By Robert A. Wade and Ralph F. Hall*
July 18, 2008
Historically, the government has considered the extent of a corporation's cooperation with law enforcement, and prosecutors in deciding whether to prosecute the company, and in the level of penalties to seek.
There has been an ongoing controversy over the government's position that a company may have to waive the attorney-client or work-product privileges to be viewed as having "cooperated" with the government. The zenith of this policy was in the "Thompson Memo" which set forth an expectation (some would say requirement) that a company waive the attorney client privilege before it would be considered as having "cooperated" with the government.
This approach triggered substantial criticism from the defense bar and corporate America as undermining the right to counsel and to an effective defense. Likewise, Senator Arlen Specter has been vocal in his concerns, and has introduced legislation (now pending as S. 3217) to prevent the government from considering or encouraging waiver of the attorney-client and work-product privileges. In response to this widespread criticism, the government issued the "McNulty Memo" which modified the earlier Thompson Memo by reducing the situations in which the government would seek a waiver and increasing the procedural hurdles for seeking any waiver. While a step in the right direction, the McNulty Memo did not end the debate.
On July 16, in a letter to Senators Specter and Leahy, Deputy Attorney General Mark Filip disclosed that the government would no longer consider whether the company waived the attorney-client privilege in determining cooperation. Specifically, the letter states:
- Cooperation will be measured by the extent the company discloses facts, not by its waiver.
- Non-factual work-product and attorney-client information will not be demanded by the government.
- The government will not consider whether the company has advanced legal fees to employees in assessing company cooperation.
- The government will not consider whether the company is part of any joint defense agreements in assessing company cooperation.
- Finally, the government will not consider whether the company has sanctioned employees in assessing cooperation. The government will continue to assess such actions in determining the quality, or effectiveness of remedial actions, or its compliance program.
Deputy Attorney General Filip also indicated that these principles would be incorporated into an upcoming modification to the McNulty Memo.
Senator Specter has already responded. He is concerned about the length of time this process will take and how the government will be operating in the interim. He also expressed concerns over the vagueness of the government's new position. For example, must a company disclose facts obtained by company counsel from an employee under an expectation of privilege? Senator Specter also indicated that he still prefers a legislative fix to this problem. Such legislation would be more permanent than a Department of Justice memo which can be easily changed in the future and may not bind other government agencies such as the IRS or SEC.
So, where does this leave corporate America? Some time in the near future, the McNulty Memo will be modified along the lines of the Filip letter. Expect some greater specificity but not complete answers. Senator Specter may well continue to push his legislation. Most importantly, corporate America now has a greater ability to resist federal efforts to compel the waiver of the attorney-client privilege. Corporate America is now freer to enter into joint defense agreements and to advance legal fees to current or ex-employees.
This is clearly a move in the right direction to preserve the attorney-client privilege and the right to an adequate defense. The final parameters are still somewhat unclear and will depend on the final revisions to the McNulty Memo and how, in practice, these principles are implemented.
*We would like to thank Robert A. Wade, Esquire, (Baker & Daniels, LLP, South Bend, IN), and Ralph R. Hall, Esquire (Baker & Daniels, LLP, Indianapolis, IN), and the Fraud and Abuse Enforcement Subcommittee for providing this email alert.