Academic journal article Defense Counsel Journal

Footing the Bill: Paying the Legal Costs of Criminal Proceedings

Academic journal article Defense Counsel Journal

Footing the Bill: Paying the Legal Costs of Criminal Proceedings

Article excerpt

Because of the possibility that insurance will not cover defense costs, corporate counsel must take steps to protect corporate interests

FOR A corporation accustomed to having its in-house counsel handle legal affairs and its insurance carrier to provide outside counsel for matters routinely covered under its comprehensive general liability policy, the receipt of a subpoena or letter from criminal authorities indicating an interest in discussing certain matters with employees or officers of the corporation may come as quite a shock.


The first step is to determine how to protect the rights of the corporation, its officers, directors and employees during the criminal investigation process. Corporate counsel must first ascertain whether the corporation is merely a source for information or a potential target of the criminal investigation. The answer to this question will determine the response of the corporation.

Many corporate officers have difficulty in accepting the fact that the company may be the target of a criminal investigation based on either a turncoat employee bringing a "whistle-blower" action or by running afoul of some federal or state regulation that provides for criminal penalties in the event of non-compliance. The first reaction of a harried corporate executive may be to "tell all" and "get it off our chest." But this may not be the right response.


After determining whether the corporation is either the target or merely a source for information, corporate counsel must consider whether there is any potential conflict between the legal interests of corporate executives and corporate employees. If so, separate counsel for each probably would be required so as to avoid any potential conflict of interest. The corporate in-house attorney probably would be disqualified from acting on behalf of either the corporate officers or the corporate employees.

If the in-house counsel conducts an internal investigation in response to the inquiry from the criminal authorities, the corporate employees who are interviewed must be told that the company attorney is not their attorney and that the role of the corporate counsel is simply to find facts on behalf of the corporation. Corporate employees should understand that they may find it necessary to retain their own counsel if they have legal questions concerning their own situations.

The corporation's in-house attorney should avoid giving legal advice to employees, officers or directors as to whether they should agree to speak with legal authorities, to testify with or without a subpoena or to produce any documents within their possession.



If individual employees of the corporation are named as defendants, a delicate problem is presented, because it is in the interests of the corporation not to have its individual employees pointing fingers at either their fellow employees or the corporation. There is certainly the potential of a conflict of interest if the same attorney representing the corporation seeks to undertake the representation of the individual employees. An investigation by the corporate attorney should determine, at least preliminarily, any potential conflict or diversion of interest among the employees and between the employees and the corporation.

In civil litigation, the corporate attorney generally is appointed to represent the interests of the employees, as well as the corporation, as long as the facts underlying the suit and the basis of the defense are undisputed. If, however, the employees are named in a criminal suit, there are more substantial questions of conflict in joint representation, and in those cases it is likely that employees would have to retain their own criminal counsel.

In civil actions, the ultimate interests of the corporate employer and the employees are the same-this is, to avoid or limit their potential liability. …

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