Tuesday, December 12, 2006

The McNulty Memo - Attorney-Client Privilege Waivers & Attorney Fees

It looks like DOJ has decided to try and save itself from legislation (here) concerning the attorney-client privilege waivers, by issuing a revision to the Thompson Memo.  DOJ issued a press release that tells of Paul McNulty's talk to Lawyers for Civil Justice in New York.  The new McNulty Memo and an Executive Summary are below.  The press release states in part:

"The new guidance requires that prosecutors must first establish a legitimate need for privileged information, and that they must then seek approval before they can request it. When federal prosecutors seek privileged attorney-client communications or legal advice from a company, the U.S. Attorney must obtain written approval from the Deputy Attorney General. When prosecutors seek privileged factual information from a company, such as facts uncovered in a company’s internal investigation of corporate misconduct, prosecutors must seek the approval of their U.S. Attorney. The U.S. Attorney must then consult with the Assistant Attorney General of the Criminal Division before approving these requests.

"The guidance cautions prosecutors that attorney-client communications should be sought only in rare circumstances. If a corporation chooses not to provide attorney-client communications after the government makes the request, prosecutors are directed not to consider that declination against the corporation in their charging decisions. Prosecutors are told to request factual information first and make sure they can establish a legitimate need to go further before requesting a waiver of privilege to obtain attorney-client communication or legal advice.

"The new memorandum also instructs prosecutors that they cannot consider a corporation’s advancement of attorneys’ fees to employees when making a charging decision. A rare exception is created for those extraordinary instances where the advancement of fees, combined with other significant facts, shows that it was intended to impede the government’s investigation. In those limited circumstances, fee advancement may be considered only if it is authorized by the Deputy Attorney General."

It is certainly wonderful to see the DOJ realizing the importance of the right to counsel, and how asking for a waiver of attorney fees can be problematic to making certain that the accused has appropriate legal counsel. In light of the Stein case, this is certainly a step in the correct direction.

But with regard to the attorney-client privilege, the new McNulty Memo does not go far enough.  For one, it is commonly known that DOJ guidelines are nothing more than internal guidelines that are unenforceable at law.  So if an AUSA fails to follow this guideline, and forgets to seek approval before requesting a waiver, there is nothing that the accused can do in response.  This is exactly why, Specter's legislation is needed.  As long as the possibility exists that DOJ will allow someone to ask for a waiver of the attorney-client privilege, the privilege is in jeopardy. 

What is not mentioned here is that DOJ always has the right to secure a waiver with a court through the crime-fraud exception.  It is sad that this new Memo tries to bypass judicial review by having the DOJ do internally what is clearly against the long standing privilege.

On the bright side - Larry Thompson is probably happy to see a new name on this memo.

(esp)

Download mcnulty_memo.pdf

Download mcnulty_memo_executive_summary.pdf

December 12, 2006 in Legal Ethics, Privileges | Permalink | Comments (0) | TrackBack (3)

Saturday, December 9, 2006

Response on Attorney-Client Privilege

Senator Specter's bill on attorney-client privilege is certainly receiving some commentary on this blog - here and here.  And although my co-blogger and I agree on most items, this topic is one that I feel compelled to respond to his comments here.

1. This bill will survive - I disagree that this bill will be lost in oblivion (although my co-blogger does not expressly state this and this is my interpretation of the commentary that states that the session is ending and Specter will no longer be chair of the Senate Judiciary Committee).   The coalition backing this bill is like none other seen before. It crosses both political and ideological boundaries.  It includes the ABA, the National Association of Criminal Defense Lawyers (NACDL), Edwin Meese, Richard Thornburgh, some associated with the CATO Institute,  the U.S. Chamber of Commerce and the National Association of Manufacturers (see here and here) as well as others. (some citations from Alan Childress' Legal Profession Blog here)  The bottom line is that Sen. Specter will be proceeding ahead on this one in the next session.  Why?  Because the DOJ has done nothing to correct this situation and the political change in legislature is not likely to influence the strong support that this bill will receive.

2. What's the procedure?  Mr co-blogger questions the lack of guidance offered by the bill on what a court should do if there is a question of a violation.  Yes, what if a prosecutor decides to violate this law by improperly requesting attorney-client privileged material?  It is true that a remedy is not included here, but it is also good that none is stated.  It would be a shame to stifle the judiciary in finding an appropriate remedy to fit the particular circumstances.  Obviously if the circumstances warrant dismissal then that is what should occur, and the government may be seeking review in a higher tribunal. But often, such an extreme remedy would not be necessary and the court needs to have the flexibility to either exclude evidence or preclude its use in further proceeding.  Is this not done in cases of a violation of immunity, so why can't it be done here (see the Hubbell case).

3. What's the standard?  Clearly if there is an alleged violation, then the government has the burden to show otherwise.  Does this need to be stated in the legislation?  No, it usually isn't in federal legislation of this nature, and is certainly presumed in light of the fact that the legislation calls for prosecutors not to be asking for the attorney-client privilege waivers. 

