MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: All Calderwood & Harkness LLP attorneys and staff assigned to Matter No. SC-MAT-2023-4172 (Belmont Ridge Bank NA — SEC Investigation)
FROM: Victoria Chambers, Partner; Jasmine Thornton, Lead Associate
DATE: September 22, 2023
RE: Upjohn Protocols and Corporate Representation Advisory — SEC Division of Enforcement Investigation, File No. HO-14287
cc: Howard Quinn, Partner; Liam Donahue, Associate; Derek Sung, General Counsel & CLO, Belmont Ridge Bank NA
I. Purpose of This Memorandum
Calderwood & Harkness LLP ("C&H" or the "Firm") has been retained by Belmont Ridge Bank National Association ("BRB" or the "Company") to represent the Company — the entity — in connection with a formal investigation by the U.S. Securities and Exchange Commission ("SEC"), Division of Enforcement, File No. HO-14287 (the "Investigation"). The engagement was formalized pursuant to an engagement letter dated September 20, 2023, and has been assigned internal Matter No. SC-MAT-2023-4172.
The purpose of this memorandum is to establish binding, firm-wide protocols for all communications with current and former BRB employees, officers, and directors conducted in connection with the Investigation. In particular, this memorandum sets forth the mandatory Upjohn/corporate-client warnings (commonly referred to as "Upjohn warnings" or "corporate Miranda warnings") that must be delivered at the outset of every substantive interview or meeting with any BRB personnel. These protocols are essential to preserving the attorney-client privilege on behalf of the Company, avoiding the inadvertent creation of individual attorney-client relationships, and ensuring that C&H complies with its ethical obligations under the New York Rules of Professional Conduct and applicable case law.
The Investigation concerns BRB's public disclosures regarding its allowance for credit losses ("ACL") related to the Company's digital lending platform, marketed and operated under the brand name "BridgeFin." Specifically, the SEC Staff is examining whether BRB's fiscal year 2022 Annual Report on Form 10-K (filed with the Commission on February 28, 2023) and the Company's Quarterly Reports on Form 10-Q for the first and second quarters of fiscal year 2023 (filed on May 10, 2023 and August 9, 2023, respectively) materially understated expected credit losses in the BridgeFin consumer fintech loan portfolio. The Staff's inquiry focuses on the Company's implementation of and compliance with the current expected credit loss ("CECL") methodology under ASC Topic 326, as well as the adequacy and accuracy of the Company's related disclosures to investors.
Compliance with this memorandum is mandatory for all C&H team members assigned to this matter, including partners, associates, counsel, paralegals, and support staff. Failure to adhere to the Upjohn protocols described herein risks the inadvertent creation of individual attorney-client relationships between C&H and BRB personnel, which could give rise to conflicts of interest, potential disqualification motions, and ethical violations. Any questions regarding the application of these protocols should be directed immediately to Victoria Chambers or Jasmine Thornton.
II. Background — The Engagement and Client Identity
A. Client Identity
The client in this matter is Belmont Ridge Bank National Association, a national banking association organized and existing under the laws of the United States pursuant to Office of the Comptroller of the Currency ("OCC") Charter No. 24891. BRB is headquartered at 200 Park Avenue South, 38th Floor, New York, New York 10003. The Company is publicly traded on the Nasdaq Stock Market under the ticker symbol "BRDG" and is a reporting issuer subject to the periodic reporting requirements of the Securities Exchange Act of 1934 (the "Exchange Act").
It is critical that every member of the C&H team understands and internalizes the following principle: C&H does not represent any individual officer, director, employee, or agent of BRB in their personal capacity in connection with this matter. The Firm's duties of loyalty, confidentiality, and zealous representation run exclusively to the corporate entity. This distinction must be communicated clearly and repeatedly to every BRB witness with whom C&H interacts, as described in detail in Sections IV and V below.
The Company's in-house point of contact for all matters relating to the Investigation is Derek Sung, General Counsel and Chief Legal Officer of BRB. All substantive communications with BRB management regarding investigation strategy, document production, privilege issues, and related legal advice should be coordinated through Mr. Sung, unless otherwise directed by Victoria Chambers. Mr. Sung's contact information is as follows:
Derek Sung, Esq. General Counsel & Chief Legal Officer Belmont Ridge Bank National Association 200 Park Avenue South, 38th Floor New York, NY 10003 Telephone: (212) 555-0149
Email: derek.sung@belmontridgebank.com
B. Key Personnel Who May Be Interviewed
In connection with the Investigation, C&H anticipates that it will need to conduct internal interviews with a number of BRB officers, employees, and directors who possess knowledge relevant to the subject matter of the SEC inquiry. The following individuals have been identified as likely interviewees, though this list is not exhaustive and may be supplemented as the investigation progresses:
In addition to the individuals listed above, C&H may need to interview employees in the following functional areas: BridgeFin operations, credit risk analytics and modeling, corporate accounting, financial reporting and SEC compliance, and internal audit. As additional witnesses are identified during the course of the Investigation, they will be added to the interview schedule and will be subject to all of the same Upjohn protocols set forth in this memorandum.
C. Relationship to Prior Counsel
BRB's regular outside securities counsel is Caldwell Pratt & Stein LLP ("CPS"), led by partner Martin Caldwell, with offices at 51 West 52nd Street, 24th Floor, New York, New York 10019. CPS has served as the Company's primary outside counsel for securities-law matters, including the preparation, review, and filing of the Company's periodic reports with the SEC. Specifically, CPS prepared and reviewed the Form 10-K for fiscal year 2022 and the Forms 10-Q for Q1 and Q2 2023 that are the subject of the SEC's inquiry.
