Prosecutorial Discretion in the Context of Corporate Attorney-Client Relations

Congressional research reportMar 9, 2010

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Prosecutorial Discretion in the Context of

Corporate Attorney-Client Relations

-name redactedSenior Specialist in American Public Law

March 9, 2010

Congressional Research Service

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www.crs.gov

RL33842

CRS Report for Congress

Prepared for Members and Committees of Congress

Prosecutorial Discretion in the Context of Corporate Attorney-Client Relations

Summary

The Justice Department enjoys prosecutorial discretion to bring criminal charges against a

corporation, its culpable officers or employees, or both. For a corporation, indictment alone can

be catastrophic, if not fatal, in some instances. The Thompson Memorandum, since replaced with

guidelines in the U. S. Attorneys Manual, described the policy factors to be considered in the

exercise of prosecutorial discretion. Two of the factors explicitly mentioned were whether a

corporation had waived its privileges and whether it had cut off the payment of attorneys’ fees for

its officers and employees.

Justice Department policies and practices under the Thompson Memorandum led to constitutional

challenges based on the Fifth Amendment’s self-incrimination clause, the Amendment’s due

process clause, and the Sixth Amendment’s right to counsel clause. Due process and right to

counsel concerns were enough for a federal district court in New York to throw out the

indictments of thirteen former partners and employees of an accounting firm, charged with

creating and marketing fraudulent tax shelters, United States v. Stein. The Second Circuit affirmed

on right to counsel grounds and consequently found it necessary to address the merits of the due

process argument.

The House addressed the conflict in attorney-client protective legislation which it passed in the

110th Congress. Soon thereafter, the Department of Justice announced a revised policy concerning

the circumstances under which a corporation’s failure to waive its attorney-client privilege might

influence the decision to prosecute it. The 110th Congress, which had previously amended the

Federal Rules of Evidence relating to the inadvertent waiver of the attorney-client privilege,

adjourned without taking further action on the House-passed legislation. Similar proposals,

however, have been introduced in 111th Congress, H.R. 4326 (Representative Scott); S. 445

(Senator Specter). This report provides a brief discussion of the legislation, the legal background,

and a chronology of related issues and events. Also available is an abridged report, stripped of its

footnotes and most of its citations to authority (CRS Report RS22588, The McNulty

Memorandum In Short: Attorneys’ Fees and Waiver of Corporate Attorney-Client and Work

Product Protection, by (name redacted)).

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Prosecutorial Discretion in the Context of Corporate Attorney-Client Relations

Contents

Introduction ................................................................................................................................1

Enterprise Liability .....................................................................................................................2

Attorney-Client Privilege and Work Product Protection ...............................................................4

Attorney-Client .....................................................................................................................4

Attorney Work Product .........................................................................................................7

Deputy Attorney General Memoranda and Related Matters .........................................................8

Holder Memorandum............................................................................................................9

Thompson Memorandum .................................................................................................... 10

Comparable Policies Elsewhere........................................................................................... 12

Sentencing Guidelines......................................................................................................... 12

McCallum Memorandum .................................................................................................... 13

Proposed Rules of Evidence................................................................................................ 13

Constitutional Concerns ...................................................................................................... 14

Substantive Due Process ............................................................................................... 15

Self-Incrimination......................................................................................................... 18

Assistance of Counsel ................................................................................................... 18

Legislative Activity in the 109th Congress............................................................................ 20

McNulty Memorandum....................................................................................................... 21

Legislative Activity in the 110th Congress............................................................................ 23

Filip Memorandum ............................................................................................................. 26

Legislative Activity in the 111th Congress........................................................................... 27

Contacts

Author Contact Information ...................................................................................................... 30

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Introduction

A corporation is subject to civil and criminal liability for the misconduct that its officers,

employees, and agents committed for its benefit.1 Federal authorities may prosecute a

corporation; its officers, employees, and agents; or both.2 For a corporation, however, indictment

can be fatal. Commentators point to the experience of the Arthur Andersen accounting firm as

evidence that some companies cannot survive the mere accusation of criminal wrongdoing, even

if they might have been vindicated ultimately. 3

Under most circumstances, corporations and their servants alike enjoy the right to attorney-client

privileges and to attorney work product protection in connection with government investigations

of possible misconduct.4 Yet, the Justice Department’s federal prosecution policy at one time

suggested that a corporation faced an increased risk of prosecution, if it claimed those privileges

or if it paid the business-related litigation costs of its officers and employees.

The federal courts in at least one circuit have concluded that the manner in which the policy (the

so-called Thompson Memorandum) was implemented contravened the dictates of the Fifth and

Sixth Amendments. 5

New York Central R.R. v. United States, 212 U.S. 481, 495-96 (1909); United States v. Potter, 463 F.3d 9, 25 (1st Cir.

2006)(internal quotation marks and citations omitted)(“a corporation may be held liable for the criminal acts of its

agents so long as those agents are acting within the scope of employment. The test is whether the agent is performing

acts of the kind which he is authorized to perform and those acts are motivated—at least in part—by an intent to benefit

the corporation.... The legal rules imputing criminal responsibility to corporations are built upon analogous rules for

civil liability”).

United States v. Wise, 370 U.S. 405, 416 (1962); United States v. Dotterweich, 320 U.S. 277, 283 (1943).

“Arthur Andersen taught that an indictment itself may be sufficiently damaging to close the doors of a public

corporation,” Boozang & Handler-Hutchinson, “Monitoring” Corporate Corruption: DOJ’s Use of Deferred

Prosecution Agreements in Health Care, 35 AMERICAN J OURNAL OF LAW AND MEDICINE 89, 89 (2009); Boese,

McClain, & Hermandez-Stern, Healthcare Behind Bars: The Use of Criminal Prosecutions in Forcing Corporate

Compliance, 3 JOURNAL OF HEATH & LIFE SCIENCE LAW 91, 106 (2009)(“Not long after the allegations [against Enron]

came to light, the government launched a sweeping probe focusing on Enron’s accountant, Arthur Andersen. What

brought down Arthur Anderson [sic] was not its audit work, but its response to a government subpoena. Arthur

Andersen was accused of ‘corruptly persuading its employees to destroy documents with an intent to impair their

availability in a United States Securities and Exchange Commission (SEC) investigation ....’ In 2002, Arthur Andersen

was convicted of obstructing justice in the government’s Enron investigation. By the time that verdict was reversed by

the Supreme Court, Arthur Andersen was out of business”).

Upjohn Co. v. United States, 449 U.S. 383, 390 (1981)(citations omitted)(“this Court has assumed that the privilege

applies when the client is a corporation and the Government does not contest the general proposition”); cf., Hickman v.

Taylor, 329 U.S. 495, 510-11 (1947).

United States v. Stein, 435 F.Supp.2d 330, 356-72 (S.D.N.Y. 2006), aff’d, 541 F.3d 130 (2d Cir. 2008); see also,

United States v. Stein, 495 F.Supp.2d 390 (S.D.N.Y. 2007).

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Both Houses held hearings on the matter during the 109th Congress and the 110th Congress.6 The

House Judiciary Committee reported out the Attorney-Client Privilege Protection Act of 2007,7

which the House passed under suspension of the rules on November 13, 2007.8 Soon thereafter,

the Department of Justice announced a revised policy concerning the circumstances under which

a corporation’s failure to waive its attorney-client privilege might influence the decision to

prosecute it.9 The 110th Congress concluded without further action, although a related amendment

to the Federal Rules of Evidence did pass.10 Proposals similar to that passed by the House in the

110th Congress have been introduced in the 111th Congress, H.R. 4326 (Representative Scott); S.

445 (Senator Specter).

Enterprise Liability

At common law, corporations were considered incapable of committing or of being punished for

criminal misconduct.11 That perception has changed, however. Corporate criminal liability is now

a matter of legislative choice. And the view of the courts is much the same as it was over a

century ago, when the Supreme Court observed:

We see no valid objection in law, and every reason in public policy, why the corporation

which profits by the transaction, and can only act through its agents and officers, shall be

held punishable by fine because of the knowledge and intent of its agents to whom it has

intrusted authority to act in the subject-matter of making and fixing rates of transportation,

and whose knowledge and purposes may well be attributed to the corporation for which the

agents act. While the law should have regard to the rights of all, and to those of corporations

no less than to those of individuals, it cannot shut its eyes to the fact that the great majority

of business transactions in modern times are conducted through those bodies, and

particularly that interstate commerce is almost entirely in their hands, and to give them

immunity from all punishment because of the old and exploded doctrine that corporation

cannot commit a crime would virtually take away the only means of effectually controlling

White Collar Enforcement: Attorney-Client Privilege and Corporate Waivers: Hearing Before the Subcomm. on

Crime, Terrorism, and Homeland Security of the House Comm. on the Judiciary, 109th Cong., 2d Sess. (2006)(House

Hearings); The Thompson Memorandum’s Effect on the Right to Counsel in Corporate Investigations: Hearing Before

the Senate Committee on the Judiciary, 109th Cong., 2d Sess. (2006)(Senate Hearings); The McNulty Memorandum’s

Effect on the Right to Counsel in Corporate Investigations: Hearing Before the Subcomm. on Crime, Terrorism, and

Homeland Security of the House Comm. on the Judiciary, 110th Cong., 1st Sess. (2007)(House Hearings II); Examining

Approaches to Corporate Fraud Prosecutions and the Attorney-Client Privilege Under the McNulty Memorandum:

Hearing Before the Senate Comm. on the Judiciary, 110th Cong., 1st Sess. (2007)(Senate Hearings II).

H.Rept. 110-445 (2007) (H.R. 3013 (110th Cong.)).

153 Cong. Rec. H13564 (daily ed. Nov. 13, 2007).

U.S. Attorneys Manual, §9-28.000 et seq.

F.R.Evid. 502, P.L. 110-322, 122 Stat. 3537 (2008). The new Rule protects against inadvertent waiver of the

attorney-client privilege and the attorney work product doctrine and authorizes protective orders for case-specific

waivers in both state and federal proceedings. As one point the proposed rule included a provision that allowed for

selective waiver of the attorney client privilege in the context of a governmental investigation, Rule 502. That feature

had disappeared, however, by the time the Judicial Conference recommended the rule to the Congress, see discussion

infra at 15-6.

1 BLACKSTONE, COMMENTARIES ON THE LAWS OF ENGLAND 464 (1765)(transliteration supplied)(“A corporation

cannot commit treason, or felony, or other crime, in it’s corporate capacity: though it’s members may, in their distinct

individual capacities. Neither is it capable of suffering a traitor’s, or felon’s punishment, for it is not liable to corporal

punishments, nor to attainder, forfeiture, or corruption of the blood”).

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the subject-matter and correcting the abuses aimed at. New York Central R.R. v. United

States, 212 U.S. 481, 495-96 (1909).

Both as a general matter and within individual criminal statutes, federal law leaves little doubt

when a criminal proscription applies to corporate entities. The Dictionary Act provides that “[i]n

determining the meaning of any Act of Congress, unless the context indicates otherwise ... the

words ‘person’ or ‘whoever’ include corporations, companies, associations, firms, partnerships,

societies, and joint stock companies, as well as individuals.”12 With this in mind, criminal statutes

ordinarily condemn—“whoever,” or any “person” who—engages in the misconduct they

proscribe.13 In some instances, the statute goes a step further and supplies an even more expansive

crime-specific definition.14

When a federal criminal statute applies to corporations, the courts have generally said that a

corporation is liable for the violations committed for its benefit by its officers, employees, or

agents acting, within the apparent scope of their authority,15 even if the corporation has either

generally or specifically prohibited the misconduct in question. 16 Of course, the officers,

employees, or agents whose misconduct is imputed to the corporation are usually subject to

criminal liability as well.17 It is a matter of prosecutorial discretion whether to prosecute an

1 U.S.C. 1; see e.g., United States v. A & P Trucking Co., 358 U.S. 121, 124 (1958)(citing the Dictionary Act in

support of the conclusion that a partnership might be held criminally liable for the improper transportation of

explosives under a statute that applied to “whoever” breached its proscriptions).

E.g., 18 U.S.C. 2 (“Whoever commits an offense against the United States ... is punishable as a principal”); 18 U.S.C.

371 (“If two or more persons conspire either to commit any offense against the United States, or to defraud the United

States ... and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under

this title”); 18 U.S.C. 661 (“Whoever, within the special maritime and territorial jurisdiction of the United States, takes

and carries away, with intent to steal or purloin, any personal property of another shall be punished as follows.... ”).

E.g., 18 U.S.C. 1961(3)(“As used in this chapter ... (3) ‘person’ includes any individual or entity capable of holding a

legal or beneficial interest in property”)(relating to racketeering offenses); 15 U.S.C. 7, 12(c) (“The word ‘person’, or

‘persons’ ... shall be deemed to include corporations and associations existing under or authorized by the laws of either

the United States, laws of any of the Territories, the laws of any State, or the laws of any foreign country”)(relating to

the anti-trust laws).

