DOJ's Past Policies Undermined Corporate Compliance Efforts; The McNulty Memo Is Not The Solution

Monday, January 1, 2007 - 01:00
Michael S. Greco

Editor's Note: Mr. Greco is a business litigator concerned about the DOJ's coerced waiver policy since the Thompson Memorandum was first issued. The opinions expressed below are his own and do not reflect the views of any association or organization.

Editor: Would you comment on the DOJ's "culture of waiver" reflected in the DOJ's Thompson Memorandum

Greco: The Thompson Memorandum encouraged prosecutors to pressure organizations to waive their attorney-client privilege and work product protections as a condition for receiving "cooperation credit" and avoiding charges for any illegal acts by employees as revealed in criminal investigations. It created a dangerous "culture of waiver" harmful in a number of respects.

While the written policy stated that waiver was not mandatory and should not be required in every situation, and while the DOJ disingenuously maintained that waiver was not coercive because defendants "voluntarily" waived their rights, the reality is that prosecutors routinely coerced companies to waive rights in return for cooperation credit. A "culture of waiver" was confirmed by a survey of more than 1,200 corporate counsel conducted by groups including the Association of Corporate Counsel and the National Association of Criminal Defense Lawyers.

What kinds of harms have been reported? Foremost, the policy eroded the bedrock protections of the attorney-client privilege and work product doctrine. It discouraged companies from consulting with lawyers and impeded the lawyer's ability and ethical obligation to effectively counsel compliance with the law. It undermined companies' internal compliance programs by discouraging internal investigations designed to quickly detect and remedy misconduct. The waiver policy thus undermined, rather than enhanced, compliance with the law.

The waiver policy also violated employees' constitutional and other legal rights, including the right to effective legal counsel, by pressuring employers to punish employees during investigations. Prosecutors denied cooperation credit to companies assisting or supporting "culpable employees and agents" by paying for their legal representation, or participating in a joint defense, or sharing relevant information with them, or declining to fire or sanction them for exercising Fifth Amendment rights in response to government demands.

By forcing companies to treat employees as "culpable" - and firing them or failing to assist with their legal defenses - prior to guilt being established by due process, the Department's policy eviscerated the hallowed "presumption of innocence" principle. And by pressuring companies not to help employees obtain legal counsel or factual information needed to defend themselves, the policy violated employees' fundamental legal rights, including the right to counsel under the Sixth Amendment, as Judge Kaplan ruled in the KPMG case.

For these reasons, among others, the DOJ waiver policy articulated in the Thompson Memorandum was misguided, dangerous and harmful to our justice system.

Editor: How widespread are the concerns raised by the Thompson Memo?

Greco: For four years now DOJ has been implored by the organized bar and a remarkable coalition of organizations with vastly differing ideological missions such as the U.S. Chamber of Commerce, the ACLU, the Association of Corporate Counsel, the National Association of Criminal Defense Lawyers, and numerous others, to revoke the waiver policy. In an extraordinary letter sent to Attorney General Gonzales on September 5, twelve former DOJofficials, including two former Attorneys General, Griffin Bell and my law partner Dick Thornburgh; three former Deputy Attorneys General; four Solicitors General, including Kenneth Starr and Theodore Olson, and other experienced and respected former leaders of the Justice Department forcefully urged DOJ to revoke the waiver policy. The U.S. Sentencing Commission, in the face of such universal opposition to the policy, prudently and unanimously eliminated it from the Sentencing Guidelines.

Editor: The McNulty Memorandum, issued by the Justice Department on December 12, 2006, replaces the Thompson Memorandum and provides a new policy approach to the issues covered in the Thompson Memo. What is its significance?

Greco: The significance of the McNulty Memorandum is not that it fixes the problem, but that DOJ has finally admitted that it has created a dangerous problem needing to be fixed.

Unfortunately, the DOJ policy as set forth in the McNulty Memorandum is not "new" - it continues virtually all of the corrosive Thompson Memorandum policy provisions. While the statements of Deputy Attorney General Paul McNulty are welcome, the announced new procedures for administering the waiver policy fall far short of what must be done to prevent harm to the attorney/client privilege and to prevent further abuse of constitutional and legal rights of persons investigated. The policy continues to provide little protection for facts gathered by a corporation's counsel. And although the McNulty Memorandum makes it slightly harder for line prosecutors to obtain waivers to get "core" attorney-client and work product materials - such as notes reflecting attorney impressions, conclusions and advice - a prosecutor merely needs approval of a higher-up in DOJ. Thus, the McNulty Memo just moves the authority to review a decision to seek waiver to a higher level within the Department, and still allows prosecutors to coerce corporate defendants into waiving the privilege and work product protections. The McNulty Memorandum creates, in effect, an "attorney-client privilege waiver czar" in the DOJ to administer the policy. A czar is not the solution to the problem. We do not need to repose that immense governmental power in one individual or one group in DOJ. What we also do not need is the waiver policy itself.

