Wednesday, August 9, 2006

ABA Attacks More of the Thompson Memo

Perhaps emboldened by recent decisions by Judge Kaplan in the KPMG tax shelter prosecution (U.S. v.  Stein), the American Bar Association adopted the Report (here) issued by its Task Force on Attorney-Client Privilege that urges the Department of Justice to disavow certain practices related to the determination of whether to charge a corporation with a crime.  The Task Force earlier recommended that the Thompson Memo, which sets forth the Department's basic principles on charging corporations, be amended to eliminate a provision encouraging corporations to waive their attorney-client privilege and work product protections as a sign of the company's cooperation.  The new Report argues that commentary in the Thompson Memo on the payment of attorney's fees, joint defense agreements, and terminating uncooperative employees is improper and undermines the rights of employees.  The Task Force makes four recommendations (text here):

(1) that the organization provided counsel to an employee or agreed to pay an employee’s legal fees and expenses;

(2) that the organization entered into or continues to operate under a joint defense, information sharing and common interest agreement with an employee or other represented party with whom the organization believes it has a common interest in defending against the investigation;

(3) that the organization shared its records or other historical information relating to the matter under investigation with an employee or other represented party; or

(4) that the organization chose to retain or otherwise declined to sanction an employee who exercised his or her Fifth Amendment right against self-incrimination in response to a government request for an interview, testimony, or other information.

None of these issues relate directly to the attorney-client privilege and waiver issues, and perhaps the Task Force should be renamed the Corporate Prosecution Principles Group.

I find the fourth recommendation interesting.  If an employee states that he/she will assert the Fifth Amendment in response to an interview request, that is at least some indication of potential wrongdoing, even if the assertion is protective and not a reflection of a view that actual criminal conduct occurred.  As an employer, would you continue to employ a person who refused to testify or make a statement because of the potential to incriminate that person, and in many instances the company?  Especially if the person is a senior executive, there are serious issues regarding whether a corporation is well-served by having the person remain in office under such a cloud.  An assertion of the Fifth Amendment does not mean the person did anything illegal, but it raises a red flag, and a company that professes to be cooperative while retaining the employee/executive in a position of authority is not a very good sign because the government will have legitimate concerns about the integrity of business records and the propriety of transactions.  While the first three recommendations by the ABA Task Force do not strike me as particularly controversial, at least if one accepts the proposition that hiring a lawyer is an acceptable response to a government investigation, but the fourth may be a bit far afield. (ph)

On most items, co-blogger Peter Henning and I agree, but this is one time we don't.  So in response to his comment above on the 4th item of the ABA Memo, I would note that I agree with what the ABA has issued, and would respond to Professor Henning with:

1. An assertion of the Fifth Amendment should never be interpreted as an indication of guilt here, especially in a business context where the lines between what are legal and illegal are oftentimes vague.

2. The Fifth Amendment may be taken on a temporary basis until there is an assurance of immunity, even when there has been no criminally culpable conduct.  Attorneys usually request immunity for clients, even those that are mere witnesses.

3.  A company may have invested time and education into an individual, do they want to throw this all away without knowing first that the person might really have committed criminal acts, or have more commonly been around criminal acts that they failed to report.

4.Is this not pitting the individual and company against each other, and is this really good for the shareholders who have invested in this company?

5. I thought we lived in a country that is founded on "innocent until proven guilty" and that a person should not be compelled to testify against themselves.  If you lose your job because of maintaining that innocence and asserting constitutional rights that accompany that innocence are we losing sight of the basic principles that founded this country? More importantly, when the Government is the one asking or giving a benefit to a company that discards the rights of the individual, the power of the government is entering into private contractual arrangements in the employer-employee context, and most importantly interfering with an individual's constitutional rights. (Note- this latter point is not in reponse to what is stated by Professor Peter Henning, as I know we both agree on these principles).


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I think that your analysis does not give sufficient weight to two practical realities.

The first is that many white collar lawyers - including myself - will advise clients to take the Fifth Amendment if they are the subject of a government investigation, even if they are innocent. The government is rarely dissuaded from believe that someone is a criminal because the putative criminal denies committing the crime; on the contrary, a perjury count is a far more likely outcome. This is particularly true in cases where the key is intent. So not only in law but in the real world, no inference of culpability should be drawn from an assertion of the Fifth.

The second problem with your analysis is the failure to distinguish adequately between steps that a corporation might take in its own interest and those that the government encourages the corporation to take - the question of state action. A corporation on its own might well oonclude in a particular case that it does not want to keep on its payroll someone who has asserted the Fifth. But that's not what the ABA resolution criticizes: it is government policies that pressure corporations to do so as the price of prosecutorial leniency. And as noted above, the government's assessment of who is culpable may differ from the corporation's own assessment.

I think that the topics covered by this resolution are in fact more significant than the much-discussed privilege waiver point. I have considerable doubt whether the government's insistence on waiver of the privilege is going to have the dire effects on corporate behavior that the bar has predicted. But there is no doubt that government policies encouraging corporations to cut off attorney fees or punish people for the assertion of their constitutional rights are going to have a significant real world impact.

Posted by: ebob | Aug 9, 2006 6:57:01 AM

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