4. What's the remedy? See # 2 above. And more importantly, if prosecutors follow the law then a remedy won't be needed.

5. Will this legislation encourage corporations to act unscrupulously?   Absolutely not.  The scenario presented by my co-blogger is one of obstruction of justice.  This is not a pre-arranged contractual relationship that is being voided by the government through its asking of a waiver of an attorney-client privilege.  Just like individuals have a right to assert a 5th Amendment privilege - a corporate executive instructing a lower level employee that they have to assert the privilege raises issues of undue influence that may trigger the obstruction statutes. It is also important to mention that nothing in the statute precludes prosecutors from securing needed information by going to a judge and presenting evidence of the existence of a crime or fraud.  The crime-fraud exception is not eradicated by this statute.

6. Could there be a constitutional problem? This same issue was raised pre-the-McDade Amendment by prosecutors who argued that the judiciary could not usurp the legislative role.  Congress stepped in with legislation to preclude prosecutors from acting unethically in court. And the legislation passed and remains valid today. It is no different here.  Prosecutor's via this proposed legislation are being given a rule as to what will be allowed in their investigation of criminal matters. This is clearly within the legislative function.

This bill is clearly one that aims toward returning our system to one that honors, as opposed to ignores, the attorney-client privilege.  It is unfortunate that DOJ failed to get its act together timely to rewrite the Thompson Memo so that it omits this language. And perhaps realizing that the Specter bill is hanging over its head, such a move will now be forthcoming. But if forced to proceed with this legislation because of DOJ inaction, it is important for this legislation to permit judges to be judges and find appropriate remedies to fit the situation.  A one-size-fits-all remedy in a statute will preclude the judiciary from tailoring the remedy to fit the particular unethical circumstances of the rogue prosecutor. 

(esp)(w/disclosure that she serves on the board of directors of the NACDL).

December 9, 2006 in Defense Counsel, Legal Ethics, Privileges | Permalink | Comments (0) | TrackBack (0)

What Does the Attorney-Client Protection Act of 2006 Do?

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:

  1. 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.
  2. 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.   
  3. 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.
  4. 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.
  5. 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)

December 9, 2006 in Defense Counsel, Privileges, Statutes | Permalink | Comments (1) | TrackBack (0)

Saturday, December 2, 2006

New Article on Compelled Waivers in the Corporate World

David Seide has an article in The Review of Securities and Commodities Regulation titled "Compelled Waivers of the Attorney-Client Privilege."  The article discusses the application of the Stein opinions to the privilege waiver provisions found in the Thompson Memo and the SEC's Seaboard Report.

(esp)

December 2, 2006 in Privileges | Permalink | Comments (0) | TrackBack (0)

Monday, November 27, 2006

The Future of the Attorney-Client Relationship in White-Collar Prosecutions

Upcoming Event of the Heritage Foundation RSVP here.

The Future of the Attorney-Client Relationship in White-Collar Prosecutions

Date: November 30, 2006
Time: 11:00 a.m. to 12:00 p.m.
Speaker(s):

The Honorable George J. Terwilliger III
Former Deputy Attorney General of the United States (1991-93)


The Honorable Larry D. Thompson
Former Deputy Attorney General of the United States (2001-03)

With Introductory Remarks by
Edwin Meese III
Chairman, Center for Legal and Judicial Studies,
The Heritage Foundation

Host(s): Dean Reuter
Director, Practice Groups,
The Federalist Society


Brian W. Walsh
Senior Legal Research Fellow,
The Heritage Foundation

(esp)

November 27, 2006 in Defense Counsel, Privileges, Think Tank Reports | Permalink | Comments (0) | TrackBack (1)

Press Privilege?

Subpoenas, privilege, and Balco - an interesting article here in the New York Times.

(esp)

November 27, 2006 in Privileges | Permalink | Comments (0) | TrackBack (0)

Saturday, November 18, 2006

Perhaps A Step in the Right Direction

Bloomberg News is reporting here that DOJ officials are reconsidering their practice of requesting waivers of attorney-client privilege by corporations.  But it also sounds like they aren't ready to just plain ban this DOJ practice.  Instead, it may just be a baby step in this direction. 

One change mentioned is to require approval from top DOJ officials before seeking a waiver from a company of their attorney-client privilege.  Approvals from high level DOJ officials are common in existing DOJ guidelines.  For example, using RICO requires approval, as does some actions involving international affairs.  But these actions that require approval are a far cry from the present practice of disregarding a basic common law privilege.

This is the second time that DOJ would be modifying the practice, with the first time requiring merely a set practice within each USA's office. (see here)  This new step would bring the issue to a higher level, but it certainly will not alleviate the problem.

For background on this issue see here, here, here and here.

(esp)

November 18, 2006 in Defense Counsel, Investigations, Privileges, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Friday, September 29, 2006

Attorney's Fees and the Fifth Amendment Privilege

It is not every day that a company's most recent general counsel and corporate ethics officer assert their Fifth Amendment privilege at the same hearing, but that's what happened at the hearing before the House Energy & Commerce Subcommittee investigating Hewlett-Packard's internal investigation that involved "pretexting" to obtain personal records.  Ann Baskins, the general counsel during the investigation who the company announced was leaving her position just hours before the hearing, and Kevin Hunsaker both refused to answer questions.  Asserting the Fifth Amendment is often a ground for being terminated, particularly when the person is the general counsel, and having the company cut you off from receiving any future benefits.  Moreover, the Thompson Memo (here) states that one factor in determining whether to charge a company with a crime is "whether the corporation appears to be protecting its culpable employees and agents," which can include "the advancing of attorneys fees."  The recent district court decision in U.S. v. Stein, involving former partners and employees of KPMG, held that the Thompson Memo's position on the payment of attorney's fees is unconstitutional. 

