CEO lacks standing to assert privilege

A corporate officer cannot challenge grand jury questions regarding an allegedly privileged conversation between himself and corporate counsel, the 1st Circuit recently ruled.
The officer argued he had standing to assert the corporation’s attorney-client privilege, but the 1st Circuit disagreed, ruling the officer was seeking to intervene in his individual capacity instead of representing the corporation’s interests.
“The [officer] is himself under investigation by the grand jury, and he is represented in this matter by the Federal Defender’s Office, which must represent [the officer’s] interests, not those of the corporation,” Judge Jeffrey R. Howard wrote on behalf of the court. (In Re: Grand Jury Proceedings, Docket No. 06-2125).
Both the corporation and the appellant – its CEO/president – are facing a grand jury investigation. The corporation is no longer in good standing, but has not been formally dissolved.
A U.S. District Court judge issued an order compelling an attorney who represented the corporation to answer before the grand jury a number of questions about a conversation between the attorney and the appellant that took place in the appellant’s corporate capacity.
The judge denied the appellant’s motion to intervene to assert the corporation’s attorney-client privilege, finding that the appellant, in his corporate capacity, waived the corporation’s privilege to bar the corporate counsel from answering the questions when he recounted aspects of the conversation in statements to the news media.
To preserve the secrecy of the investigation, the 1st Circuit did not provide additional details or the names of the appellant, the corporation or the corporate counsel.

Conflict of interest
On appeal to the 1st Circuit, the appellant argued that although he did not know the specific questions the lower court judge had ordered the corporate counsel to answer, the order was improper in that it might have directed the corporate counsel to provide details about the conversation beyond those disclosed in the media interviews.
Howard found this argument to have a “superficial appeal” because a “corporation’s chief executive officer and president generally is empowered to invoke the privilege on the corporation’s behalf.”
But, Howard found, to “permit an individual corporate officer – even an individual with authority to act on behalf of the corporation – to assert the corporation’s interests in his personal capacity would be to invite an intolerable conflict of interests.”
He added: “The interests of the corporation and the interests of the individual corporate officer frequently diverge where, as here, both are under investigation. In such situations, it might well behoove the corporation to waive the privilege, even though the waiver may damage the individual officer.”
Howard also warned that “where appellant’s counsel is authorized only to represent appellant in his personal capacity, permitting appellant to assert the corporation’s privilege in his personal capacity would give rise to a situation in which the corporation’s interests are not represented by authorized counsel. This is impermissible.”

Personal capacity
Howard observed that the lower court judge “would have been obliged to grant intervention” had the appellant “made a colorable claim of entitlement to assert privilege because counsel also represented appellant in his personal capacity in connection with the conversation in question.”
But the officer hasn’t made such a claim, according to Howard.
The appellant’s brief never “developed any argument that the district court misapprehended the ground on which he sought intervention nor argued that he could make the demanding showing required for the grant of a motion to quash in his personal capacity,” Howard pointed out.
“Notwithstanding a few bald assertions made in his filings, below and on appeal, that counsel also represented appellant in his personal capacity, appellant never developed an argument before the district court that he should be entitled to intervene to assert his own privilege.”
To the contrary, the judge noted, “in the several hearings at which the district court permitted appellant’s counsel to appear and argue, the intervention issue consistently was framed in terms of whether appellant could intervene to assert the corporation’s privilege.”