United States v. Singh, 518 F.3d 236, 249 (4th Cir. 2008); United States v. Jorgensen, 144 F.3d 550, 560 (8th Cir.

1998); United States v. Investment Enterprises, Inc., 10 F.3d 263, 267 (5th Cir. 1994); United States v. Paccione, 949

F.2d 1183, 1200 (2d Cir. 1991); United States v. Automated Medical Laboratories, Inc., 770 F.2d 399, 407 (4th Cir.

1985)(“The term ‘scope of employment’ has been broadly defined to include acts on the corporation’s behalf in

performance of the agent’s general line of work. To be acting within the scope of his employment, agent must be

‘performing acts of the kind which he is authorized to perform, and those acts must be motivated—at least in part—by

an intent to benefit the corporation’”), quoting, United States v. Cincotta, 689 F.2d 238, 241-42 (1st Cir. 1982).

United States v. Potter, 463 F.3d 9, 25-6 (1st Cir. 2006)(“The case law has rejected arguments that the corporation

can avoid liability by adopting abstract rules. . . . Even a specific directive to an agent or employee or honest efforts to

police such rules do not automatically free the company for the wrongful acts of agents. Thus the principal is held

liable for acts done on his account by a general agent which are incidental or customarily a part of a transaction which

the agent has been authorized to perform. And this is the case, even though it is established fact that the act was

forbidden by the principal”); United States v. Twentieth Century Fox, 882 F.2d 656, 660 (2d Cir. 1989)(“We agree with

the District Court that Fox’s compliance program, however extensive, does not immunize the corporation from liability

when its employees, acting within the scope of their authority, fail to comply with the law and the consent decree. It is

settled law that a corporation may be held criminally responsible for antitrust violations committed by its employees or

agents acting within the scope of their authority”); United States v. Portac, Inc., 869 F.2d 1288, 1293 (9th Cir. 1989).

United States v. Wise, 370 U.S. 405, 416 (1962); United States v. Dotterweich, 320 U.S. 277, 283 (1943)(rejecting

the contention that by establishing corporate liability Congress intended to exempt its culpable agents with the

observation that, “It is not credible that Congress [in making it clear that the criminal prohibition applied to

corporations] should by implication have exonerated what is probably a preponderant number of persons involved in

acts of disobedience. . . .”); United States v. Sain, 141 F.3d 463, 475 (3d Cir. 1998).

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apparently culpable corporation, or its apparently culpable agents, employees, and officers, or

both the corporation and the individuals through whom it has acted. 18 Because their interests are

intertwined, corporations often bear the legal costs of defending their agents, employees, and

officers in litigation arising out of conduct within the apparent scope of their employment.19 The

corporation in such cases, however, is generally entitled to reimbursement should its agent,

officer or employee be convicted or otherwise found at fault.20

Attorney-Client Privilege and Work Product

Protection

The attorney-client privilege and work product protection are federal evidentiary privileges,

which means they are “governed by the principles of the common law as ... interpreted by the

courts of the United States in light of reason and experience,” F.R.Evid. 501, unless altered by

rule or statute.

Attorney-Client

The attorney-client privilege is one of the oldest common law privileges.21 The purpose of the

privilege is to encourage “full and frank communication between attorneys and their clients and

thereby promote broader public interests in the observance of law and the administration of

justice.”22 It protects confidential communications with an attorney made in order to obtain legal

advice or assistance.23

It is available to corporations as well as to individuals. 24 In the case of a corporation, it now

seems beyond dispute that the privilege applies to the confidential communications from its

Wayte v. United States, 470 U.S. 598, 607 (1985); United States v. LaBonte, 520 U.S. 751, 762 (1997).

United States v. Stein, 435 F.Supp. at 353-55, citing inter alia, 3A FLETCHER, CYCLOPEDIA OF THE LAW OF PRIVATE

CORPORATIONS, §1344.10 (2002).

Id.

Upjohn v. United States, 449 U.S. 383, 389 (1981).

Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998); see also, Upjohn v. United States, 449 U.S. 383, 389

(1981); Fisher v. United States, 425 U.S. 391, 403 (1976); Mohawk Industries, Inc. v. Carpenter, 130 S.Ct. 599, 606

(2009).

Fisher v. United States, 425 U.S. 391, 403 (1976); In re Grand Jury, 454 F.3d 511, 519 (6th Cir. 2006); In re Grand

Jury: Under Seal, 415 F.3d 333, 338 n.3 (4th Cir. 2005)(The privilege applies if “(1) the asserted holder of the privilege

is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a

court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication

relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the

purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal

proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege as been (a) claimed and (b)

not waived by the client”); United States v. Bisanti, 414 F.3d 168, 171 (1st Cir. 2005) (“The essential elements of the

claim of attorney-client privilege are as follows: (1) Where legal advice of any kind is sought (2) from a professional

legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the

client, (6) are at his insistance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except

the protection be waived ”); United States v. Ruehle, 583 F.3d 600, 607 (9th Cir. 2009).

Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343, 348 (1985); Upjohn Co. v. United States, 449 U.S.

383, 389-90 (1981).

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officers, agents, and employees to its attorney for the purpose of supplying the corporation with

legal advice or assistance. 25 At one time, however, some courts believed the privilege should be

limited to the communications of the “control group of the corporation,” those ultimately

responsible for corporate policy. The Supreme Court in Upjohn found this reading too limited. 26

The case began when officials at Upjohn became concerned that some of its officers or employees

might have been involved in the business-related bribery of foreign officials. 27 Upjohn’s general

counsel was instructed to conduct an investigation. 28 Following the internal investigation, Upjohn

reported suspicious payments to the Securities and Exchange Commission (SEC) and the Internal

Revenue Service (IRS).29 The company also identified which of its officers and employees had

been interviewed or had submitted responses to questionnaires as part of the internal

investigation.30 Then the IRS issued a summons demanding that Upjohn turn over all its files on

the internal investigation including responses to its general counsel’s questionnaires and

memoranda and to notes of the investigation’s interviews conducted under his supervision. 31

Upjohn refused to comply, claiming attorney-client and attorney work product privileges, and the

IRS sought judicial enforcement of its summons.32

The Sixth Circuit Court of Appeals rejected Upjohn’s attorney-client claim on the grounds that

the communications sought were not those of Upjohn’s control group, thus not those of the client,

and therefore not privileged. 33 The Supreme Court found this control group test insufficiently

protective. The test failed to recognize the importance of the attorney’s fact gathering

communications with the corporation’s employees conducted in order to provide the corporate

client with legal advice or assistance.34 In doing so, it frustrated the very purpose of the privilege

by discouraging full and frank disclosures by those associated with the company who were in a

Upjohn Co. v. United States, 449 U.S. at 390-97 (holding the privilege applicable to employee questionnaire

responses as well as interview notes and memoranda collected during the course of an internal investigation conducted

under the direction of the company’s general counsel); In re Allen, 106 F.3d 582, 606-7 (4th Cir. 1997); Admiral

Insurance Co. v. U.S. District Court, 881 F.2d 1486, 1492-493 (9th Cir. 1989).

Upjohn Co. v. United States, 449 U.S. 383 (1981).

Id. at 386.

Id. at 386-87.

Id. at 387.

Id.

Id. at 387-88.

Id. at 388.

United States v. Upjohn Co., 600 F.2d 1223, 1225 (6th Cir. 1979)(“Upjohn claims that the communications to counsel

made by all of its employees including regular and middle management employees as well as top management, are

privileged as confidential communications between client and attorney. To the extent that the communications were

made by officers and agents not responsible for directing Upjohn’s actions in response to legal advice, we disagree for

the simple reason that the communications were not the ‘client’s’”).

Upjohn Co. v. United States, 449 U.S. 383, 390-91 (1981)(internal citations omitted) (“Such a view, we think,

overlooks the fact that the privilege exists to protect not only the giving of professional advice to those who can act on

it but also the giving of information to the lawyer to enable him to give sound and informed advice. The first step in the

resolution of any legal problem is ascertaining the factual background and sifting through the facts with an eye to the

legally relevant.... In the case of the individual client the provider of information and the person who acts on the

lawyer’s advice are one and the same. In the corporate context, however, it will frequently be employees beyond the

control group as defined by the court below—‘officers and agents ... responsible for directing [the company’s] actions

in response to legal advice’—who will possess the information needed by the corporation’s lawyers. Middle-level and

indeed lower-level-employees can, by actions within the scope of their employment, embroil the corporation in serious

legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate

counsel if he is adequately to advise the client with respect to such actual or potential difficulties”).

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position to expose it to civil and criminal liability, thereby denying counsel the basis for sound

legal advice and assistance. 35 Moreover, it chilled communications between counsel and company

employees designed to ensure company compliance with the law.36

In a situation like the one in Upjohn, the attorney represents the corporation, the privilege that

envelops the communications with the attorney belongs to the corporation, 37 and may be waived

by the corporation.38 Although disclosure ordinarily waives the privilege, the circuits are divided

over whether the privilege may survive disclosure for limited selective purposes (selective

waiver) such as the disclosures in Upjohn to government investigators or regulators.39

The prospect of selective waiver was apparently first raised in Diversified Industries v. Meredith,

where the Eighth Circuit held voluntary disclosure to the Securities and Exchange Commission

(SEC) did not constitute a waiver of the privilege for subsequent purposes. 40 To one extent or

another, the District of Columbia, First, Second, Third, Fourth and Tenth Circuits have declined to

accept the Eighth Circuit suggestion that the attorney-client privilege may be claimed following a

selective disclosure to a governmental agency. 41

The existence of either a common interest or joint defense attorney-client privilege further

complicates matters, for either may arise in the course of an investigation of allegations of

449 U.S. at 392 (1981)(internal citations omitted) (“The control group test adopted by the court below thus frustrates

the very purpose of the privilege by discouraging the communication of relevant information by employees of the client

to attorneys seeking to render legal advice to the client corporation. The attorney’s advice will also frequently be more

significant to noncontrol group members than to those who officially sanction the advice, and the control group test

makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client

corporation’s policy”).

Id. (“The narrow scope given the attorney-client privilege by the court below not only makes it difficult for corporate

attorneys to formulate sound advice when their client is faced with a specific legal problem but also threatens to limit

the valuable efforts of corporate counsel to ensure their client’s compliance with the law. In light of the vast and

complicated array of regulatory legislation confronting the modern corporation, corporations, unlike most individuals,

constantly go to lawyers to find out how to obey the law, particularly since compliance with the law in this area is

hardly an instinctive matter”).

Otherwise “[c]ourts have been willing to allow corporate employees to assert a personal privilege with respect to

conversations with corporate counsel, despite the fact that the privilege generally belongs to the corporation ... only by

meeting certain requirements.... First, they must show they approached [counsel] for the purpose of seeking legal

advice. Second, they must demonstrate that when they approached [counsel] they made it clear that they were seeking

legal advice in their individual rather than in their representative capacities. Third, they must demonstrate that the

[counsel] saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise.

Fourth, they must prove that their conversations with [counsel] were confidential. And, fifth, they must show that the

substance of their conversations with [counsel] did not concern matters within the company or the general affairs of the

company,” United States v. International Brotherhood of Teamsters, 119 F.3d 210, 215 (2d Cir. 1997); see also, In re

Grand Jury Subpoena, 274 F.3d 563, 571 (1st Cir. 2001); Grand Jury Proceedings v. United States, 156 F.3d 1038,

1041 (10th Cir. 1998); In re Bevell, Bresler & Schulman Asset Management Corp., 805 F.2d 120, 123-25 (3d Cir.

1986).

Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. at 348 (1985); In re Grand Jury Proceedings, 219 F.3d

175, 184-86 (1st Cir. 2001); United States v. Dakota, 197 F.3d 821, 825 (6th Cir. 1999); Sprague v. Thorn Americas,

Inc., 129 F.3d 1355, 1371 (10th Cir. 1997).

In re Qwest Communications International, Inc., 450 F.3d 1179, 1186-197 (10th Cir. 2006).

Diversified Industries v. Meredith, 572 F.2d 596, 611 (8th Cir. 1977).

Permian Corp. v. United States, 665 F.2d 1214, 1219-221 (D.C. Cir. 1981); United States v. Massachusetts Institute

of Technology, 129 F.3d 681, 685-86 (1st Cir. 1997); In re John Doe Corp., 675 F.2d 482, 489 (2d Cir. 1982);

Westinghouse Electric Corp. v. Republic of the Philippines, 951 F.2d 1414, 1425-426 (3d Cir. 1991); In re Martin

Marietta Corp., 856 F.2d 619, 623-24 (4th Cir. 1988); In re Qwest Communications International Inc., 450 F.3d 1179,

1200 (10th Cir. 2006).