The Stein decision may have an effect on whether the government views Baskins' separation agreement (here) with H-P as an indication of a lack of cooperation by the company.  In addition to receiving unvested stock options that will be worth $1 million, the agreement contains the following language:

To the extent doing so is consistent with the exercise of my rights under the federal and state Constitutions, I agree that I will cooperate with the Company in connection with any internal investigation, and the defense or prosecution of any claim that may be made against or by the Company (with the exception of any claims that may be asserted by the Company against me), or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including any proceeding, civil or criminal, before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in or in connection with any proceeding, to the extent such claims, investigations or proceedings relate to services performed or required to be performed by me, pertinent knowledge possessed by me, or any act or omission by me.

The key to this provisions is that an assertion of the Fifth Amendment by Baskins does not mean she has failed to cooperate with the company in connection with any investigations.  The agreement further provides that "[t]he Company agrees to indemnify me to the fullest extent permitted by the Company’s bylaws and applicable law to include but not limited to Section 2802 of the California Labor Code," and that "the Company agrees to advance Expenses actually and reasonably incurred by me in connection with any Proceeding  provided I acted in good faith and in a manner I reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, I had reasonable cause to believe my conduct was lawful."  Baskins' right to receive attorney's fees permits her to assert the Fifth Amendment and still be viewed as acting in good faith, so her invocation of the privilege against self-incrimination at the Subcommittee hearing will not affect her right to have H-P pay the cost of her lawyers, which could be considerable over the next few months.

The Stein decision took dead aim at the Thompson Memo's statement regarding attorney's fees, and it may be that the U.S. Attorney's Office does not want to pick this fight again, at least not while the district court's decision is on appeal.  The government's credibility on Capitol Hill is not all that high at the moment, so it may not want to raise the issue of attorney's fees at this time.  It will be interesting to see if the two other former H-P executives, Hunsaker and security chief Anthony Gentilucci, who asserted the Fifth Amendment have similar agreements with the company.  If so, then the government could raise the issue of cooperation with H-P, although I don't think it is a particularly strong basis on which to judge whether a company is being cooperative. (ph)

September 29, 2006 in Investigations, Privileges | Permalink | Comments (0) | TrackBack (0)

Thursday, September 28, 2006

Everyone Takes the Fifth

The first panel before the House Energy & Commerce Subcommittee investigating "pretexting" by Hewlett-Packard has come and gone, and all of them asserted their Fifth Amendment privilege and refused to answer questions.  Among those who asserted the Fifth were H-P's former general counsel, Ann Baskins, who announced her resignation shortly before the hearing, former chief ethics officer Kevin Hunsaker, and former security chief Anthony Gentilucci.  In addition, all the private investigators who assisted in the pretexting for H-P asserted their self-incrimination privilege. 

After the dismissal of the witnesses, Rep. Joe Barton, the chairman of the full committee, said that he had never seen an entire panel take the Fifth Amendment and lamented the inability of the Subcommittee to gather information.  It is clear, however, that holding a hearing while there are ongoing federal and state criminal investigations, including an assertion by the California State Attorney General that crimes took place, is almost a guarantee that witnesses who were involved in the alleged misconduct will assert their constitutional privilege before knowing where the criminal investigations are going.  It may be hard for Congress to hear this, but criminal liability is much more important to a witness than what a committee or subcommittee wants to hear. For those interested in listening to the hearing, it is available on the Subcommittee website (here). (ph)

September 28, 2006 in Investigations, Privileges | Permalink | Comments (0) | TrackBack (0)

Thursday, September 21, 2006

Getting Ready for the H-P Hearing in Congress

The attention in the Hewlett-Packard investigation will turn to Congress on September 28 when a subcommittee of the House Energy & Commerce Committee grills chairwoman Patricia Dunn, general counsel Ann Baskins, outside counsel Larry Sonsini, and security manager Anthony Gentilucci.  Outside private investigator Ronald DeLia, who has been linked to the "pretexting" that is the ostensible subject of the hearing, will assert his Fifth Amendment privilege (see Bloomberg story here).  An article in The Recorder (here) lists the various white collar crime practitioners who have been retained by Dunn, Baskins, Sonsini, and H-P's chief ethics officer, Kevin Hunsaker.  I assume the company is paying for all the attorneys, and it is likely that some -- or even all -- of the other board members have retained counsel.

An interesting question will be whether Baskins, Sonsini, and Hunsaker, if he is asked to testify, will assert the attorney-client privilege in response to questions at the hearing.  A New York Times article (here) quotes from an e-mail Hunsaker sent that explains the reason why he was taking over supervision of H-P's internal investigation: "Ann Baskins has asked me to oversee the investigation into this in order to protect the attorney-client privilege in the event there is litigation or a government inquiry of some sort."  Well, the government inquiry is here, and there may well be a privilege waiver already.

