A recently unsealed USDC—DC opinion reveals that Greg Craig, former White House Counsel under President Obama, failed to prevent—on privilege grounds—two of his former Skadden law partners from testifying before a grand jury. Craig’s privilege loss paved the way for his indictment on charges of providing misleading and false information to the DOJ, but also provides lessons for in-house lawyers, particularly law firm in-house counsel. In re Grand Jury Investigation, 2019 WL 2179116 (D.D.C. Mar. 4, 2019) (opinion available here).
This privilege tale involves many of today’s inside-the-beltway subjects: Manafort, Mueller, Russia, a foreign leader, and DOJ investigations. So, let’s explore.
2011—Ukraine Trial of Yulia Tymoshenko
In October 2011, a Ukrainian court convicted Orange Revolution leader and former Ukrainian Prime Minister Yulia Tymoshenko for abusing her official powers in negotiating a natural-gas deal with Russia while serving as prime minister.
After issuance of the seven-year jail sentence, $190M fine, and a ten-year ban from political office, many claimed that the trial and conviction were politically motivated by then-President Viktor Yanukovych, her political rival. One publication labeled Tymoshenko a “victim of a kangaroo trial.”
Paul Manafort, who represented Mr. Yanukovych, arranged for the Skadden Arps firm to investigate the Tymoshenko trial and prepare a report evaluating whether the trial complied with Western standards of due process. The Skadden team, led by Greg Craig, produced a 300+ page report concluding, among other things, that the court based its verdict on factual determinations that had evidentiary support. You may read the Skadden report here.
Just before the Report’s release, Craig contacted a New York Times reporter and provided him with a copy. The reporter published an article on the report, noting that Skadden “seemed to side heavily with the government of President Viktor F. Yanukovich.” Craig later provided interviews with other publications.
December 2012–January 2014—FARA Unit (Relevant Period)
The Foreign Agents Registration Act (FARA) requires any person acting as “an agent of a foreign principal” to register with the Attorney General for certain activities, such as public-relations efforts. Immediately after the Report’s release and Craig’s interactions with the press, a DOJ FARA Unit began investigating whether Skadden and/or Craig should have registered as a foreign agent.
Importantly, during this Relevant Period Craig provided statements to FARA investigators and discussed these issues internally with Skadden lawyers—including Skadden’s General Counsel. Did Craig believe the privilege covered these conversations? Did the Skadden GC give him an Upjohn warning?
2017—Special Counsel Robert Mueller
During his investigation into Russia’s interference with the 2016 presidential election, Special Counsel Mueller, while tracing Paul Manafort’s activities, investigated Skadden and Craig’s statements to the FARA Unit and their failure to register. He then transferred the matter to the U.S. Attorney for the District of Columbia.
January 2019—Skadden/DOJ Settlement
In January 2019, the DOJ determined that Skadden and its partners, including Craig, were Ukraine agents by contributing to a Ukraine “public relations campaign directed at U.S. media” but failed to register as FARA requires. Skadden and the DOJ reached a settlement that compelled the firm to retroactively register and pay a $4.6M penalty—the amount it received in fees for the Report. You may read the settlement here.
February–March 2019: Privilege Issues Arise
The USAO, however, continued to pursue Craig. It empaneled a grand jury and called Skadden’s General Counsel and another Skadden partner to testify about their communications with Craig during the Relevant Period—during the FARA inquiries.
But Craig protested, saying that the attorney–client privilege precluded their testimony because he believed that the firm GC and other law partner were his lawyers when the conversations occurred. The DOJ filed a motion, refuting Craig’s last-minute privilege invocation and seeking an order that no privilege existed to prevent the Skadden lawyers’ grand-jury testimony.
Craig withheld no arrows, asserting not only the privilege but that his (now former) law partners “breached professional obligations” by earlier discussions with DOJ and that the DOJ’s motion was simply “an effort to obtain retrospective absolution for the sins committed by the Skadden lawyers.” Think Skadden will invite Craig to its next alumni party?
The Court went to the heart of the matter—did an attorney–client relationship exist between Craig and his Skadden partners? The test “is one of objective reasonableness,” and “the ultimate question is whether a client and an attorney explicitly or by their conduct, manifested an intention to create” the relationship. Factors to consider are—
The nature of the information shared with the attorney;
Actions taken by the lawyer on the client’s behalf;
The payment of fees and existence of an agreement; and
The passage of time between the alleged former representation and the current litigation.
Craig—the one with the burden—produced nothing more than his “belief” that his Skadden partners were his personal lawyers, which, standing alone, is insufficient.
No Upjohn Warning
Skadden’s General Counsel did not provide Craig with an Upjohn warning, and Craig argued that the lack of warning was evidence that his partners intended to represent him personally. This Upjohn “twist,” however, was unavailing.
There was no evidence that, during the Relevant Period, Skadden’s interest and Craig’s interest diverged so that a conflict of interest and the need for an Upjohn warning arose. In addition, the Court found that Craig was “a sophisticated attorney” and, therefore, did not need an Upjohn warning to know that the firm’s lawyers were not his lawyers.
April 2019—Indictment and Privilege Agreement
The Court held that, because no privileged relationship existed, the privilege did not prevent the Skadden GC and another partner from testifying about communications with Craig during the Relevant Period. The lawyers testified, and the DOJ indicted Craig on April 11, 2019.
But he maintained privilege hope.
After the indictment, Craig informed the trial judge that he may seek to preclude the Skadden lawyers’ trial testimony—again on privilege grounds. Craig and the DOJ reached an agreement, however, that precluded further privilege rulings. The agreement, available here, allows prosecutors to question the Skadden lawyers at trial about their Craig communications during the Relevant Period—the same ruling as the grand-jury judge.
Trial is set to begin August 12, 2019.
Josh Gerstein, Senior Legal Affairs Contributor at Politico, was the first to sniff out this developing privilege issue, and published two informative pieces, available here and here, on the matter. Strip away the inside-the-beltway intrigue and lessons abound for in-house lawyers and law firm general counsel.
Don’t let Upjohn warnings slip your mind—non-lawyer executives certainly need the instructions when a conflict of interest is foreseeable. And to law firm in-house lawyers—not all firm lawyers are as “sophisticated” as Mr. Craig, a former White House counsel, on evidentiary privileges. A reminder for them, too, is worthwhile.
For those individuals talking to entity counsel, address the representation head-on. If you want a privileged conversation, expressly establish an attorney–client relationship and document it. Communicate in a confidential manner with the lawyer, and include “privileged and confidential” in written correspondence. Create the privilege evidence on the front end and be ready to show it to a judge on the back end.
These are privilege foundation issues, and we don’t need Mueller, Manafort, or Russian operatives to remind us. Or at least we shouldn’t.