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corporate misconduct. The common interest privilege is created when an attorney simultaneously

represents more than one client based on their common interest in the same matter. Under such

circumstances, “communications between each of the clients and the attorney are privileged

against third parties, and it is unnecessary that there be actual litigation in progress for this

privilege to apply.”42 Moreover, two or more clients represented by individual attorneys may

agree to work jointly in a common defense of a particular suit or case. In such circumstances,

“many courts have held that the attorney-client privilege gives rise to a concomitant ‘joint defense

privilege’ which serves to protect the confidentiality of communications, passing from one party

to the attorney for another party where a joint defense effort or strategy has been decided upon

and undertaken by the parties and their respective counsel.”43 The courts have generally held—

although not universally so—that communications or attorney work product protected by a joint

or common defense privileges can only be waived with the consent of all parties.44

Attorney Work Product

At least since the Supreme Court announced its decision in Hickman v. Taylor,45 the federal courts

have recognized that an attorney’s work product gathered or created in anticipation of litigation

enjoys qualified disclosure protection. The protection has been reenforced by rule both on the

civil side46 and in criminal cases.47

“At its core, the work-product doctrine shelters the mental processes of the attorney providing a

privileged area within which he can analyze and prepare his client’s case.... It is therefore

necessary that the doctrine protect material prepared by agents of the attorney as well as those

prepared by the attorney himself.”48

The protection can be waived,49 but here too the circuits are divided on the question of whether it

can survive a selective waiver in the form of disclosure to a government investigator or regulator.

The Fourth Circuit and Federal Circuit have been unwilling to say that the protection afforded

Hanson v. United States Agency for International Development, 372 F.3d 286, 292 (4th Cir. 2004); see also, United

States v. Doe, 429 F.3d 450, 453 (3d Cir. 2005).

United States v. Almeida, 341 F.3d 1318, 1324 (11th Cir. 2003); see also, United States v. Austin, 416 F.3d 1016,

1021 (9th Cir. 2005); In re Grand Jury Subpoena, 274 F.3d 563, 574-75 (1st Cir. 2001).

In re Grand Jury Subpoenas, 902 F.2d 244, 248(4th Cir. 1990); John Morrell & Co. v. Local Union 304A, 913 F.2d

544, 555 (8th Cir. 1990); In re Auclair, 961 F.2d 65, 70-1 (5th Cir. 1992); but see, In re Grand Jury Subpoena, 274 F.3d

563, 572-73 (1st Cir. 2001)(“a party is always free to disclose his own communications ... a corporation may

unilaterally waive the attorney-client privilege with respect to any communications made by a corporate officer in his

corporate capacity, notwithstanding the existence of an individual attorney-client relationship between him and the

corporation’s counsel”).

329 U.S. 495 (1947).

F.R.Civ.P. 26; Upjohn v. United States, 449 U.S. 383, 396 (1981); Regional Airport Authority v. LFG, LLC, 460 F.3d

697, 713 (6th Cir. 2006); In re Qwest Communications International, Inc., 450 F.3d 1179, 1186 (10th Cir. 2006).

F.R.Crim.P. 16; United States v. Nobles, 422 U.S. 225, 236-39 (1975).

United States v. Nobles, 422 U.S. at 238-39; see also, Hickman v. Taylor, 329 U.S. at 511-14 (“Proper preparation of

a client’s case demands that he assemble information, sift what he considers to be the relevant from the irrelevant facts,

prepare his legal theories and plan his strategy without undue and needless interference.... Were such materials open to

opposing counsel on mere demand, much of what is now put down in writing would remain unwritten ... Inefficiency,

unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for

trial”).

United States v. Nobles, 422 U.S. at 239.

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attorney opinion work product (work containing the attorney’s analysis of the law, facts, and

strategy reflecting the attorney’s mental impressions)50 is lost simply because it has been

disclosed to governmental entities.51 On the other hand, the Third Circuit has said without

equivocation that the same standard used in the case of attorney-client waivers should apply; that

is, disclosure to a governmental entity constitutes complete waiver.52 The other circuits that have

considered the question have assumed positions at various points between the two.53

Deputy Attorney General Memoranda and Related

Matters

Five Deputy Attorneys General have issued memoranda to guide the exercise of prosecutorial

discretion on the question of whether criminal charges should be brought against a corporation.

Each includes provisions concerning the waiver of attorney-client and attorney work product

protection, and all but one address employee legal costs and joint defense agreements as well.

They are the memoranda of: Deputy Attorney Generals Holder,54 Thompson,55 McNulty,56 and

Filip57 and Acting Deputy Attorney General McCallum.58

This is distinguished from “non-opinion” or “fact” work product which consists of all other material gathered or

produced by or at the direction of an attorney in anticipation of litigation.

In re Martin Marietta Corp., 856 F.2d 619, 625-26 (4th Cir. 1988); In re Echostar Communications Corp., 448 F.3d

1294, 1301-305 (Fed. Cir. 2006).

Westinghouse Electric Corp. v. Republic of the Philippines, 951 F.2d 1414, 1429 (3d Cir. 1991).

In re Qwest Communications International, Inc., 450 F.3d 1179, 1192, 1194 (10th Cir. 2006)(refusing to

acknowledge survival of the protection under the facts before it rather than as a general rule)(“we conclude the record

in this case is not sufficient to justify adoption of a selective waiver doctrine as an exception to the general rules of

waiver upon disclosure of protected material.... In short, Qwest’s confidentiality agreements do not support adoption of

selective waiver”); In re Columbia/HCA Healthcare Corp. Billing Practices Litigation, 293 F.3d 289, 307 (6th Cir.

2002)(emphasis added)(footnote 30 of the court’s opinion in brackets)(“These and other reasons persuade us that the

standard for waiving the work-product doctrine should be no more stringent than the standard for waiving the attorneyclient privilege—once the privilege is waived, waiver is complete and final. [This is especially true as to ‘fact’ work

product....”]; United States v. Massachusetts Institute of Technology, 129 F.3d 681, 688 (1st Cir. 1997)(holding the

protection waived under the facts before it but noting that the decision does not address whether “opinion” work

product protection might survive disclosure to the government); In re Steinhardt Partners, 9 F.3d 230, 235-36 (2d Cir.

1993)(holding the party waived work product production by voluntarily turning material over to the SEC, but

“declin[ing] to adopt a per se rule that all voluntary disclosures to the government waive work product protection”); In

re Chrysler Motors Corp., 860 F.2d 844, 846 (8th Cir. 1989)(holding the party waived work product protection by

voluntary disclosure, but noting that the material did not include “opinion” work product “which enjoys a very near

absolute immunity and can be discovered only in very rare and extraordinary circumstances”); In re Subpoena Duces

Tecum, 738 F.2d 1367, 1375 (D.C. Cir. 1984)(emphasis added)(“we cannot see how the developing procedure of

corporations to employ independent outside counsel to investigate and advise them would be thwarted by telling a

corporation that it cannot disclose the resulting reports to the SEC if it wishes to maintain their confidentiality. The

same choice is open under the work product privilege. Or the company can insist on a promise of confidentiality before

disclosure to the SEC”).

“Bringing Criminal Charges Against Corporations,” Memorandum from the Deputy Attorney General, to All

Component Heads and United States Attorneys, dated as signed on June 16, 1999, (Holder Memorandum), 66 BNA

Criminal Law Reporter 189 (December 8, 1999).

“Principles of Federal Prosecution of Business Organizations,” Memorandum from Larry D. Thompson, Deputy

Attorney General, to Heads of Department Components and United States Attorneys, dated January 20, 2003,

(Thompson Memorandum), available at http://www.justice.gov/dag/cftf/corporate_guidelines.htm.

“Principles of Federal Prosecution of Business Organizations,” Memorandum from Paul J. McNulty, Deputy

Attorney General, to Heads of Department Components and United States Attorneys, undated, (McNulty

(continued...)

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Holder Memorandum

Signed on June 19, 1999, the Holder Memorandum was designed to provide prosecutors with

factors to be considered when determining whether to charge a corporation with criminal activity.

It emphasized that “[t]hese factors are, however, not outcome-determinative and are only

guidelines.”

The factors consisted of: “1. The nature and seriousness of the offense. . . 2. The pervasiveness of

wrongdoing within the corporation. . . 3. The corporation’s history of similar conduct. . . 4. The

corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in

the investigation of its agents. . . 5. The existence and adequacy of the corporation’s compliance

program. . . 6. The corporation’s remedial actions. . . 7. Collateral consequences ... and 8. The

adequacy of non-criminal remedies. . . .”59

In the section devoted to cooperation and voluntary disclosure, the Memorandum stated that “In

gauging the extent of the corporation’s cooperation, the prosecutor may consider the corporation’s

willingness ... to waive the attorney-client and work product privileges.”60 As the Comment that

followed explained:

One factor the prosecutor may weigh in assessing the adequacy of a corporation’s

cooperation is the completeness of its disclosure including, if necessary, a waiver of the

attorney-client and work product protections, both with respect to its internal investigation

and with respect to communications between specific officers, directors, and employees and

counsel. Such waivers permit the government to obtain statements of possible witnesses,

subjects, and targets, without having to negotiate individual cooperation or immunity

agreements. In addition, they are often critical in enabling the government to evaluate the

completeness of a corporation’s voluntary disclosure and cooperation. Prosecutors, may,

therefore, request a waiver in appropriate circumstances. [This waiver should ordinarily be

limited to the factual internal investigation and any contemporaneous advice given to the

corporation concerning the conduct at issue. Except in unusual circumstances, prosecutors

should not seek a waiver with respect to communications and work product related to advice

concerning the government’s criminal investigation.] The Department does not, however,

(...continued)

Memorandum), available at http://www.justice.gov/dag/speech/2006/mcnulty_memo.pdf.

“Principles of Federal Prosecution of Business Organizations,” Memorandum from Mark Filip, Deputy Attorney

General to Heads of Department Components [and] United States Attorneys, dated August 28, 2008 (Filip

Memorandum)(with U.S. Attorneys Manual, Title 9, Chapter 9-28.000 attached), available at

http://www.justice.gov/dag/readingroom/dag-memo-08282008.pdf.

“Waiver of Corporate Attorney-Client and Work Product Protection,” Memorandum from Robert D. McCallum, Jr.,

Acting Deputy Attorney General, to Heads of Department Components and United States Attorneys, dated October 21,

2005, (McCallum Memorandum) (we have been unable to locate on the Justice Department’s website the McCallum

Memorandum which previously appeared in the Justice Department’s Criminal Resource Manual), available on

Westlaw as either SL031 ALI_ABA 1299 or 1571 PLI/Corp 705; see also, 78 BNA Criminal Law Reporter 183.

Holder Memorandum, II. Charging Corporations—Factors To Be Considered, A. General Principle. The Sentencing

Commission had declared similar considerations appropriate organizational sentencing factors, United States

Sentencing Commission Guideline Manual, U.S.S.G. §8C2.5 (1991 ed.), 56 Fed.Reg. 22791-792 (May 16,

1991)(indicating that a convicted organization’s culpability score should be determined by weighing a corporation’s

involvement in or tolerance of criminal activity; its prior history; any evidence of its efforts to obstruct justice; the

existence of a organizational compliance program; and the extent to which the organization reported the criminal

activity, cooperated with the investigation, and accepted responsibility).

Holder Memorandum, VI.A.

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consider waiver of a corporation’s privileges an absolute requirement, and prosecutor should

consider the willingness of a corporation to waive the privileges when necessary to provide

timely and complete information as only one factor in evaluating the corporation’s

cooperation. Holder Memorandum, VI. B. (Memorandum’s footnote appears in brackets).

The Memorandum also addressed the adverse weight that might be given a corporation’s

participation in a joint defense agreement with its officers or employees and its agreement to pay

their legal fees:

Another factor to be weighed by the prosecutor is whether the corporation appears to be

protecting its culpable employees and agents. Thus, while cases will differ depending on the

circumstances, a corporation’s promise of support to culpable employees and agents either

through the advancing of attorneys’ fees,[*] through retaining the employees without

sanction for their misconduct, or through providing information to the employees about the

government’s investigation pursuant to a joint defense agreement, may be considered by the

prosecutor in weighing the extent and value of a corporation’s cooperation. By the same

token, the prosecutor should be wary of attempts to shield corporate officers and employees

from liability by a willingness of the corporation to plead guilty. [Some states require

corporations to pay the legal fees of officers under investigation prior to a formal

determination of their guilt. Obviously, a corporation’s compliance with governing law

should not be considered a failure to cooperate.] Holder Memorandum, VI. B.

(Memorandum’s footnote in brackets at the asterisk above).