CPS initially received the SEC Division of Enforcement's voluntary document request letter, dated September 18, 2023, which was addressed to the Company and delivered to Mr. Sung. Following receipt of that letter and consultation between Mr. Sung and BRB's Board of Directors, BRB determined to retain C&H to serve as lead outside counsel specifically for the Investigation. CPS continues to serve as the Company's regular securities counsel for ongoing reporting and compliance matters unrelated to the Investigation.
CPS does not represent any individual officer or director of BRB in connection with this matter. Any coordination with CPS regarding factual background, historical documents, or the preparation of the filings at issue must be handled exclusively through Victoria Chambers or Jasmine Thornton, in order to preserve the integrity of the privilege and to avoid any confusion regarding the scope of C&H's representation versus CPS's separate engagement. Under no circumstances should junior team members communicate directly with CPS attorneys about Investigation-related matters without prior authorization from Chambers or Thornton.
D. Independent Auditor
BRB's independent registered public accounting firm is Whitfield Keane LLP ("WK"), a firm registered with the Public Company Accounting Oversight Board under PCAOB Registration No. 2847. WK's offices are located at 600 Third Avenue, 22nd Floor, New York, New York 10016. The audit engagement partner for BRB's fiscal year 2022 audit and Q1 and Q2 2023 interim reviews is Lorraine Dupont.
WK has retained its own independent legal counsel in connection with the Investigation: Hargrove & Millstein LLP ("H&M"), led by partner Samuel Hargrove, at 1700 K Street NW, Suite 900, Washington, D.C. 20006. WK's retention of separate counsel is standard practice in SEC enforcement investigations involving audited financial statements.
C&H does not represent WK. WK and H&M are separate parties with their own interests. Communications with WK or H&M should be coordinated with extreme care to avoid inadvertent waiver of any privilege belonging to BRB. In particular, C&H team members should be aware that the sharing of privileged communications or attorney work product with WK or its counsel, absent an appropriate common-interest or joint-defense agreement, could result in a waiver of the privilege. The considerations applicable to privilege coordination with WK and H&M are addressed in greater detail in Section VI.A below.
E. Forensic Accounting Consultant
C&H has engaged Brindoval Analytic Partners LLC ("Brindoval") to provide forensic accounting analysis and support in connection with the Investigation. Brindoval is led by Dr. Franklin Osei, CPA, CFF, and is located at 350 South Grand Avenue, Suite 2100, Los Angeles, California 90071. The Brindoval engagement is governed by a separate consulting engagement letter between C&H and Brindoval dated October 10, 2023.
Brindoval has been retained under the Kovel doctrine, see United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), as an agent of C&H for the purpose of providing specialized forensic accounting analysis necessary for C&H to render legal advice to BRB. Under Kovel, communications between C&H and Brindoval, and work performed by Brindoval at the direction of C&H counsel, are protected by the attorney-client privilege and the attorney work-product doctrine, provided that certain conditions are met — specifically, that the purpose of the engagement is to assist counsel in providing legal advice, rather than to perform business functions that BRB would have undertaken in the ordinary course.
Brindoval personnel should be treated as agents of counsel for privilege purposes. However, the Upjohn warnings described in this memorandum apply to BRB employee interviews and are not applicable to Brindoval consultants, who are not employees or agents of BRB. That said, Brindoval personnel should be reminded that all work product and communications generated in connection with this engagement are privileged and confidential and should be clearly marked as such.
III. Legal Framework — *Upjohn v. United States* and Progeny
A. The *Upjohn* Doctrine
The foundational legal authority governing the protocols set forth in this memorandum is the Supreme Court's decision in Upjohn Co. v. United States, 449 U.S. 383 (1981). In Upjohn, the Court held that the attorney-client privilege applies to communications between corporate counsel and employees of the corporation, regardless of their level within the corporate hierarchy, when those communications are made at the direction of corporate management for the purpose of obtaining legal advice for the corporation.
The Upjohn decision rejected the narrower "control group" test, which had limited the corporate attorney-client privilege to communications with a small group of senior officers who directed corporate affairs. Instead, the Court recognized that lower-level employees often possess information critical to counsel's ability to advise the corporate client, and that the privilege must extend to communications with those employees in order for the privilege to serve its purpose of fostering full and frank communication between client and lawyer.
Several principles from Upjohn and its progeny are particularly relevant to this engagement:
1. The privilege belongs to the corporation, not the individual employee. This is the central principle that animates the Upjohn warning. When an employee communicates with corporate counsel in the employee's capacity as a corporate agent, the privilege that attaches to that communication is the corporation's privilege. The corporation — acting through its management and, ultimately, its Board of Directors — holds the power to assert or waive the privilege. The individual employee has no independent right to assert the privilege over those communications and cannot prevent the corporation from disclosing them.
2. The corporation's counsel is the corporation's counsel. Corporate counsel owes duties of loyalty and confidentiality to the corporate entity. While counsel may interact extensively with individual employees in the course of gathering facts and providing legal advice, those interactions do not create an attorney-client relationship with the individual unless the individual reasonably believes, and the lawyer fails to dispel such belief, that the lawyer is acting as the individual's personal counsel.
3. The duty to clarify. Because the corporate attorney-client relationship can be confusing to lay witnesses — particularly employees who may naturally assume that a lawyer investigating company matters is "on their side" — counsel has an affirmative obligation to clarify the nature and scope of the representation. This obligation is reflected in Model Rule 1.13(f) of the ABA Model Rules of Professional Conduct and Rule 1.13(b) of the New York Rules of Professional Conduct, which require a lawyer representing an organization to explain the identity of the client when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the individual with whom the lawyer is communicating.
