Message from the Chairs

On August 28, 2008, there were two significant evelopments involving the prosecution of corporations.

Deputy Attorney General Mark R. Filip testified before the Senate Judiciary Committee on July 9, 2008 that the US Department of Justice was in the process of revising its policy for investigating and charging corporations. On August 28, Deputy Attorney General Filip announced the new standards, which are known as “Principles of Federal Prosecution of Business Organizations.” Unlike previous articulations of the Department’s policy (i.e.., the Thompson and McNulty Memorandums), the new principles are incorporated into the U.S. Attorneys’ Manual.

The revisions come after many organizations (including the ABA) have sharply criticized the government for pressuring corporations (under the Justice Department’s predecessor policies) to waive the attorney-client privilege and work product doctrine to gain credit for “cooperation.” The Justice Department undertook these revisions as Congress scrutinized this practice. Indeed, the United States House of Representatives passed legislation in 2007 to protect these bedrock privileges, and a similar bill remains under consideration by the Judiciary Committee of the United States Senate.

Among the significant changes effected by the Department’s new policy is that it is the disclosure of relevant facts – not the waiver of privileges – that is appropriate for consideration in determining a corporation’s cooperation. Under the revised charging principles, federal prosecutors may not request privileged information except in two specific circumstances (invocation of advice of counsel defense or communications in furtherance of crime or fraud). Federal prosecutors also may not consider a corporation’s advancement of attorneys’ fees to its employees or whether the corporation has entered into a joint defense agreement in evaluating "cooperation." Consideration of whether employees are disciplined or terminated is permitted only for the purpose of evaluating the corporation’s remedial measures or its compliance program.

On the same day that the Department of Justice announced its new policy, the Second Circuit disapproved one of the practices now prohibited by the Department’s charging policy: pressuring corporations to withhold payment of its employees’ legal fees.

The Second Circuit’s opinion was the latest in a series of watershed opinions relating to the government’s KPMG tax prosecution. The charging standards in effect when the government indicted 13 KPMG partners and employees were set forth in the (now superseded) 2003 Thompson Memorandum, which provided that the voluntary payment of the legal expenses of wrongdoing employees could weigh in favor of a decision to prosecute a corporation. The Second Circuit affirmed District Judge Lewis Kaplan’s dismissal of charges against 13 KPMG partners and employees because the government unconstitutionally pressured KPMG into cutting off payment of the employees’ attorney fees by using the threat of prosecution.

If there are other topics you would like to see us address, or if you would like to become more involved in the Committee, please contact either one of us.

Thomas Gilson
Laurie Fulton
Co-Chairs, Criminal Litigation Committee