Hot Topics for Trial Lawyers

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TOPIC:

Corporate Crime Prosecutions

Posted 8/19/08  

At a July 9, 2008 oversight hearing of the Department of Justice (DOJ) by the Senate Judiciary Committee, Attorney General Michael Mukasey indicated that the DOJ would be making several important changes to its corporate charging policies contained in the McNulty Memorandum (McNulty Memo). The McNulty Memo, published in November 2006 - and predecessor memos dating back to the Clinton Administration - direct federal prosecutors across the country as to the DOJ’s policies for investigating, charging, and prosecuting corporate crimes. 

Over the past year, Congress has repeatedly threatened legislation to cure the McNulty’s purported failure to protect the attorney-client and work-product privileges in corporate crime prosecutions. More specifically, Congress has been critical of several provisions in the McNulty Memo that allow federal prosecutors to, after seeking approval from Main Justice in Washington D.C., demand waivers of attorney-client privileged communications, as well as non-core (Category I) and core (Category II) work-product, essentially in exchange for “cooperation credit.”

On the same day as the oversight hearing, Deputy Attorney General Mark Filip wrote to Senator Patrick Leahy (D-VE), Chairman of the Judiciary Committee, and Senator Arlen Spector (R-PA), ranking Committee member, to outline several prospective revisions to the McNulty Memo that the DOJ expects to publish in the next few weeks. Filip’s letter summarizes the following revisions:

• Cooperation will be measured by the extent to which a corporation discloses relevant facts and evidence, not its waiver of privileges. The government’s key measure of cooperation will be the same for a corporation as an individual: to what extent has the corporation timely disclosed the relevant facts about the misconduct? That will be the operative questions - not whether the corporation waived the attorney-client privilege or work product protection in making its disclosures.

• Federal prosecutors will not demand the disclosure of “Category II” information as a condition for cooperation credit. To be eligible for cooperation credit, a corporation need not disclose, and the government may not demand, what the McNulty Memo defines as “Category II” - namely, non-factual attorney-work product and core attorney-client privileged communications.

In addition, Filip noted that the revised memorandum will prohibit federal prosecutors from considering whether a targeted corporation has entered into a joint defense agreement, or whether it has sanctioned or terminated culpable employees, in evaluating cooperation by the corporation. Nonetheless, how and whether a corporation disciplines culpable employees may still bear on the quality of its remedial measures, an element that federal prosecutors consider when determining whether to prosecute a business organization.

Senator Spector quickly criticized Filip’s letter, calling the revisions “unsatisfactorily vague.” In addition, Senator Spector pointed out that the proposed revisions, unlike the legislation that Congress was proposing, did not bind other federal enforcement agencies such as the SEC and IRS. 

While the outcome is still unclear, it appears that there will soon be movement at the DOJ and/or through legislation to modify DOJ policies that have a significant impact on lawyers and their corporate clients. Additional information will be provided as it becomes available.

This contribution was made by Gregory S. Saikin.  Mr. Saikin is an associate in the white collar criminal defense and internal investigation practice group of Locke Lord Bissell & Liddell LLP’s Houston office.

Gregory S. Saikin, Locke Lord Bissell & Liddell LLP