DOJ Guidance On Federal Prosecution Of Business Organizations

Dec 12: U.S. Deputy Attorney General Paul McNulty announced during a speech at a meeting of the Lawyers for Civil Justice in New York that the Department of Justice (DOJ) is revising its corporate charging guidelines for federal prosecutors throughout the country. The new guidance revises the Thompson Memorandum, which was issued in January 2003 by then-Deputy Attorney General Larry Thompson and titled the “Principles of Federal Prosecution of Business Organizations.” The memo provides useful guidance to prosecutors in the field through nine factors to use when deciding whether to charge a corporation with criminal offenses.

The guidance continues to require consideration of the factors from the Thompson memo but adds new restrictions for prosecutors seeking privileged information from companies. Specifically, it creates new approval requirements that Federal prosecutors must comply with before they can request waivers of attorney-client privilege and work product protections from corporations in criminal investigations. McNulty said, “Our efforts to investigate and prosecute corporate fraud in the past five years through the President’s corporate initiative have been tremendously successful. With this new guidance, we want to encourage corporations to prevent corruption through self-policing and continue to punish wrongdoers through cooperation with law enforcement.”

The new guidance requires that prosecutors must first establish a legitimate need for privileged information, and that they must then seek approval before they can request it. When Federal prosecutors seek privileged attorney-client communications or legal advice from a company, the U.S. Attorney must obtain written approval from the Deputy Attorney General. When prosecutors seek privileged factual information from a company, such as facts uncovered in a company’s internal investigation of corporate misconduct, prosecutors must seek the approval of their U.S. Attorney. The U.S. Attorney must then consult with the Assistant Attorney General of the Criminal Division before approving these requests.

The guidance cautions prosecutors that attorney-client communications should be sought only in rare circumstances. If a corporation chooses not to provide attorney-client communications after the government makes the request, prosecutors are directed not to consider that declination against the corporation in their charging decisions. Prosecutors are told to request factual information first and make sure they can establish a legitimate need to go further before requesting a waiver of privilege to obtain attorney-client communication or legal advice.

On September 12, 2006, the Senate Judiciary Committee, Chaired by Senator Orrin Hatch (R-UT) held a hearing on, The Thompson Memorandum’s Effect on the Right to Counsel in Corporate Investigations. The hearing dealt with what some are called policies of Federal agencies that prevent executives and employees from freely, candidly, and confidentially consulting with their attorneys [See WIMS 9/18/06 and links below].

On the latest guidance, Stanton Anderson, Senior Counsel to the President of the United States Chamber of Commerce, issued a statement on the so-called "McNulty memorandum" that revises DOJ's policies on attorney-client privilege and said, "While containing some improvements, this new policy does not adequately protect the right to attorney-client privilege, and unwisely ignores many of the recommendations of former senior Justice Department officials, the American Bar Association, and a massive coalition of some of the nation's most prominent business, legal, and civil rights groups."

In a related attorney-client privilege matter, on August 17, 2006, the U.S. Court of Appeals, Sixth Circuit issued an important ruling in Regional Airport v. LFG,LLC (Case No. 05-5754) involving the Comprehensive Environmental Response, Compensation and Liability Act litigation [See WIMS 8/18/06]. On the important first impression issue of disclosure of attorneys "work product," the Appeals Court says, "While the attorney-client privilege protects only confidential communications, the work product doctrine generally protects from disclosure documents prepared by or for an attorney in anticipation of litigation... Prior to 1993, there was general agreement that Federal Rule of Civil Procedure 26 excluded categorically the discovery of attorney opinion work product, even when provided to testifying experts." In 1993, however, Rule 26 was amended to require parties to submit expert reports for all testifying experts." The district court held that the Authority "must disclose all information given to its testifying experts, including attorney opinion work product." The Appeals Court said, "We agree with the district court and the majority view that Rule 26 now requires disclosure of all information provided to testifying experts."

Access a 12/12/06 release from the DOJ (click here). Access the full text of the McNulty 12/12/06 speech (click here). Access the 21-page McNulty Memo (click here). Access the Senate hearing website and links to all testimony (click here). Access the complete U.S. Chamber 12/12/06 statement (click here). Access the Sixth Circuit opinion cited above (click here). [*All]