## Facts

- ISS Marine Services, Inc. provided ship-husbanding and port services to the U.S. Navy and other agencies.
- After internal site visits in late 2007 raised concerns about potentially improper practices and possible fraud exposure, an executive informed outside counsel (Arnold & Porter LLP) of the issues.
- Outside counsel proposed an engagement to conduct an internal investigation, but company leadership rejected a lawyer-led investigation.
- Leadership instead directed a non-lawyer internal auditor to conduct an internal audit to help management decide “future steps.”
- Before the audit began, outside counsel provided general information about potential liability issues and the types of documents that might be useful, but did not direct or conduct the audit.
- The internal auditor interviewed employees without attorneys present, and employees were not told interviews were to obtain legal advice.
- The audit report was completed and only later transmitted to outside counsel.
- The Department of Defense Office of Inspector General (DoD OIG) issued an administrative subpoena under the Inspector General Act seeking the audit report and related materials.
- ISS refused production, asserting attorney-client privilege and work-product protection, and the United States petitioned to enforce the subpoena.

## Issues

1. Whether the audit report and related materials were protected by attorney-client privilege as part of an internal investigation undertaken for the purpose of obtaining legal advice.
2. Whether the audit report and related materials were protected by the work-product doctrine as prepared in anticipation of litigation.
3. If no protection applied, whether the court should enforce the DoD OIG subpoena and compel production.

## Decision

- The court granted the government’s petition and ordered compliance with the subpoena.
- The court held the attorney-client privilege did not apply because the audit was not undertaken primarily to obtain legal advice and was not directed by counsel.
- The court held work-product protection did not apply because ISS failed to show the audit was prepared because of anticipated litigation rather than as a business-driven review.

## Legal Principles

- Attorney-client privilege protects confidential communications made for the purpose of securing legal advice; the party asserting the privilege bears the burden of proving that purpose.
- In the corporate context, privilege may extend to employee communications gathered in an internal investigation only when the investigation is conducted to obtain legal advice and is structured as a legal inquiry rather than a business audit.
- Routing an otherwise non-privileged business document to counsel after its creation does not retroactively make it privileged; privilege protects communications, not underlying facts.
- Work product requires a showing that materials were prepared because of the prospect of litigation; ordinary-course business or compliance reviews are not protected absent a sufficient litigation nexus.
- An Inspector General subpoena is enforceable in district court when issued within statutory authority, stated with adequate definiteness, and reasonably relevant to an authorized investigation; unsupported privilege assertions do not bar enforcement.

## Conclusion

The court enforced the DoD OIG subpoena, concluding that a management-directed internal audit conducted by non-lawyers and only later provided to counsel was neither attorney-client privileged nor work product, and therefore had to be produced.


United States v. ISS Marine Servs., Inc., 905 F. Supp. 2d 121 (D.D.C. 2012)