Subsequent decisions have refined and reinforced these principles. See, e.g., In re Bevill, Bresler & Schulman Asset Mgmt. Corp., 805 F.2d 120 (3d Cir. 1986) (establishing five-factor test for determining whether an individual may assert a personal attorney-client privilege over communications with corporate counsel); United States v. International Brotherhood of Teamsters, 119 F.3d 210, 215 (2d Cir. 1997) (privilege belongs to the entity; individuals cannot assert it); In re Grand Jury Subpoena, 274 F.3d 563 (1st Cir. 2001) (reaffirming Upjohn and discussing the importance of corporate counsel's advisement to employee witnesses).
B. The Risk of Implied Individual Representation
The most significant practical risk addressed by this memorandum is the creation of an implied individual attorney-client relationship between C&H and a BRB employee. If an employee reasonably believes that C&H is acting as their personal lawyer — and that belief is not promptly corrected — a court may find that an individual attorney-client relationship has been formed, regardless of C&H's subjective intent or the terms of its engagement letter with BRB. See Bevill, Bresler, 805 F.2d at 124-25; Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311 (7th Cir. 1978).
The consequences of an implied individual representation are severe and potentially disabling:
• Conflicts of interest. If C&H is deemed to represent both the Company and an individual employee, a conflict of interest arises whenever the interests of the Company and the individual diverge. In the context of an SEC enforcement investigation, divergence is common: the Company may wish to cooperate with the Staff and produce documents or testimony that implicates individual misconduct, while the individual may wish to resist disclosure or invoke personal privileges.
• Disqualification. If a conflict is identified, C&H could face a disqualification motion — brought by the SEC, by the individual, or by other parties — that would force the Firm to withdraw from representing BRB at a critical juncture in the Investigation. Disqualification would cause substantial prejudice to BRB, including the loss of institutional knowledge, the need to retain new counsel, and potential delays in the investigation timeline.
• Ethical violations. Under New York Rule 1.7 (Conflict of Interest: Current Clients) and Rule 1.13 (Organization as Client), C&H could face disciplinary proceedings if it is found to have represented an individual in conflict with the Company without proper informed consent and disclosure.
• Privilege complications. If an individual is deemed to be a client, that individual would hold a personal privilege over communications with C&H. This could complicate BRB's ability to waive privilege over interview memoranda or other communications, as the individual's consent would also be required.
In the context of SEC enforcement investigations, this risk is particularly acute because individual officers and employees — especially those with signatory authority over financial statements — may face personal exposure under the securities laws. The Exchange Act provisions at issue in this Investigation include Section 13(a) (requiring issuers to file periodic reports with the SEC) and Section 13(b)(2)(A) (requiring issuers to make and keep books, records, and accounts that accurately and fairly reflect the transactions and dispositions of assets). Rules 13a-1 and 12b-20 under the Exchange Act further require that reports contain all material information necessary to make the required statements not misleading.
Of particular significance, Section 304 of the Sarbanes-Oxley Act of 2002 ("SOX") provides for the disgorgement of bonuses, incentive-based compensation, and profits from securities sales by the CEO and CFO of an issuer that is required to prepare a restatement due to material noncompliance with financial reporting requirements resulting from misconduct. The SEC has also sought personal liability against certifying officers under SOX Sections 302 and 906 in connection with inaccurate certifications. These provisions create a natural tension between the interests of the corporate entity and those of the individuals who signed the filings at issue.
C. Relevance to the Present Investigation
The principles described above have direct and immediate application to the present Investigation. The SEC's inquiry (File No. HO-14287) focuses on the adequacy of BRB's ACL disclosures for the BridgeFin portfolio. At the core of the Staff's inquiry is whether the Company's CECL model — adopted effective January 1, 2020 pursuant to ASC Topic 326, Financial Instruments — Credit Losses — properly accounted for deteriorating credit quality in vintage cohorts of BridgeFin consumer loans originated after the second quarter of 2021.
The Staff's document request letter and subsequent communications with C&H indicate that the Division of Enforcement is particularly focused on the treatment of approximately 12,847 re-aged and modified BridgeFin consumer loans with an aggregate outstanding principal balance of approximately $236.4 million. The Staff appears to be investigating whether the re-aging and modification of these loans had the effect of masking delinquency and default trends, thereby causing the Company's CECL model to underestimate expected credit losses and, in turn, causing the ACL figures reported in the 10-K and 10-Qs to be materially understated.
Key witnesses in this Investigation — particularly Patricia Navarrete (CFO), Raymond Hu (CAO), and Naveen Chakravarti (SVP & BridgeFin Division Head) — were directly involved in the ACL estimation process, the implementation and calibration of the CECL model, the management of the BridgeFin portfolio (including decisions regarding loan modifications and re-aging), and the preparation and review of the financial disclosures at issue. These individuals may have personal interests that could potentially diverge from those of the Company. For example, the CFO certified the accuracy of the 10-K and 10-Qs under SOX; the CAO was responsible for the accounting judgments underlying the ACL estimates; and the BridgeFin Division Head oversaw the portfolio management practices that the SEC is scrutinizing.
It is therefore critical that all witnesses — and especially these key witnesses — understand the limited scope of C&H's representation from the outset. The Upjohn warning serves this purpose and must be delivered with precision and care, as described in the following section.
