On October 10, 2012, a federal district judge in Missouri granted in part and denied in part class action plaintiffs’ motion to compel certain documents that KPMG had supplied to the Public Company Accounting Oversight Board (“PCAOB”) in a 2006 investigation.
Judge Ortrie D. Smith held that KPMG was not required to produce the bulk of its withheld documents relating to a 2006 PCAOB inspection because those documents were privileged under SOX. Specifically, SOX provides that documents and information prepared or received by or specifically for the PCAOB are confidential and privileged and not subject to disclosure. Not all documents fell under the privilege, the court held: documents from the underlying transaction and work that was the subject of the investigation were not prepared for the PCAOB and so could not claim the privilege protection.
The court rejected plaintiffs’ arguments that the SOX privilege only covers documents “in the hands” of the PCAOB and not third parties, like KPMG, because the privilege covered materials both prepared for, and received by, the PCAOB. Finally, KPMG had not waived the privilege when it shared some of the information with Sprint employees or defendants in the litigation.