Even if the witnesses attempt to assert the attorney-client privilege, it is not entirely clear that Congress recognizes such a claim to prevent testimony.  There have been instances in the past in which Congressional committees rejected attorney-client privilege claims on the ground that the Legislative Branch does not recognize common law privileges, as opposed to a constitutional privilege such as the Fifth Amendment.  For example, in hearings related to the Ferdinand and Imelda Marcos regime, a committee recommended contempt for lawyers who asserted the privilege, although the contempt citation ultimately rested on the basis that there was no attorney-client relationship.  A recent article in the American Criminal Law Review entitled "Congressional Investigations and the Role of Privilege" discusses the issues (43 Am. Crim. L. Rev. 165 (2006)). There is a chance that a broad attorney-client privilege claim by Baskins or Sonsini could trigger a move to hold either in contempt, although I expect that the parameters of their testimony will be worked out in advance. 

The lawyers who will be witnesses have to be equally careful about guarding the attorney-client privilege, regardless of how Congress views its right to reject a common law privilege claim.  Under California law, which covers Baskins and Sonsini, they are required to "maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client." (Cal. Bus. & Prof. Code Sec. 6068(e)(1))  It's that "at every peril" language that could put them at risk if Congress were decide to push the privilege issue, however unlikely that may be.  In their testimony, the California lawyers have to be especially careful in what they say.  (ph)

September 21, 2006 in Investigations, Privileges | Permalink | Comments (0) | TrackBack (1)

Friday, September 8, 2006

Another Shot at the Thompson Memo

A group of former senior Department of Justice officials, including former Attorney Generals Griffin Bell and Dick Thornburgh, and former Solicitor Generals Ted Olson, Ken Starr, and Seth Waxman, sent another letter (available below) to Attorney General Alberto Gonzales asking that the Department revise the Thompson Memo "to state affirmatively that waiver of attorney-client privilege and work-product protections should not be a factor in determining whether an organization has cooperated with the government in an investigation."  The letter comes in advance of a hearing before the Senate Judiciary Committee on September 12  on "The Thompson Memorandum’s Effect on the Right to Counsel in Corporate Investigations."  Virtually all of the former Department officials are now in private practice,  and many of their firms represent corporate clients.  Moreover, two signatories, Ted Olson and Seth Waxman, were in the Department when the Thompson Memo and its predecessor, the Holder Memo, were issued.   It would be interesting to learn whether they took the same position on this issue during their time in government. A Legal Times story (here) discusses the letter sent to A.G. Gonzales. (ph)

Download thompson_memo_letter_sept_5_2006.pdf

September 8, 2006 in Defense Counsel, Privileges | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 16, 2006

Reporters Ordered to Testify About Leaks in Balco Grand Jury Investigation

Two reporters for the San Francisco Chronicle, Mark Fainaru-Wada and Lance Williams, have been ordered to testify before a federal grand jury about the leak of the grand jury testimony of major league baseball players who testified in 2003 about receiving steroids from Balco (Bay Area Laboratory Co-operative).  Among those whose testimony reached the reporters is San Francisco Giants slugger Barry Bonds, who stated to the grand jury that he did not knowingly use steroids provided by his personal trainer who also worked at Balco.  Bonds is now the target of a separate grand jury investigation into possible perjury, and the Department of Justice has also been investigating the leak for well over a year.  Fainaru-Wada and Williams published the book Game of Shadows that asserted Bonds used steroids for a number of years, which apparently triggered baseball's investigation of steroid use and may have stimulated the perjury investigation.

U.S. District Judge Jeffrey White issued an opinion (In re Grand Jury Subpoenas to Mark Fainaru-Wada and Lance Williams available below) rejecting the reporters' assertion of a journalist privilege to maintain the confidentiality of sources, and found that the grand jury subpoenas were not "unreasonable or oppressive" under Federal Rule of Criminal Procedure 17(c).  The decision to enforce the subpoenas is consistent with the decisions reached in the Special Counsel's investigation of the leak of Valerie Plame's identity as a CIA agent in which former New York Times reporter Judith Miller spent almost three months in jail on a civil contempt before I. Lewis Libby released her from the promise of confidentiality.  See In re Grand Jury Subpoena, Judith Miller, 438 F.3d 1141 (D.C. Cir. 2006).  Among those filing affidavits in support of the two reporters were former baseball commissioner Fay Vincent and well-known journalist and author Carl Bernstein.

The reporters are unlikely to testify before the grand jury and could end up in jail for civil contempt, a fate that has already befallen Bonds' former personal trainer, Greg Anderson, who refused to testify in the perjury investigation.  While Judith Miller's source released her from the confidentiality agreement, that is probably less likely to occur here because of the substantial legal risks that person (or persons) faces.  The leak of grand jury material is punishable as a criminal contempt under Rule 6(e)(7).  Moreover, during the government's investigation, it appears that all parties to the Balco case with access to the leaked grand jury testimony have stated they did not disclose it, so revealing the source of the information could well open that person up to additional charges of perjury, obstruction of justice, and making a false statement (Sec. 1001).  The two reporters may be in jail for quite a while if the case is being investigated by the new grand jury empaneled in July in the Bonds perjury investigation because the civil contempt lasts for the panel's term, which could be until January 2008 (assuming it's not extended another six months).  (ph)

Download order_denying_motion_to_quash_subpoenas_fainaruwada.pdf

August 16, 2006 in Grand Jury, Investigations, Privileges | Permalink | Comments (1) | TrackBack (5)

Monday, August 14, 2006

Voice Samples in a White Collar Case

One might find voice samples being requested by the government in street crime cases, especially ones where the accused is thought to have made a threatening telephone call or a statement at the scene of the crime.  But in a white collar case? 

