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Internal Investigation? Time to go outside.

There are a number of good reasons to have inside corporate counsel conduct your internal investigation. Examples include greater employee buy-in, case familiarity, and cost control. Ignore them all. Even the most careful corporate counsel can worsen the company’s position by failing to properly establish, or by inadvertently waiving, the attorney-client privilege.

While the exact construction of the attorney-client privilege varies from jurisdiction to jurisdiction, it is generally understood to have eight elements: [1] where legal advice is sought, [2] from an attorney in his capacity as such, [3] the communications relating to that purpose, [4] made in confidence, [5] by the client, [6] are permanently protected, [7] from disclosure by himself or by the attorney, [8] unless waived. And while establishing each of these elements can pose different challenges for corporate counsel, the first and last elements are particularly tricky.

Corporate counsel generally wears two hats. He or she is both a business advisor and a legal advisor, and the line between the two can become dangerously blurred. During the internal investigation, when is the advice being sought business advice and when is it clearly legal? And when corporate counsel collaborates with outside parties during the internal investigation—accountants, for example—has the privilege been inadvertently waived? Usually, client disclosure of privileged information to third parties destroys the privilege.

The facts of an internal investigation need to remain confidential until management concludes disclosure is necessary or desirable. When an internal investigation is implicated, it’s time to go outside.