DOJ drops policy encouraging turnover of corporate records to prosecutors

[JURIST] US Deputy Attorney General Paul McNulty [official profile] announced Tuesday that the Department of Justice (DOJ) [official website] will no longer encourage corporations to turn over confidential records to officials investigating corporate fraud [JURIST news archive]. The new McNulty Memorandum [PDF text] revises portions of the 2003 Thompson Memorandum [PDF], which included business record turnover as a factor prosecutors could use in determining whether corporations were cooperating with investigations, by now requiring prosecutors to receive McNulty's approval before seeking investigative facts gathered by corporate counsel and protected by attorney-client privilege. In a speech [text] at a Lawyers for Civil Justice [advocacy website] event, McNulty explained the revisions, saying:

First, my policy now makes clear that attorney-client communications should only be sought in rare cases; that is, that legal advice, mental impressions and conclusions and legal determinations by counsel are protected. Before they are requested, the United States Attorney must seek approval directly from me. I must personally approve each waiver request for attorney-client communications. Both the request for approval and my authorization will be in writing.

Second, to support the request, prosecutors must show a "legitimate need" for the information. If they cannot meet that test, I will not authorize their seeking privileged information. To meet this test, prosecutors must show:
    (1) the likelihood and degree to which the privileged information will benefit the government's investigation;

    (2) whether the information sought can be obtained in a timely and complete fashion by using alternative means that do not require waiver;

    (3) the completeness of the voluntary disclosure already provided; and

    (4) the collateral consequences to the corporation in requesting a waiver.
This is a substantial test and it addresses the criticism that prosecutors are merely asking for blanket waivers in every circumstance. I do not agree that blanket waivers were routinely sought in the past, but establishing this test ensures that requesting waiver is a thoughtful, considered process and that prosecutors are not requesting waiver from corporations without examining their real need for the information.
The revisions also generally prohibit prosecutors from considering whether corporations pay attorneys' fees for their employees and agents undergoing investigation. Such evidence will be considered, however, in totality of circumstances inquiries when the advancement of fees purposely impedes an investigation. A federal court ruled in June that prosecutors, acting under the Thompson Memorandum guidance, violated the constitutional rights [JURIST report] of 16 former KPMG employees by pressuring the professional services firm to stop paying the employees' defense costs in an ongoing tax fraud case.

In September, McNulty expressed support [JURIST report] for the Thompson Memorandum despite concerns over its restraint on attorney-client communications from groups including the American Bar Association and the US Chamber of Commerce. AP has more.


 

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