Risk Management

Specter Re-ups Thompson Memo Battle

The senator reintroduces a bill that would curb how prosecutors can ask for privileged information in corporate criminal cases.
Sarah JohnsonJanuary 10, 2007

The debate over how a federal prosecutor considers a company’s cooperativeness in corporate crimes seemed like it had fizzled in December when the Justice Department revised its policy last month. But Republican U.S. Senator Arlen Specter isn’t letting the matter rest.

Just a few days into the 110th Congressional session, Specter reintroduced his bill aiming to protect attorney-client confidentiality. In his floor statement submitted with the legislation, he claims U.S. deputy attorney general Paul McNulty’s recent revisions of controversial guidelines for investigations of corporate criminal cases didn’t go far enough in dissuading prosecutors from requesting attorney-client privileged information.

Specter and business-friendly and human-rights groups have criticized the so-called Thompson Memo, the predecessor document to McNulty’s guidelines, for encouraging companies to hand over privileged information and for waiving attorney-client privilege rights in return for lenient treatment.

Specter’s retort to McNulty’s changes was effectively a “slap” at the Justice Department, says Alan Vinegrad, a partner at Covington & Burling LLP and a former U.S. attorney for the Eastern District of New York. “It’s interesting to see an influential senator with a unique background—he was once a prosecutor himself—saying very plainly that the department has not dealt with this problem adequately,” Vinegard told CFO.com.

Shortly before his term as chairman of the Senate Judiciary Committee ended in December, Specter introduced his original bill, hoping it would nudge the Department of Justice to change its policy. In fact, he said, if McNulty did not come forward with revisions, he would reintroduce the legislation in the next session. Making good on his word—even though McNulty did make several revisions in a memorandum to prosecutors on December 12— the Pennsylvania senator switched “2006” references to “2007” and reissued his bill on January 4 with the exact same wording on.

The so-called McNulty Memo calls for prosecutors to still consider the guidelines outlined in the Thompson Memo. But it restricts how they can seek privileged information. Before requesting information shared between an employee and his lawyer, the prosecutor must now get McNulty’s signature. Further, prosecutors can no longer consider whether a company has paid for its employees’ attorneys fees when determining how they’ll charge the corporation.

Although the new guidelines reflect some improvements, Specter said, they still allow prosecutors to ask for waivers—a point that will “erode the attorney-client relationship.” His bill states that prosecutors shouldn’t factor in whether a company voluntarily turned over such information into how they charge a case.

Critics of the original memo included 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. Those three organizations have said they believe the McNulty Memo is a disappointment.

According to lawyers watching the debate closely, attorney-client confidentiality is crucial for companies investigating whether a crime occurred. “If an employee knows that talking to corporate counsel is equivalent to talking to a U.S. attorney, you won’t get people to talk freely,” Vinegrad says. “In some ways, the government is building in a disincentive and making it harder to get to the bottom of corporate fraud.”

“There have to be ways for employees to be able to talk to corporate counsel freely or they will be intimidated and won’t ask for advice,” says Jennifer Moore, attorney with Sutherland, Asbill & Brennan and a former assistant U.S. attorney for the Southern District of New York. “You can’t run a compliance program effectively that way.”

Specter also criticizes McNulty’s memo for letting legal advice play a role in prosecutors’ investigations and charging determinations. McNulty splits privileged information into two categories: “purely factual information,” such as witness statements and chronologies documented in a company’s internal investigation, and legal advice given by corporate counsel before, during, and after an incident involving misconduct. He does not, however, explain why prosecutors would ever need to use legal advice, which can be pursued only if the first type of information is inadequate for their investigation, Specter notes.