In Bennett v. Sprint Nextel Corp., No. 11-9014 (W.D. Mo. Oct. 10, 2012), the court held that the privilege created by the Sarbanes Oxley Act (“SOX”) of 2002 protects not just documents and information submitted to the Public Company Accounting Oversight Board (“PCAOB”) during an inspection, but also internal communications of the respondent relating to the inspection. In 2006, the PCAOB began an annual inspection of KPMG, and included KPMG’s 2005 audit of Sprint in the scope of the inspection. KPMG provided information directly to the PCAOB, and also created internal materials, such as communications that discussed confidential questions or comments made by the PCAOB or reflected KPMG’s development of responses to those comments and questions. In this class action against Sprint, plaintiffs sought discovery from KPMG of documents relating to the PCAOB inspection. KPMG asserted privilege over both internal documents and documents communicated to the PCAOB based on 15 U.S.C. §7251(b)(5)(A) (a/k/a §105(b)(5)(A) of SOX), which provides that “all documents and information prepared or received by or specifically for the Board . . . shall be confidential and privileged as an evidentiary matter (and shall not be subject to civil discovery or other legal process ) in any proceeding in any Federal or State court or administrative agency[.]” Plaintiffs, citing an unpublished opinion (Silverman v. Motorola, No. 07-C-4507 (N.D. Ill. June 29, 2010)), argued that the statutory privilege does not apply to all documents and information relating to a PCAOB inspection, but only to documents “prepared specifically for the Board.” The court declined to follow the earlier opinion. “While this Court follows Silverman’s ultimate holding that the statute limits the protection to materials that are ‘specifically for’ the Board, this Court finds that internal KPMG communications that discuss confidential questions or comments made by the Board or reflect KPMG’s development of responses to Board inquiries are also protected.”
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SOX privilege protects materials prepared in response to PCAOB investigation
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