Although several academics and defense counsel expressed concern over the possible impact of

the waiver feature of the Holder Memorandum, 61 a survey of United States Attorneys conducted

in late 2002 indicated that waivers were rarely requested.62

Thompson Memorandum

On January 30, 2003, the Thompson Memorandum superseded the Holder Memorandum in a

manner which hardly seemed designed to the meet the concerns of its critics. The Thompson

Zornow & Krakaur, On the Brink of a Brave New World: The Death of Privilege in Corporate Criminal

Investigations, 37 AMERICAN CRIMINAL LAW REVIEW 147, 156 (2000)(“Thus unfettered, federal prosecutors are

authorized by Justice Department policy to rend the fabric of confidential communications ranging from those that

occurred around the time of the conduct at issue to those that occurred during and in connection with the criminal

investigation itself. And once these privileges have been waived, they will likely become fair game for plaintiffs in civil

suits”); Cole, Revoking Our Privileges: Federal Law Enforcement’s Multi-Front Assault on the Attorney-Client

Privilege (and Why It Is Misguided), 48 VILLANOVA LAW REVIEW 469, 543 (2003)(“These statements in the Holder

Memorandum go quite far toward effectively forcing a corporation to waive privilege protections if it hopes to obtain

favorable charging treatment at the hands of DOJ prosecutors. In complex corporate criminal cases federal prosecutors

have enormous prosecutorial discretion to decide the nature and number of charges, if any, that they will bring against

the responsible corporate entity and culpable individuals. Moreover, the manner in which that prosecutorial discretion

is exercised is not subject to legal challenges or judicial review. This combination of broad discretion and limited

accountability presents the potential for misguided policy decisions and, in the worst cases, even abuses of

governmental power”); The Erosion of the Attorney-Client Privilege and Work Product Doctrine in Federal Criminal

Investigations: A Report Prepared by the American College of Trial Lawyers, 41 DUQUESNE LAW REVIEW 307

(2003)(“The Justice Department’s policy, as expressed in the Holder Memo Standards, is to obtain waivers of the

corporate attorney-client and work-product privilege where, in the government’s view these protections might keep

information relevant to a criminal investigation from discovery. Indeed, there is no pretense that the values underlying

these privileges are to be sacrificed for any reason other than to make the prosecution’s job easier”).

Buchanan, Effective Cooperation by Business Organizations and the Impact of Privilege Waivers, 39 WAKE FOREST

LAW REVIEW 587, 597-98 (2004); United States Sentencing Commission, Report of the Ad Hoc Advisory Group on the

Organizational Sentencing Guidelines 98-9 (October 7, 2003).

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Memorandum appeared to call for a more aggressive stance. The Thompson Memorandum was

essentially a reissuance of its predecessor. Little of the text was new. That portion of the

Memoranda devoted to the waiver of attorney-client and work product protections, and

cooperation and voluntary disclosure in general—Part VI—was the same in both except for a new

paragraph added in the Thompson Memorandum. 63 The addition said nothing about waivers per

se, but made clear the risks that a corporation ran if it failed to be forthcoming early on or

continued to support those officers or employees that prosecutors thought culpable:

Another factor to be weighed by the prosecutor is whether the corporation, while purporting

to cooperate, has engaged in conduct that impedes the investigation (whether or not rising to

the level of criminal obstruction). Examples of such conduct include overly broad assertions

of corporate representation of employees or former employees; inappropriate directions to

employees or their counsel, such as directions not to cooperate openly and fully with the

investigation including, for example, the direction to decline to be interviewed; making

presentations or submissions that contain misleading assertions or omissions; incomplete or

delayed production of records; and failure to promptly disclose illegal conduct known to the

corporation. Thompson Memorandum, VI. B.

Yet, this is one of the few amendments to the Holder Memorandum. To some, the whole scale

adoption of language from the earlier Memorandum suggested a Justice Department perception

that the problem with the Holder Memorandum was not its content, but rather its application. The

Thompson Memorandum’s description of the changes might be read to confirm this impression:

The main focus of the revisions is increased emphasis on and scrutiny of the authenticity of a

corporation’s cooperation. Too often business organizations, while purporting to cooperate

with a Department investigation, in fact take steps to impede the quick and effective

exposure of the complete scope of wrongdoing under investigation. The revisions make clear

that such conduct should weigh in favor of a corporate prosecution. Thompson

Memorandum, [Preamble].

Moreover, where the Holder Memorandum seemed to bespeak guidance, the Thompson

Memorandum appeared to sound a command. The Holder Memorandum’s preamble provided

that, “These factors are, however, not outcome-determinative and are only guidelines. Federal

prosecutors are not required to reference these factors in a particular case....” The remarks might

have suggested that prosecutors enjoyed some significant degree of flexibility as to whether and

how to apply the standards it announced. The Thompson Memorandum seemed to speak with a

much more commanding tone; its introductory remarks stated that, “prosecutors and investigators

in every matter involving business crimes must assess the merits of seeking the conviction of the

business entity itself.” Thompson Memorandum, [Preamble] (emphasis added). 64

See Berry, Revised Principles of Federal Prosecutions of Business Organizations: An Overview, 51 UNITED STATES

ATTORNEYS’ BULLETIN 8 (November 2003)(“One significant ‘non-revision’ of the Holder memo is noteworthy. Amidst

controversy, no change in the use of waivers of the attorney-client and work protect protections has been included in

the Thompson memo”).

Cf., United States v. Stein, 435 F.Supp.2d 330, 338 (S.D.N.Y. 2006)(“Unlike its predecessor, however, the

Thompson Memorandum is binding on all federal prosecutors”).

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Comparable Policies Elsewhere

Nevertheless, the policies articulated in the Holder and Thompson Memoranda are similar to the

enforcement policies announced by a substantial number of federal regulatory agencies that call

for voluntary corporate disclosure of statutory or regulatory violations.65 Some specifically

mention the waiver of the attorney-client or work product protection, 66 while others seem to speak

with sufficient generality to justify consideration on enforcement and sanction questions.67

Sentencing Guidelines

In May of 2004, the United States Sentencing Commission amended Commentary in the

Sentencing Guidelines that some read as an endorsement of this new, more aggressive approach.

The change explicitly described the circumstances under which a corporation’s failure to waive

could have sentencing consequences: “Waiver of attorney-client privilege and of work product

protections is not a prerequisite to a reduction in culpability score under subdivisions (1) and (2)

of subsection (g) unless such waiver is necessary in order to provide timely and thorough

disclosure of all pertinent information known to the organization.”68

For a description of several of these see, Wray & Hur, Corporate Criminal Prosecution in a Post-Enron World: The

Thompson Memo in Theory and Practice, 43 AMERICAN CRIMINAL LAW REVIEW 1095, 1118-135 (2006).

E.g., U.S. Commodity Futures Trading Commission, Division of Enforcement, Enforcement Advisory: Cooperation

Factors in Enforcement Division Sanction Recommendations (“The three areas of a company’s conduct that bear on the

Division’s decision-making about sanctions recommendations include the following ... II. Quality of the Company’s

Efforts in Cooperating with the Division and Managing the Aftermath of the Misconduct... 3. Did the company willing:

a. waive corporate attorney-client and work product protection and other corporate documents? b. waive corporate

attorney-client privilege for employee testimony? ...”); Securities Exchange Commission, Report of Investigation

Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of

Cooperation to Agency Enforcement Decisions, Release No. 44969 (October 23, 2001) (Seaboard Report)(“In brief

form, we set forth below some of the criteria we will consider in determining whether, and how much, to credit selfpolicing, self-reporting, remediation and cooperation—from the extraordinary step of taking no enforcement action to

bringing reduced charges, seeking lighter sanctions, or including mitigating language in documents we use to announce

and resolve enforcement actions.... In some cases, the desire to provide information to the Commission staff may cause

companies to consider choosing not to assert the attorney-client privilege, the work product protection and other

privileges, protections, and exemptions with respect to the Commission... Did the company promptly make available to

our staff the results of its review... did the company identify possible violative conduct and evidence with sufficient

precision to facilitate prompt enforcement actions ... In this regard, the Commission does not view a company’s waiver

of a privilege as an end in itself, but only as a means (where necessary) to provide relevant and sometimes critical

information to the Commission”).

E.g., Federal Energy Regulatory Commission, Policy Statement on Enforcement, 113 FERC ¶ 61,068 (October 20,

2005)(“the Commission will consider these factors even for entities that did not self-report violations, provided that

cooperation was provided once the violation was uncovered. > Did the company volunteer to provide internal

investigation or audit reports relating to the misconduct ... > Did the company ... actively encourage [its] employees to

provide the Commission with complete ... information?”); Federal Financial Institutions Examination Council,

Assessment of Civil Money Penalties, 63 Fed.Reg. 30226, 30227 (June 3, 1998)(“In determining the amount and the

appropriateness of initiating a civil money penalty assessment proceeding ... the agencies have identified the following

factors as relevant... (4) The failure to cooperate with the agency in effecting early resolution of the problem; (5)

Evidence of concealment of the violation, practice, or breach of fiduciary duty or, alternatively, voluntary disclosure of

the violation, practice or breach of fiduciary duty”).

69 Fed.Reg. 29021 (May 19, 2004); United States Sentencing Commission Guidelines Manual, U.S.S.C. §8C2.5,

Commentary Note 12 (2004 ed.).

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Although apparently crafted at least in part to ease corporate anxiety,69 it seemed to have the

opposite effect. 70 The following August, the American Bar Association voted to recommend that

the Commentary be changed to state that waiver should not be considered a sentencing factor.71

The Commission instead removed from the Commentary the language quoted above that it had

added in 2004.72

McCallum Memorandum

Then on October 21, 2005 came the McCallum Memorandum. It made no revision in the

Thompson Memorandum, but briefly addressed the manner in which the Thompson

Memorandum’s policy on waiver was to be implemented. The various United States Attorneys

were instructed to prepare written guidelines for supervisory approval of requests for corporate

waivers.73 The effort did little to assuage critics. 74

Proposed Rules of Evidence

In January, 2006, the then Chairman of the House Judiciary Committee asked the Judicial

Conference to consider a rule which would protect against inadvertent waiver of the attorneyclient privilege, and which would permit protective court orders to limit the consequences of

disclosure of privileged material during discovery, and selective waivers in the case of

United States Sentencing Commission, Reason for the Amendment, 69 Fed.Reg. 29024 (May 19, 2004).

Brown, Reconsidering the Corporate Attorney-Client Privilege: A Response to the Compelled-Voluntary Waiver

Paradox, 34 HOFSTRA LAW REVIEW 897, 937 (2006) (“Whatever faint distinctions existed between the two Memos, the

ultimate result appears to be the same, at least from the perspective of the corporate bar, namely, routine demands by

DOJ for waiver, which corporations feel compelled to provide... The amendment to the U.S. Sentencing Guidelines,

suggesting that waiver could be a prerequisite to the reduction of a corporation’s culpability score under certain

circumstances, added further credence to this perception”); McLucas, Shapiro & Song, The Decline of the AttorneyClient Privilege in the Corporate Setting, 96 JOURNAL OF CRIMINAL LAW AND CRIMINOLOGY 621, 634 (2006)(“The U.S.

Sentencing Commission has validated the DOJ view of waiver of the attorney-client privilege by recent amendments to

the Organizational Sentencing Guidelines. In particular, recently amended Commentary to §8C2.5 ... [in which] the

exception is likely to swallow the rule; prosecutors will make routine requests for waivers and organizations will be

forced to routinely grant them”).

American Bar Association Task Force on Attorney-Client Privilege, Report to the House of Delegates 4 n.4 (2006)

71 Fed.Reg. 28073 (May 15, 2006)(“The Commission added this sentence to address some concerns regarding the

relationship between waivers and §8C2.5(g), and at the time stated that ‘[t]he Commission expects that such waivers

will be required on a limited basis.’ Subsequently, the Commission received public comment and heard testimony at

public hearings ... that the sentence at issue could be misinterpreted to encourage waivers”).

“To ensure that federal prosecutors exercise appropriate prosecutorial discretion under the principles of the

Thompson Memorandum, some United States Attorneys have established review processes for waiver requests that

require federal prosecutors to obtain approval from the United States Attorney or other supervisor before seeking a

waiver of the attorney-client privilege or work product protection. Consistent with this best practice, you are directed to

establish a written waiver review process of your district or component. The United States Attorneys’ Manual will be

amended to reflect this policy. Such waiver review processes may vary from district to district (or component to

component), so that each United States Attorney or component head retains the prosecutorial discretion necessary,

consistent with their circumstances, to seek timely, complete, and accurate information from business organizations,”

McCallum Memorandum.

