U.S. deputy attorney general Paul McNulty has revised the controversial guidelines that federal prosecutors have been using for more than three years to measure the cooperativeness of companies whose employees are accused of corporate crime. These provisions, collectively called the McNulty Memorandum by his office, call for prosecutors to still consider many of the guidelines outlined in the so-called Thompson memo, but restrict how they can seek privileged information from companies.

Prosecutors will now need McNulty’s signature before requesting information shared between an employee and his lawyer, or legal advice given to a company. “We encourage full and frank communication between corporate employees and their lawyers,” McNulty said. “With this new guidance, I will personally approve all future requests for attorney-client communications.”

The new memorandum also instructs prosecutors to not consider whether a company has paid for its employees’ attorneys fees when determining how they’ll charge the corporation.

McNulty announced the changes, which were expected, on Tuesday during a speech at a meeting of the Lawyers for Civil Justice in New York. The Thompson memo’s controversial provisions put pressure on companies to cut off legal support to employees accused of wrongdoing and waive the attorney-client privilege rights in return for lenient treatment. McNulty had been asked to make revisions by various groups, including the Chamber of Commerce, the American Civil Liberties Union, the American Bar Association, and even Larry Thompson, who released the original memo in January 2003 when he was the deputy attorney general.

In addition, Sen. Arlen Specter introduced a bill last week, a few days before the 109th Congress adjourned, intended to pressure McNulty to make revisions before the end of the year. Specter said the Thompson memo is “excessive and it impinges upon the constitutional right to counsel.”

During an interview with CFO magazine on July 21, McNulty stood by his department’s use of the Thompson memo but did not rule out considering a revision. “I believe that the vast majority of prosecutors handle these considerations responsibly and work in a productive way with companies that want to cooperate,” he told CFO. “And I wonder sometimes if companies cooperate because they realize it is in the interest of the corporation to do so, and then complain later because it may be a more popular thing to do.”

At a recent Heritage Foundation conference, Thompson jokingly said he wanted the memo changed to get his moniker out of the headlines, but he also acknowledged that the provisions were being used too broadly. “It was anticipated and actually included in the memorandum that waiver of attorney-client privilege would only exist in a limited kind of situation and only in the context necessary to facilitate cooperation,” he said.

To further specify limited use, McNulty’s guidance requires that prosecutors prove there’s a need for accessing privileged information and get his office’s written approval before requesting it from a company. He also outlines that information shared between an attorney and a client “should be sought only in rare circumstances.” And if a corporation declines that request, prosecutors should not hold that fact against it when deciding the severity of any charges.

“Waiver of attorney-client and work product protections is not a prerequisite to a finding that a company has cooperated in the government’s investigation,” the memo says. “However, a company’s disclosure of privileged information may permit the government to expedite its investigation. In addition, the disclosure of privileged information may be critical in enabling the government to evaluate the accuracy and completeness of the company’s voluntary disclosure.”

The Thompson memo has come under fire in the past year, notably during the preliminary hearings for KPMG’s tax-shelter scandal case in June. In that case, the judge and critics said prosecutors pressured the company to cut off the 16 defendants’ legal funds. As a result, U.S. District Court Judge Lewis Kaplan deemed the prosecutors’ actions “unconstitutional” and has postponed the trial indefinitely since the former KPMG employees are unable to pay their legal bills.