IV. Mandatory Upjohn Warning — Substance and Delivery Protocol
A. When the Warning Must Be Given
The Upjohn warning must be given at the beginning of every substantive interview or meeting with any current or former BRB employee, officer, or director conducted in connection with Matter No. SC-MAT-2023-4172. For purposes of this memorandum, the term "substantive" is defined broadly to encompass any discussion related to the SEC Investigation, the BridgeFin portfolio, ACL methodology and estimation, the CECL model, the Form 10-K or Forms 10-Q at issue, loan modification and re-aging practices, financial reporting and disclosure processes, internal controls over financial reporting, or any other facts, documents, communications, or circumstances that may be relevant to the Investigation.
The following rules govern the timing of the Upjohn warning:
1. First interview. The Upjohn warning must be delivered orally at the very beginning of the interview, before any substantive questions are asked. The interviewee must be given an opportunity to ask questions about the warning, and the interviewing attorney must ensure that the interviewee understands each of the four core points (set forth in Section IV.D below). A written acknowledgment form (Exhibit A) must be signed by the interviewee.
2. Subsequent interviews. The warning must be given again at the beginning of each subsequent interview session, even if the same interviewee has already received the warning in a prior session. Each session requires a fresh oral advisement. In subsequent sessions, a signed acknowledgment form is not required (the signed form from the first session should be referenced), but the interviewee's oral acknowledgment of understanding must be noted on the record and in the interview memorandum.
3. Format-agnostic requirement. The warning applies regardless of the format or medium of the interview. Whether the interview is conducted in person at C&H's offices, at BRB's offices, by telephone, or by video conference (e.g., Calderon Software, Northgate Data Systems), the full Upjohn warning must be delivered.
4. Informal contacts. If an C&H attorney has an informal or unplanned conversation with a BRB employee that touches upon matters relevant to the Investigation, the attorney should deliver the Upjohn warning as promptly as possible within that conversation. If circumstances do not permit a full advisement (e.g., a brief hallway exchange), the attorney should avoid eliciting substantive information and should schedule a formal interview at which the full warning can be delivered.
B. Who Must Deliver the Warning
At least one C&H attorney must deliver the Upjohn warning orally. The authorized attorneys for delivery of the Upjohn warning in this matter are: Victoria Chambers (Partner), Howard Quinn (Partner), Jasmine Thornton (Lead Associate), and Liam Donahue (Associate). If additional attorneys are added to the matter team and may be conducting interviews, they must be specifically authorized by Victoria Chambers before delivering the Upjohn warning.
A paralegal, legal assistant, or other non-attorney staff member may not deliver the Upjohn warning in lieu of an attorney under any circumstances. The delivery of the warning is a legal communication that requires the professional judgment and authority of a licensed attorney, and delegation to non-attorney staff could undermine the effectiveness of the advisement and expose C&H to ethical liability.
C. Documentation. Thorough and contemporaneous documentation of the delivery of the Upjohn warning is essential. The interviewing attorney must note in the interview memorandum prepared for each session the following information:
(i) That the Upjohn warning was delivered orally at the beginning of the session;
(ii) The date, time, and location (or medium, if the interview was conducted remotely) of the interview;
(iii) The names and titles of all persons present during the interview, including all C&H attorneys and staff, any Brindoval consultants, and any in-house BRB counsel (e.g., Derek Sung);
(iv) That the interviewee acknowledged understanding of the Upjohn warning, including whether the acknowledgment was oral or written;
(v) Any questions asked by the interviewee regarding the warning and the substance of the responses provided by the interviewing attorney; and
(vi) Whether the interviewee indicated any interest in retaining personal counsel or raised any concerns about the scope of C&H's representation.
As noted above, a written acknowledgment form (Exhibit A, attached hereto) should be signed by each interviewee at the first interview. The original signed form should be retained in the matter file. In subsequent interviews, the oral acknowledgment on the record is sufficient, but the interviewing attorney should reference the date on which the written acknowledgment was signed.
D. Recommended Language
The following four points constitute the substance of the Upjohn warning and must be conveyed to each interviewee. The template language in Exhibit A uses this language verbatim; however, natural-language delivery is acceptable so long as all four points are clearly and accurately communicated. The interviewing attorney should use professional judgment in adapting the delivery to the circumstances (e.g., the sophistication of the witness, the formality of the setting), but no substantive element may be omitted or diluted.
Point 1 — We represent the Company.
"Calderwood & Harkness LLP represents Belmont Ridge Bank National Association — the Company — in connection with an investigation by the U.S. Securities and Exchange Commission. We do not represent you individually or personally."
Point 2 — The privilege belongs to the Company.
"This conversation is protected by the attorney-client privilege, but the privilege belongs to the Company, not to you. That means the Company may decide to disclose the substance of our conversation to third parties, including the SEC or other regulators, without your consent."
Point 3 — You may want your own lawyer.
"Because we represent the Company and not you, you have the right to retain your own personal attorney at your own expense. If at any time you believe your personal interests may differ from those of the Company, we encourage you to consult with your own counsel."
Point 4 — Confidentiality obligation.
"We ask that you keep the substance of this interview confidential and not discuss it with other employees, officers, or third parties unless directed otherwise by the Company's General Counsel, Derek Sung, or by us. This is to protect the Company's privilege and the integrity of the investigation."
The interviewing attorney should pause after delivering these four points and ask the interviewee whether they understand each point and whether they have any questions. The attorney should answer any questions candidly and completely. If the interviewee expresses concern, confusion, or a desire to consult personal counsel before proceeding, the interview should be paused to allow the interviewee time to do so. Under no circumstances should an interviewing attorney pressure or discourage a witness from seeking personal counsel.
