A recent decision serves as a reminder to company counsel of the importance of providing adequate corporate Miranda warnings, also known as “Upjohn” warnings, to witnesses during internal investigations, attorneys in the law firm Ballard Spahr note.

Such warnings, named for the 1981 Supreme Court decision in Upjohn Co. v. United States, have since become standard practice in conducting interviews in internal investigations to avoid the possibility that a witness may claim an attorney-client privilege exists between him or her and interviewing counsel.

The warnings ensure that witnesses are not under the false impression that an attorney-client privilege between the witnesses and the attorney will arise out of the interview, while protecting the privilege for the company, notes an April 13 alert by attorneys in the law firm Ballard Spahr.

When conducting internal investigations and interviewing witnesses, company counsel must ensure that they protect the company’s attorney-client privilege against witnesses’ claims that they too have an attorney-client relationship with interviewing counsel, authors John Grugan, Henry Hockeimer, and Justin Klein advise.

“The decision in [United States v.] Nicholas reinforces the importance of providing proper Upjohn warnings in order to protect the interests of the company,” the authors write.

In that case, the District Court concluded that counsel failed to give proper Upjohn warnings to a chief financial officer who was interviewed by outside counsel hired by his company as part of an internal investigation relating to its stock option grant practices.

According to the alert, the only warning outside counsel provided to the CFO was that the interview was on behalf of the company in connection with an internal investigation. Outside counsel later admitted that they never told the CFO that they weren’t his lawyers, that he could consult with another lawyer, or that statements made to them could be shared with third parties, including the government.

At the company’s instruction, outside counsel disclosed the investigation findings to the Securities and Exchange Commission and the Department of Justice, including statements made by the CFO without obtaining his consent. When the DoJ prosecuted the CFO and sought to use statements outside counsel attributed to him against him, the CFO objected on the ground that the statements were privileged attorney-client communications that he hadn’t authorized counsel to disclose.

“The court stated that it had ‘serious doubts whether any Upjohn warning was given’ and found that, even if an Upjohn warning had been provided, the substance of the warning given was ‘woefully inadequate under the circumstances,’” the alert notes.

In assessing whether the attorney-client privilege applied, the trial court examined whether the CFO reasonably believed that an attorney-client relationship existed.

A company’s voluntary disclosure of facts learned during an internal investigation, including information from company employees, remains a relevant factor in determining the extent of a company’s cooperation with the government. However, if both the witness and company jointly control privileged information, the witness may prevent the company from disclosing privileged information to the government, jeopardizing the company’s ability to cooperate with the government and receive favorable treatment as a result of that cooperation.

To avoid that result, the authors state, “Interviewing counsel must clearly inform the witness that counsel represents the company and not the witness; the company and not the witness holds the attorney-client privilege; the witness’s statements will be communicated to the client company; and the client company may decide to waive privilege and disclose information it receives to third parties, including the government.”