Yes, AP reports here that a judge has allowed the government to obtain voice samples from three individuals charged in the "theft of trade secrets from The Coca-Cola Co." case. This case originates when Pepsi turned over evidence to Coca-Cola that someone was trying to sell them alleged trade secrets.

In the case of United States v. Dionisio, 410 U.S. 1 (1973), the Supreme Court held that requiring a grand jury witness to produce voice exemplars would not violate constitutional rights under the Fourth and Fifth Amendments.

(esp)

August 14, 2006 in Investigations, Privileges, Prosecutions | Permalink | Comments (0) | TrackBack (1)

Saturday, August 5, 2006

More on KPMG - Stein et al Case

The Stein case (KPMG related) has been a subject of a good number of posts on this blog. (e.g., here and here).  Here is one to add to this collection, as Joan Rogers has an extremely thorough and thoughtful article in the ABA/BNA Lawyers' Manual on Professional Conduct.  The ABA and BNA have been kind enough to allow this blog to provide direct access to this article. (Download PDFArtic.pdf)

The article dissects Hon. Lewis Kaplan's decision and provides extensive commentary on the decision.  It also places it in context with happenings on this issue in the ABA and the New York State Bar Association.

The Wall Street Jrl reports here of other happenings on this case.

(esp)

August 5, 2006 in Defense Counsel, Investigations, Privileges, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 26, 2006

Sixth Circuit Rejects Government Taint Team to Review Subpoenaed Documents

In the usual case in which a grand jury issues a subpoena for documents, the recipient determines what is responsive and, if necessary, asserts any attorney-client privilege and work product protection claim by refusing to turn over the records.  At that point, the ball is in the government's court to either challenge the claimed privilege or protection, or to assert the crime-fraud exception to undermine the claim.  A recent decision by the Sixth Circuit in In re Grand Jury Subpoenas 04-124-03 and 04-124-5 (here) essentially follows that model when a third party held the documents and was willing to turn them over to the government despite a privilege claim by the target of the investigation.

The investigation concerns Venture Holdings and possible looting of the company by its former owner, Larry Winget, before it went into bankruptcy.  As a result of the bankruptcy, new ownership took control of Venture (called "New Venture" in the opinion), and when a grand jury investigation began regarding questionable transactions at Venture, New Venture received a subpoena for documents that it was more than happy to comply with, including waiving any corporate attorney-client privilege.  At this point, Winget stepped in and claimed that records held by New Venture included documents covered by his personal attorney-client privilege.  The district court accepted the government's suggestion that a "taint team" made up of a prosecutor and investigator with no connection to the case -- behind the so-called "Chinese Wall" -- review the documents and determine which ones were subject to a privilege claim.  Under the government's proposal, if the taint team determined that a document was not privileged, it would go straight to the personnel assigned to the grand jury investigation without a chance for Winget to challenge that decision, at least not until after disclosure of the document.

It was this step in the process that cause the Sixth Circuit to reject the taint team and instead permit the privilege claimant to make the initial determination on the privileged nature of the documents, as if the subpoena were served directly rather than on a cooperative the third party.  The court expressed some hesitation about the fairness of the proposed government review, stating:

It is reasonable to presume that the government’s taint team might have a more restrictive view of privilege than appellants’ attorneys. But under the taint team procedure, appellants’ attorneys would have an opportunity to assert privilege only over those documents which the taint team has identified as being clearly or possibly privileged. As such, we do not see any check in the proposed taint team review procedure against the possibility that the government’s team might make some false negative conclusions, finding validly privileged documents to be otherwise; that is to say, we can find no check against Type II errors in the government’s proposed procedure. On the other hand, under the appellants’ proposal, which incidentally seems to follow a fairly conventional privilege review procedure employed by law firms in response to discovery requests, the government would still enjoy the opportunity to challenge any documents that appellants’ attorneys misidentify (via the commission of Type I errors) as privileged. We thus find that, under these circumstances, the possible damage to the appellants’ interest in protecting privilege exceeds the possible damage to the government’s interest in grand jury secrecy and exigency in this case.  Therefore, we reverse the district court, and hold that the use of a government taint team is inappropriate in the present circumstances. Instead, we hold that the appellants themselves must be given an opportunity to conduct their own privilege review; of course, we can presently make no ruling with respect to the merits of any claimed privilege that may arise therefrom.

