During discovery in an SEC administrative and cease-and-desist proceeding instituted in December 2012 (pursuant to Sections 9(b) and 9(f) of the Investment Company Act of 1940)[1] the SEC Division of Enforcement (DOE) inadvertently produced 11 privileged e-mails to the respondents.  This is noteworthy because the production included an e-mail forwarding a whistleblower complaint from the SEC Tips, Complaints, and Referrals (TCR) system.

On January 18, 2013, the DOE was so notified by respondents’ counsel and requested identification of the potentially privileged e-mails.  On January 23, 2013, the DOE asserted “privilege as to internal e-mails among the staff, as well as any draft or final action memos.”  On January 30, 2013, the independent directors disclosed one of the privileged e-mails as an attachment to a “Supplemental Response” to the DOE’s Motion to Strike and did not file it under seal.  In response, on February 11, 2013, the DOE filed a Motion for Protective Order Sealing the Independent Directors’ Supplemental Response in Opposition to the DOE’s Motion to Strike. 

The DOE sought the following relief: a protective order; findings that the 11 e-mails are privileged, that the DOE did not waive any privilege by the inadvertent production, and that the emails are inadmissible; and that respondents return or destroy all copies of the e-mails. 

The ALJ determined that that the e-mails fell into the following categories:

  1. An e-mail forwarding a complaint from the TCR system;
  2. E-mails between SEC staff forwarding information of potential use in the investigation leading to the present matter;
  3. E-mails between SEC staff that evidence deliberations over whether to file the present matter; and
  4. An e-mail between SEC staff about a possible separate administrative proceeding against an entirely different respondent.

By order dated March 5, 2013, the ALJ found the e-mails were privileged and largely irrelevant.   The ALJ thus granted the DOE’s motion and ordered that all copies of the e-mails be returned or destroyed and that all documents referring to those e-mails be treated as confidential and be filed under seal. 

This has caught the eye of attorneys representing whistleblowers, as Dodd-Frank imposes limitations on the SEC’s ability to disclose information relating to whistleblower reports.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.