ABA President Karen J. Mathis Says Justice Department Policy Is Inconsistent With Presumption of Innocence
WASHINGTON, D.C., March 8, 2007—The Department of Justice’s policy pressuring corporate targets of federal criminal investigations to take punitive action against employees who assert their legal rights “is inconsistent with the fundamental legal principle that all prospective defendants … are presumed to be innocent,” said American Bar Association President Karen J. Mathis today.
Testifying before the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security, Mathis cited shortcomings in the Justice Department’s 2006 McNulty Memorandum, which modifies the 2003 Thompson Memorandum on corporate charging guidelines for federal prosecutors. Both of these Justice Department memoranda have been widely criticized as eroding attorney-client privilege, work product, and employee legal protections in the corporate context, and harming corporate compliance with the law. She urged committee members to introduce or support corrective legislation in the House similar to S. 186, sponsored by Sen. Arlen Specter.
The Thompson Memorandum instructed federal prosecutors to consider specific factors in determining whether corporate targets of investigations would receive leniency in the form of cooperation credit during federal investigations. The factors include a company’s willingness to waive its attorney-client privilege and work product protections and to fire or not assist its employees with their legal defenses. The McNulty Memorandum continues to allow prosecutors to demand privilege waiver after receiving high level Department approval, and grants companies credit for “voluntarily” waiving without being formally asked. The new memorandum also continues to allow prosecutors to force companies to take certain punitive actions against employees in return for cooperation credit.
Specter’s bill would bar Justice and other federal agencies from pressuring companies to take punitive actions against employees or other corporate agents, premised on assumptions of employee guilt before wrongdoing has been proven, as a condition for the business to receive credit for cooperating with investigations. It also would bar those agencies from compelling corporate waiver of attorney-client privilege or work product protection or granting credit for voluntary waivers.
“Prosecutors take the position that certain employees and other agents suspected of wrongdoing are culpable long before their guilt has been proven or the company has had an opportunity to complete its own internal investigation. In those cases, the prosecutors often pressure the company to fire the employees in question or refuse to provide them with legal representation or otherwise assist them with their legal defense as a condition for receiving cooperation credit,” she said.
Mathis said the policy overturns well-established corporate governance practices and intrudes on the fiduciary duties of corporate directors to determine in the best interest of shareholders whether to provide defense to an employee. It also improperly weakens the corporation’s ability to help employees defend themselves in criminal actions, and undermines the employees’ rights, she said.
The Thompson Memorandum was cited in a 2006 survey of more than 1,200 corporate counsel as a key factor in creating a “culture of waiver” among federal prosecutors to regularly pressure companies and other entities to waive their privileges during investigations, said Mathis. The survey was conducted by the Association of Corporate Counsel, the National Association of Criminal Defense Lawyers and the ABA.
“From a practical standpoint, companies have no choice but to waive [their attorney-client privilege] when requested to do so, as the government’s threat to label them as ‘uncooperative’ will have a profound effect not just on charging and sentencing decisions, but on each company’s public image, stock price and credit worthiness,” she said.
Mathis noted that the “profoundly negative, if unintended, consequences” of the Justice Department privilege waiver policy, and similar policies subsequently adopted by other federal agencies, spurred efforts by the ABA and by a diverse coalition of influential legal and business groups seeking modifications. The coalition members range from the U.S. Chamber of Commerce and the Association of Corporate Counsel to the National Association of Criminal Defense Lawyers.
She also cited the objections of a group of prominent former senior Justice Department officials, including three former attorneys general, who wrote to the U.S. Sentencing Commission in 2005 and to Attorney General Alberto Gonzales in 2006 voicing the same concerns. The Sentencing Commission reversed its policy in 2006.
With more than 413,000 members, the American Bar Association is the largest voluntary professional membership organization in the world. As the national voice of the legal profession, the ABA works to improve the administration of justice, promotes programs that assist lawyers and judges in their work, accredits law schools, provides continuing legal education, and works to build public understanding around the world of the importance of the rule of law in a democratic society.