McLucas, Shapiro & Song, The Decline of the Attorney-Client Privilege in the Corporate Setting, 96 JOURNAL OF

CRIMINAL LAW AND CRIMINOLOGY 621, 633 (2006)(“The McCallum Memo ensures that each U.S. Attorney across the

country will be ready to strike with a demand for a privilege waiver. Significantly, it does not require consistency or

predictability across offices in making these demands—an issue that is particularly troublesome for corporations doing

business in a global marketplace”).

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governmental investigations.75 On May 15, 2006, the Federal Advisory Committee on Evidence

opened for comment a proposed evidentiary rule amendment crafted, among other things, to

resolve the split in the circuits and to afford corporations some relief in the form of selective

waivers.76 The proposed new Federal Rule of Evidence, proposed Rule 502, would have provided

that disclosure of protected attorney-client or work product information to governmental

investigators or regulators would not constitute a waiver of those protections with respect to third

parties. 77

The selective waiver feature of the rule, however, proved to be highly controversial and was

dropped from the proposed rule the Judicial Conference recommended to the Congress.78

Congress ultimately accepted the recommendation and enacted a rule with only inadvertent

waiver and protective order components.79

Constitutional Concerns

In ther summer of 2006, a court in the Southern District of New York held that implementation of

the Thompson Memorandum’s policy with regard to a corporation’s reimbursement of the

attorneys’ fees of its employees and pressure on them to make incriminating statements violated

the Fifth Amendment substantive due process rights of the employees, their Fifth Amendment

privilege against self-incrimination, as well as their Sixth Amendment right to the assistance of

counsel.80

The case began with the criminal tax investigation of an accounting firm and its employees. After

issuing subject letters to more than twenty of the firm’s officers and employees, prosecutors met

with the firm’s attorneys. 81 At the meeting, the firm indicated that it intended to “clean house;”

that it had already taken some personnel actions; that it meant to cooperate fully with the

government’s investigation; and that its objective was to avoid indictment of the firm and the fate

of Arthur Andersen by acting so as to protect the firm and not the employees and officers

Letter from Chairman F. James Sensenbrenner, Jr. to Director Leonidas Ralph Mecham, Administrative Office of the

United States Courts, dated January 23, 2006, available on October 11, 2008 at http://www.uscourts.gov/rules/2006-0123-Sensenbrenner.pdf.

Memorandum from the Honorable Jerry E. Smith, Chair of the Advisory Committee on Evidence Rules to the

Honorable David F. Levi, Chair of the Standing Committee on Rules of Practice and Procedure, relating to a Report of

the Advisory Committee on Evidence Rules and dated May 15, 2006, available on October 11, 2008 at

http://www.uscorts.gov/rules/Report/ev05_2006.pdf.

“In a federal or state proceeding, a disclosure of a communication or information covered by the attorney-client

privilege or work product protection—when made to a federal public office or agency in the exercise of its regulatory,

investigative, or enforcement authority—does not operate as a waiver of the privilege or protection in favor of nongovernmental persons or entities. The effect of disclosure to a state or local government agency, with respect to nongovernmental persons or entities is governed by applicable state law. Nothing in this rule limits or expands the

authority of a government agency to disclose communications or information to other government agencies or as

otherwise authorized or required by law,” proposed F.R.Evid. 502(c).

Letters from Judge Lee H. Rosenthal, Chair of the Comm. On Rules and Procedure of the Judicial Conference of the

United States to Senators Patrick J. Leahy and Arlen Specter as well as Representatives John Conyers, Jr., and Lamar

Smith, each dated January 26, 2007, at 6, available on October 11, 2008 at http://www.uscourts.gov/rules/

Hill_Letter_re_Ev_502.pdf.

F.R.Evid. 502, P.L. 110-322, 122 Stat. 3537 (2008). See also, S.Rept. 110-264 (2008).

United States v. Stein, 435 F.Supp.2d 330, 356-72 (S.D.N.Y. 2006); United States v. Stein, 440 F.Supp.2d 315, 33738 (S.D.N.Y. 2006).

United States v. Stein, 435 F.Supp.2d at 341.

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targeted.82 The firm indicated that it had been its practice to cover the litigation costs of its

employees, but that it would not pay the fees of employees who refused to cooperate with the

government’s investigation or who invoked their Fifth Amendment privilege. 83 Prosecutors

referred to the Thompson Memorandum and the Sentencing Guidelines and indicated they would

take into account any instances where the firm was legally obligated to pay attorneys’ fees.84 They

also indicated, however, that misconduct should not be rewarded and that prosecutors would

examine “under a microscope” the payment of any fees that were not legally required.85

In consultation with prosecutors, the firm sent the subjects of the investigation form letters

informing them that attorneys’ fees would be capped at $400,000 and that fees would be cut off

for any employee charged with criminal wrongdoing. 86 Thereafter, prosecutors advised the firm’s

attorney when one of the firm’s employees proved uncooperative; the firm then advised the

employees that they would be fired and their attorneys’ fees cut off if they did not cooperate; and

did so in cases of those employees who remained recalcitrant.87 The firm then entered into a

deferred prosecution agreement with prosecutors for the eventual dismissal of charges under

which it agreed to waive indictment; pay a $456 million fine; accept restrictions on its practice;

waive all privileges including but not limited to attorney-client and attorney work product; and

provide the government with extensive cooperation in its investigation and prosecution of the

firm’s former officers and employees. 88

The by-then indicted former officers and employees moved to have their indictments dismissed

on constitutional grounds.89 The court agreed that constitutional violations had occurred, but

declined at least temporarily to dismiss the indictments under the understanding that the

government had agreed that it would accept, without prejudice to the firm in its deferred

prosecution agreement or otherwise, any fee arrangement that the firm should come to with its

former officers and employees. 90 It subsequently dismissed the indictment against 13 of the

defendants, but declined to do so with respect to three others who had left the firm sometime

previously and therefore had not been the victims of the misconduct the court perceived. 91

Substantive Due Process

With regard to the constitutional provisions implicated in the Stein decision, the Fifth Amendment

guarantees that “No person shall ... be deprived of life, liberty, or property, without due process of

Id. See also, United States v. Stein, 440 F.Supp.2d 315, 337 (S.D.N.Y. 2006)(“Many companies faced with

allegations of wrongdoing are under intense pressure to avoid indictment, as an indictment—especially of a financial

services firm—threatens to destroy the business regardless of whether the firm ultimately is convicted or acquitted.

That is precisely what happened to Arthur Andersen & Co., one of the world’s largest accounting firms, which

collapsed almost immediately after it was indicted—and the Supreme Court’s eventual reversal of its conviction did not

undo the damage. So any entity facing such catastrophic consequences must do whatever it can to avoid indictment”).

Id. at 342.

Id. at 342-43.

Id. at 344.

Id. at 345-46.

Id. at 347.

Id. at 349.

Id. at 350.

Id. at 382.

United States v. Stein, 495 F.Supp. 390, 425-28 (S.D.N.Y. 2007).

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law,” nor “be compelled in any criminal case to be a witness against himself,” U.S.Const. Amend.

V. The Sixth Amendment promises that “[i]n all criminal prosecutions, the accused shall enjoy the

right ... to have the Assistance of Counsel for his defence,” U.S.Const. Amend. VI.

The Fifth Amendment due process clause and its twin in the Fourteenth Amendment contain both

procedural and substantive components. 92 The courts have said that the substantive due process

component of the due process clauses provides protection against the denial of any fundamental

right to life, liberty, or property by “oppressive,” “egregious or arbitrary” governmental action. 93

Given its sweeping potential breadth, the courts have been reluctant to recognize new claims to its

safeguards.94 They have noted that the component affords no protection against private

deprivations,95 imposes no affirmative duties upon government entities, 96 and protects only

legally recognized entitlements not expectations or anticipated benefits.97 Moreover, when “a

particular Amendment provides an explicit textual source of constitutional protection against a

particular sort of government behavior, that Amendment, not the more generalized notion of

substantive due process, must be the guide for analyzing these claims.”98

When substantive due process is found to include a particular fundamental right, infringement by

government action may only survive if it is narrowly tailored to serve a compelling governmental

interest.99 Faced with the question of whether a particular type of government action is

oppressive, egregious or arbitrary for substantive due process purposes, courts have often referred

to the Rochin standard: government action cannot be said to violate substantive due process

unless it first shocks the conscience of the court.100

Reno v. Flores, 507 U.S. 292, 301 (1993)(“Respondents’ ‘substantive due process’ claim relies upon our line of cases

which interprets the Fifth and Fourteenth Amendments’ guarantee of ‘due process of law’ to include a substantive

component, which forbids the government to infringe certain fundamental liberty interests at all, no matter what

process is provided, unless the infringement is narrowly tailored to serve a compelling state interest’); see also,

Washington v. Glucksberg, 521 U.S. 702, 719 (1997); Collins v. Harker Heights, 503 U.S. 115, 1992 (1992).

Cuyahoga Falls v. Buckeye Community Hope Foundation, 538 U.S. 188, 198 (2003); Sacramento v. Lewis, 523 U.S.

833, 846 (1998); Collins v. Harker Heights, 503 U.S. 115, 126 (1992); DeShaney v. Winnebago County Dept. of Social

Services, 489 U.S. 189, 196 (1989).

Washington v. Glucksberg, 521 U.S. 702, 720 (1997) (“we have always been reluctant to expand the concept of

substantive due process because guideposts for responsible decisionmaking in this unchartered area are scarce and

open-ended. By extending constitutional protection to an asserted right or liberty interest, we, to a greatest extent, place

the matter outside the area of public debate and legislative action. We must therefore exercise the utmost care whenever

we are asked to break new ground in this field, lest the liberty protected by the Due Process Clause be subtly

transformed into the policy preferences of the Members of this Court”); see also, Collins v. Harker Heights, 503 U.S.

115, 125 (1992).

Castle Rock v. Gonzales, 545 U.S. 748, 755 (2005); DeShaney v. Winnebago Country Dept. of Social Services, 489

U.S. 189, 195 (1989).

Collins v. Harker Heights, 503 U.S. 115, 126 (1992).

Castle Rock v. Gonzales, 545 U.S. at 756; Board of Regents v. Roth, 408 U.S. 564, 577 (1972).

Sacramento v. Lewis, 523 U.S. 833, 842 (1998); see also, Albright v. Oliver, 510 U.S. 266, 273 (1994).

Reno v. Flores, 507 U.S. at 302; Collins v. Harker Heights, 503 U.S. at 125.

100

Chavez v. Martinez, 538 F.3d 760, 774 (2003)(“Convictions based on evidence obtained by methods that are so

brutal and so offensive to human dignity that they shock the conscience violate the Due Process Clause. Rochin v.

California, 342 U.S. 165, 172, 174 (1952)”); Sacramento v. Lewis, 523 U.S. 833, 847 n.8 (1998); Collins v. Harker

Heights, 503 U.S. 115, 128 (1992); Ellis v. Ogden City, 589 F.3d 1099, 1101 (10th Cir. 2009); Chambers v. School

District of Philadelphia, 587 F.3d 176, 190 (3d Cir. 2009); Okin v. Village of Cornwall-on-Hudson Police Department,

577 F.3d 415, 431 (2d Cir. 2009); Maldonado v. Fontanes, 568 F.3d 263, 272 (1st Cir. 2009); Corales v. Bennett, 567

F.3d 554, 568 (9th Cir. 2009); Wolf v. Fauquier County Board of Supervisors, 555 F.3d 311, 323 (4th Cir. 2009); United

States v. Rutherford, 555 F.3d 190, 195 (6th Cir. 2009); Alvear-Velez v. Mukasey, 540 F.3d 672, 682 n.6 (7th Cir. 2008);

(continued...)

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The Stein court concluded that a criminal defendant has a substantive due process right “to obtain

and use in order to prepare a defense resources lawfully available to him or her, free of knowing

or reckless government interference.”101 It also found that the Thompson Memorandum and the

pressure the prosecutors exerted upon the accounting firm to cut off the payment of attorneys’

fees for the firm’s former employees impinged upon the right.102 While the court conceded that

the government had a compelling interest in investigating and prosecuting crime and in

preventing obstruction of those efforts, it felt the means chosen to serve its interests were

insufficiently tailored to satisfy strict scrutiny:

The first difficulty is that the Thompson Memorandum does not say that payment of legal

fees may cut in favor of indictment only if it is used as a means to obstruct an investigation.

Indeed, the text strongly suggests that advancement of defense[] costs weighs against an

organization independent of whether there is any circling of the wagons... If the government

means to take the payment of legal fees into account in making charging decisions only

where the payments are part of an obstruction scheme—and thereby narrowly tailor its

means to its ends—it would be easy enough to say so. But that is not what the Thompson

Memorandum says.

