There is likely going to be an appeal of a recent decision by a three-judge panel regarding Kellogg Brown & Root (KBR), a defense contractor, and whistleblowing over alleged fraud.
Harry Barko, a former employee of KBR, alleges KBR was involved in fraud during the Iraq war. He claimed there was fraud in a multibillion-dollar program related to U.S. military bases in Iraq. Barko made an internal complaint about his concerns, which led to his computer getting confiscated “at the request of the company’s legal department in Houston,” according to a report from The Washington Post. He later filed a lawsuit against KBR and Halliburton, which at the time was its parent company.
KBR has denied wrongdoing, and KBR has revealed there are agreements in place that prevent employees “seeking to report fraud from discussing their allegations without authorization from KBR’s general counsel,” The Post, said, and employees who violate the agreement could be fired.
Stephen M. Kohn, executive director of the National Whistleblower Center, wants KBR to release reports of fraud, but KBR says the reports should not be released because of attorney-client privilege.
The Kellogg Brown & Root decision was made by a three-judge appeals court panel on June 27, and the internal corporate compliance records in this case showed widespread fraud, according to allegations. The documents revealed possible bid-rigging, conflicts of interest, and overcharging by KBR.
“If the Court’s initial ruling is sustained, companies will be able to use compliance investigations to hide fraud and discredit whistleblowers,” Kohn said in a statement.
Before the decision by the appeals court, a federal district court judge wanted the documents released, calling them business records. That ruling was supported by whistleblowing advocates.
The investigation was undertaken as part of a corporate compliance program. In addition, compliance specialists, not lawyers, did the interviews and did not tell witnesses the investigation was protected by attorney-client privilege, Forbes reported.
“The D.C. Circuit, unlike the district court, assigned little importance to who conducted witness interviews and what was specifically said to those interviewed about the purpose of the investigation,” Forbes added in the report. “What mattered was that lawyers, in this case in-house lawyers, were overseeing a fact-gathering process intended to help provide the company with legal advice. In short, an investigation is privileged according to the D.C. Circuit so long as ‘one of the significant purposes’ of the investigation was to obtain or provide legal advice.”
In an explanation of the ruling by the Court of Appeals, attorneys from Dykema Gossett added that “the decision … reaffirms the applicability of the attorney-client privilege to internal investigations. As the Court of Appeals noted, eliminating the attorney-client privilege in investigations required by corporate policy or law would not only vitiate the protection in great number of internal investigations, it would make companies less likely to disclose information to their attorneys. In the wake of the D.C. Circuit opinion, companies performing internal investigations can be more confident that communications in those investigations will be protected by the attorney-client privilege.”