The real solution is immediate revocation of the waiver policy, as the U.S. Sentencing Commission has done. For two centuries prior to issuance of the Thompson Memo, and now the McNulty Memo, prosecutors did their jobs effectively without violating constitutional rights. Why is it not now possible for prosecutors to perform their duties without violating bedrock principles such as the attorney-client privilege and work product doctrine, without denying due process, and without violating constitutional and legal rights of American citizens?

The McNulty Memo unwisely continues to impede the ability - and constitutional right - of corporate leaders to obtain legal guidance needed effectively to comply with the law. In a cooperation plea agreement, the McNulty Memo still leaves prosecutors free to seek broad waivers of the privilege and legal rights.

Nor does the "new" policy adequately protect employees' rights. Although the policy states that only in "extremely rare" cases would the advancement of attorney's fees to an employee be considered a failure to cooperate, prosecutors are allowed to force companies to take punitive actions against employees even before any guilt has been established, in return for cooperation credit.

Editor: Do you believe that focusing approval on one individual who says he would only seek a waiver in rare instances would in fact reduce the number of requests for waivers?

Greco: It may reduce the number of requests, but that is not the point. While the McNulty procedures may lessen the frequency by which DOJ lawyers request privilege waivers, which had become routine under the Thompson Memorandum, a less frequent violation of these crucial rights is unacceptable. The McNulty procedures effectively preserve DOJ's power to seek these waivers - exactly the power that DOJ should abandon, preferably voluntarily or by Congressional action. And if the McNulty Memorandum was designed to create in Congress comfort with DOJ's new pledge that waivers will be requested (coerced) less frequently, Congress should not be lulled into allowing DOJ to continue to exercise this immense coercive power. Indeed, accepting DOJ's new "trust us" pledge should sound uncomfortably familiar. When the Thompson Memo was issued, DOJ assured everyone that prosecutors' judgment on seeking privilege waivers could be trusted because they would only seek waiver in rare instances. That did not turn out to be true. Having the decision now rest on the judgment of one ultimate decisionmaker in the DOJ may provide less frequent and more uniform application of the policy, but it leaves in place a waiver policy that now is almost universally scorned and that must be eliminated.

Editor: How have the policies expressed by the Thompson Memo and McNulty Memo inhibited the ability of counsel to represent corporate clients?

Greco: Both outside and inside counsel have been inhibited, as well as marginalized, by the DOJ's policy of coerced waivers. Prior to the Thompson/McNulty Memoranda forced waiver policy, corporate clients without hesitation could consult counsel for needed advice when mistakes or wrongdoing - negligent or intentional - were discovered. Consistent with the Sixth Amendment guarantee, clients were able to seek counsel's advice on what steps to take to bring the company back into compliance with the law.

That process - and the role of counsel - have been seriously undermined by the waiver policy because clients now routinely withhold information from counsel, and are not maintaining records (whether inculpatory or exculpatory) in fear that information may have to be turned over to the prosecutor. Clients thus are left to substitute their own judgment for that of independent counsel. Counsel no longer is given all the information needed to provide informed legal representation. If a corporation has conducted an internal investigation, the prosecutor seeks to force a waiver to obtain the report. In some instances, corporations have been required to conduct an internal investigation, paid by the company, with the understanding that the report will be turned over to the prosecutor.

Counsel retained to conduct the investigation is placed in an ethical dilemma when instructed not to inform employees who are interviewed that the information provided and statements made (including incriminatory) may be turned over to prosecutors, in violation of the employee's legal rights. The process thus has a chilling effect on executives who need the advice of fully informed counsel, prevents lawyers from doing what is ethically required of counsel, and violates the rights of unsuspecting employees. In effect, the DOJ's waiver policy drives a wedge between counsel and client, and violates the client's Sixth Amendment right to effective assistance of counsel. In addition, the client's Fifth Amendment rights are being abridged because the waiver policy requires the client's (and employee's) self-incrimination in cooperating to help prove the prosecutor's case. Prior to the Thompson/ McNulty Memos, the burden was on the government to prove guilt without the aid of coerced waiver of the attorney-client privilege or disregard of Fifth Amendment rights. Elimination of the waiver policy would restore that time-honored principle of our justice system.

Editor: Now that the McNulty Memorandum has been issued, what is to be done? Are there legislative efforts to correct the situation?

Greco: On December 7, Senator Arlen Specter filed legislation that essentially calls for the elimination of DOJ's waiver policy. The McNulty Memorandum, issued on December 12, signals that DOJ intends not to abandon its waiver policy voluntarily. While the Memorandum concedes that a serious problem has resulted from DOJ's waiver policy - a growing cancer spreading in the justice system - it offers only a band-aid solution when drastic surgery is needed. The Specter bill provides the surgical solution and that is why it should be enacted without delay by the new Congress. Unless checked now, denial of the privilege's protection today to some will lead to its denial tomorrow for all Americans.

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