The attorney-client privilege and work-product protections are critical to businesses. These privileges allow businesses to consult freely and confidentially with their attorneys as they respond to litigation and seek to navigate a world filled with increasingly complex regulations.
More and more, these regulations threaten not only civil penalties but criminal charges for alleged violations. However, the attorney-client privilege has been under intense assault due to policy shifts by prosecutors and regulators.
In 2003, in response to Enron and related corporate scandals, the U.S. Department of Justice issued the Thompson Memorandum – tough guidelines that allowed federal prosecutors to demand waiver of the attorney-client privilege and work-product protections to assist them in their investigations.
A wide array of business, legal and political organizations came together to demand revisions to this policy, which many considered coercive and corrosive to the relationship between counsel and corporate officers and employees. Recently, the Department of Justice bowed to mounting criticism and amended its policy.
On Dec. 12, Deputy Attorney General Paul McNulty issued new guidelines intended to address some of the criticism of the Thompson Memorandum (read his speech at www.usdoj.gov/dag/speech/2006/dag_speech_061212.htm). McNulty’s new policy cautions prosecutors not to seek waivers out of convenience, but rather only when there is a “legitimate need” for privileged information. McNulty also said that any waiver request must be made in writing and approved by either a U.S. attorney (if it is for “factual” information) or by the deputy attorney general (if it is for legal advice or for attorney mental impressions).
The revised policy, however, still leaves businesses unsure of the sanctity of their communications with counsel.
First, prosecutors may still request a waiver and may still consider a corporation’s response to waiver requests when deciding whether to charge the corporation criminally. In short, the policy still leaves the door open for prosecutors to exert pressure on businesses to waive their fundamental rights.
Second, the new policy still offers significantly less protection to “factual” information such as witness interviews, memorandums or summaries, etc., as opposed to attorney advice and mental impressions.
The McNulty Memorandum raises the specter that waiver requests for “factual” material may become routine. Protection of these kinds of “factual” communication, however, is essential to promoting the flow of information critical to corporations receiving valid legal advice.
Officers and employees want to know that what they say to counsel will be protected, not typed up and forwarded to federal prosecutors.
Third, the announced “threshold” for waiver requests – a showing of “legitimate need” – may prove illusory. The threshold can be met by, among other things, demonstrating a need for timely and complete disclosure, the likelihood that the requested information will benefit the government’s investigation, or a need to determine the completeness of voluntary disclosure. Such factors are likely to exist in any substantial investigation.
Whether the McNulty Memorandum results in any substantial amelioration of current threats to the attorney-client and work-product protections remains to be seen. Early reaction applauds the Justice Department for acknowledging the need for reform but criticizes the reforms as insufficient to prevent prosecutors from continuing to pressure businesses to waive their rights.
U.S. Sen. Arlen Specter, R-Pa., has submitted a bill that represents a better long-term solution for businesses and lawyers (S. 186).
Originally introduced very late in the last Congress and reintroduced last month, it has bipartisan support.
n It would cover all agents of the federal government, not just attorneys at the Justice and U.S. attorneys’ offices.
n It would flatly prohibit any consideration of waiver by corporations.
n It would extend the protections of the attorney-client privilege and work product protection by also prohibiting the government from requesting that corporations refuse to pay the legal fees of, or share information with, employees and officers, or terminate employees who assert these protections.
The McNulty Memorandum signaled that the concerns of the business and legal community have registered with the Justice Department. However, business and legal organizations, including the U.S. Chamber of Commerce and the Association of Corporate Counsel, have determined that the Specter bill’s unequivocal language and greater scope offer the best chance for meaningful protection.
Howard Merten, a partner at Partridge Snow & Hahn LLP, is a veteran litigator with two decades’ experience representing businesses, financial institutions and individuals in complex civil litigation.
