Wednesday, March 8, 2006
The House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security conducted an oversight hearing on March 7 entitled "White Collar Enforcement (Part l): Attorney-Client Privilege and Corporate Waivers." The witnesses were Associate Attorney General Robert McCallum, Jr., former Attorney General Dick Thornburgh, Thomas Donahue, the CEO of the U.S. Chamber of Commerce, and Winston & Strawn partner William Sullivan. McCallum defended the government's policy of requesting waivers of the attorney-client privilege from corporations involved in possible wrongdoing, noting that the McCallum Memo requires local U.S. Attorney's Offices to develop policies on when a waiver will be sought and mandating approval by a superior before such a waiver is requested. (It seems to be all the rage to have an eponymous memorandum outlining DOJ policy, i.e. the Thornburgh, Thompson, and Holder Memos) McCallum's prepared statement (here) also notes that the advisory committee for the Federal Rules of Evidence is considering a proposal to limit third-party use of privileged materials supplied to the government. The use of privileged and protected information by shareholders or securities class action plaintiffs is not the sole, or even primary, reason for objections to the demand for waivers, although corporations would likely welcome some protection from having their internal investigations used in civil litigation.
The other three witnesses protested the push toward demanding attorney-client privilege waivers from corporations. Thornburgh's prepared statement (here) asserts that while the tone of the Thompson and McCallum Memos is "moderate" and "officials representing these entities stress their intent to implement them in reasonable ways, it has by now become abundantly clear that, in actual practice, these policies pose overwhelming temptations to prosecutors seeking to save time and resources and to target organizations desperate to save their very existence. And each waiver has a 'ripple effect' that creates more demands for greater disclosures, both in individual cases, and as a matter of practice. Once a corporation discloses a certain amount of information, then the bar is raised for the next situation, and each subsequent corporation will need to provide more information to be deemed cooperative." Sullivan noted that recently he was asked for a complete privilege and work product waiver at the initial meeting with prosecutors before an internal investigation had even commenced. He called for the development of clear policies on what the government can seek from a corporation and the protection of otherwise privileged materials from use by third parties in private, civil actions (prepared statement here).
Donahue discussed the results of two surveys commissioned by the Chamber of Commerce regarding corporate waivers (prepared statement here), and noted the following results:
Almost 75% of both inside and outside counsel agree with the statement that a “culture of waiver” has evolved to the point that governmental agencies believe it is reasonable and appropriate to expect a company under investigation to broadly waive attorney-client privilege or waiver protections.
Of the respondents who confirmed that they or their clients had been subject to investigation in the last five years, approximately 30% of in-house respondents and 51% of outside respondents said that the government expected wavier in order to engage in bargaining or to be eligible to receive more favorable treatment.
From the title of the hearing, this is only the beginning. The interesting question will be whether there is any legislation proposed, or whether the fact that Congress has expressed concern with the practice may be sufficient to restrain the Department of Justice in this area. The development of an evidence rule on the issue of third-party use of internal investigation reports and the like will not be a quick process, as that process usually takes years, not months. (ph)