Government taint teams have been used primarily in law office search cases in which documents seized are within the government's control, and there has been quite a bit of controversy about them because the same incentives identified by the Sixth Circuit are present.  While In re Grand Jury Subpoenas is a subpoena case, so the court is merely putting the privilege claimant in the same position he would have been in if the he received the subpoena directly, the court's rationale regarding taint teams could be applied to challenges to searches involving privileged documents.  (ph)

July 26, 2006 in Grand Jury, Investigations, Privileges | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 27, 2006

Judge Kaplan's Decision - KPMG

If one were ranking decisions by the quality of the writing, Hon. Lewis Kaplan's decision would be very high on the list, as it ranks in quality with those authored by Learned Hand.  From the opening passage that states -

"Those who commit crimes - regardless of whether they wear white or blue collars - must be brought to justice.  The government, however, has let its zeal get in the way of its judgment.  It has violated the Constitution it is sworn to defend."

To the detailed footnotes, like seen in footnote 13 -

"Mr. Thompson was quoted in the press as having defended pressuring companies to cut off payment of defense costs for their employees on the ground that "they [the employees] don’t need fancy legal representation" if they do not believe that they acted with criminal intent. Laurie P. Cohen, In the Crossfire: Prosecutors’ Tough New Tactics Turn Firms Against Employees, WALL. ST. J., June 4, 2004, A1. Naturally, the Court does not consider it in deciding this matter, as it is not in evidence. It notes, however, that such a view, whether held by Mr. Thompson or anyone else, would be misguided, to say the least.

"The innocent need able legal representation in criminal matters perhaps even more than the guilty. In addition, defense costs in investigations and prosecutions arising out of complex business environments often are far greater than in less complex criminal matters. Counsel with the skills, business sophistication, and resources that are important to able representation in such matters often are more expensive than those in less complex criminal matters. Moreover, the need to review and analyze frequently voluminous documentary evidence increases the amount of attorney time required for, and thus the cost of, a competent defense. Thus, even the innocent need substantial resources to minimize the chance of an unjust indictment and conviction.

This decision is a masterpiece.  The interesting question now will be whether the Thompson Memo survives in light of this decision.  Here my answer is yes.  Prosecutors need cooperation.  Prosecutors also need corporations to have compliance programs that will assist in diminishing fraudulent conduct.  Having cooperation and compliance programs, however, is a far cry from seeking to waive the attorney-client privilege or asking a corporation to waive attorney fees that were contractually agreed upon prior to the government investigation or indictment. 

The defendants in this case will eventually enter pleas or go to trial.  And if convicted they will be sentenced.  But this decision will make the eventual verdict fairer, and for that we should all thank Judge Lewis Kaplan.

(esp)

June 27, 2006 in Defense Counsel, Investigations, Judicial Opinions, Privileges, Prosecutions | Permalink | Comments (1) | TrackBack (1)

Highlights from the Order on KPMG Defendants

Highlights from the opinion by Judge Lewis Kaplan:

  • "The Thompson Memorandum and the USAO pressure on KPMG to deny or cut off defendants'  attorneys' fees necessarily impinge upon the KPMG Defendants' ability to defend themselves."
  • "If the government means to take the payment of legal fees into account in making charging decisions only where the payments are part of an obstruction scheme - and thereby narrowly tailor its means to its ends- it would be easy enough to say so.  But that is not what the Thompson Memorandum says."
  • "The Thompson Memorandum discourages and, as a practical matter, often prevents companies from providing employees and former employees with the financial means to exercise their constitutional rights to defend themselves.  This is so even where companies obstruct nothing and, to the contrary, do everything within their power to make a clean breast of the facts to the government and to take responsibility for any offenses they may have committed.  It undermines the proper functioning of the adversary process that the Constitution adopted as the mode of determining guilt or innocence in criminal cases.  The actions of prosecutors who implement it can make matters even worse, as occurred here."
  • "[T]he government's interference in the KPMG Defendants' ability to mount a defense 'creates an appearance of impropriety that diminishes faith in the fairness of the criminal justice system in general.'"

The remedy is not a dismissal of the action, but rather:

"1. The Court declares that so much of the Thompson Memorandum and the activities of the USAO as threatened to take into account, in deciding whether to indict KPMG, whether KPMG would advance attorneys’ fees to present or former employees in the event they were indicted for activities undertaken in the course of their employment interfered with the rights of such employees to a fair trial and to the effective assistance of counsel and therefore violated the Fifth and Sixth Amendments to the Constitution.

2. The government shall adhere to its representation that any payment by KPMG of the defense costs of the KPMG Defendants is acceptable to the government and will not be considered in determining whether KPMG has complied with the DPA or otherwise prejudice KPMG.

3. The Clerk shall open a civil docket number to accommodate the claims of the KPMG Defendants against KPMG for advancement of defense costs should they elect to pursue them. If they file a complaint within 14 days, the Clerk shall issue a summons to KPMG. The Court in that event will entertain the claims pursuant to its ancillary jurisdiction over this case.

