Martin Shkreli ("Pharma Bro") Cannot Claim Attorney-Client Privilege for Communications with Corporate Counsel | Practical Law

Martin Shkreli ("Pharma Bro") Cannot Claim Attorney-Client Privilege for Communications with Corporate Counsel | Practical Law

Are communications between a company's Chief Executive Officer and the company's outside counsel regarding his personal legal matters protected as privileged? A court order recently unsealed in the US District Court for the Eastern District of New York determined that documents created during a CEO's employment were company property and could not be withheld by the employee on privilege grounds.

Martin Shkreli ("Pharma Bro") Cannot Claim Attorney-Client Privilege for Communications with Corporate Counsel

by Practical Law Litigation
Law stated as of 08 Feb 2016 • USA (National/Federal)
Are communications between a company's Chief Executive Officer and the company's outside counsel regarding his personal legal matters protected as privileged? A court order recently unsealed in the US District Court for the Eastern District of New York determined that documents created during a CEO's employment were company property and could not be withheld by the employee on privilege grounds.
Martin Shkreli, known in the press as "Pharma Bro," was arrested last December and charged with seven counts of securities fraud and conspiracy. Prosecutors allege that he looted the pharmaceutical developer Retrophin, Inc., where he was CEO, to pay back hedge fund investors in a quasi-Ponzi scheme. Retrophin's outside counsel was also arrested and charged with conspiring with Shkreli to commit fraud.
Before Shkreli was charged, the grand jury sought emails exchanged between Shkreli and Retrophin's outside counsel. Retrophin, a victim of the alleged fraud, waived the privilege. Shkreli argued that the company's outside counsel also represented him personally and Retrophin could not waive his personal attorney-client privilege. Retrophin redacted the emails it produced pursuant to the grand jury subpoena to preserve Shkreli's privilege claim.
The government filed an ex parte application requesting the court to determine whether the emails were appropriately redacted. In an order unsealed after Shkreli's indictment, the district court found the emails were not subject to the attorney-client privilege (In re Grand Jury Investigation (Dec. 3, 2015)). The court explained that:
  • The company warned Shkreli that the documents created during his employment were company property.
  • As company documents, they were not subject to a privilege between the employee and an attorney acting for the employee and also for the company.
  • The attorney-client relationship and privilege, if any, was voided by the criminal conduct of Shkreli and Retrophin's outside counsel.
  • The emails concerned company business that is not subject to personal privilege.
Practical Law has numerous resources to assist attorneys in understanding the contours of the attorney-client privilege, including: