Internal fraud investigations are privileged, appeals court rules

The U.S. Court of Appeals for the District of Columbia Circuit last week reversed a ruling requiring a government contractor to release in-house fraud investigation reports, according to the District-based law firm Wiley Rein.

"This decision is welcome news for companies that do business with the government," the firm wrote, "confirming that their internal investigations should continue to be protected by the attorney-client privilege, even if they are conducted with support from outside of their law departments or in response to regulatory requirements."

A federal district court judge previously ruled that documents pertaining to a government contractor's in-house investigations weren't protected by attorney-client or attorney work-product privileges, as FierceHealthPayer: Anti-Fraud reported. The documents in this case were prepared by the global engineering company Kellogg Brown & Root in response to fraud allegations brought against it by a whistleblower.

The District appeals court rejected the argument that an internal investigation isn't privileged if it happens pursuant to a regulatory requirement, Wiley Rein noted. The court also found it irrelevant that interviewed staff didn't know the investigation occurred for legal purposes.

Notwithstanding the court's decision, it's important to document that an internal fraud investigation is privileged, Wiley Rein advised. Ways to do that include involving an attorney in each stage of the case, marking all communications with appropriate privilege designations, combining factual reports with legal analyses and hiring outside lawyers, the article noted.

On this last point, procurement departments can help payers choose outside attorneys who deliver the greatest business value, according to an Inside Counsel article. Answering four questions, the article noted, can help insurers gain the most from outsourcing legal services:

  1. How does your company define the scope of engagement with outside law firms?
  2. How will your company measure the engagement's success?
  3. What level of transparency should your organization require about rates, alternative fee arrangements and profitability?
  4. What technologies and data elements should your plan use to set and oversee performance indicators?

For more:
- here's the WileyRein article
- read the Inside Counsel article