Emtrain Blog

Insider Trading & Your Privilege

Posted by Timothy Crudo

September 2, 2014

Are you being investigated or have concerns about insider trading? Should you waive your privilege and share information gathered with the government, including statements made during an internal investigation? Read on to learn more.

insider trading

The following post is written by insider trading industry expert,  Timothy Crudo — who is a direct contributor to our Insider Trading training course.


Here's the good news, waiving your privilege can garner your company brownie points in charging and sentencing decisions. On the other hand, since the government is precluded from asking for privileged materials, certain information and statements by witnesses that are, shall we say — "uncomfortable" — may never see the light of day if your company decides not to waive.  But you won’t have the chance to prevent disclosure of privileged material if the privilege doesn’t exist in the first place, something that Halliburton recently learned the hard way.

In response to an internal tip reporting a possible violation of the company’s Code of Business Conduct (COBC), the company’s investigators undertook an investigation. The investigators – who were not lawyers — obtained a number of damning employee statements, and their subsequent reports to the General Counsel were, as the court later described , “eye-openers.”  In an ensuing False Claims Act suit, the plaintiff asked to see the documents relating to the investigation, including witness statements and the investigators’ reports. The company invoked the attorney-client privilege and refused to produce the documents. 

The Court found that the documents were not privileged and ordered them to be produced anyway.  Under law, Halliburton needs to show that “the communications at issue were made by [company] employees to counsel for [the company] acting as such, at the direction of corporate superiors in order to secure legal advice from counsel.”  As it turns out, Department of Defense (DoD) regulations require contractors to have internal control programs that “[f]acilitate timely discovery and disclosure of improper conduct in connection with Government contracts, ” and Halliburton’s COBC policies were designed to implement that requirement.  The reports did not seek legal advice or identify possible legal issues for review.

The court found that Halliburton’s investigation was undertaken “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice” and so was not privileged.  The court similarly rejected the company’s claim of work product protection because the investigation had not been undertaken in anticipation of litigation.  

Whether the outcome would have been different had the investigation been done by lawyers or involved conduct that didn’t involve a DoD contract likely would depend on all of the circumstances of the investigation, but this decision is worth a read for anyone structuring an internal investigation

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tim-crudo Timothy Crudo             

An expert in corporate governance and white collar criminal matters, Tim regularly advises corporate boards and executives on topics such as: insider trading, securities violations, accounting fraud, and other corporate crimes. As a former Chief of the Securities Fraud Section of the U.S. Attorney’s Office in San Francisco, Tim was the lead prosecutor in a number of high-profile criminal trials of senior corporate executives in Silicon Valley. Currently, he is a partner at Coblentz Patch Duffy & Bass, where he heads up the firm’s White Collar Defense and Government Enforcement Practice Group. As a trial lawyer, he focuses on investigations and cases brought by criminal prosecutors, government regulators, and shareholders in white collar, securities, and corporate governance matters as well as internal corporate investigations..

Topics: Business Compliance, Insider Trading