The Justice Department today issued new guidelines meant to gird attorney-client privilege and defendant rights in corporate investigations, a step many in the business and legal communities welcomed guardedly.
The department’s policies on corporate investigations have shifted five times in the last decade, drawing pique from the white-collar bar, the American Bar Association, a number of former Attorneys General and the U.S. Chamber of Commerce, among others. Congress is considering legislation that would pin them down for good.
The announcement, made by Deputy Attorney General Mark Filip at the New York Stock Exchange, came on the same day the U.S. Court of Appeals for the Second Circuit threw out charges against former executives at accounting firm KPMG, finding that prosecutors violated the defendants’ rights.
Filip, who first outlined the revisions in a letter to the Senate Judiciary Committee last month, declined to comment on the KPMG ruling. “I haven’t read it yet. I don’t want to speak precipitously,” he said. In that case, the lower court found that prosecutors improperly pressured KPMG to break its practice of funding the legal defense of its employees. U.S. District Judge Lewis Kaplan (S.D.N.Y.) dismissed conspiracy and tax evasion charges against 13 employees, ruling that prosecutors violated their Sixth Amendment right to counsel. Today, the Second Circuit upheld his decision.
The new guidelines, the second revision in less than two years, bar prosecutors from evaluating a corporation's cooperation based on whether it is covering attorney's fees for its employees. The other key change deals with attorney-client privilege.
Filip said cooperation in criminal investigations will no longer depend on a corporation’s waiver of attorney-client privilege or disclosure of attorney work product. And in no instance may federal prosecutors demand attorney-client communications or work product, he said.
The guidelines also state that the Justice Department will no longer base cooperation on whether companies discipline or sanction employees involved in wrongdoing, nor will the department penalize corporations that have entered into joint defense agreements, provided they refrain from sharing information the Justice Department disclosed in confidence.
The changes will be effective immediately, Filip said. They will be added to the U.S. attorney’s manual, giving them added gravity. “The U.S attorney’s manual is…a big deal in the prosecutorial community,” Filip said.
A bill pending in the Senate would incorporate many of the same changes, but the Justice Department has opposed it. The House approved its own version of the bill last year. Filip today said that legislation “tends to be terse in how it treats these issues” and that Congress was too busy to tackle the issue immediately.
“We’re best positioned to get it right, to refine it if necessary,” Filip said.
Winston & Strawn partner William Sullivan, a white-collar attorney who twice has testified before Congress on the issue, said the revisions were a welcomed step, but he criticized the department for its reluctance to implement them.
"Such enlightenment was only achieved after years of criticism levied by the white-collar bar, the American Bar Association, a number of former Attorneys General, the U.S. Chamber of Commerce, and various business organizations,” he said, adding that legislation was necessary to prevent a backslide in department policy.
The American Bar Association also applauded the guidelines but said they were a poor substitute for legislation that would give the reforms “the force of law.”
“That policy cannot, standing alone, reverse the widespread ‘culture of waiver’ created by all these federal policies—a culture that is seriously undermining both the confidential attorney-client relationship and basic employee rights in the corporate community,” said ABA President H. Thomas Wells Jr.