Risk & Compliance

Down to the Wire: Thompson Memo Revised?

Sen. Arlen Specter's swan song may change the way the DoJ trades leniency for cooperation in corporate crime cases. Will the DoJ sign off on the idea?
Sarah JohnsonDecember 8, 2006

Sen. Arlen Specter has made good on his threat to introduce legislation that aims to protect attorney-client confidentiality in corporate criminal cases. The measure, the Attorney-Client Privilege Protection Act, is a last-minute effort by the Republican lawmaker from Pennsylvania to get the issue in front of the Department of Justice before the 109th Congress adjourns and Specter ends his chairmanship of the Senate Judiciary Committee.

Hoping to spur the DoJ into changing its own policy, the legislation — which was introduced on Thursday — would nix the guideline DoJ prosecutors have been using to gauge a company’s level of cooperation. The guideline, known as the Thompson memo, has controversial provisions that 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.

Specter says the memo, crafted in 2003 by then–Deputy Attorney General Larry Thompson, is “excessive and it impinges upon the constitutional right to counsel.” The 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 used the memo’s provisions to support what some experts considered aggressive prosecution methods. As a result, U.S. District Court Judge Lewis Kaplan deemed the prosecutors’ actions “unconstitutional” for pressuring the company to cut off the 16 defendants’ legal funds. He has since postponed the trial indefinitely since the former KPMG employees are unable to pay their legal bills.

The text of the new bill attacks the memo, saying “the Department of Justice and other agencies have increasingly employed tactics that undermine the adversarial system of justice, such as encouraging organizations to waive attorney-client privilege and work product protections to avoid indictment or other sanctions.” The memo’s use has even been criticized by Thompson himself, who admitted last week at a Heritage Foundation conference that it should be revised. “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.

Thompson, who now provides general counsel for PepsiCo, underscored the fine line prosecutors must walk as they push to gather as much information as they can from corporations without compromising the integrity of an investigation. “Cooperation is the mother lode of law enforcement,” he said. “If you do not have cooperation and don’t have a way to get cooperation, you really won’t be able to solve most criminal probes.”

Other calls for revisions have come from the U.S. Chamber of Commerce, the American Civil Liberties Union, and the American Bar Association — whose Presidential Task Force on the Attorney-Client Privilege members include Thompson. This unlikely alliance is trying to protect fundamental rights, says Jan Handzlik, a partner at Howrey LLP and a former federal prosecutor.

Specter’s bill would prohibit federal lawyers and investigators from asking a company to waive its attorney-client privilege and from basing an organization’s cooperation on whether it has paid an employee’s legal fees or kept that person under employment. A report released last week by the Committee on Capital Markets Regulation, a group that is backed by Treasury Secretary Henry Paulson, similarly requests that the DoJ prohibit prosecutors from seeking attorney-client-privilege waivers and the nonpayment of employees’ legal fees.

Likewise, Specter’s bill mirrors the recommendations made by the ABA’s task force, Handzlik told CFO.com. Ideally, the changes to the memo would come from the DoJ itself, Handzlik says, and if U.S. Deputy Attorney General Paul J. McNulty does not come forward with changes, Specter has said he will reintroduce his bill next year. “I think the real impetus [for revisions] is the concern that there will be a legislative solution setting the Department of Justice’s policy,” says Handzlik.

McNulty reportedly is working on some type of revision to the memo, which is expected to be revealed publicly by the end of the year. A DoJ spokesman told The Legal Times that the department has not made a final decision on the issue but has been looking into the concerns posed by the memo’s critics. He did not respond to either of CFO.com’s two requests for comment.

Earlier this year, McNulty told CFO magazine that he disagreed with Kaplan’s decision and any suggestion that companies are forced to cooperate against their will. “I’m not suggesting we anticipate a revision of the Thompson memo, but I’m not saying that we’re closed to that possibility,” he told CFO.“As we speak today, the Thompson memo is the policy of this department.”

At a Senate Judiciary Committee hearing in September, McNulty further supported the memo by calling it “superior” to any alternative guidance. “The irony of the attacks on the Thompson memo is that the federal criminal justice system would be a much harsher, less predictable, and less transparent environment for corporations and their counsel in the absence of this guidance,” he testified.

But has McNulty’s take on the issue changed now that there’s been so much pressure to revisit the Thompson memo? Another member of the ABA task force reckons Specter’s bill will influence McNulty. “I believe that placing as much pressure from as many different directions as possible on the DoJ to withdraw aspects of the Thompson memorandum concerning the waiver of the attorney-client and work product privilege is appropriate,” Sam Damren, an attorney at Dykema Gossett, told CFO.com. “Through a combination of all of these efforts, the DoJ might find itself in the ironical situation of deciding to ‘voluntarily waive’ those aspects of the memorandum on its own initiative.”