V. Special Considerations for Specific Categories of Witnesses
A. Senior Officers — CEO (Marcus R. Ellingham), CFO (Patricia Navarrete), CLO (Derek Sung)
As senior management of the Company, these individuals act on behalf of and direct the affairs of BRB. In many respects, they embody the corporate client: they direct the Company's legal strategy, approve privilege waivers, and oversee the Company's cooperation with the SEC Staff. The attorney-client privilege generally flows through them in their capacity as agents of the Company.
Nonetheless, the Upjohn warning must still be given to each of these individuals. The reason is straightforward: the Investigation could theoretically result in personal exposure for any of these officers. The CFO, Patricia Navarrete, certifies the accuracy and completeness of BRB's financial statements under SOX Sections 302 and 906. The CEO, Marcus Ellingham, is likewise a certifying officer under SOX. If the SEC concludes that the Company's financial statements were materially misstated, the certifying officers could face personal enforcement actions, including potential civil penalties, officer-and-director bars, and disgorgement under SOX Section 304. Even Derek Sung, as General Counsel, could face scrutiny if the SEC determines that in-house counsel was involved in approving disclosures that the Staff considers materially misleading.
Given these dynamics, the Upjohn warning serves a particularly important protective function for both C&H and these individuals. It ensures that each senior officer understands — from the very first interaction — that C&H is the Company's counsel and not their personal advocate, and that the Company may make decisions (including privilege waivers, cooperation agreements, or strategic concessions) that are not in the personal interest of any individual officer.
If any senior officer indicates, at any point during the Investigation, a desire to obtain personal counsel, C&H should facilitate that process without delay. C&H may, if requested by the Company, provide recommendations of qualified defense counsel; however, C&H should not select or retain personal counsel on behalf of any individual, as doing so could create the appearance of a conflict. Once personal counsel has been retained, C&H should coordinate with such counsel as appropriate, including with respect to scheduling and logistics for SEC testimony, with the understanding that C&H's obligation runs exclusively to the corporate entity.
B. Chief Accounting Officer (Raymond Hu) and BridgeFin Division Head (Naveen Chakravarti)
Raymond Hu and Naveen Chakravarti warrant particular attention because they are among the individuals most directly involved in the facts at the center of the SEC's inquiry. Hu, as Chief Accounting Officer, was responsible for the application of the CECL methodology, the calibration and operation of the CECL model, and the accounting judgments underlying the ACL estimates reported in the 10-K and 10-Qs. Chakravarti, as SVP and Division Head of BridgeFin, oversaw the origination, servicing, and management of the BridgeFin consumer loan portfolio, including the loan modification and re-aging practices that the SEC Staff appears to be scrutinizing.
The SEC may determine that the conduct of these individuals — their specific decisions, approvals, and communications — is central to any potential enforcement action. In fact, the SEC has already issued testimony subpoenas to key witnesses in this Investigation: Patricia Navarrete was subpoenaed on November 22, 2023; Naveen Chakravarti was subpoenaed on December 5, 2023; and Raymond Hu ultimately provided investigative testimony on February 14, 2024.
When the SEC issues testimony subpoenas to BRB employees, C&H will represent the Company's interests during the testimony. C&H attorneys will be present in the testimony room as counsel for BRB. However, it is imperative that each witness understand — and that the Upjohn warning make clear — that C&H is present to protect BRB's privileges and interests, not the personal interests of the individual witness. If a witness desires individual representation for SEC testimony, that representation must be arranged separately, through counsel retained by the individual (at the individual's expense or, if applicable, pursuant to BRB's indemnification and advancement obligations under its charter, bylaws, or applicable insurance policies).
The interviewing team should be especially attentive to any signs of divergence between the interests of these individuals and those of the Company. If, during an internal interview, either Hu or Chakravarti provides information suggesting that they acted independently, without proper authorization, or contrary to Company policy, the interviewing attorney should note this carefully and escalate the matter to Victoria Chambers promptly. See Section VII below for the procedures governing potential conflicts.
C. Board Members — Audit Committee Chair (Gwendolyn Prescott) and Other Directors
Gwendolyn Prescott, as Chair of the Audit Committee of BRB's Board of Directors, plays a significant role in the Company's oversight of financial reporting and the external audit. The Audit Committee is responsible for, among other things, reviewing the Company's annual and quarterly financial statements, overseeing the Company's internal controls over financial reporting, and liaising with the independent auditor. As such, the Audit Committee — and Ms. Prescott in particular — may be a focus of the SEC's inquiry regarding the Board's role in overseeing the adequacy of the ACL disclosures.
Independent directors may have perspectives on the matters under investigation that differ from those of management. While C&H represents the corporate entity — and the Board, acting as the governing body of that entity, is the ultimate decision-maker regarding the direction of the Company's defense — individual directors are not C&H's clients. Upjohn warnings must be given to all board members who are interviewed, including Ms. Prescott and any other directors who may be identified as witnesses.
In the event that the Board or the Audit Committee determines that a special committee should be formed to conduct an independent investigation — or that independent counsel should be retained to advise the Board or a committee thereof separately from C&H — the Firm will cooperate fully with such arrangements. The formation of a special committee and the retention of independent committee counsel are decisions within the Board's prerogative and may be advisable depending on the evolution of the Investigation.
