Emails to Wife Are Fair Game for SEC Subpoena

MANHATTAN (CN) - An executive facing civil securities fraud charges cannot use marital privilege to protect emails he sent to his wife from a work account, a federal judge ruled on Monday.

The Securities and Exchange Commission filed a civil fraud action in May 2009 against Reserve Management Co., chairman Bruce Bent Sr., vice chairman and president Bruce Bent II, and Resrv Partners.

The federal complaint accuses the defendants of failing disclose their Reserv Primary Fund's vulnerability in the wake of the collapse of Lehman Bros.

In prosecuting that case, the SEC sought about 60 emails that Bent II sent to his wife, Rebecca, between Sept. 15 and 16, 2008.

Bent II complained that the emails were protected by marital privilege.

U.S. District Judge Paul Gardephe shot down that argument in a 20-page order Monday, saying that the emails were not confidential because they were sent from an address that he knew was monitored by his company.

The order states that marital privilege can be broken down into statutes preventing "adverse spousal testimony" and "marital communications" barring confidential information sent between spouses.

Neither of these privileges apply to Bent II, the judge wrote.

"The emails in question were exchanged by Bent II and his wife on September 15 and 16, 2008 - the crucial two-day period following Lehman Brothers' September 14, 2008 bankruptcy announcement, during which a run on the Reserve Primary Fund ensued, leading to the Fund's collapse and this litigation," the 20-page order states. "The emails were transmitted by Bent II using an RMCI computer and were stored on RMCI's server."

According to the order, Bent II knew that his company had a policy of saving all communications and making them available for public disclosure. The judge wrote that Reserve Management barred employees from writing personal emails on the company server.

"In sum, because RMCI's email policy bans personal use of the RMCI email system, this factor weighs in favor of finding that Bent II had no reasonable expectation of privacy in the emails he sent to his wife over that system on September 15 and 16, 2008," the order states. "Where an employer's policy bans personal use of the employer's email system, courts frequently find that employees have no reasonable expectation of privacy in email transmitted over that system."

In a footnote, Judge Gardephe likewise dismissed Rebecca Bent's motion arguing that she never used the server her husband used and did not waive her own marital privilege.

"Mrs. Bent's arguments misapprehend the nature of this Court's inquiry," Gardephe wrote. "[T]he issue is not whether Bent II can waive marital privilege on behalf of his spouse," he added. "Instead, the issue is whether the emails exchanged by Bent II and Mrs. Bent were ever - in the eyes of the law - confidential."

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