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September 30, 2009 5:36 PM

Major Privilege Ruling in Broadcom Case Goes to Prosecutors

Posted by Zach Lowe

This just in: A federal appeals court ruled today that statements that Broadcom's chief financial officer made to Irell & Manella lawyers Broadcom hired to investigate backdating allegations are not protected by attorney-client privilege, according to the Los Angeles Times and a copy of the ruling. The ruling reverses a federal trial court decision earlier this year.

In that earlier ruling, a federal judge tossed out all evidence gleaned from statements Irell lawyers took from Broadcom's ex-chief financial officer, William Ruehle, during the firm's internal investigation of Broadcom in 2006, according to the LAT. Broadcom's audit committee hired Irell to investigate allegations of options backdating, and Irell lawyers had a clear duty to turn over all the information they uncovered to the audit committee, court records show. Irell partners who interviewed Ruehle on June 1, 2006, testified that they informed Ruehle they were representing Broadcom, not him, and that attorney-client privilege existed only between Broadcom and Irell.

Federal prosecutors have since used Ruehle's statements to Irell as part of a criminal case against him. Ruehle (who later retained Wilson Sonsini Goodrich & Rosati) later claimed the Irell lawyers violated attorney-client privilege in turning over his statements to the audit committee. A federal district court ruled in Ruehle's favor earlier this year and strongly chastised Irell for its conduct, court records show. But the U.S. Court of Appeals for the Ninth Circuit reversed late Wednesday. The court ruled Ruehle knew or should have known his statements would not be protected. 

A team from Skadden, Arps, Slate, Meagher & Flom argued the case before the Ninth Circuit for Ruehle. Associate Matthew Umhofer led oral arguments. 

Broadcom had to restate its earnings and reveal about $2.2 billion in previously undisclosed employee compensation after the backdating scandal emerged, according to the LAT.

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