Specter Moves To Change Corporate Crime Rules

Senator Specter is moving to overturn key parts of a Justice Department policy that gives lenient treatment to companies under investigation when they waive their right to confidential legal advice.

Mr. Specter, a Republican of Pennsylvania, introduced legislation yesterday that would nullify portions of corporate crime guidelines issued to federal prosecutors in 2003 as part of the response to business frauds, such as the collapse of Enron. The directive, authored by the deputy attorney general at the time, Larry Thompson, has come under fire from many quarters as an erosion of attorney-client privilege.

"The Thompson memorandum is excessive in that it impinges upon the constitutional right to counsel, and the Congress has the ultimate say in how the Department of Justice is going to function," Mr. Specter said, according to a transcript provided by his office.

The senator, who is the outgoing chairman of the Judiciary Committee, was flanked at a Capitol Hill event yesterday by an unusual set of allies, ranging from the Chamber of Commerce to the American Civil Liberties Union.

"The privilege to consult with an attorney freely, candidly, and confidentially has been under attack in this country," the president of the chamber, Thomas Donahue, said in a statement. "A company that refuses to waive its privilege risks being labeled as uncooperative, which all but guarantees that it will not get a settlement. It also ensures damage to the company's brand, shareholder value, and the company's relationships with suppliers and customers."

The ACLU's chief lobbyist in Washington, Caroline Fredrickson, said Mr. Specter's legislation would return the right of employees and employers to consult freely with lawyers. "This is a common sense approach to restoring one of the fundamental legal protections guaranteed under the Constitution to those under investigation. This is a rubber meets the road justice issue," she said in a statement.

The Justice Department is conducting an internal review of the guidelines but is not expected to delete the attorney-client provisions completely, as Mr. Specter's bill would do.

"DOJ is committed to preserving the attorney-client privilege and work-product protection, punishing those who undermine our financial system through criminal conduct, and protecting the investing public," a spokesman for the department, Brian Roehrkasse, said. "Currently, we have not made any final decisions to amend our guidance."

Mr. Specter's legislation would also bar the Justice Department from making prosecutorial decisions based on a company's provision of legal fees or legal counsel to its employees. In March, a federal judge in Manhattan, Lewis Kaplan, ruled that prosecutors violated the constitutional rights of defendants in a tax shelter case by pressuring the accounting firm where they worked, KPMG, not to pay for their legal defense. The government's appeal of that ruling is pending before the 2nd Circuit.

In September, 10 former high-ranking officials at the Justice Department wrote to Attorney General Alberto Gonzales seeking changes to the Thompson memo. All of the attorneys are now in private practice and sell the kind of advice that is devalued by the Justice Department's policy.