The concerns do not end here. The argument that payment of legal fees to employees and

former employees is relevant to gauging the extent of a company’s cooperation also is

problematic. . . [I]t simply cannot be said that payment of legal fees for the benefit of

employees and former employees necessarily or even usually is indicative of an

unwillingness to cooperate fully. This is especially unlikely after employees have been

indicted and fired, as is the situation here. Id. at 363-64 (emphasis in the original).

The Stein district court initially deferred dismissing the indictments in the hopes that an

alternative remedy would develop.103 When it took up the case again, it supplemented its

earlier due process analysis with an assessment of whether the circumstances met the

“shock” standard for substantive due process.104 It concluded that the “government’s actions

with respect to legal fees were at least deliberately indifferent to the rights of the defendants

and others. In all the circumstances, this behavior shocks the conscience in the constitutional

sense whether prosecutors were merely deliberately indifferent to the KPMG Defendants’

rights or acted more culpably.”105

(...continued)

Marco Outdoor Advertising, Inc. v. Regional Transit Authority, 489 F.3d 669, 672 n3 (5th Cir. 20078); Estate of

Phillips v. District of Columbia, 455 F.3d 397, 403 (D.C. Cir. 2006).

101

United States v. Stein, 435 F.Supp.2d at 361-62.

102

Id. at 362 (The court calculated that “even a minimal defense of this case could well cost $500,000 to $1 million, if

not significantly more”).

103

United States v. Stein, 495 F.Supp.2d 390, 394 (S.D.N.Y. 2007).

104

Id. at 412-15.

105

Id. at 415. The circumstances included the fact from the court’s perspective the United States Attorney’s Office had

been “‘economical with the truth’ in its effort to avoid an evidentiary hearing on the defendants’ motion with respect to

the fee issues,” id. at 410. Perhaps more telling, however, was the impact of reduced resources available to defendants

in a case that involved more than 22 million pages of evidentiary material and complex legal issues that had resulting in

twenty-four separate court opinions by the time the indictments were dismissed, id. at 417-18.

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Self-Incrimination

The court resolved the self-incrimination issue in a separate decision following defendants’

suppression motions.106 Here the government was a bit more successful, for, although the court

found a violation in some instances, it declined to do so in others.

As a general rule, statements secured under governmental threat of job termination are

inadmissible in subsequent criminal proceedings.107 During the course of the Stein case

investigation, several employees had initially refused to talk to authorities. Prosecutors then

brought the matter to the attention of the firm’s attorneys and employees were told to cooperate or

payment of their attorneys’ fees would be discontinued and if still employed they would be

fired.108 In some cases, the coercion resulted in involuntary statements; in others, the employees

made voluntary statements for reasons of their own notwithstanding the pressure. 109

To the government’s argument that no Fifth Amendment consequences flowed from the conduct

of the firm, a private non-governmental actor, the court found the firm’s conduct attributable to

the government. 110 Yet in the end, only two of the nine challenged statements were suppressed. 111

On appeal, the Second Circuit found it unnecessary to address either Fifth Amendment issue

because of its treatment of the Assistance of Counsel issue. 112

Assistance of Counsel

The Sixth Amendment assures the criminally accused the right to assistance of counsel “in all

criminal prosecutions.” It is said the right generally attaches once “prosecution has been

commenced, that is, at or after the initiation of adversary judicial criminal proceedings—whether

by way of formal charge, preliminary hearing, indictment, information, or arraignment.”113 Once

attached, the right includes the right to counsel of the defendant’s choosing, subject to several

limitations.114 Among those limitations is the fact that an accused has no right to secure counsel of

106

United States v. Stein, 440 F.Supp.2d 315 (S.D.N.Y. 2006).

Garrity v. New Jersey, 385 U.S. 493, 496-500 (1967); United States v. Moten, 551 F.3d 763, 766 (8th Cir. 2008);

United States v. Waldon, 363 F.3d 1103, 1112 (11th Cir. 2004).

108

United States v. Stein, 440 F.Supp.2d at 330-33.

109

Id.

110

Id. at 337 (“the government, both through the Thompson Memorandum and the actions of the [United States

Attorney’s Office], quite deliberately coerced, and in any case significantly encouraged, [the firm] to pressure its

employees to surrender their Fifth Amendment rights. There is a clear nexus between the government and specific

conduct of which the Moving Defendants complain”).

111

Id. at 338.

107

112

United States v. Stein, 541 F.3d 130, 136, 136 n.2 (2d Cir. 2008)(footnote 2 of the court’s opinion in brackets) (“[In

a separate summary order filed today, we dismiss as moot the government’s appeal from the order of the district court

suppressing [on grounds of self-incrimination] proffer statements made by Defendants-Appellees Smith and Watson.]

In light of this disposition, we do not reach the district court’s Fifth Amendment [due process] ruling”).

113

Texas v. Cobb, 532 U.S. 162, 166 (2001); see also, McNeil v. Wisconsin, 501 U.S. 171, 175 (1991); United States v.

Mills, 412 F.3d 325, 328 (2d Cir. 2005).

114

Wheat v. United States, 486 U.S. 153, 159 (1988)(“The Sixth Amendment right to choose one’s own counsel is

circumscribed in several important respects. Regardless of his persuasive powers, an advocate who is not a member of

the bar may not represent clients (other than himself) in court. Similarly, a defendant may not insist on representation

by an attorney he cannot afford or who for other reasons declines to represent the defendant. Nor may a defendant insist

on the counsel of an attorney who has a previous or ongoing relationship with an opposing party, even when the

(continued...)

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his choice using funds subject to confiscation, or as the Supreme Court stated, “[a] defendant has

no Sixth Amendment right to spend another person’s money for services rendered by an attorney,

even if those funds are the only way that that defendant will be able to retain the attorney of his

choice.”115

The government contended that its conduct could not constitute a violation of the Sixth

Amendment because (1) it had occurred before indictment and thus before the right to counsel

had attached and (2) the employees had no Sixth Amendment right to pay for their counsel of

choice with someone else’s money. Attachment was no obstacle, replied the court, when the

motive or at least the clearly foreseeable result was to impede the employees criminal defense

after they were indicted.116 As for the Supreme Court’s someone else’s money comment, it

referred to defendants using the government’s money, money to which they had neither right nor

expectation. Here, the court said the defendants had every reason to expect that the firm would

have assumed their legal expenses, but for the government’s intervention.117

In the eyes of the district court, the government’s conduct so struck at the heart of the adversarial

nature of the criminal justice system that it commanded redress without reference to proof of

actual prejudice to its victims,118 and warranted the rarely granted dismissal of the indictments.119

The court of appeals agreed.120 It held (1) that “KPMG’s adoption and enforcement of a policy

under which it conditioned, capped and ultimately ceased advancing legal fees to defendants

followed as direct consequence of the government’s overwhelming influence;” (2) that “KPMG’s

conduct therefore amounted to state action;” (3) that “ the government thus unjustifiably

interfered with defendants’ relationship with counsel and their ability to mount a defense in

violation of the Sixth Amendment;” and (4) that “the government did not cure the violation.”121

(...continued)

opposing party is the government”); see also, United States v. Gonzalez-Lopez, 548 U.S. 140, 144 (2006).

115

Caplin & Drysdale v. United States, 491 U.S. 617, 626 (1989); see also, United States v. Monsanto, 491 U.S. 600,

614-615 (1989).

116

United States v. Stein, 435 F.Supp.2d at 366.

117

Id. at 367 (“Thus, both the expectation and any benefits that would have flowed from that expectation—the legal

fees at issue now—were, in every material sense, their property not that of a third party”).

118

Id. at 368-73 (noting the similarity to Gonzalez-Lopez, and observing that the “Thompson Memorandum

discourages and, as a practical matter, often prevents companies from providing employees and former employees with

the financial means to exercise their constitutional rights to defend themselves. This is so even where companies

obstruct nothing and, to the contrary, do everything within their power to make a clean breast of the facts to the

government and to take responsibility for any offenses they may have committed. It undermines the proper functioning

of the adversary process that the constitution adopted as a mode of determining guilt or innocence in criminal cases.

The actions of prosecutors who implement it can make matters even worse, as occurred here”). See also, United States

v. Stein, 495 F.Supp.2d 390, 426-27 (S.D.N.Y. 2007)(“The Department of Justice, in promulgating the aspects of the

Thompson Memorandum here at issue, and the USAO in the respects discussed above and in Stein I, deliberately or

callously prevented many of these defendants from obtaining funds for their defense that they lawfully would have had

absent the government’s interference. They thereby foreclosed these defendants from presenting the defense they

wished to present, and in some cases, even deprived them of counsel of their choice. This is intolerable in a society that

holds itself out to the world as a paragon of justice”).

119

Id. at 427.

120

United States v. Stein, 541 F.3d 130, 136 (2d Cir. 2008).

121

Id.

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Legislative Activity in the 109th Congress

Both the House and Senate Judiciary Committees held hearings on the policy reflected in the

Thompson Memorandum during the 109th Congress.122 They heard contentions from some

witnesses that:

•

The policy represented a departure from past practices, since historically, Justice

Department requests for waivers of corporate attorney-client and work product

protection were unheard of.123

•

“A culture of waiver has evolved in which government agencies believe it is

reasonable and appropriate to them to expect a company under investigation to

broadly waive.”124

•

Although characterized as “voluntary disclosures” or “waivers,” in reality a

company faced with a Justice Department request often has no alternative but to

comply. 125

•

Company officials responsible for regulatory compliance are less likely to seek

the advice of counsel if they believe those communications unprotected. 126

•

“[D]uring an investigation, if employees suspect that anything they say to their

attorneys can be used against them, they won’t say anything.”127

•

Even if a company should prove innocent of any criminal or regulatory

wrongdoing, it may have lost the privilege against third party civil plaintiffs by

virtue of its disclosure to the government. 128

The Justice Department’s perspective was a bit different. Its officials responded that:

•

The Holder and Thompson Memoranda emerged in an environment of corporate

scandal. Congress suggested, and the Department agreed, that enormous

companies and their executives simply because of their wealth, position and

influence should not be considered above the law, but should instead be held

accountable if they engage in criminal conduct.129

122

White Collar Enforcement: Attorney-Client Privilege and Corporate Waivers: Hearing Before the Subcomm. on

Crime, Terrorism, and Homeland Security of the House Comm. on the Judiciary, 109th Cong., 2d Sess. (2006)(House

Hearings); The Thompson Memorandum’s Effect on the Right to Counsel in Corporate Investigations: Hearing Before

the Senate Committee on the Judiciary, 109th Cong., 2d Sess. (2006)(Senate Hearings).

123

House Hearings 13-4 (testimony of former U.S. Attorney General Thornburgh).

124

House Hearings 13 (testimony of former U.S. Attorney General Thornburgh).

125

House Hearings 17 (testimony of U.S. Chamber of Commerce, President and CEO Thomas J. Donohue) (“A

company that refuses to waive its privilege risks being labeled as uncooperative, which all but guarantees that it will

not get a chance to come to a settlement or receive, if it needs to, leniency in sentencing or fines. But it goes far beyond

that, Mr. Chairman. The uncooperative label can severely damage a company’s brand, its shareholder value, [its]

relationship with suppliers and customers, and [its] very ability to survive”); see also, Senate Hearings (statement of

Karen J. Mathis, President of the American Bar Association).

126

Id.

127

Id.

128

Id.

129

Senate Hearing (statement of Deputy Attorney General Paul J. McNulty).

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•

The Memoranda reflected an articulation of the principles that good prosecutors

had long used in the context of a potential corporate prosecution.130

•

The Department believed that waivers need not be, and had not been, routinely

sought. 131

•

The Memoranda balance “the legitimate interests furthered by the privilege, and

the societal benefits of rigorous enforcement of the laws supporting ethical

standards of conduct.”132

•

Waiver was one, but only one, factor considered in the exercise of prosecutorial

discretion.133

•

The Department would support establishment of a selective waiver provision that

would allow companies to continue to claim the attorney-client and work product

protection against third parties notwithstanding disclosure to the government. 134

In the final days of the 109th Congress, Senator Specter introduced S. 30 which, among other

things, would have prohibited federal authorities from requesting a waiver of organizational

attorney-client or work product protection or predicating the adverse exercise of prosecutorial

discretion on the absence of such a waiver or the payment of attorneys’ fees for their employees

or officers.135

McNulty Memorandum

The McNulty Memorandum, announced December 12, 2006, superseded the Thompson and

McCallum Memoranda.136 While it incorporated a great deal of the substance of its predecessors,

the McNulty Memorandum rewrote the principles and commentary that addressed corporate

attorney-client and work product protection waivers as well as those covering the payment of

employee litigation costs.

It dropped the specific reference to the waivers from the general statement of factors to be

weighed when considering whether to charge a corporation. 137

130

Id.

Id. at 7.

