There are numerous federal regulations requiring investigations into possible fraud, related to both mandatory disclosure and simply performing some fact gathering while seeking legal advice. The U.S. Court of Appeals for the D.C. Circuit recently ruled in In re Kellogg Brown & Root that investigations into possible fraud associated with these regulations are privileged.
In the case, the appeals court rejected the district court’s ruling that communications are only privileged if they wouldn’t have been made except for reasons of obtaining legal advice. Additionally, the court ruled that communications are privileged in situations not only where the investigation’s primary purpose is to offer legal advice, but also when it is merely one of the significant purposes of the internal investigation.
The case came about when Henry Barko filed a False Claims Act lawsuit against the company he previously worked for, Kellogg, Brown & Root (KBR). In the suit, Barko claimed that the organization inflated some costs of construction and other services in Iraq and then submitted those costs to the federal government for reimbursement. The company had already conducted an independent investigation of these allegations, but a non-attorney initiated the investigation and non-attorney investigators conducted all of the reports.
When the district court received KBR’s internal investigation documents, it realized they were created for the purpose of compliance with the mandatory disclosure rule rather than obtaining legal advice. The ruling by the appeals court indicates that obtaining legal advice was a significant purpose, if not the primary purpose.
This is a complicated area of law that is continuing to evolve, and one that affects whistleblowers across the United States. For more information about what this case could mean for other disclosure issues, speak with a knowledgeable Dallas attorney at Whistleblower Law for Managers.