It’s not a new state of affairs when corporate America confuses unethical or illegal activity with corporate governance rights and responsibilities. The self designated all-American business, Wal-Mart, which fired two executives for hanky-panky that violated company policy, had an employee who was busy tape recording telephone conversations with a New York Times reporter. The same employee eavesdropped on board of directors’ meetings. Wal-Mart fired Bruce Gabbard, member of Wal-Mart’s Threat Research and Analysis Group and then got a restraining order to keep him from talking about “Project Red”.

And now we are learning that paranoia has set in at Wal-Mart. The otherwise cost-conscious company spent millions to spy on employees and critics.

First we learned that a Wal-Mart employee taped phone calls between Michael Barbaro, a New York Times reporter, and Wal-Mart officials. This came after The Times reported on a Wal-Mart memo that suggested such clever tactics as forcing all shop clerks to spend some time hauling shopping carts in from the parking lot — the better to weed out unhealthy workers who might submit health insurance claims.

Wal-Mart fired the employee it said was responsible for taping the calls, a man named Bruce Gabbard, and said his actions were unauthorized. Then Mr. Gabbard started talking to The Wall Street Journal, saying the department he worked for had spied on critics. Wal-Mart quickly issued apologies to the critics and got a judge to order Mr. Gabbard to stop talking.

Mr. Gabbard said he told a Wal-Mart lawyer that “I’m the guy listening to the board of directors when Lee Scott is excused from the room.”

[Paranoia and Bugging at Wal-Mart, New York Times, subscription only access]

Lessons Counsel Can Learn From Hewlett-Packard’s Pretexting Scandal explores the dire consequences of unchecked internal company investigations and weak scrutiny of company retained private investigators. The authors offer education in the law and advise on proper investigative approaches.

That is not to say that engaging outside counsel will necessarily insulate an investigation from public scrutiny. First, when advising the corporation regarding any aspect of an internal investigation, counsel should be cautious not to offer business advice as opposed to legal advice; the former may jeopardize the attorney-client privilege. U.S. v. Davis, 636 F.2d 1028, 1044 (5th Cir. 1981). Second, absent a pending investigation or possible civil litigation, internal investigations are not protected by the work product doctrine. Binks Mfg. Co. v. National Presto Industries, Inc., 709 F.2d 1109, 1120 (7th Cir. 1983). HP is a case in point. Because the company was not facing the possibility of an investigation or civil litigation, documents related to the investigation are arguably discoverable. Finally, the attorney-client privilege and work product doctrine do not shield improper techniques used at any point in the investigation. U.S. v. Zolin, 491 U.S. 554, 556 (1989).

[Article via TVC]