Recent Decision Dismissing Charges Against Penn State Administrators Renews Focus On Conflict, Waiver, Upjohn, And The Yates Memo

The Pennsylvania Superior Court recently dismissed several criminal charges against three former Penn State administrators facing prosecution over their handling of the Jerry Sandusky child molestation investigation, after concluding that former University General Counsel Cynthia Baldwin improperly testified against them before the grand jury.

The three-judge panel dismissed perjury, obstruction of justice and conspiracy counts against Graham B. Spanier, the university’s former president, and Gary Schultz, a former senior vice president for business and finance, and also tossed charges of obstruction of justice and conspiracy charges against Tim Curley, the athletic director. The Superior Court held that Ms. Baldwin breached attorney-client privilege when she testified to a grand jury in 2012 about Spanier, Schultz and Curley and what she believed they knew about the allegations of abuse.

The Superior Court found that “Ms. Baldwin did not adequately explain to [Schultz and Spanier] that her representation of [them] was solely as an agent of Penn State and that she did not represent [their] individual interests.” Com v. Spanier, 2016 WL 286663, at *14 (Pa. Super. Ct. Jan. 22, 2016).  Ms. Baldwin had appeared with Spanier, Schultz and Curley before each testified on their own behalf before the grand jury, and they believed she was there representing their interests. However, because Ms. Baldwin solely represented Penn State and failed to provide Spanier, Schultz and Curley with adequate warnings about her limited representation, her conduct left the three administrators without the personal counsel they desired before the grand jury. 

This decision highlights the increased importance of engaging separate counsel for employees in the wake of the Department of Justice’s Yates Memo, which requires corporations to fully cooperate with the government investigators and disclose all relevant facts related to potentially culpable individuals. This increased focus on individual accountability in corporate investigations enhances the possibility that the interests of the corporation may become adverse to those of its employees. Corporations must decide at the outset of an internal investigation whether to engage separate, independent counsel for employees. If separate counsel is not retained, it is crucial that the attorney for the corporation makes clear that (1) he or she represents only the corporation, and not the employee; (2) that any information provided may be privileged but the privilege is held by and controlled by the corporation, not the employee; and (3) that it is up to the corporation to decide whether it will waive that privilege and share any information with a third party, such as the government.