Paying For The Privilege?
In a series of press briefings in recent months, the Director of the Serious Fraud Office, David Green, appears to be setting the organisation on the offensive – particularly on the thorny topic of legal privilege.
The aggressive stance has been highlighted at a key juncture in the SFO’s history, with the first LIBOR trial having recently commenced at Southwark Crown Court. As the Telegraph reported (http://www.telegraph.co.uk/finance/libor-scandal/11625229/Tom-Hayes-First-Libor-trial-to-begin.html), there has been a significant public backlash at the SFO’s apparent inability or unwillingness to bring to book individuals and companies perceived as having contributed to the global financial crisis who have thus far escaped criminal sanction.
The LIBOR trial comes in the wake of a number of high profile SFO failures in prosecutions, and the suggestion that the Home Secretary Theresa May still favours dissolving the SFO into the National Crime Agency.
So why does Green appear to believe that taking the offensive on legal privilege might benefit the SFO? And how does this interact with another topic upon which Green has been publicly vociferous: companies or organisations undertaking their own internal investigations into alleged corporate misbehaviour, and allegedly “contaminating the crime scene”, as Anil Rajani recently explored in the Financial Times.
What Green is getting exercised about in respect of privilege relates to the operation of s2(9) of the Criminal Justice Act 1967, which provides for the situation where the SFO may require a person to answer questions, provide information or produce specified documents under the aegis of an on-going SFO investigation.
However, s2(9) specifies that disclosure of information or documentation is not required for materials “which he would be entitled to refuse to disclose or produce on grounds of legal professional privilege in proceedings in the High Court”.
The two distinct areas of privilege must be borne in mind: legal advice privilege, which can include advisory notes being provided in a commercial context on legally related matters, and litigation privilege, made for the primary purpose of existing, pending or “reasonably” contemplated litigation.
The definitions of both areas of privilege are capable of being interpreted broadly, particularly the latter. And it appears that it is this, and its interplay with the situation where a defined and limited internal investigation team is formed within organisations, which is causing Green and the SFO to complain.
But is this just sour grapes as the SFO are confronted with claims to privilege in investigation after investigation? After all, it could be suggested that prudent in-house legal teams are just doing what they’re paid for when ensuring that tight systems are in place regarding any documents, which could end up being privileged. Such prudence could include numerous practical steps including restricting relevant communications to a defined and limited team during any internal investigation, ensuring that necessary meetings are always held with lawyers present – and therefore covered by legal privilege – and establishing secure electronic communication systems to ensure that the risk of documents leaking to another party, and therefore the potential loss of privilege, is minimised.
It could be that the SFO needs to take a position on one side of the fence or the other. This is an organisation, which is keen on companies self-reporting and is never unwilling to make use of the results of any internal investigations if possible. However, that brings with it the risk of a clash with the strictures of legal advice or litigation privilege being claimed over any documents or advice generated during just such an investigation.
Green can’t have it both ways. One may think that the position the SFO ultimately takes may be dictated by an entirely more pragmatic consideration: the fact that the SFO’s budget for both investigation and subsequent enforcement proceedings continues to be subject to the financial squeeze.
Full report: http://ftalphaville.ft.com/2015/05/27/2130535/guest-post-the-pitfalls-of-internal-corporate-investigations/.