By James Hamilton, J.D., LL.M.
Many companies faced with allegations of wrongdoing are under intense pressure to avoid indictment since an indictment, especially of a financial services firm, would probably destroy the business regardless of whether the firm ultimately is convicted or acquitted. That is what happened to Arthur Andersen & Co., which collapsed almost immediately after it was indicted, and the Supreme Court’s eventual reversal of its conviction did not undo the damage. It is thus axiomatic that a firm facing such catastrophic consequences must do whatever it can to avoid indictment.
According to Judge Kaplan, in his KPMG rulings, the DOJ and other federal agencies have capitalized on this, in part by altering the manner in which suspected corporate crime has been investigated, prosecuted, and, when proven, punished. The Thompson Memorandum is a part of this change. The Thompson Memorandum made clear that the failure of a business organization facing possible indictment to induce its personnel to submit to interviews by the government and to disclose whatever they know may be a factor weighing in favor of indictment.
The DOJ has announced revisions to the Thompson Memorandum. A new memorandum, under the signature of Deputy Attorney General Paul McNulty, provides revised guidance to corporate fraud prosecutors across the country. The memorandum clarifies the intent of the Thompson Memorandum in connection with how prosecutors evaluate a company’s cooperation in making their charging decisions. In remarks, Mr. McNulty clarified that attorney-client communications should only be sought in rare cases; that is, that legal advice, mental impressions and conclusions and legal determinations by counsel are protected. Before they are requested, the US Attorneys must seek approval directly from the deputy AG. He must personally approve each waiver request for attorney-client communications. Both the request for approval and his authorization will be in writing.
In addition, to support the request, prosecutors must show a legitimate need for the information. If they cannot meet that test, he will not authorize their seeking privileged information. To meet this test, prosecutors must show: (1) the likelihood and degree to which the privileged information will benefit the government’s investigation; (2) whether the information sought can be obtained in a timely and complete fashion by using alternative means that do not require waiver; (3) the completeness of the voluntary disclosure already provided; and (4) the collateral consequences to the company in requesting a waiver.
According to the senior official, the privilege is protected to such an extent that, even if the prosecutors have established a legitimate need and he approves the request for the waiver, the DOJ will not hold it against the company if it declines to provide the information. That is, he explained, prosecutors will not view it negatively in making a charging decision.
However, if the company decides to give DOJ the information, it will be considered favorably. The government wants to encourage cooperation and the production of information where requested. He believes that a company would want to receive credit for its production of privileged materials if the decision is made to waive the privilege.