Justice Department Makes Concessions In Corporate Prosecution Tactics To Forestall Attorney-Client Privilege Legislation

July 11, 2008

Faced with continuing Congressional interest in legislation aimed at preventing federal prosecutors and other enforcement attorneys from seeking privileged information, the Justice Department has announced that it will again revise its policy regarding the investigation and prosecution of business organizations.  The DOJ’s proposals will restrict the ability of federal prosecutors to seek privileged information from companies, and will have an immediate impact on the ways in which businesses cooperate with government investigations.  The current Principles of Federal Prosecution of Business Organizations, outlined in the "McNulty Memo,"  have been the focus of Congressional and public criticism, and Pennsylvania Senator Arlen Specter has spear-headed legislation aimed at protecting the attorney-client and work product privileges and restraining the government’s hand in investigations. 

Senator Specter re-introduced the legislation – the Attorney-Client Privilege Protection Act of 2008 – on June 26, 2008; it has already passed the House.  Apparently in response to that proposed legislation and continuing criticism, Attorney General Michael B. Mukasey announced during testimony before a Senate Judiciary Committee oversight hearing on July 9, 2008, that the DOJ would be updating the McNulty Memo.  Following that testimony, Deputy Attorney General Mark Filip sent a July 9th letter [PDF] to the Senate Judiciary Committee leadership identifying some of the changes that the DOJ anticipates making in the coming weeks, and requesting that legislation be held in abeyance while the changes are implemented.  Specifically, the Deputy Attorney General identified the following changes:

• Cooperation will be measured the same way for businesses as for individuals: by considering solely the extent to which the company has timely disclosed the relevant facts about the misconduct in question, and "not whether the corporation waived attorney-client privilege or work product protection in making its disclosures." 
• The Justice Department will not seek the disclosure of any non-factual attorney work product or core attorney-client communications as a condition for cooperation credit.
• Federal prosecutors will not consider, in evaluating cooperation, whether a corporation has (1) advanced attorneys’ fees to its employees; (2) entered into joint-defense or similar agreements; or (3) retained or sanctioned culpable employees.

Whether these proposed changes will sufficiently placate critics and successfully avoid the proposed legislation remains to be seen.  Indeed, the initial response from Senator Specter suggests that the DOJ’s effort to head off legislation may have been a political miscalculation.  It is also important to note, however, that the proposed changes do not have the force of law, and apply only to Justice Department prosecutors, not civil enforcement attorneys from the Securities and Exchange Commission or other federal agencies, unlike Senator Specter’s proposed legislation.

While these proposed changes – if implemented – will undoubtedly have a significant impact on how corporations respond to federal criminal investigations, corporations must remember that full and forthcoming factual disclosure will remain required to demonstrate cooperation, and thereby help to avoid the threat of indictment in situations where there is culpability by corporate employees.  The attorneys at Gibson, Dunn & Crutcher LLP will continue to follow these ongoing changes in the Department’s policies, as they have over the previous several years, so that businesses can make the best-informed decisions about how to respond to a Department of Justice investigation.

© 2008 Gibson, Dunn & Crutcher LLP

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