Considerations when interviewing employees abroad

When interviewing employees abroad, investigators should determine whether local laws permit witness interviews; whether interviewees have a right to legal or union representation or to refuse to co-operate with an internal investigation; whether a labour union must be notified; and whether employees have any procedural rights during internal investigations, including whether they can have access to interview topics in advance or whether they can review and revise interview notes and memoranda subsequent to the interview. Finally, where an investigation may lead to potential discipline of employees, investigators should consult with local employment counsel to ensure that information gathered at interviews can be used in a disciplinary hearing. Local employment and labour laws will also need to be carefully considered before disciplinary actions are taken.

Investigators should pay particular attention to local data protection and privacy laws, which may have a significant impact on their ability to collect and review documents and to interview witnesses. The European Union’s recently enacted General Data Protection Regulation (GDPR), for instance, should be taken into account when the data of EU citizens must be collected, processed, used or transferred as part of an internal investigation. The EU has long recognised a fundamental right to privacy in one’s personal information, and the GDPR strengthens these protections by including heightened transparency and consent requirements. For example, investigators may need to obtain an employee’s consent before collecting and reviewing any documents, which may impact the investigators’ ability to collect documents before an investigation target is tipped off. Investigators should also keep in mind that even in situations where processing and reviewing personal data, such as emails, is permitted, data may only be transmitted to EU Member States, other specifically designated countries or countries that can demonstrate an adequate level of protection, and registered and approved companies.