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The DOJ Contra Mundum

Six months ago, without fanfare, the Justice Department scrapped the notorious McNulty Memo. It replaced it with new guidance to federal prosecutors about when to charge corporate organizations with crimes, including violations of the Foreign Corrupt Practices Act. The new guidance appears in the U.S. Attorney?s Manual (USAM) at chapter 9-28.000. One of its most striking features is what it says about the attorney-client and attorney work-product privileges.

Under the 2006 McNulty Memo, and the Thompson Memo before it -- both named for former Deputy Attorney Generals who signed them -- the DOJ gave itself the green light to judge cooperation by corporations based on their willingness to waive the privileges. Refusing to waive could result in a criminal indictment or stepped up charges. Agreeing to waive, however, could result in softer treatment. Once given, the waiver obligated the company to disclose to prosecutors conversations and documents exchanged between the company's employees and its lawyers, even if the employees thought those communications were confidential and protected from disclosure. At least that's how everyone outside the Justice Department thought it worked.

But the new U.S. Attorney?s Manual says everyone was wrong. It says the DOJ never required corporations to give up their rights. It argues, with a straight face, that since the privilege belongs to the company, only the company can choose to give it up. So every waiver is therefore voluntary as a matter of law. (An armed robber's victim might also have a choice to give up his wallet or die, so is giving up the wallet voluntary after all?) The DOJ pays tribute to the privileges, saying they're old and sacrosanct; they serve the public interests by allowing full and frank discussions between attorneys and clients; and they're essential in today's world of complex rules and regulations imposed by governments at all levels. "For these reasons," the DOJ concludes, "waiving the attorney-client and work product protections has never been a prerequisite under the Department's prosecution guidelines for a corporation to be viewed as cooperative."

Never a prerequisite? Tell that to the 33 former U.S. Attorneys who sent a letter last June to Senator Patrick Leahy (D.,VT), chair of the Judiciary Committee. They asked him to support a proposed bill intended to stop the Justice Department's practice of pressuring companies to waive the attorney-client privilege. The bill hasn't gone anywhere but the message from the 33 ex-federal prosecutors was loud and clear.

Under the McNulty Memo, they said, "prosecutors can demand that a business waive the privilege with regard to a host of communications with its counsel in exchange for more lenient treatment. . . . The widespread practice of requiring waiver has led to the erosion not only of the privilege itself, but also of the constitutional rights of the employees who are caught up, often tangentially, in business investigations." (emphasis added)

The former prosecutors told Senator Leahy that federal legislation is the only way to fix things. The McNulty Memo, they wrote, supposedly set up a review process whenever waivers were sought, but the oversight didn't work. They cite a report by E. Norman Veasey, the former Chief Justice of Delaware. He found that prosecutors in the field still requested or demanded privilege waivers without the supervision required by the McNulty Memo. And, the ex-prosecutors warned, the McNulty Memo never covered other federal agencies, including the SEC, HUD, the FCC, and EPA, among others, "all of which have issued copy-cat policies requiring waiver in exchange for cooperation."

What's up with USAM 9-28.710? Maybe it was an attempt by the Old Justice Department to write (or rewrite) some history before the New Justice Department came along. We don't know. But if federal legislation to protect companies and individuals from coerced waivers was needed last year under the McNulty Memo, it must still be needed now. USAM 9-28.710 didn't really change anything. It's just the latest version of the DOJ's internal guidance, that's all. Will U.S. Attorneys in the field adhere to it? Who can say? But the track record of oversight under the McNulty Memo isn't encouraging. And the new guidance doesn't apply to other federal agencies. No matter what the DOJ does or doesn't do, other parts of the federal government can go on demanding waivers in exchange for cooperation. It's up to them.

View the U.S. Attorney?s Manual 9-28.000 / Principles of Federal Prosecution of Business Organizations here and USAM 9-28.710 on attorney-client and work-product protections here.

Download the June 20, 2008 letter to Senator Leahy regarding the Attorney Client Privilege Protection Act here.

Download the McNulty Memo here (large pdf file) and the Thompson Memo here.

Listen to the podcast here.
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Full post as published by The FCPA Blog on February 05, 2009 (boomark / email).