How Does Attorney-Client Privilege Work in Internal Investigations

How Does Attorney-Client Privilege Work in Internal Investigations

Your company just launched an internal investigation into accounting irregularities. Outside counsel is interviewing employees, reviewing documents, and preparing findings for the Audit Committee. The CFO asks: “Will these investigation findings be protected by attorney-client privilege, or will DOJ demand we produce them if there’s a government investigation?” Your General Counsel says privilege protects communications with counsel, but the board wants investigation findings shared with business-side executives to inform operational decisions, and someone heard that using legal advice for business purposes destroys privilege protection. Here’s what actually matters: October 3, 2025, Sixth Circuit ruled in In re FirstEnergy Corp. that attorney-client privilege protects internal investigation findings even when the resulting advice informs business decisions – what matters is whether company sought legal advice, not what company does with that advice afterward. But that protection evaporates if you don’t properly invoke privilege from investigation’s beginning, if employees aren’t given Upjohn warnings before interviews, or if you later disclose investigation findings to DOJ while negotiating cooperation and courts determine that selective disclosure waived privilege entirely.

Thanks for visiting Spodek Law Group – a second generation law firm managed by Todd Spodek, with over 40 years of combined experience structuring internal investigations to preserve privilege protection. When federal prosecutors investigate corporations, they demand all relevant facts about misconduct – and they use privilege waivers extracted during cooperation negotiations to obtain internal investigation findings that become roadmaps for prosecution. We’ve represented companies that maintained privilege throughout internal investigations and DOJ enforcement actions, forcing prosecutors to develop their own evidence rather than relying on company’s investigation work. We’ve also seen companies inadvertently waive privilege by sharing investigation summaries with regulators, only to face discovery demands in shareholder litigation that forced production of complete investigation files because privilege had been waived. This article explains how attorney-client privilege and work-product protection operate differently in internal investigations, why Upjohn warnings are mandatory before every employee interview, and how to structure investigations so findings remain privileged unless company strategically chooses to disclose for cooperation credit.

What Attorney-Client Privilege Actually Protects in Corporate Context

Attorney-client privilege protects confidential communications between client and attorney made for purpose of obtaining legal advice. In corporate context, three complications arise. First: who is the client? The corporation is the client, not individual employees. Communications between corporate counsel and employees are privileged communications between attorney and client’s agents, protected under Upjohn Co. v. United States, 449 U.S. 383 (1981). But employees must understand counsel represents the corporation, not them personally – which is why Upjohn warnings are mandatory.

Second complication: what constitutes “legal advice” when corporations seek both legal and business guidance from counsel? FirstEnergy Sixth Circuit decision resolves this: what matters for attorney-client privilege is not what company does with legal advice, but whether company sought legal advice. Investigation directed by counsel to assess legal risks and litigation exposure is privileged communication, even if findings also inform business decisions like whether to terminate employees or restructure departments. Dual-purpose communications where legal advice is significant reason for communication remain privileged.

Third complication: privilege belongs to corporation, not to counsel or individual employees. That means board of directors or properly delegated executives can waive privilege by disclosing communications to third parties. Once waived, privilege doesn’t revive – communications remain discoverable in all subsequent litigation and investigations. Strategic waiver for one purpose (cooperation with DOJ) often extends to all purposes (shareholder derivative suits, SEC enforcement, employment litigation).

Work-Product Protection: Broader But More Fragile

Work-product doctrine protects materials prepared in anticipation of litigation. Work-product includes documents, memoranda, and tangible things prepared by attorney or by party or its representative for litigation or trial. Two tiers: fact work product (ordinary work product) can be discovered upon showing substantial need and undue hardship in obtaining equivalent. Opinion work product (attorney mental impressions, conclusions, legal theories) receives near-absolute protection.

Internal investigations create work product when conducted in anticipation of litigation. Government investigation threatened or underway? Investigation creates work product. Shareholder derivative suit likely? Investigation creates work product. But if investigation is purely business function – assessing employee misconduct for termination decisions, evaluating compliance program effectiveness – work-product protection doesn’t apply because litigation isn’t anticipated.

The strategic decision: do we invoke both attorney-client privilege and work-product protection by having counsel direct investigation explicitly for legal advice and in anticipation of litigation? Or do we conduct business-side investigation accepting that findings won’t be protected? This decision is permanent and must be made before investigation begins.

Upjohn Warnings: Why They’re Mandatory Before Every Interview

Supreme Court’s 1981 Upjohn decision established that corporations can assert attorney-client privilege for communications between counsel and non-management employees. But Upjohn warnings are required: before each interview, counsel must inform employee that (1) counsel represents the corporation, not the employee individually, (2) the conversation is protected by company’s attorney-client privilege, (3) the company controls the privilege and can waive it, disclosing the conversation to government agencies or adverse parties, and (4) employee should consider whether they want separate personal counsel present.

Why mandatory? Without Upjohn warning, employee might reasonably believe counsel represents their interests, creating attorney-client relationship between counsel and employee. That relationship conflicts with counsel’s duty to corporation and can destroy corporation’s privilege protection. Courts examining privilege claims in internal investigations review interview notes to verify Upjohn warnings were given and documented. No warning documented? Privilege claim likely fails.

