DOJ Introduces New Guidelines Curbing Prosecutors

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New Justice Department guidelines will prevent federal prosecutors from outright pressuring companies to fire employees who are accused of wrongdoing.

The guidelines, which the deputy attorney general, Mark Filip, announced today at the New York Stock Exchange, contain several other restrictions as well, such as a prohibition against prosecutors requesting that companies under investigation turn over certain attorney-client communications.

The new guidelines are intended to quell criticism that the Justice Department has been too aggressive in demanding cooperation from companies whose employees are under threat of indictment.

A Columbia Law School professor, John Coffee, said that in one respect he believed the guidelines went too far in restraining prosecutors. Under the new guidelines, Mr. Coffee said that prosecutors weighing whether to indict a company ought to be able to consider whether the same executives responsible for the alleged wrongdoing were still in charge.

“I do think there are times when the government should say, as the price of reduced punishment, you have to replace someone who corrupted the organization,” he said.

The new guidelines largely address what prosecutors are allowed to pressure companies to do while prosecutors pursue a criminal investigation of corporate wrongdoing. Prosecutors often take into account the degree of a company’s cooperation with their demands in deciding whether, or whom, to indict. And companies in turn, are eager to cooperate, in a bid to spare either the corporate entity, or individual executives, from prosecution.

In one notable case, a federal judge found that the government had put too much pressure on a company and, in doing so, violated the Constitution. The judge, Lewis Kaplan of U.S. District Court at Manhattan, dismissed charges against 13 executives at the accounting firm KPMG on the grounds that prosecutors had wrongly pressured the company to not pay the legal fees of the executives. The government, Judge Kaplan ruled, had violated the defendants’ Sixth Amendment right to counsel.

Today, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of the charges on the grounds that the government had “unjustifiably interfered with defendants’ relationship with counsel and their ability to mount a defense.”

The KPMG case brought scrutiny to Justice Department guidelines for prosecuting white-collar cases.

The new guidelines prevent prosecutors from considering whether a company is paying for employees’ lawyers in deciding whether to indict.

The part of the new guidelines expected to generate the most interest among the white-collar defense bar pertains to what access prosecutors will get to the legal opinions produced by a company’s lawyers.

Such attorney-client communications are of use to prosecutors because they can contain internal assessments of the legality of a company’s actions as well as descriptions of conduct that is under investigation. Under the new guidelines, prosecutors are prohibited from asking for companies to waive their attorney-client privilege and turn over certain kinds of these communications.

“What you hopefully won’t have are any type of bullying tactics that impel companies that would otherwise not want to waive the privilege to do so,” a former Justice Department official who assisted in drafting an earlier version of the guidelines, Andrew Hruska, now of the law firm King & Spalding, said.

But Mr. Hruska said that the new guidelines don’t prevent companies from voluntarily handing over such communications in an effort to cooperate or tell their side of the story.

“Often companies decide that to tell their stories effectively they have to waive” the attorney-client privilege, he said.

Professor Coffee, of Columbia Law, said that he expected prosecutors to continue handing over such documents.

“A funny dance will occur,” Professor Coffee said. “Corporations will remain under pressure to do anything the government wants even though the government can’t officially ask for it.”

It is not clear whether the new guidelines will prevent Congress from passing pending legislation that would encompass much of the Justice Department’s revisions to the guidelines. The legislation by law all federal agencies, including the Securities and Exchange Commission and the Environmental Protection Agency, from pressuring companies to waive their attorney-client privilege.

Mr. Filip, at today’s news conference, said that ultimately the guidelines won’t effect “the number or types of cases” the Justice Department prosecutes.


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