D. Former Employees
In the course of the Investigation, C&H may identify former BRB employees who possess information relevant to the SEC's inquiry. This may include individuals who worked in the BridgeFin division, credit risk, accounting, or financial reporting functions during the relevant time period and who have since left the Company.
C&H has no authority to compel the cooperation of former employees. Unlike current employees, who may be directed by management to participate in internal interviews, former employees are under no obligation to speak with C&H and may decline the interview entirely. The Upjohn warning should still be delivered to any former employee who agrees to be interviewed, with the following modifications:
(i) C&H should state clearly that the Firm represents BRB, not the former employee;
(ii) C&H should advise the former employee that any privilege attaching to communications between the former employee and BRB counsel during the former employee's tenure at the Company belongs to BRB, not the individual, and remains BRB's privilege notwithstanding the termination of the employment relationship;
(iii) C&H should advise the former employee that they are free to decline the interview at any time and are free to consult with their own personal counsel before or during the interview; and
(iv) C&H should request that the former employee maintain the confidentiality of the interview, but should acknowledge that the former employee is not bound by BRB's internal confidentiality policies in the same manner as current employees.
If a former employee declines to be interviewed, C&H should document the refusal and assess whether alternative means of obtaining the relevant information are available (e.g., document review, interviews with other witnesses, or SEC subpoena).
VI. Privilege Coordination with Third Parties
A. Whitfield Keane LLP (Independent Auditor) and Hargrove & Millstein LLP (Auditor's Counsel)
As noted in Section II.D above, C&H does not represent WK or any of its partners or employees. WK has retained its own counsel, H&M, to represent WK's interests in connection with the Investigation. The interests of BRB and WK may overlap in certain respects — for example, both parties may share an interest in demonstrating that the Company's CECL model was reasonably designed and properly applied — but there are also areas of potential divergence. WK may seek to establish that any errors in the ACL estimates were attributable to management's failure to provide complete and accurate information to the auditors, while BRB may contend that WK failed to detect or appropriately respond to audit evidence of credit deterioration.
In light of these dynamics, communications with WK or H&M may implicate common-interest or joint-defense considerations. A common-interest agreement could potentially allow BRB and WK to share certain privileged communications without waiving their respective privileges, to the extent the communications are made in furtherance of a common legal interest. However, no common-interest agreement is currently in place between C&H/BRB and WK/H&M. Any decision to enter into such an agreement requires the express prior approval of Victoria Chambers, in consultation with Derek Sung and the BRB Audit Committee.
Until and unless a common-interest agreement is executed, the following rules apply:
• C&H team members should not share attorney work product, privileged legal analysis, interview memoranda, or other privileged communications with WK or H&M without prior written authorization from Chambers or Thornton.
• Factual communications with WK (e.g., requests for audit workpapers, responses to document requests) should be coordinated through Chambers or Thornton and should be limited to information that BRB is willing to have disclosed outside the privilege.
• Any meeting or call involving both C&H and H&M counsel should be preceded by a clear understanding of the ground rules regarding privilege, including whether any shared communications will be treated as privileged under a common-interest theory.
B. Caldwell Pratt & Stein LLP (Prior Securities Counsel)
CPS possesses substantial relevant information regarding the preparation of the 10-K and 10-Q filings at issue. CPS attorneys drafted and reviewed disclosure language, participated in drafting sessions with BRB management, reviewed backup documentation supporting the financial statements, and communicated with BRB's accounting and financial reporting teams regarding the adequacy of the ACL disclosures. These communications between BRB and CPS, made in the course of the original securities-reporting engagement, are protected by the attorney-client privilege, and that privilege belongs to BRB.
C&H may need to review CPS's files relating to the preparation of the filings at issue, including drafts, comments, internal CPS memoranda, and communications with BRB personnel. C&H may also need to interview CPS attorneys regarding the factual circumstances surrounding the preparation and review of the disclosures. Any such review and any such interviews must be conducted at BRB's direction, through Derek Sung, and should be documented under the umbrella of the litigation hold and privilege protocol for this matter. A separate Privilege Protocol & Document Preservation Memorandum has been circulated to the C&H team and to BRB management and should be consulted for detailed guidance on document preservation and privilege logging.
C&H team members should be mindful that CPS has a continuing relationship with BRB as regular securities counsel. All interactions with CPS should be conducted with professionalism and courtesy, while maintaining clear lines of responsibility between CPS's ongoing advisory role and C&H's role as Investigation counsel.
C. Brindoval Analytic Partners LLC (Forensic Consultant)
As discussed in Section II.E above, Brindoval has been engaged under the Kovel doctrine as an agent of C&H for the purpose of providing forensic accounting analysis. All communications with Dr. Franklin Osei and his team should be clearly marked as "Privileged and Confidential — Attorney-Client Communication" or "Privileged and Confidential — Attorney Work Product," as appropriate. Brindoval's work product — including analytical reports, financial models, memoranda, and data analyses — constitutes opinion work product prepared at the direction of counsel in anticipation of litigation and should be treated accordingly.
Brindoval personnel are not subject to Upjohn warnings, as they are not BRB employees or agents. However, Brindoval should be periodically reminded that:
• Their engagement is at the direction of C&H counsel for the purpose of assisting counsel in providing legal advice to BRB;
• All work product and communications generated in connection with the engagement should be treated as privileged and confidential;
• Brindoval should not communicate directly with BRB personnel without C&H's knowledge and involvement, except as specifically authorized; and
• Brindoval should not disclose any information obtained in the course of the engagement to any third party without C&H's prior written consent.
