“Panama Papers” Case Reminds How to Protect Against Inadvertently Waiving Attorney-Client Privilege
Recent efforts by the Department of Justice to obtain confidential attorney-client communications in connection with a “Panama Papers” indictment present a stark reminder that lawyers and clients must fastidiously protect the attorney-client privilege else their communications may be compromised and used against them at trial. In an age where the threat from hackers stealing and disseminating confidential information is all too real, prosecutors still will be restricted from accessing and using such materials in their investigation provided you and your clients know what steps to take to protect against an inadvertent waiver of privilege.
The Government’s Allegations of Waiver
On August 14, 2019, DOJ filed a motion to obtain attorney-client privileged communications between Harald von der Goltz and his former attorney and co-defendant Ramses Owens. The litigation stems from the indictment of both men and two others for conspiracy, wire fraud, money laundering and tax charges relating to the massive “Panama Papers” leak and document dump of over 11 million documents, including financial details and confidential attorney-client communications, from Owens’ Panama-based law firm Mossack Fonseca & Co.1
In its recent motion, the government sought the disclosure of what it deemed to be “relevant information” that included communications and documents between von der Goltz and Mossack Fonseca or Owens, which the defendants claimed were protected by the attorney-client privilege. The government’s primary argument was that the communications were subject to the “crime-fraud” exception to the privilege, because Mossack Fonseca allegedly assisted in the fraudulent concealment of assets and income from the IRS.2 However, prosecutors also argued that the privilege was waived for other reasons, and two of the government’s allegations present a valuable reminder concerning the bounds of the attorney-client privilege and the lengths to which DOJ may seek ways to access attorney-client communications if they are not adequately safeguarded.
First, the government alleged that in the aftermath of the Panama Papers’ release, which was widely publicized and included von der Goltz’s confidential communications with his attorneys, von der Goltz did not undertake any remedial efforts, i.e., “reasonable steps to prevent  disclosure” or further dissemination of the protected information. The prosecution noted that, despite the dissemination of von der Goltz’s privileged information through the leak and subsequent news reports in April 2016, the first time von der Goltz or his attorneys raised the issue of privilege with the government was in November 2017—over 18 months later. While there is no bright line rule as to how long one can delay before the attorney-client privilege is waived, the government cited to cases where courts found much shorter delays of just six to nine months were sufficient to have waived the privilege.3
Second, the government argued that it was significant that von der Goltz actually contacted DOJ after learning that his name was mentioned in the Panama Papers. According to the government, von der Goltz’s then-attorney (identified only as “U.S. Law Firm”) emailed DOJ, insisting that he was “tax compliant” even though news reports about him would suggest otherwise, and then invited the government to interview him. During his subsequent interview with the government, von der Goltz allegedly discussed his relationship with Mossack Fonseca and Owens “at great length” without asserting attorney-client privilege.4 According to the government, such conduct constituted a waiver of the privilege, and the prosecutors suggested that the defendant’s “gamesmanship” for “attempt[ing] to ‘select[ively]’ discuss their subject matter with the government” should not be rewarded.5
What This Means for You
The allegations in the government’s briefing underscores the need to protect against an inadvertent waiver of the attorney-client privilege. The case provides at least three important takeaways to help safeguard confidential attorney-client communications.
1. Be careful with affirmative waivers of privilege.
First, companies and individuals must be very careful to avoid affirmative waivers of privilege, unless it is the rare case where it may be in their strategic interest to do so. This can be accomplished by closely following counsel’s recommendations regarding what communications are privileged and which communications are not, and following appropriate procedures to protect the privilege. For individuals and corporate clients that are subjects or targets of a criminal investigation, it is necessary to make sure that any proffer materials provided to the government are under the condition that the attorney-client privilege has not been waived. Privileged information also may be offered pursuant to Federal Rule of Evidence 408, which prohibits the use of certain evidence used in compromise or settlement negotiations at trial. In certain situations, defense counsel also may be well suited to remind prosecutors of DOJ’s longstanding policy to respect the attorney-client privilege and avoid seeking privileged communications or in any way suggesting that cooperation credit would be linked with a waiver of such communications.6 These ground rules need to be made clear at the outset, and should be clearly memorialized.
2. (Mis)using the privilege offensively, rather than defensively, might constitute waiver.
Second, companies and individuals should be thoughtful about when it may be appropriate to use the attorney-client privilege “offensively” rather than defensively. One generally cannot waive the privilege on a selective portion of a document or collection of documents that appears favorable, without expecting the government (or a third party in a separate case) to request the remainder of the relevant information for completeness purposes. The government may seize the opportunity to argue that such a position constitutes “gamesmanship” of the sort that undermines “the fundamentals of fairness” and “weigh in favor of waiver” of the privilege.7
3. Protect your privilege swiftly and forcefully to minimize the possibility of waiver.
Finally, in an era where companies are constantly facing the threat of malicious hackers eager to steal confidential, and potentially privileged information, clients are advised to remember that under the Federal Rules of Evidence, privileged materials that are accidentally released are still protected—so long as one acts quickly to protect the privilege. Indeed, Federal Rule of Evidence 502(b) notes that an inadvertent disclosure does not operate as a waiver in a federal or state proceeding so long as reasonable steps were taken to prevent disclosure, and the privilege holder “promptly took reasonable steps to rectify the error[.]”8 Attorneys and clients are well served to heed the advice from another case: A privilege holder “must treat the confidentiality . . . like jewels—if not crown jewels[.]”9
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1 See Indictment, U.S. v. Owens, 1:18-cr-00693 (S.D.N.Y.); DOJ press release, available at https://www.justice.gov/usao-sdny/pr/four-defendants-charged-panama-papers-investigation.
2 See Indictment, U.S. v. Owens, 1:18-cr-00693 (S.D.N.Y.) at ¶¶ 6-7.
3 See Gov’t’s Mem. in Supp. of Mot. Regarding Application of The Crime Fraud Exception and Waiver of the Attorney-Client Privilege (hereinafter “DOJ Memo”) at 27-28 (citing In re Philip Servs. Corp. Sec. Litig., No. 98 Civ. 0835 (MBM) (DF), 2005 WL 2482494 (S.D.N.Y. Oct. 7, 2005) (client waived privilege when documents were inadvertently disseminated for a period of nine months before he asserted privilege, and he “asserted no objection” when documents were used during a civil deposition during that time period); Bank Brussels Lambert v. Chase Manhattan Bank, N.A., No. 93 Civ. 5298 (LMM) (RLE), 1996 WL 944011, at *5 (S.D.N.Y. Dec. 19, 1996) (six-month delay in asserting the privilege after receiving notice of the involuntary disclosure constituted waiver)).
4 Id. at 28.
5 Id. at 28-29. The government also made a third argument that the defense waived the privilege over all of the relevant information it sought, including advice concerning the “instant criminal matter,” which new defense counsel claimed were not part of the other materials that may have been selectively waived. Id. at 29.
6 See Justice Manual § 9-27.810 (“. . . waiving the attorney-client and work product protections has never been a prerequisite under the Department's prosecution guidelines for a corporation to be viewed as cooperative.”).
7 Id. 29.
8 FED. R. EVID. 502.
9 See DOJ Memo at 25 (citing In re Sealed Case, 877 F.2d 976, 980 (D.C. Cir. 1989)).