Confiding in the Government <b><i>Corporate Fraud Brings New Pressures to Provide Disclosure to the Government in Confidentiality and Non-waiver Agreements</b></i>

But the decision to waive these protections and share the results of an internal probe with the government should be taken only after carefully weighing the possible consequences. Voluntary disclosure may be used as a declaration against interest, or an admission of fact, with devastating effect in later litigation. While the purpose of voluntary disclosure is to avoid liability and mitigate damage, it is no guarantee against criminal prosecution.

And, as sure as night follows day, plaintiffs in subsequent actions, and defendants in related criminal cases, will demand copies of any reports and interview materials to use in their own cases. Courts generally agree that the information gathered by counsel in the course of an internal investigation is privileged or subject to work product protection. See, eg, In re Int'l Sys. & Controls Corp. Sec. Litig., 693 F.2d 1235 (5th Cir. 1982). But disclosure of such information to a third party, including the government, is generally held to waive the privilege in litigations against other adversaries. Further, such disclosure may result in an even broader waiver for communications related to the subject matter of the disclosed communication. See, In re Steinhardt Partners, L.P., 9 F.3d 230, 235 (2d Cir. 1993); In re Subpoenas Duces Tecum, 738 F.2d 1367, 1375 (D.C. Cir. 1984); In re Sealed Case, 676 F.2d 793, 823-824 (D.C. Cir. 1982); Permian Corp. v. United States, 665 F.2d 1214, 1218-19, 1222 (D.C. Cir. 1981); Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d 1122d, 1126-27 (7th Cir. 1997).