132

House Hearing 6 (testimony of Assoc. Attorney General Robert D. McCallum, Jr.)

133

Id.

134

Senate Hearing (statement of Deputy Attorney General Paul J. McNulty).

135

152 Cong. Rec. S11439, S11740 (daily eds. December 7 and 8, 2006).

136

Department of Justice, U.S. Deputy Attorney General Paul J. McNulty Revises Charging Guidelines for Prosecuting

Corporate Fraud, Press Release December 12, 2006, available at http://www.justice.gov/opa/pr/2006/December/

06_odag_828.html.

137

“... In conducting an investigation, determining whether to bring charges and negotiating plea agreements,

prosecutors should consider the following factors in reaching a decision as to the proper treatment of a corporate target

... the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation

of its agents, including, if necessary, the waiver of corporate attorney-client and work product protection (see section

VI, infra),” Thompson Memorandum, II.A.4 (language omitted in McNulty Memorandum in italics; see McNulty

Memorandum, III.A.4).

131

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Earlier Memoranda stated that waiver was not an “absolute” requirement for the favorable

exercise of prosecutorial discretion,138 suggesting to some that it was a requirement under most

circumstances. The McNulty Memorandum suggested that prosecutors’ waiver requests were to

be considered the exception rather than the rule:

Prosecutors may only request waiver of attorney-client or work product protections when

there is a legitimate need for the privileged information to fulfill their law enforcement

obligations. A legitimate need for the information is not established by concluding it is

merely desirable or convenient to obtain privileged information. The test requires a careful

balancing of important policy considerations underlying the attorney-client privilege and

work product doctrine and the law enforcement needs of the government’s investigation.

Whether there is a legitimate need depends upon:

(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 a corporation of a waiver. McNulty Memorandum,

VII. B. 2.

Moreover, the McNulty Memorandum divided attorney-client and work product material into two

categories. Category I consisted of factual information. Category II material was described in

much the same manner as opinion work product material (It “might include the protection of

attorney notes, memoranda or reports containing counsel’s mental impressions, conclusions legal

determinations reached as a result of an internal investigation, or legal advice given to

corporation”), McNulty Memorandum, VII. B.2. The Memorandum cautioned prosecutors that

only in rare circumstances should they seek the waiver of Category II material, id. A request for

Category I had to be approved by the United States Attorney in consultation with the head of the

Department’s Criminal Division; a request for Category II information required prior approval of

the Deputy Attorney General, id. A corporation’s refusal to waive could not be considered in the

exercise of prosecutorial discretion, id.

It also added an explicit provision concerning attorneys’ fees, declaring that, “Prosecutors

generally should not take into account whether a corporation is advancing attorneys’ fees to

employees or agents under investigation and indictment,” id. at VII.B.3. On the other hand, it

noted that, “In extremely rare cases, the advancement of attorneys’ fees may be taken into account

when the totality of the circumstances show that it was intended to impede a criminal

investigation ... approval must be obtained from the Deputy Attorney General before prosecutors

may consider this factor in their charging decisions,” id. at VII.B.3. n.3.

138

Holder and Thompson Memoranda, VI.B.

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Legislative Activity in the 110th Congress

The House and Senate Judiciary Committees held hearings during the 110th Congress which

focused on the McNulty Memorandum and upon related legislative proposals.139 Senator Specter

introduced the Attorney-Client Privilege Protection Act of 2007 (S. 186) early in the 110th

Congress,140 which reappeared in revised form later in the Congress (S. 3217). S. 186 as

introduced was identical to S. 30 (109th Cong.) that the Senator introduced at the end of the earlier

Congress.141 It was also identical to H.R. 3013 offered in the House by Representative Scott142

and virtually identical to the version of that bill passed by the House.143 In their final versions,

they were much like their successors in the 111th Congress.

The testimony of some of the hearing witnesses and the views of some commentators applauded

the changes in the McNulty Memorandum and questioned the justification for the legislative

proposals on several grounds, e.g.:

•

the McNulty Memorandum changes the tone of the policy, abandoning the

aggressive implications of the Thompson Memorandum in favor of statements

that confirm the Department’s recognition and respect for the importance of the

attorney-client privilege;144

•

the Memorandum establishes a strict procedure for waiver requests and generally

bars prosecutors from holding against a company its payment the legal expenses

of an employee;145

•

the Memorandum strikes the proper balance between the public’s interest in

vigorous investigation and prosecute white collar crime and fairness to

corporations and their officers and employees;146

•

experience since the issuance of the McNulty Memorandum refute the suggestion

of widespread prosecutorial abuse; “legislative action is simply not needed;”147

•

although the bills have no explicit enforcement mechanism and the courts are

generally reluctant to impose sanctions in the absence of statutory authority, the

139

The McNulty Memorandum’s Effect on the Right to Counsel in Corporate Investigations: Hearing Before the

Subcomm. on Crime, Terrorism, and Homeland Security of the House Comm. on the Judiciary, 110th Cong., 1st Sess.

(2007)(House Hearings II); Examining Approaches to Corporate Fraud Prosecutions and the Attorney-Client Privilege

Under the McNulty Memorandum: Hearing Before the Senate Comm. on the Judiciary, 110th Cong., 1st Sess.

(2007)(Senate Hearings II).

140

153 Cong. Rec. S181-183 (daily ed. January 4, 2007)(text at S183).

141

154 Cong. Rec. S6294-295 (daily ed. June 26, 2008).

142

The House Judiciary Committee reported H.R. 3013 without amendment, H.Rept. 110-445 (2007)(the text of the

substance of the bill, i.e., proposed 18 U.S.C. 3014, begins on page 8 of the report).

143

153 Cong. Rec. H13562-564 (daily ed. November 13, 2007)(text at H13563).

144

Testimony of Deputy Assistant Attorney General Barry M. Sabin, House Hearings II at 14.

145

Prepared Statement of Deputy Assistant Attorney General Barry M. Sabin, House Hearings II at 19-22.

146

Testimony of Professor Michael Seigel, Senate Hearings II at 1. Since the relevant Senate hearings from the 110th

Congress are not yet publicly available, the citations to Senate hearing testimony here and elsewhere refer to the pages

in the witness’s prepared statements available on November 16, 2007 at http://judiciary.senate.gov.

147

Testimony of United States Attorney Karin Immergut, Senate Hearings II at 6.

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bills’ proposals are likely to bring forth a “cottage industry of prosecutorial abuse

claims” that may deter the prosecution of worthy cases;148

•

even if the Memorandum fosters an environment in which employees must waive

their Fifth Amendment privilege or be fired, it results in no more than a situation

in which the guilty suffer;149

•

the legislative proposals will make prosecution of white collar crime more

difficult because they reduce the incentive for corporate cooperation and thereby

encourage “stonewalling.”150

Others found the McNulty Memorandum troubling and applauded the legislative proposals for

several reasons of their own, e.g.:

•

the McNulty Memorandum will continue to result in routine compelled waiver of

the attorney-client privilege and the work product protection;151

•

the policy improvements contained in the McNulty Memorandum are not binding

and lack an enforcement mechanism;152

•

the Memorandum continues to allow prosecutors to encourage companies to fire

employees who fail to waive their Fifth Amendment rights;153

•

the Memorandum affords inadequate, partial attorney-client and attorney work

product protection by assigning less stringent approval levels for waivers

involving “factual” information which reveal client statements and attorney

strategy;154

•

the Memorandum addresses only Justice Department investigation and

prosecution practices, whereas the legislative proposals reach the practices of

other agencies as well;155

•

the legislative proposals would not unduly impinge upon the prerogatives of

federal prosecutors; to a limited extent, they bar interference with the attorneyclient privilege, a mainstay of the Anglo-American system of justice since

148

Testimony of Professor Daniel Richman, Senate Hearings II at 2; see also, Testimony of United States Attorney

Karin Immergut, Senate Hearings II at 7.

149

Testimony of Professor Michael Seigel, Senate Hearings II at 5-6 (“The bulk of that leverage, of course, would

come from the threat of the ultimate sanction: termination. Only an employee truly mired in criminality would suffer

this consequence rather than cooperate”).

150

Testimony of United States Attorney Karin Immergut, Senate Hearings II at 8.

151

Testimony of American Bar Association President Karen J. Mathis, House Hearings II at 45; testimony of former

Attorney General Dick Thornburgh, Senate Hearings II at 1-2; 153 Cong. Rec. H.13564 (daily ed. November 13,

2007)(American Bar Association letter in support of H.R. 3013).

152

Testimony of William M. Sullivan, Jr., Esq., House Hearings II at 33-4; see also, Restricting Prosecutors’ Powers:

Increasing Oversight to Reinstate Corporate Interests, 92 IOWA LAW REVIEW 1523, 1548 (2007).

153

Testimony of Andrew Weissmann, Esq., House Hearings II at 24; see also, Griffin, Compelled Cooperation and the

New Corporate Criminal Procedure, 82 NEW YORK UNIVERSITY LAW REVIEW 311, 378 (2007)(“Even setting aside

whether the end of fighting corporate crime can be achieved via the Thompson and McNulty Memoranda, the means

here violate important Fifth Amendment protections”).

154

Testimony of Andrew Weissmann, Esq., House Hearings II at 24-5.

155

Statement of Richard T. White, Chairman of the Board of Directors of the Association of Corporate Counsel, House

Hearings II at 89.

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Elizabethan times and one whose presence has not heretofore been considered an

unwarranted impediment to prosecution;156

•

the proposals would “uphold the finest traditions of the DoJ by allowing it to

strike harsh blows but fair ones in combating corporate crime.”157

Senator Specter addressed some of these observations in S. 3217. S. 3217 expressly excluded

from its protections certain terrorists organizations, illicit drug cartels, and crime-for-profit

entities. 158 Where the earlier bar applied to federal criminal and civil matters and investigations

alone, S. 3217 covered administrative adjudications and proceedings as well.159 Where the earlier

bills condemned governmental demands that an organization abandon its privileges, S. 3217 also

removed any claim of those privileges from the permissible array of prosecutorial

considerations.160 Where the earlier bills permitted authorities to request information that they

might reasonably consider beyond the scope of the privileges, S. 3217 also permitted them to

seek information otherwise within the reach of a federal grand jury subpoena, privilege

considerations notwithstanding, or to seek information whose privilege status was unknown to

them. 161

S. 3217 would have carried forward, with some modification, the subsections added to the House

bill just before its passage there. The exception it afforded to instances, in which a statute “that

may authorize” authorities to compel disclosure of privileged material, was revised to cover

statutes “that authorize” compulsory access.162

Following House passage of H.R. 3013, then Deputy Attorney General Mark Filip issued a

superseding memorandum accompanied by a revised chapter of the U.S. Attorneys Manual. The

110th Congress adjourned without further action of the proposals.

156

Testimony of former Attorney General Dick Thornburgh, Senate Hearings II at 2.

Testimony of Andrew Weissmann, Esq., Senate Hearings II at 4.

158

Proposed 18 U.S.C. 3014(a)(3)(“The term ‘organization’ does not include—(A) a continuing criminal enterprise, as

defined in section 408 of the Controlled Substances Act (21 U.S.C. 848); (B) any group of individuals whose primary

purpose is to obtain money through illegal acts; or ( C ) any terrorist organization, as defined in section 2339B”).

159

Proposed 18 U.S.C. 3014(b).

160

Proposed 18 U.S.C. 3014(b)(2)(“In any Federal investigation or criminal or civil enforcement matter, including any

form of administrative proceeding or adjudication, an agent or attorney of the United States shall not consider any

conduct described in subparagraph (B)[claiming attorney-client or work product privileges, paying attorneys’ fees for

employees, entering into joint defense agreements with employees, and refusing to fire employees who claim their

constitutional or other rights] in—(i) making a civil or criminal charging or enforcement decision relating to an

organization, or a current or former employee or agent of such organization; (ii) determining whether an organization,

or a current or former employee or agent of such organization, is cooperating with the Government”).

161

Proposed 18 U.S.C. 3014(c)(“Nothing in this section shall be construed to prohibit an agent or attorney fo the

United States from requesting or seeking any communication or material that—(1) an agent or attorney of ordinary

sense and understanding would not know is subject to a claim of attorney-client privilege or attorney work product; (2)

an agent or attorney of ordinary sense and understanding would reasonably believe is not entitled to protection under

the attorney-client privilege or attorney work product doctrine; or (3) would not be privileged from disclosure if

demanded by a subpoena duces tecum issued by a court of the United States in aid of a grand jury investigation”).

162

Proposed 18 U.S.C. 3014(e).

