While companies, like people, are entitled to protect privileged communications with their counsel, companies only can act through individuals. So what happens when the former CEO wants to disclose a privileged communication he had with his company’s corporate counsel? As SEC v. Present highlights, if the company does not want that communication disclosed, the former CEO may be barred from making such a disclosure.

Howard Present was the co-founder and CEO of F-Squared Investments, and in this role he routinely consulted with the company’s outside counsel. In 2013, the SEC commenced an investigation into F-Squared’s activities, which culminated in a settlement whereby the company paid a $35Million fine. On the same day that this settlement was reached, the SEC sued Present, personally.

As part of Present’s defense, he claimed to have “reasonably relied upon the work, advice, professional judgment, and opinion of others, including but not limited to legal and compliance professionals.” To prove this defense, Present sought to use communications to which he was privy between F-Squared and its counsel. Unfortunately for Present, F-Squared objected to this and asserted the attorney-client privilege. Present argued that it was fundamentally unfair to deny him the ability to use such communications in his defense, and the Court, itself, noted:

[A] tension arising from legal rules that encourage corporate officials to seek legal advice about their actions on behalf of the corporation, and protect those communications from disclosure, but, as here, prevent the corporate official from defending himself personally based (possibly) on the very advice he received when the corporation and the official differ on whether to waive the privilege.

Nevertheless, the Court refused to allow Present to use the privileged communications, relying, among other reasons, on the fact that the United States Supreme Court and other courts have consistently rejected any sort of balancing test to determine whether the attorney client privilege should be waived.

For in-house counsel, Present is a stark reminder that it is important to let company executives know that while they may have the ability to create a privileged communication, they may not have the ability to waive that privilege. Likewise, in-house counsel should periodically remind their internal clients that the company’s counsel is just that, and individuals should seek personal advice elsewhere. Failing to do these things can put lay people in the unenviable position in which Howard Present found himself, i.e., knowing that there might be exculpatory evidence out there, but not being able to use it.