Have you heard of Maritza I. Munich?
The answer is almost certainly no, yet she is a central figure in Walmart’s unfolding bribery scandal. Ms. Munich was a Walmart lawyer who advocated an aggressive response to investigating the scandal but has been silenced by Walmart, which has invoked the attorney-client privilege to keep her from speaking.
It’s yet another example of how companies use the attorney-client privilege to shelter potential wrongdoing, perhaps to the detriment of many people, including shareholders.
But Ms. Munich may yet have her chance to talk. A recent Delaware court decision may not only allow Ms. Munich to talk about what happened at Walmart, it may give shareholders of all companies a way to sidestep the attorney-client privilege when wrongdoing takes place.
Ms. Munich was the general counsel of Walmart’s international division when Walmart discovered that its employees might have been involved in a sweeping bribery operation in Mexico.
The full details are not known, but according to documents disclosed in an article in The New York Times in 2012, Ms. Munich led the bribery investigation as it unfolded in 2004.
Yet she was stymied in both that investigation and others.
It appears that she argued in 2004 for a fuller investigation into Walmart’s possible misconduct in Mexico and against any executive interference.
She was ignored.
In another case, when a Walmart executive decided to have a complaint at the company’s Puerto Rico operations investigated by a company officer instead of the corporate investigations unit, she objected that the investigation was “at the direction of the same company officer who is the target of several of the allegations.”
Not only was she ignored, but Ms. Munich resigned in 2006 in the middle of Walmart’s investigation into its Mexico operations. After a few weeks, the investigation was buried by the general counsel of Walmart’s Mexico operations, a man later implicated in the scandal. We still don’t know the exact reasons for Ms. Munich’s resignation, though in at least one interview touching on the subject she talked about being able “to sleep” at night.
It was only as The Times began reporting for its article that Walmart reopened its investigation and reported the suspected misconduct in Mexico to the United States government.
Since then, Walmart has conducted a widespread investigation that has cost it $439 million as of earlier this year. In addition, many Walmart executives involved in the investigation have left the company.
Yet it’s not finished, and we still don’t know the full story.
This is in part because Walmart has asserted that attorney-client privilege. The deliberations of Ms. Munich and others have been guarded as confidential by Walmart.
“Walmart is fully cooperating with the Department of Justice and the Securities and Exchange Commission through the government’s ongoing investigation,” the company said in a statement to me. “A thorough investigation like this will take time to complete, and it would be inappropriate to comment further at this time.”
Walmart has maintained that not only does the privilege bar its lawyers from speaking, it prevents their documents from being used in court, even if they are disclosed inadvertently.
This has led to some strange situations. Ms. Munich herself has honored the privilege. She has no choice if she wants to continue to be a lawyer. She is now a general counsel of a company based in Puerto Rico. Ms. Munich has stated to her alumni magazine at Arizona State University that “I’m available” to speak to investigators and that because of “attorney-client privilege constraints, they first need to come to agreement” with Walmart. She added that she had “no reluctance” to speak but could not because of the privilege.
That is where things stood until a recent Delaware decision.
The Indiana Electrical Workers Pension Trust Fund, a Walmart shareholder, has taken steps to investigate the Walmart bribery matter to decide whether directors engaged in any wrongdoing. As part of this suit, the pension fund issued a demand for documents that Ms. Munich had written that were either confidential or had been leaked but could not be used in court because of the privilege. This type of demand is allowed under corporate law to permit shareholders to determine whether wrongdoing has taken place.
Walmart denied the request, asserting the attorney-client privilege, among other things.
But the Delaware Supreme Court refused to side with Walmart and apply the privilege. Instead, the court said there was an exception to the privilege rule for shareholders. The court also ruled that “the allegations at issue implicate criminal conduct” under the Foreign Corrupt Practices Act and that the pension fund was a legitimate stockholder. Accordingly, the information “should be produced by Walmart pursuant to [an] exception to the attorney-client privilege.”
The decision comes as the attorney-client privilege for companies is increasingly under attack. A former tax lawyer for Vanguard has brought a whistle-blower suit against the company, contending it avoided more than $1 billion in taxes and specifically citing privileged communications. These and other cases highlight the exception when executives actually try to report wrongdoing to the government.
Yet, unless a whistle-blower steps forward, the principle remains strong. Despite the widespread involvement of its legal staff, General Motors successfully invoked the privilege to help keep silent on the ignition scandal it eventually faced. Even the Justice Department changed its guidelines in 2008 to remove a provision that penalized companies for invoking the privilege.
The result is that companies have a great incentive to shift anything hinting at legal trouble to their in-house counsel to ensure that it is protected from disclosure. The in-house legal department thus becomes the “cover-up and damage control” arm of the company.
And so we have a strange situation in which the privilege applies, to be used by companies, unless someone steps forward under a whistle-blower provision. Yet, not all crimes and misdeeds are covered by the whistle-blower laws. More important, not everyone wants to be a whistle-blower and bear the stigma that comes with it. The tax lawyer in the Vanguard case, for example, has given up his law license because he views himself as unemployable. Ms. Munich does not appear to want to go so far.
In this light, the Delaware case is yet another chip in the attorney-client privilege, a sensible one perhaps.
The privilege is important because it allows for people to freely discuss their problems and receive good legal advice. But in the corporate context, it has always been an uneasy mix because the company is owned by its shareholders. If the corporation is doing wrong, the shareholders are the ones who are harmed when they bear the costs. The Delaware court decision sides with shareholders on this matter, allowing them to be the ones to decide whether there is wrong.
But even then, the court decision still requires that the shareholders keep what they find confidential unless the privilege is waived. For now, they can use the information only to decide whether to pursue a claim against the directors of Walmart for failing to adequately supervise the Mexican operations. And so we’ll have to wait to find out whether there is a claim from the Walmart lawyer documents.
But as we wait, perhaps the issue of Ms. Munich’s silence should be seen as part of a wider debate. Is it time to cut back privilege or even end it to prevent companies from hiding corporate crimes? In other words, should we let Ms. Munich and others finally speak?
Steven Davidoff Solomon, a professor of law at the University of California, Berkeley, is the author of “Gods at War: Shotgun Takeovers, Government by Deal and the Private Equity Implosion.” E-mail: email@example.com | Twitter: @StevenDavidoff