The motions are denied insofar as they seek monetary sanctions against the government. The Court reserves decision as to whether to grant additional relief." (citations omitted)

(esp)

June 27, 2006 in Judicial Opinions, Legal Ethics, Privileges, Prosecutors | Permalink | Comments (0) | TrackBack (6)

Wednesday, June 21, 2006

Tenth Circuit Rejects Selective Waiver Argument in Qwest Securities Class Action

The Tenth Circuit joined every other federal circuit aside from the Eighth Circuit in rejecting the "selective waiver" approach to the attorney-client privilege and work product protection, which means that documents provided to the government cannot be withheld on either a privilege or work product claim.  The decision arises from the private securities fraud claims filed against Qwest Communications after the Department of Justice and the SEC began investigating the company when it disclosed in 2002 that there were substantial accounting problems.  As part of that investigation, Qwest voluntarily turned over to the government more than 220,000 pages that were subject to privilege and work product claims.  Qwest settled an SEC civil enforcement action in November 2004 by paying a $250 million penalty.  In the consolidated securities class action, the plaintiffs demanded production of the documents turned over to the government, which the district court ordered.

In a mandamus action to the Tenth Circuit, In re Qwest Communications International Inc. Securities Litigation (here), Qwest argued that the court should adopt the selective waiver analysis from the Eighth Circuit decision in Diversified Industries v. Meredith, 572 F.2d 596 (8th Cir. 1977) (en banc), that would permit it to assert the attorney-client privilege and work product protection because it only intended to waive the privilege with regard to the government agencies and not private parties.  The court noted that every other circuit has rejected that position with regard to waiver of the attorney-client privilege, and, aside from attorney opinion work product, the same result applied to general work product claims, including the Eighth Circuit.  The court rejected the argument that a failure to recognize selective waiver in the current "culture of waiver" would result in less cooperation by corporations with law enforcement investigations, stating:

[H]aving considered the purposes behind the attorney-client privilege and the work-product doctrine as well as the reasoned opinions of the other circuits, we conclude the record in this case is not sufficient to justify adoption of a selective waiver doctrine as an exception to the general rules of waiver upon disclosure of protected material. Qwest advocates a rule that would preserve the protection of materials disclosed to federal agencies under agreements which purport to maintain the attorney-client privilege and work-product protection but do little to limit further disclosure by the government. The record does not establish a need for a rule of selective waiver to assure cooperation with law enforcement, to further the purposes of the attorney-client privilege or work-product doctrine, or to avoid unfairness to the disclosing party. Rather than a mere exception to the general rules of waiver, one could argue that Qwest seeks the substantial equivalent of an entirely new privilege, i.e., a government-investigation privilege. Regardless of characterization, however, the rule Qwest advocates would be a leap, not a natural, incremental next step in the common law development of privileges and protections. On this record, "[w]e are unwilling to embark the judiciary on a long and difficult journey to such an uncertain destination." Branzburg v. Hayes, 408 U.S. 665, 703 (1972).

The Tenth Circuit noted that adoption of a selective waiver provision is better left to Congress and the rulemaking committee of the Judicial Conference, which has proposed a new Evidence Rule 502(c) (here) on this issue, which if adopted will provide:

In a federal or state proceeding, a disclosure of a communication or information covered by the attorney-client privilege or work product protection — when made to a federal public office or agency in the exercise of its regulatory, investigative, or enforcement authority — does not operate as a waiver of the privilege or protection in favor of non-governmental persons or entities. The effect of disclosure to a state or local government agency, with respect to non-governmental persons or entities, is governed by applicable state law. Nothing in this rule limits or expands the authority of a government agency to disclose communications or information to other government agencies or as otherwise authorized or required by law.

Without selective waiver in this case, counsel for the plaintiffs now get to wade through a mountain of documents that Qwest will have to produce. (ph)

June 21, 2006 in Privileges, Securities | Permalink | Comments (0) | TrackBack (0)

Saturday, June 17, 2006

District Court Hears Argument in Challenge to Search of Rep. Jefferson's Office

Chief U.S. District Judge Thomas Hogan heard arguments on June 16 about the search of Representative William Jefferson's office in the Rayburn House Office Building by FBI agents seeking evidence of his involvement in soliciting and accepting bribes.  Representative Jefferson, who was removed from the House Ways & Means Committee that same day, and the counsel for the House of Representatives argued that under the Speech or Debate Clause the government cannot search the office of a Congressman because the materials there are privileged.  They argued that the search would only be lawful if the Congressman were present to review the documents and withhold those that are part of the legislative process.  The government, echoing earlier Supreme Court decisions on the Speech or Debate Clause, asserted that bribery is not a legislative act.

Representative Jefferson and the Legislative Branch face two hurdles in making their argument that the Constitution protects legislative materials from being seized by the Executive Branch in an otherwise lawful search (there does not appear to be any issue regarding probable cause or the validity of the warrant).  First, there is no clear delineation of what documents would be part of the legislative process that would allow a court to determine whether the claimed privilege applies.  Unlike attorney-client communications, which can be identified as privileged if they involve consultation related to legal representation, almost any document or statement could -- or could not -- be related to the legislative process.  Second,  the location of the documents would seem to be irrelevant, yet that is the heart of the separation of powers argument.  A search of a Congressman's home, car, luggage, etc. would not appear to raise the same concerns as a search of the legislator's office, yet it's not clear why documents in that office should be treated any differently. 

