Where Has Attorney-Client Privilege Gone?
Do financial institutions have any attorney-client privilege left? That’s the question posed in a recent commentary in American Banker.
The author is not a reactionary blogger, but Thomas P. Vartanian, who has previously served as a government counsel to two federal banking agencies, argues that regulators are taking an increasingly aggressive stance in efforts to obtain access to communications and work products lawyers provide to financial institutions. He warns financial institutions that “acting as if there is a privilege, when in fact there may be none, can lead to an institution’s unvarnished legal analysis, conclusions and communications being accessible to the very regulators that are instituting enforcement actions against it.” The issue has taken on added importance in the aftermath of federal legislation passed in 2006 that clarified that financial institutions that provide privileged communications to regulators do not lose the attorney-client privilege as applied to other parties.
Credit unions are not immune from this issue. In a strongly worded opinion letter, NCUA opined that examiners have a right to “complete access to a credit union’s records.’ It went on to explain that with the new federal law, “NCUA will no longer permit credit unions to withhold privileged documents because of an assertion that producing them will waive a privilege as to a third party.”
To be clear, NCUA or any regulator for that matter is not the ultimate arbiter of privilege. If your credit union does find itself being asked for privileged information, it should consult with an attorney and see if there are grounds to refuse the request. The key point to keep in mind is that given the state of the law, communications with your attorney may not be as private as you think they are.
This unfortunate reality is in no one’s interest. Right after I am done with this blog, I am going to attend the second day’s program of the Association’s Legal and Compliance Conference. Laws and regulations are getting more complicated by the day. Mistakes are going to happen, and when they do, there has to be a mechanism to ensure that frank and honest discussions can take place about how to correct them.