Privilege Can’t Derail Fired Lawyer’s Testimony

SAN FRANCISCO (CN) – June 7, 2013 started like any ordinary Friday for former Bio-Rad general counsel Sanford Wadler, But by the end of the day, Wadler found himself standing outside the company headquarters, jobless.

Wadler took the stand Wednesday in a trial accusing the life sciences company of firing him for blowing the whistle on possible corporate bribery of Chinese public officials in violation of the federal Foreign Corrupt Practices Act.

Bio-Rad Laboratories, which also sells diagnostic equipment and other products in the medical field, maintains Wadler was fired due to professional incompetence and because his temper had become unmanageable.

The case is an unusual one, triggering a dispute over whether Wadler’s two decades as top in-house counsel can keep him from discussing matters traditionally falling under attorney-client privilege.

Even U.S. District Judges Charles Breyer and Vincent Chhabria have wandered in to view the proceedings.

On the eve of trial, Bio-Rad’s lawyers made a last-ditch attempt to keep Wadler from talking about virtually everything he learned as general counsel. In his order denying the motion, U.S. District Judge Joseph Spero wrote that this encompasses basically all of the evidence and testimony Wadler might need to prove his case.

On Wednesday, Wadler’s attorney James Wagstaffe asked him whether he had any clue that June 7, 2013, would end with CEO Norman Schwartz handing him his walking papers.

“It was the furthest thing from my mind,” Wadler said, later adding, “It’s like if you walk out of your house and somebody hits you with a baseball bat.”

Wadler said Schwartz told him the company’s board of directors had voted to fire him, which Wadler thought was highly bizarre considering he had been given the most glowing performance review of his career only six months earlier along with a generous raise and promotion.

“I didn’t know I was going to get fired and somehow he’s talking about how the whole board has agreed to terminate me. It was like getting hit with a two-by-four,” Wadler said.

Wadler said Schwartz also added that his termination had nothing to do with an investigation by Davis Polk, an outside law firm Wadler had pushed the company to hire to review its Foreign Corrupt Practices Act compliance for possible discrepancies. The act prohibits companies from making payments to foreign government officials and requires them to keep accurate books and records.

Beginning in 2012, Wadler said, he became increasingly concerned about red flags indicating potential bribery in China, such as the giving of free products to Chinese doctors and hospital administrators.

“We had seen that we had corruption all over by this point. It wasn’t just an isolated event. It was like a cesspool we were swimming in,” Wadler said. “China is known as one of the most corrupt places on the planet.”

Bio-Rad was already in hot water with the federal government, having agreed to pay a $55 million fine for Foreign Corrupt Practices Act violations in Russia, Thailand and Vietnam that occurred back in 2009.

The company hired outside law firm Steptoe & Johnson to investigate the bribery allegations in China as well as worldwide, but Patrick Norton, who led the investigation, said he could find no actual evidence of wrongdoing.

Wadler and Schwartz were scheduled to meet with officials from the Justice Department and Securities and Exchange Commission in late February 2013 to ensure the company complying with the law. “I thought it was necessary that some action had to be taken by someone,” Wadler said. “We were in February. I was set to meet with the DOJ and SEC on the 24th and I was going to give a presentation on everything we’d done to get the company up to speed.”

Wadler said he was also concerned about a potential lawsuit from Life Tech, from whom Bio-Rad licensed products. Life Tech conducted regular audits to make sure it was being compensated properly, and Bio-Rad was unable to provide Life Tech with any documentation on its dealings in China.

“Life Tech was getting louder and louder about litigation,” Wadler said. For these reasons, he said he went above Schwartz’s head to the Bio-Rad’s audit committee. At Wadler’s urging, investigators from law firm Davis Polk were brought in. But they also found no direct evidence of Foreign Corrupt Practices Act breaches.

At his termination meeting, Wadler said he asked Schwartz for the Davis Polk report, which he hadn’t yet seen. “That’s where he showed some anger and he said ‘no,’” Wadler said.

Wadler told the jury that he wasn’t even allowed to collect his personal belongings. He was given no traditional severance, and fellow employees were told not to speak with him. He said this was highly irregular, since three other high-level employees who had been fired for their roles in bribing officials in Russia, Thailand and Vietnam, were treated leniently by comparison.

“It was astounding. They were given severance packages and they were allowed time to exercise their options. They had the run of Bio-Rad for several months. No employees were told they couldn’t speak to them,” Wadler said.

His testimony continues Thursday.