Saturday, December 9, 2006
Senator Arlen Specter's legislative proposal, The Attorney-Client Protection Act of 2006 (here), would roll back portions of the Thompson Memo on the considerations that go into deciding whether to prosecute a corporation, if Congress enacts it. The legislation may go beyond just organizations by protecting "any communication" covered by the attorney-client privilege and not just those of a corporation. Perhaps more importantly, while the title refers to the privilege and includes the work product protection, it also extends to prohibiting consideration of a company's decision to pay the attorney's fees of an employee under investigation, entering into a joint defense agreement with employees, and refusing to terminate a person's employment if the employee does not cooperate in an investigation. This language has little to do with the privilege directly, and largely tracks the ABA's criticism of the Thompson Memo adopted this past August. It also reaches beyond just criminal prosecutions by covering civil enforcement actions, which means the SEC, FTC, and OIGs, among others, that pursue civil actions would also be governed by the legislation.
The proposal is certainly interesting, and addresses problems that have developed since the adoption of the Thompson Memo and its predecessor, the Holder Memo. Nevertheless, the bill will not go anywhere in the current Congress because the session is over and a bill will have to be introduced in the 110th Congress that convenes in January, when Senator Specter will no longer chair the Judiciary Committee. In analyzing the legislation, some issues that may be worth thinking about include:
- What's the procedure? While the proposal says that in a civil or criminal investigation the government shall not "demand, request, or condition treatment" of an organization on its decision to waive the privilege, pay an employee's attorney's fees, etc., it does not say what will happen if someone alleges a violation of the law. Who can challenge the government if there is a belief that such a "demand, request or condition" has occurred? Most likely the corporation can raise the issue because that's whose rights are being protected, but could an individual investigative target, such as an employee, bring a challenge? If so, and particularly if this is during the pre-indictment phase of an investigation, there may be substantial grand jury secrecy issues if discovery were permitted. A procedure similar to raising a Rule 6(e)(7) contempt challenge to improper disclosure of grand jury information might be used, but the law says nothing about what a court is supposed to do, so some guidance may be helpful.
- What's the standard? Imagine this scenario, unlikely as it might be: an attorney whose corporate client is under investigation meets with the prosecutor and states that the company will pay all attorney's fees and will not waive any privilege, and that if the company is indicted then that decision will be challenged because the decision must have been affected by the company's posture on these issues. If an indictment takes place, will there be a hearing on the company's challenge at which it can take discovery of the government's decision-making process? If so, who bears the burden of production and persuasion, and can a court grant discovery on the issue? Mini-trials are not welcomed in criminal cases, and there would be issues whether the propriety of the charges could be considered by a court hearing a challenge. The Supreme Court has been reluctant to permit discovery of the exercise of prosecutorial discretion, and this legislation goes to those charging decisions, so this is another issue that should at least be considered.
- What's the remedy? Closely tied to the procedural issue is what remedy a court could grant if a violation were found. No doubt, investigative targets would want the investigation enjoined, or an indictment dismissed. But where would a court get its authority to do that? The language of Senator Specter's proposal says nothing about this crucial issue. The Supreme Court has restricted the supervisory power of the courts to redress prosecutorial misconduct by dismissing indictments, and stopping a criminal investigation may be extreme if an indictment has not issued, especially if it ends up protecting culpable individuals. The Court in U.S. v. Williams, 504 U.S. 36 (1992), acknowledged that supervisory power could be used to dismiss an indictment for a violation of a clear statutory or constitutional right, so this proposal might grant a court that authority. That said, is dismissal of an indictment proper if a corporation's employees engaged in wrongdoing and the prosecutors sought a waiver of the privilege? Congress may want to be a bit more clear on what happens if there is a violation, and whether any remedy would extend to individuals who are not the privilege holder, such as an employee. Again, the Rule 6(e)(7) contempt model of a contempt proceeding might be a workable approach, so that the underlying investigation or prosecution is unaffected by the prosecutorial misconduct.
- Will this legislation encourage corporations to act unscrupulously? The legislative prohibition may create an unintended incentive for a corporation -- or more particularly its senior executives -- to try to keep lower-level employees from cooperating if there is no downside to doing so. While one would hope this never happens, imagine a corporation and its senior officers are being investigated for a criminal violation, and the company tells its employees that any of them who cooperate with the government will not have their attorney's fees paid by the company, but if they refuse to cooperate then all their fees will be paid and the company will not waive the privilege or work product protection. Even worse, it tells them that if called to testify before a grand jury they should assert their Fifth Amendment privilege and refuse to testify. Could the government take that conduct into consideration in deciding whether to prosecute the company? The bill's language is categorical that the government cannot "condition a civil or criminal charging decision" on the issue of fee payments, privilege waivers, joint defense agreements, information sharing, and retaining uncooperative employees. Of course, the conduct by the senior executives might be an obstruction of justice, but the discussions on attorney's fee payments and cooperation may be protected by a joint defense agreement, and the government could not seek a waiver to learn about the discussion. The legislation could produce a "beware what you wish for" response because it could make prosecutors more reluctant to charge an organization, so the government will charge individual officers more frequently, even in close cases if there's any suspicion of executive stonewalling. This raises the "criminalization of agency costs" issue that has been discussed by some.
- Could there be a constitutional problem? I won't pretend to be an expert on constitutional law, particularly separation of powers questions, but this legislation strikes me as unique in having the Legislative Branch direct the Executive Branch in the exercise of its authority to decide who to prosecute on the basis of investigatory considerations. While courts have imposed limits on prosecutors regarding charging decisions based on protected categories like race and sex, the legislature's role is to define the crimes and then leave it to the executive to enforce the law. Here, the legislation tells prosecutors what they may not consider in making a charging decision, even if the conduct might have probative weight (e.g. conditioning payment of attorney's fees on not cooperating) regarding corporate criminality. Courts have been quite reluctant to second-guess prosecutorial charging decisions absent strong proof of an impermissible motive, and there could be a constitutional issue raised by the legislation.
I've gone on way to long, but these are some of the issues I would like to see explored if the next Congress is going to pursue Senator Specter's proposal. If the goal of the legislation is to bail corporation's out of criminal prosecutions, then the bill may not be the best idea. If it is a serious effort to protect the privilege and not simply insulate organizations from civil and criminal liability, then Congress should address not only how best to go about doing that, but also what happens if there is a violation, and how to keep corporate executives from perhaps misusing the protections Congress may afford companies. (ph)