VII. Procedures for Handling Potential Conflicts
A. Identification of Conflicts
Throughout the Investigation, all C&H team members must remain vigilant for situations in which the interests of an individual BRB officer, director, or employee may diverge from those of the Company. The duty to monitor for conflicts is ongoing and applies at every stage of the engagement, from initial document review through witness interviews, SEC testimony preparation, and any subsequent enforcement proceedings.
Warning signs that may indicate a potential or actual conflict of interest include, but are not limited to, the following:
• An individual witness whose personal conduct or decision-making is a specific focus of the SEC's inquiry — for example, an individual who personally authorized or approved the re-aging or modification of BridgeFin loans, or who personally reviewed and approved the ACL estimates reported in the filings at issue.
• An individual who may face personal liability or SEC enforcement proceedings separate from the Company — for example, a certifying officer who may face SOX Section 304 clawback liability or a Section 13(b)(5) charge for knowingly circumventing internal accounting controls.
• An individual who expresses disagreement with the Company's factual narrative, defense strategy, or position regarding the adequacy of the ACL disclosures — for example, a witness who states during an internal interview that they raised concerns about the ACL estimates with management that were overruled or ignored.
• An individual who requests indemnification or advancement of legal defense costs from BRB pursuant to the Company's bylaws, charter, or applicable directors' and officers' insurance policies — while such a request does not in itself create a conflict with BRB, it may signal that the individual perceives personal exposure and is taking steps to protect their personal interests.
• An individual who has retained or is considering retaining personal counsel, or who has been contacted directly by the SEC Staff and asked to provide information or testimony in their individual capacity.
• An individual who is the subject of an internal investigation or disciplinary proceeding by BRB, or who has been placed on administrative leave in connection with the matters under investigation.
B. Steps Upon Identification
If a potential conflict of interest is identified — whether through the conduct of an interview, the review of documents, communications from the SEC Staff, or any other source — the following steps must be taken without delay:
1. Immediate notification. The attorney who identifies the potential conflict must immediately notify Victoria Chambers. If Chambers is unavailable, notification should be directed to Howard Quinn.
2. Assessment and consultation. Chambers will assess the nature and severity of the potential conflict and will consult with Derek Sung (BRB General Counsel) and, if the circumstances warrant, with Gwendolyn Prescott (Audit Committee Chair) to determine the appropriate course of action. The determination of how to address a conflict is ultimately a decision for the Company, guided by C&H's legal advice and the applicable ethical rules.
3. Potential courses of action. Depending on the nature and severity of the conflict, appropriate responses may include one or more of the following:
(a) Advising the individual to retain separate personal counsel and providing the individual with a reasonable opportunity to do so before any further interviews or testimony;
(b) Adjusting the scope of C&H's representation to ensure that C&H does not undertake any dual representation of the Company and the individual, and documenting that adjustment in writing;
(c) Implementing information barriers (commonly referred to as "ethical walls" or "screening arrangements") within the C&H team, if appropriate, to ensure that attorneys who have received confidential information from the individual in a context that could give rise to a claim of implied personal representation are screened from further involvement with aspects of the matter adverse to that individual;
(d) In extreme cases, withdrawing from the representation of BRB if the conflict is irreconcilable and cannot be managed through less drastic measures — though this would be a last resort and would require careful consideration of the impact on BRB.
4. Suspension of interviews. Under no circumstances should C&H continue to interview a witness after a clear conflict of interest has been identified without first resolving the conflict issue through the procedures described above. If a conflict emerges during the course of an interview, the interviewing attorney should pause the interview, explain to the witness that a conflict issue may exist, and advise the witness to refrain from further substantive discussion until the matter has been addressed.
All decisions regarding the identification and resolution of conflicts should be documented in memoranda maintained in the matter file, marked as privileged and confidential attorney work product.
VIII. SEC Testimony — Additional Protocols
A. Pre-Testimony Preparation Sessions
When BRB employees receive subpoenas for investigative testimony before the SEC Division of Enforcement Staff, C&H will conduct preparation sessions with each witness prior to the testimony date. These preparation sessions are a standard and essential part of the representation and serve the dual purpose of (a) familiarizing the witness with the testimony process, the relevant documents, and the likely areas of Staff inquiry, and (b) preserving BRB's privileges by ensuring that the witness understands the boundaries of appropriate disclosure.
The Upjohn warning must be delivered at the start of each preparation session, following the same protocols set forth in Section IV above. This requirement applies even if the witness has already received the warning in one or more prior internal interviews. The pre-testimony context heightens the importance of the advisement: the witness may be anxious about the upcoming testimony and may be inclined to look to C&H for personal reassurance or advice that goes beyond the scope of the corporate representation. The Upjohn warning is designed to prevent such misunderstandings.
Preparation memoranda will be prepared for each witness by the C&H team. These memoranda are internal attorney work-product documents prepared for BRB's benefit and should be marked accordingly. Preparation memoranda should include, at a minimum: (i) a summary of the anticipated areas of Staff inquiry; (ii) a compilation of key documents likely to be used as exhibits during testimony; (iii) guidance on how to handle common testimony situations (e.g., privilege objections, document requests, requests for narratives); and (iv) applicable legal standards and potential exposure areas relevant to the witness's role.
B. Representation at Testimony
C&H attorneys will attend SEC investigative testimony sessions as counsel for BRB. In that capacity, C&H may instruct a witness not to answer a particular question only on grounds of privilege belonging to BRB. The privileges that may be asserted include:
• The attorney-client privilege, to the extent a question seeks disclosure of confidential communications between BRB and its counsel (C&H, CPS, or in-house counsel);
• The attorney work-product doctrine, to the extent a question seeks disclosure of materials prepared by or at the direction of BRB's counsel in anticipation of litigation or the Investigation; and
• The bank-examination privilege under 12 U.S.C. § 1828(x), to the extent a question seeks disclosure of confidential supervisory information relating to OCC examinations or other regulatory communications that are protected from disclosure under applicable banking regulations.