The argument against the search seeks to extend the Speech or Debate Clause from an immunity for the individual legislator and evidentiary rule precluing reference to legislative acts to a full protection of documents from ever being obtained by investigators.  The Supreme Court has noted (see earlier post here) that acts related to demanding or accepting a bribe are not legislative acts, and therefore can be introduced in a prosecution of a Congressman.  Arguing that certain documents are completely immune from seizure because of their location and possible relation to the legislative process may have the effect of making it appear that Congress is above the law.  I doubt the judiciary will accept a rule with that type of an effect.  A New York Times story (here) discusses the hearing before Judge Hogan. (ph)

June 17, 2006 in Corruption, Investigations, Privileges | Permalink | Comments (0) | TrackBack (0)

Saturday, June 3, 2006

What Does the Speech or Debate Clause Protect?

One product of the contretemps arising from the search of Louisiana Representative William Jefferson's office is the question about what protection the Constitution provides in Article I, Sec. 6, the Speech or Debate Clause.  The protection is different from most any other afforded an individual in a criminal prosecution, and this case may well renew a debate over the protection that has not been seen since the 1970s.  What does the Speech or Debate Clause protect: the individual Congressman by providing an immunity, the Legislative Branch, or is it an evidentiary privilege affecting what can be used in a criminal prosecution?  Resolution of that issue may be important for deciding the acceptability of the Department of Justice's proposal to have a "filter team" of government attorneys, working with Representative Jefferson's counsel, review all the documents and files seized to determine what is protected by the Constitution (see earlier post here).

The Supreme Court has described the Clause as creating an evidentiary privilege that prevents the government from using the legislative acts of a Congressman against that person in a proceeding.  In United States v. Gillock, 445 U.S. 360 (1980), the Supreme Court stated, "The Framers viewed the speech or debate privilege as fundamental to the system of checks and balances."  In that case, the Court rejected a state legislator's claim that a similar evidentiary privilege be recognized for state elected officials because it was unnecessary under the Constitution or principles of comity.  As a privilege, that would appear to make the documents held by a Congressman that relate to legislative acts protected, perhaps in the same way the attorney-client privilege protects the content of communications.  That would seem to support Representative Jefferson's claim that the Executive Branch should not be permitted to peruse records that it cannot use, and the search was therefore unconstitutional. 

In United States v. Helstoski, 442 U.S. 477 (1979), however, the Court viewed the Speech or Debate Clause as only limiting the evidence that can be used at trial, and not as a form of protection for the content of documents related to the legislative process.  The Court stated, "As to what restrictions the Clause places on the admission of evidence, our concern is not with the 'specificity' of the reference. Instead, our concern is whether there is mention of a legislative act. To effectuate the intent of the Clause, the Court has construed it to protect other 'legislative acts' such as utterances in committee hearings and reports."  This statement would appear to support permitting the DoJ to search for records, and only restrict the subsequent use at trial of any evidence that might relate to legislative acts.

In Gravel v. United States, 408 U.S. 606 (1972), a Senator argued that the Speech or Debate Clause could be the basis for quashing a grand jury subpoena to the Senator's aide for testimony related to a legislative act.  While the Court found that the conduct in question -- the publication of portions of the Pentagon Papers in the Congressional Record and arrangement for private publication of then-secret documents -- was not a legislative act subject to the Clause, it did not reject the possibility that a subpoena for such material could require a court to quash a subpoena.  The opinion describes the goal of the protection for the Legislative Branch:

The Speech or Debate Clause was designed to assure a co-equal branch of the government wide freedom of speech, debate, and deliberation without intimidation or threats from the Executive Branch. It thus protects Members against prosecutions that directly impinge upon or threaten the legislative process. We have no doubt that Senator Gravel may not be made to answer-either in terms of questions or in terms of defending himself from prosecution-for the events that occurred at the subcommittee meeting.

Which way does Gravel cut?  The separation of powers basis for the Clause would argue in favor of finding that a search can be as much of an intrusion on a co-equal branch as the filing of charges, and limiting the Constitutional protection to just a basis to dismiss charges or limit evidence at trial would not be much protection at all.  Interestingly, a claim to dismiss charges on Speech or Debate Clause grounds is one of only three pre-trial orders expressly recognized as permitting an immediate appeal by a defendant under the "collateral order" doctrine, similar to the protection from double jeopardy. That means the trial itself, and not just a conviction, is the real harm because the Congressman's legislative function has been interfered with by the Executive Branch.  Yet, Gravel reflects the language of the Clause, which states that "for any Speech or Debate in either House, they [members of Congress] shall not be questioned in any other Place."  A search is not a matter of questioning a Congressman, and the Supreme Court has held that the Fifth Amendment privilege against self-incrimination does not apply to searches because they do not involve any testimonial communication. 

Does a search simply fall outside the Speech or Debate Clause, so that the offer of a "filter team" by the DoJ is really simply an effort to maintain good public relations but not constitutionally required?  As has been noted, this is the first time a Congressman's office has been searched, so we are on very new ground.  Figuring out what the Speech and Debate Clause protects will be the first order of business if a resolution is not worked out during the 45-day cooling-off period ordered by the President.  (ph)

June 3, 2006 in Corruption, Investigations, Privileges | Permalink | Comments (1) | TrackBack (0)