157

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Filip Memorandum

The Filip Memorandum dates from August 28, 2008.163 Following the pattern of earlier

Memoranda, much of what appears in the U.S. Attorneys Manual is a verbatim recitation of the

McNulty Memorandum. Some things, however, are new. The Filip Memorandum revisions

“concern what measures a business entity must take to qualify for the long-recognized

‘cooperation’ mitigating factor, as well as how payment of attorneys’ fees by a business

organization for its officers or employees, or participation in a joint defense or similar agreement,

will be considered in the prosecutive analysis.”164

Thus, the Memorandum declares that “a corporation remains free to convey non-factual or ‘core’

attorney-client communications or work product—if and only if the corporation voluntarily

chooses to do so—prosecutor should not ask for waivers and are directed not to do so.”165

Nevertheless, “cooperation is a potential mitigating factor, by which a corporation . . . can gain

credit in a case that otherwise is appropriate for indictment and prosecution.”166 The entity’s

receipt of credit for its cooperation turns on its timely disclosure of information relating to the

government’s investigation, regardless of whether the entity acquired or maintains information

under circumstances that entitle it to claim attorney-client or attorney work product protection. 167

Nor does a corporation’s payment of its employees’ attorneys’ fees or its entry into a joint defense

agreement preclude credit for cooperation. 168

On the other hand, “[i]f the payment of attorney fees were used in a manner that would otherwise

constitute criminal obstruction of justice—for example, if fees were advanced on the condition

that an employee adhere to a version of the facts that the corporation and the employee knew to

be false—these Principles would not (and could not) render inapplicable such criminal

prohibitions.”169

This represents a substantial modification of the previous standard in the McNulty Memorandum

which explicitly permitted prosecutors to weigh negatively any number of specifically identified

impediments—some well short of a criminal obstruction of justice.170

163

“Principles of Federal Prosecution of Business Organizations,” Memorandum from Mark Filip, Deputy Attorney

General to Heads of Department Components [and] United States Attorneys, dated August 28, 2008 (Filip

Memorandum)(with U.S. Attorneys Manual, Title 9, Chapter 9-28.000 attached), available at

http://www.justice.gov/dag/readingroom/dag-memo-08282008.pdf.

164

Id.

165

U.S. Attorneys Manual §9-28.710.

166

U.S. Attorneys Manual §9-28.700.

167

U.S. Attorneys Manual §9-28.720 (“so long as the corporation timely discloses relevant facts about the putative

misconduct, the corporation may receive due credit for such cooperation, regardless of whether it chooses to waive

privilege or work product protection in the process”).

168

U.S. Attorneys Manual §9-28.730.

169

U.S. Attorneys Manual, §9-28.730.

170

The superseded provision stated, “Another factor to be weighed by the prosecutor is whether the corporation, while

purporting to cooperate, has engaged in conduct intended to impede the investigation (whether or not rising to the level

of criminal obstruction). Examples of such conduct include: overly broad assertions of corporate representation of

employees or former employees; overly broad or frivolous assertions of privilege to withhold the disclosure of relevant,

non-privileged documents; inappropriate directions to employees or their counsel, such as directions not to cooperate

openly and fully with the investigation including, for example, the direction to decline to be interviewed; making

presentations or submissions that contain misleading assertions or omissions; incomplete or delayed production of

(continued...)

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Prosecutorial Discretion in the Context of Corporate Attorney-Client Relations

Legislative Activity in the 111th Congress

Early in the 111th Congress, Senator Specter introduced the Attorney-Client Privilege Protection

Act of 2009 (S. 445), for himself and Senators Landrieu, Carper, Kerry, McCaskill, and Cochran.

It is essentially the same as the later Specter proposal in the 110th Congress (S. 3217). Towards

the end of the first session, Representative Scott (Va.) introduced a similarly styled AttorneyClient Privilege Protection Act of 2009 (H.R. 4326), for himself and Representatives Conyers,

Smith (Tex.), Nadler, Delahunt, Coble, and Lungren. It is a replica of the bill which the House

passed in the 110th Congress (H.R. 3013).

The two 111th Congress proposals are much the same, although with occasional differences. They

espouse a common purpose: “to place on each agency clear and practical limits designed to serve

the attorney-client privilege and work product protections available to an organization and

preserve the constitutional rights and other legal protections available to employees of such an

organization.”171

They would define “attorney-client privilege” as currently understood under the federal law, that

is as “the attorney-client privilege as governed by the principles of the common law, as they may

be interpreted by the courts of the United States in the light of reason and experience, and the

principles of article V of the Federal Rules of Evidence.”172 They would adopt an equally

contemporaneous definition of “attorney work product,” i.e., “materials prepared by, or at the

direction of an attorney in anticipation of litigation, particularly any such materials that contain a

mental impression, conclusion, opinion, or legal theory of that attorney.”173

The Specter bill (S. 445) alone would insert a definition of “organization.” The definition would

foretell the scope of the bill, since the bill’s commands speak to how federal prosecutors and

investigators may deal with organizations. The bill’s definition has two distinct components—

what is an organization and what is not for purposes of the bill. It describes organizations as

persons other than human beings and expressly includes state, local, and municipal governmental

entities. 174 The absence of similar definition in the Scott bill (H.R. 4326) leaves open the question

whether federal, state, local, and municipal entities fall within the scope of its provisions. The

omission of federal and tribal governmental entities from the Specter bill’s definition suggests

that they would not be considered organizations for purposes of the bill.

The Specter bill (S. 445) would exclude from the definition of organization, drug cartels

(continuing criminal enterprises (21 U.S.C. 848(c))); designated foreign terrorist organizations

(18 U.S.C. 2339B(g)(6)); and entities charged under the RICO provisions.175 The RICO

(...continued)

records; and failure to promptly disclose illegal conduct known to the corporation,” McNulty Memorandum, VII.B.4.

171

Section 2(b) in both bills.

172

Proposed 18 U.S.C. 3014(a)(1) in both bills.

173

Proposed 18 U.S.C. 3014(a)(2) in both bills.

174

S. 445, proposed 18 U.S.C. 3014(a)(3)(A) (“The term ‘organization’—(A) means an organization as defined in

section 18 of title 18, United States Code, and any State, local, or municipal government entity or instrumentality”). 18

U.S.C. 18 defines organization as “a person other than an individual.” The Dictionary Act, which provides definitions

applicable through out the Code unless the context dictates otherwise, provides that the word “person” includes

“corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as

individuals,” 1 U.S.C. 1.

175

S. 445, proposed 18 U.S.C. 3014(a)(3)(B).

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exemption may raise questions. Common business organizations do not ordinarily include drug

cartels or designated foreign terrorists organizations, but they are infrequently associated with

RICO prosecutions. Federal racketeer influenced and corrupt organization (RICO) provisions

proscribe, among other things, the patterned commission of two or more other federal or state

offenses in order to conduct the affairs of an enterprise whose activities affect interstate or foreign

commerce, 18 U.S.C. 1962(c). Depending upon the circumstances, an organization might either

be an offender or the victimized intestate enterprise, 18 U.S.C. 1961(3), (4). Since the bill uses

the phrase “entity charged,” it might be thought to apply only to offending organizations and only

after they are indicted. Such a reading, however, may be more narrow than its sponsors intend.

In somewhat different terms, the two bills would bar the Justice Department and other federal

investigative, regulatory, or prosecutorial agencies from demanding that an organization:

•

waive its attorney-client privilege or attorney work product protection;

•

decline to pay the legal expenses of an employee;

•

avoid joint defense, information sharing or common interest agreements with its

employees;

•

refrain from disclosing information concerning an investigation or enforcement

action to employees; or

•

terminate or discipline an employee for the employee’s exercise of a legal right

or prerogative with respect to a governmental inquiry.176

They would also preclude using such organizational activity as the basis in whole or in

part for a civil or criminal charge against the organization.177 Only the Specter bill (S.

445) would also prohibit the government from rewarding an organization for waiving its

attorney-client privilege or work product protection. 178 The provision may be a response

to criticism some commentators have leveled against the Filip Memorandum:

The problem is rooted in the fact that indictments are fatal to major corporations. This means

that from the beginning of the process, a corporation is compelled to follow the prosecutor’s

instructions on how to avoid indictment. Under the Filip revisions, like it was under the

Thompson Memorandum, the way to avoid indictment is by cooperating with the

government. Now, the government will not view negatively a corporation’s refusal to give

privileged information. It will, however, still give credit for that privileged information.

Under the Filip revisions the compelling is done differently, almost passively—allowing the

implied threat of indictment to do the work.179

Both bills would allow the government to request information it believes is beyond the scope of

the attorney-client privilege or the attorney work product protection. 180 And they would not

prevent an organization, on its own initiative, from sharing the results of an internal investigation

176

Proposed 18 U.S.C. 3014(b) in both bills.

177

Id.

178

S. 445, proposed 18 U.S.C. 3014(b)(1)(B), (d).

179

Revisions of the Thompson Memorandum and Avoiding the Stein Problems: A Review of the Federal Policy on the

Prosecution of Business Organizations, 42 CONNECTICUT LAW REVIEW 273, 317-18 (2009).

180

Proposed 18 U.S.C. 3014(c) in both bills.

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Prosecutorial Discretion in the Context of Corporate Attorney-Client Relations

with authorities, although the Specter bill (S. 445) would preclude the government from

considering such a waiver positively. 181

Each of the bills declares that its proposals are not intended to apply to situations when the

government is statutorily authorized to demand a waiver.182 It is not entirely clear what subsection

3014(e) intended to preserve when it referred to “any other federal statute that may authorize[s],

in the course of an examination or inspection, an agent or attorney of the United States to require

or compel the production of attorney-client privilege material.” Many federal statutes authorize

the examination or inspection of corporate records and other materials. Few, if any, federal

statutes state in so many words that federal inspectors may examine otherwise privileged

attorney-client or work product material. In fact, if privilege is mentioned at all, the statute is

likely to preserve the privileged material against inspection. 183

Use of the phrase in the Scott bill (H.R. 4326) that “any other federal statute that may authorize”

may indicate that the authors of the subsection were referring to statutes which grant general

authority that on a given occasion “may” extend to compelled access to privileged material. The

absence of the word “may” in the Specter bill (S. 445)may be intended to limit the exception to

instances of explicit statutory authority to demand.

The term “in the course of an examination or inspection” suggests that the exception likely would

not extended to situations where the material was sought through an administrative or grand jury

subpoena or through a civil investigative demand. Finally, reference to “privileged” material

narrows the category further and belies any intent to include material which on its face seems

“privileged” but which because of the “crime or fraud” or some other exception cannot be

classified as such. It is difficult to see what remains.

Finally, both bills would permit federal prosecutors, in determining whether to bring criminal

charges against a corporation, to consider the fact the corporation had provided counsel for an

employee, entered into a joint defense agreement with an employee, or shared information

relating to investigation with an employee—but only when those activities are themselves federal

crimes. 184

Commentators who support the proposals argue that they are necessary (1) to overcome the

“culture of waiver” produced by the Thompson Memorandum; (2) to establish consistent policy

not only for the Department of Justice but for all federal investigative agencies; and (3) to provide

stability and certainty that regularly shifting Justice Department policy statements cannot

provide.185 Others contend that the proposals “would only frustrate the DOJ corporate charging

181

Proposed 18 U.S.C. 3014(d) in both bills.

“This Act does not affect any other federal statute that may authorize[s], in the course of an examination or

inspection, an agent or attorney of the United States to require or compel the production of attorney-client privilege

material or attorney work product,” proposed 18 U.S.C. 3014(e) in both bills; the italicized work “may” appears only in

the Scott bill.

183

E.g., 42 U.S.C. 2996h(d)(“Notwithstanding the provisions of this section or section 2996g of this title, neither the

Corporation nor the Comptroller General shall have access to any reports or records subject to the attorney-client

privilege”); 7 U.S.C. 2143(a)(6)(B) (“No rule, regulation, order, or part of this chapter shall be construed to require a

research facility to disclose ... to the Institutional Animal Committee during its inspection, trade secrets or commercial

or financial information which is privileged or confidential”).

184

Proposed 18 U.S.C. 3014(f) in both bills.

185

Prosecutorial Discretion of the Department of Justice in Corporate Criminal Cases, 74 BROOKLYN LAW REVIEW

231, 270-71 (2008); see also, 155 Cong. Rec. S2331-332 (daily ed. Feb. 13, 2009)(remarks of Sen. Spector).

182

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policy, likely without altering the occurrence of waiver, but at the same time, rendering

prosecutions needlessly complex.”186

As of February 2010, neither House had held hearings on the proposals during the 111th Congress.

Author Contact Information

(name redacted)

Senior Specialist in American Public Law

[redacted]@crs.loc.gov, 7-....

186

The Attorney-Client Privilege Protection Act: the Prospect of Congressional Intervention into the Department of

Justice’s Corporate Charging Policy, 35 FORDHAM URBAN LAW JOURNAL 1075, 1136 (2008).

Congressional Research Service

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