Best practice from 2025 guidance: write Upjohn warning at top of interview notes, document that warning was given orally, confirm employee understood, note whether employee agreed to proceed. If employee declines interview or requests personal counsel, document that decision. These notes prove privilege was properly invoked if later challenged.

DOJ Policy: No Privilege Waiver Required for Cooperation Credit

October 2021: Deputy Attorney General Lisa Monaco announced DOJ would not request companies waive attorney-client privilege or work-product protection as condition of receiving cooperation credit. Justice Manual 9-28.000 now provides that eligibility for cooperation credit is not predicated upon privilege waiver. Prosecutors are directed not to ask for waivers.

What DOJ requires instead: disclosure of all relevant facts about misconduct, identification of individuals involved, production of relevant non-privileged documents and communications. Companies can provide factual summaries of what investigation found without producing privileged investigation reports, interview notes, or attorney analyses. Prosecutors get the facts but not the privileged work product showing how company’s counsel developed those facts or what legal conclusions were drawn.

The constitutional principle: attorney-client privilege exists to encourage frank communication between clients and counsel, enabling effective legal representation. DOJ policy demanding privilege waiver as condition of cooperation would force companies to choose between constitutional rights and prosecutorial leniency. October 2021 policy change eliminated that unconstitutional coercion – at least officially.

Practical Reality: Courts Still Find Waiver Through Selective Disclosure

Despite DOJ’s policy, practical risk remains. Recent court decisions find companies waived privilege and work-product protection by disclosing investigation details to DOJ while negotiating to resolve criminal investigations. The legal principle: selective disclosure of privileged communications to third party waives privilege for related communications on same subject matter.

Example pattern: Company conducts privileged internal investigation. To obtain cooperation credit, company provides DOJ with factual summary of investigation findings – who did what, when they knew, what documents show. DOJ doesn’t request full investigation report and company doesn’t volunteer it. Shareholders file derivative suit demanding production of investigation files. Court rules: company waived privilege by disclosing investigation findings to DOJ, even though DOJ didn’t formally request waiver. Factual summaries disclosed to government constituted selective disclosure waiving privilege for complete investigation materials.

This creates strategic dilemma. Refuse to disclose any investigation findings to DOJ: no cooperation credit, higher penalties. Disclose factual summaries: cooperation credit with DOJ, but privilege waiver creates discovery exposure in civil litigation. Disclose only facts learned from non-privileged sources while maintaining privilege over counsel’s investigation work: prosecutors argue company isn’t fully cooperating because it’s withholding investigation conclusions.

How to Structure Investigation to Preserve Privilege

Hour one: draft investigation plan stating investigation’s purpose is obtaining legal advice to assess legal risks and litigation exposure. Document investigation plan explaining singular focus is gathering facts to determine company’s legal risk and how litigation exposure can be mitigated. This written plan becomes evidence supporting privilege claim if later challenged.

Investigation team: outside counsel directs investigation to maximize privilege protection and demonstrate independence. Non-lawyers (forensic accountants, industry experts, compliance personnel) can participate without destroying privilege if their work is directed by counsel for legal advice purposes. Document that non-attorney investigators are working at counsel’s direction and reporting findings to counsel for legal analysis.

Employee interviews: Upjohn warnings before every interview, documented in interview notes. Interviews conducted by counsel or by investigators under counsel’s direction. Interview summaries prepared by counsel, not by business-side personnel. Summaries marked “Attorney Work Product – Prepared in Anticipation of Litigation” and stored separately from business records.

Document review: Counsel reviews collected documents for privilege before allowing investigators access. Documents categorized as relevant privileged material (withheld from investigation team), relevant non-privileged (provided to investigators), or not relevant (excluded). Privilege log created describing each withheld document, basis for privilege, and participants.

Findings and recommendations: Final investigation report prepared by counsel, addressed to General Counsel or Audit Committee, marked privileged and confidential, containing legal conclusions and recommendations. Separate factual chronology can be prepared without legal conclusions if company anticipates needing to share facts with regulators without waiving privilege over legal analysis.

When Strategic Waiver Makes Sense

You’ve preserved privilege throughout investigation. Now you’re negotiating with DOJ for cooperation credit. Prosecutors want investigation findings but say they won’t request privilege waiver per DOJ policy. You can provide factual summary risking waiver through selective disclosure, or maintain privilege and possibly lose cooperation credit. The calculus: cooperation credit value versus civil litigation exposure from waiver.

For criminal matters where cooperation eliminates prosecution risk, waiver may be worth civil litigation exposure. For regulatory matters where cooperation reduces penalties but doesn’t prevent enforcement action, maintaining privilege might be more valuable. Each case requires strategic analysis of cooperation benefits, waiver risks, and alternative ways to demonstrate cooperation without disclosing privileged materials.

At Spodek Law Group, we’ve structured internal investigations to preserve privilege when companies faced simultaneous DOJ and SEC investigations, shareholder derivative suits, and employment litigation. The FirstEnergy October 2025 decision confirms what we’ve argued: privilege protects communications made to obtain legal advice, regardless of how that advice is later used. But privilege only protects communications actually made for legal advice purposes and properly documented as such. Contact us at 212-300-5196.