C&H cannot assert the witness's personal Fifth Amendment privilege against self-incrimination. The Fifth Amendment is a personal right belonging to the individual witness, not to the corporate entity. If a witness indicates, during preparation or during testimony, a desire to invoke the Fifth Amendment with respect to any question, the witness must retain personal counsel to advise on that decision. C&H should not counsel the witness on whether to invoke the Fifth Amendment, as doing so would risk creating an individual attorney-client relationship and could compromise C&H's ability to represent BRB's interests.
The SEC Staff assigned to this Investigation includes the following individuals, with whom C&H team members should be familiar for purposes of testimony preparation and Investigation communications:
All communications with the SEC Staff should be handled by Victoria Chambers, Howard Quinn, or Jasmine Thornton. Associates and other team members should not communicate directly with the Staff without prior authorization.
C. Post-Testimony Debriefs
Following each testimony session, the attending C&H attorney will prepare a post-testimony debrief memorandum summarizing the key questions asked by the Staff, the substance of the witness's answers, the areas on which the Staff appeared to focus, any documents used as exhibits during testimony, any privilege objections asserted, and the strategic implications of the testimony for BRB's defense. These debrief memoranda are privileged attorney work product and should be marked as such.
The debrief memorandum should also note any areas where the witness's testimony was inconsistent with prior internal interview statements, any new factual information revealed during testimony, and any areas where the Staff's questions suggest investigative directions or theories that C&H had not previously anticipated. These observations will be critical for shaping BRB's ongoing defense strategy and for preparing subsequent witnesses.
At the conclusion of testimony, the witness should be reminded of the following:
• The Upjohn protections described in Section IV continue in full force following testimony;
• The substance of the testimony should be kept confidential within the Company and should not be discussed with other employees, officers, or third parties except as directed by Derek Sung or by C&H;
• Any subsequent communications from the SEC or its Staff — including follow-up requests, additional subpoenas, or informal contacts — should be directed immediately to C&H and should not be responded to without C&H's involvement; and
• The witness should preserve all documents, communications, and records that may be relevant to the Investigation and should not alter, delete, or destroy any such materials.
IX. Recordkeeping and File Management
Proper recordkeeping is essential to the integrity of the Upjohn protocols and to the preservation of the attorney-client privilege and work-product protections in this matter. All documents generated in connection with the protocols described in this memorandum should be maintained in the matter file under Matter No. SC-MAT-2023-4172, in accordance with the following organizational structure:
• Upjohn Acknowledgments. All signed Upjohn acknowledgment forms (Exhibit A) should be maintained in a dedicated subfolder designated "Upjohn Acknowledgments." Each form should be filed chronologically and cross-referenced to the corresponding interview memorandum.
• Witness Interviews. Interview memoranda for each witness should be filed in individual subfolders designated "Witness Interviews — [Last Name, First Name]." Each subfolder should contain all interview memoranda, document lists, and related materials for that witness, organized chronologically.
• Testimony Materials. Pre-testimony preparation memoranda, post-testimony debrief memoranda, and related materials should be filed in subfolders designated "SEC Testimony — [Last Name, First Name]."
• Conflict Documentation. Any memoranda documenting the identification and resolution of potential conflicts of interest (see Section VII) should be maintained in a subfolder designated "Conflicts Analysis."
All files described above are subject to the document retention policy applicable to this matter. Given the nature and potential duration of the SEC Investigation and any related proceedings, the anticipated retention period is a minimum of seven years following matter close-out, as determined by the Firm's Records Management Committee in consultation with Victoria Chambers.
X. Questions and Points of Contact
Any questions regarding the application of the protocols set forth in this memorandum should be directed to the following individuals:
Victoria Chambers, Partner Calderwood & Harkness LLP 425 Lexington Avenue, 30th Floor New York, NY 10017 Telephone: (212) 555-7200
Email: vchambers@calderwoodharkness.com
Jasmine Thornton, Lead Associate Calderwood & Harkness LLP 425 Lexington Avenue, 30th Floor New York, NY 10017 Telephone: (212) 555-7234
Email: jthornton@calderwoodharkness.com
For in-house coordination at BRB, all inquiries should be directed to:
Derek Sung, General Counsel & Chief Legal Officer Belmont Ridge Bank National Association 200 Park Avenue South, 38th Floor New York, NY 10003 Telephone: (212) 555-0149
Email: derek.sung@belmontridgebank.com
This memorandum, including Exhibits A and B attached hereto, is a confidential attorney-client communication and attorney work product. It should not be distributed outside the C&H matter team and the designated BRB contacts without the prior approval of Victoria Chambers.
Victoria Chambers Partner, Calderwood & Harkness LLP
Jasmine Thornton Lead Associate, Calderwood & Harkness LLP
EXHIBIT A
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED
Calderwood & Harkness LLP 425 Lexington Avenue, 30th Floor New York, NY 10017
Matter: Belmont Ridge Bank National Association — SEC Investigation
Matter No.: SC-MAT-2023-4172
SEC File No.: HO-14287
UPJOHN WARNING AND ACKNOWLEDGMENT
Date of Interview: ________
Interviewee Name: ________
Title / Position: ________