WMT Walmart Inc

By Dylan Tokar 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 1, 2019).

A legal dispute that arose during a seven-year foreign bribery probe into Walmart Inc. may have a lasting impact on how companies handle future investigations.

The dispute led to a ruling by the U.S. Court of Appeals for the Fourth Circuit in Richmond, Va., last year that could make it harder for companies to cooperate with the government while also maintaining legal privilege over internal documents. Legal privilege is a rule that protects the confidentiality of communications between a lawyer and client.

The case centered on the types of agreements companies strike with prosecutors when they decide to cooperate with a government probe, including by making employees available for interviews and sharing documents from their own internal investigations.

Walmart last week agreed to pay $282 million to resolve Foreign Corrupt Practices Act violations in Mexico, India, Brazil and China, in settlements with the U.S. Justice Department and the Securities and Exchange Commission.

The company took a cooperative stance with the Justice Department during the government probe, including by allowing prosecutors to interview 18 current and former employees, according to the court's judgment.

In exchange, prosecutors agreed that any information disclosed by the employees that was covered by legal privilege would remain so. Such arrangements, also known as non-waiver agreements, are common in government investigations.

But when the Justice Department tried to subpoena the former general counsel of a Walmart subsidiary to testify before a grand jury about statements made during a voluntary interview, the company balked, saying the subpoena sought privileged information, according to the court's opinion.

The court ruled in Walmart's favor. "Declining to hold the government to the terms of an agreement it struck would discourage private entities from cooperating with the government in the future," Chief Judge Roger Gregory and Judge Steven Agee wrote.

Since then, the Justice Department has been more reluctant to make non-waiver agreements with companies, lawyers say.

"The government has pulled back from entering into agreements like that, as a consequence," said Joan Meyer, a former government prosecutor and a white-collar defense lawyer at the firm Pierce Bainbridge Beck Price & Hecht LLP. That makes it harder for companies to cooperate with the government and protect legal privilege over documents created in the course of an internal investigation, she said.

If the Justice Department stops handing out non-waiver agreements, companies may stop sharing most privileged information, Ms. Meyer said. Justice Department guidelines prevent prosecutors from asking for privileged information or penalizing companies that don't voluntarily share it.

The Justice Department relies on companies to disclose potential violations and cooperate with investigators, especially multinational companies that have encountered issues in far-flung locations, she said. "It would be very difficult for the DOJ to find out about it and then conduct a full investigation of that problem without the cooperation of the company," Ms. Meyer said.

The circuit court opinion doesn't name the company under investigation, calling it X Corp., and doesn't specify the country of the subsidiary at issue. X Corp. is Walmart, according to a person familiar with the matter. A Walmart spokesman declined to comment on the decision.

The case was argued by lawyers at Jones Day who also served as counsel to Walmart in its internal probe into violations of the FCPA and by prosecutors from the Justice Department's FCPA unit.

The dispute may have remained a sore point between prosecutors and Walmart. In last week's settlement, the Justice Department gave the company full credit for its cooperation with the government's investigations in Brazil, China and India. But it gave only partial credit for Walmart's cooperation in Mexico, saying the company had failed to prevent conflicts between its own investigation and the department's with respect to one witness interview.

Bruce Searby, a former trial attorney in the Justice Department's FCPA unit, said the dispute shows how the department and a company can have different views on what cooperation means in practice.

"It was a situation that the government set itself up for by having an ambiguous non-waiver agreement," said Mr. Searby, who said he didn't work on the Walmart case during his time at the Justice Department. "But it also shows how the company's idea of cooperation was very, very minimalistic."

"They wanted to limit the ability of the government to prove facts in court that their own witness was telling them voluntarily," he added.

Write to Dylan Tokar at dylan.tokar@wsj.com

(END) Dow Jones Newswires

July 01, 2019 02:47 ET (06:47 GMT)

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