News & Developments
SEC Issues Enforcement Manual
On October 6, 2008, the United States Securities and Exchange Commission ("SEC") issued its first "Enforcement Manual," providing insights into the SEC’s enforcement policies and processes. Of particular interest is the section on Privileges (Section 4, pp. 92-108), and specifically, Section 4.3 (p. 98) on Waiver of Privilege. The SEC Enforcement Manual sets forth the policy view that cooperation need not include voluntary waiver of privileged information as long as all relevant information is disclosed. It further states that the staff is directed not to ask a party to waive privileged information, but does not indicate precisely where the authority is to make the determination whether or not to seek a waiver. "The staff must respect legitimate assertions of the attorney-client privilege and attorney work product protection, unless a party voluntarily chooses to waive privilege.
As a matter of public policy, the SEC wants to encourage individuals, corporate officers and employees to consult counsel about potential violations of the securities laws. A key objective in staff’s investigations is to obtain relevant information, and parties are, in fact required to provide relevant information in response to SEC subpoenas. Both entities and individuals, however, may provide significant cooperation in investigations by voluntarily disclosing relevant information. That voluntary disclosure of information need not include a waiver of privilege to be an effective form of cooperation, as long as all relevant facts are disclosed." Id. "The staff should not ask a party to waive the attorney-client or work product privileged and is directed not to do so. All decisions regarding a potential waiver of privilege are to be reviewed with the Assistant supervising the matter and that review may involve more senior members of management as deemed necessary." Id. at p. 99.
Federal Rule of Criminal Procedure 32(h): R.I.P.
Near the end of its last term, the Supreme Court issued a little-noticed opinion on sentencing issues. Irizarry v. United States addresses whether a district judge need follow Federal Rule of Criminal Procedure 32(h) – a rule promulgated before the Court declared in United States v. Booker that the Federal Sentencing Guidelines were advisory.
Justice Revising Principles of Prosecution of Business Organizations
On July 9, 2008, as the U.S. Senate Judiciary Committee was conducting an oversight hearing on the Justice Department, Attorney General Mukasey announced that the Department of Justice is in the process of revising the Department’s Principles of Federal Prosecution of Business Organizations, also known as the "McNulty Memorandum." By letter of the same date, July 9, 2008, Deputy Attorney General Mark Filip wrote to Hon. Patrick Leahy (Chair) and Hon. Arlen Specter (Ranking Minority Member) of the Senate Judiciary Committee announcing certain changes that the Department of Justice intends to make to the Principles governing federal prosecution of corporations. The changes include:
- Cooperation will not require waiver of attorney-client privileged or work product information.
- Advancement of attorneys’ fees to employees will not be taken into account in evaluating cooperation.
- Entering into a joint defense agreement will not be considered in evaluating cooperation.
- Federal Prosecutors will not consider whether the corporation has sanctioned employees in evaluating cooperation.
The Filip letter came after the Department of Justice requested an opportunity to address the Senate Judiciary Committee’s concerns about the McNulty Memorandum and before the Committee marked up the Attorney Client Privilege Protection Act of 2008, of which Senator Specter was the primary sponsor. The Department’s comments were due on July 7th. When Senator Specter asked the Attorney General about this issue at the hearing on July 9th, the Attorney General announced that revisions were being considered. The letter from Deputy Attorney General Filip was sent that day.
The following day, July 10, 2008, Senator Specter sent a letter in response. In this letter, Senator Specter makes clear that his recommendation to Chairman Leahy is that the Committee not delay consideration of the legislation. Senator Specter also asks Mr. Filip for a more explicit statement on the "Filip memorandum" and requests that the Committee be informed of specific cases pending under the McNulty memorandum.
» Read Leahy Comment to the Filip letter |
» Read Specter Response to Filip Letter |
Supreme Court Offers New Guidance on Money Laundering Statute
On June 2, 2008, the Supreme Court decided Cuellar v. United States, narrowing the reach of the federal money laundering statute, 18 U.S.C. § 1956. At issue was the meaning of the statute’s prohibition against transporting money from the United States to another country "knowing that the [funds] involved in the transportation . . . represent the proceeds of some form of unlawful activity and knowing that such transportation . . . is designed in whole or in part . . . to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity." Petitioner was convicted under this provision of the money laundering statute after being stopped in Texas driving toward the Mexican border; police discovered $81,000 in cash in his car’s secret floorboard compartment. The Fifth Circuit, sitting en banc, affirmed the petitioner’s conviction, holding that his actions in concealing the cash fell within the statute’s ambit.
Procurement and Grant Fraud: White Paper
JULY 9, 2007—The National Procurement Fraud Task Force Legislation Committee released a “white paper” including several legislative proposals seeking to improve the Government’s detection, prevention and prosecution of procurement and grant fraud. The Department of Justice established the task force in 2006 as a partnership among Federal agencies responsible for investigating and prosecuting criminal violations concerning contracting and grant activities.
The task released the “white paper” to detail three areas of reform it believes are necessary to remedy vulnerabilities: ”1) improved ethics and internal controls among contractors and grantees; 2) improvements in the government’s ability to prevent and detect procurement and grant fraud; and 3) upgraded prosecution and adjudication resources.”
United States of America v. Jeffrey Stein, et al.
U.S District Judge Lewis A. Kaplan dismissed charges against 13 former KPMG employees in what the government had described as the largest criminal tax case in U.S. history. Judge Kaplan found that he had no choice but to dismiss after finding last year that the government violated the former executives’ constitutional rights by pressuring KPMG to cut off the defendants’ legal fees.
Panetti v. Quarterman
On June 28, 2007, the United States Supreme Court blocked the execution of Texas death-row inmate Scott Panetti because lower courts failed to consider whether his mental illness prevented him from understanding the reason for his execution. The Court reached this conclusion despite the fact that evidence concerning Panetti’s schizophrenia did not arise until his execution date was set.
Rita v. United States
In United States v. Booker, the Supreme Court declared the United States Sentencing Guidelines to be advisory, rather than binding, and concluded that appellate courts must review sentences for “reasonableness.” Resolving a disagreement between the Circuit Courts, the Court recently held in Rita v. United States that appellate courts may find sentences imposed within the Guidelines to be presumptively “reasonable.”
Second Circuit Ruling on KPMG Appeal
On May 23, 2007, the Second Circuit Court of Appeals ruled that SDNY Judge Kaplan lacked ancillary jurisdiction to hear state law contract claims brought by the KPMG defendants against KPMG to force it to pay their attorneys’ fees and expenses in their pending criminal trial.
DOJ Revising Corporate Charging Guidelines
On December 12, 2006, United States Deputy Attorney General Paul J. McNulty announced during a speech at a meeting of the Lawyers for Civil Justice that the Department of Justice is revising its corporate charging guidelines for federal prosecutors. The DOJ’s press release is available online.
