Reviving the Attorney-Client Privilege

Once upon a time, federal law enforcement agencies investigated allegations of corporate criminal activity using their own powers, authorities, and investigative techniques. Companies that were subject to federal criminal investigations relied on their in-house and outside counsel to defend them vigorously.

The formulation of the corporate federal sentencing guidelines in the late 1980s began the discussion about the appropriate weight that should be given to the waiver of the attorney-client privilege and the work-product doctrine in determining a company’s “cooperation.” Such cooperation was established as the key to minimizing potential corporate sanctions.

The changes in the Justice Department's published guidance gave little sense of the massive transformation taking place in the real world. 

Since 1999, the federal government has issued three successive policy documents (each named for the deputy attorneys general who issued them): the Holder Memorandum (1999), the Thompson Memorandum (2003), and, most recently, in late 2006, the McNulty Memorandum.

Each of these documents provided federal prosecutors with a common framework to determine whether criminal charges should be brought against not individual executives but companies themselves. Although these memos contained various considerations, over time the most controversial became the treatment of the attorney-client privilege and its relationship to the notion of the company’s cooperation with a federal investigation. The Thompson Memo suggested that in some circumstances a company’s willingness to waive its attorney-client privilege would become the measure of its cooperation.

But the changes in the Justice Department’s published guidance on the issue gave little sense of the massive transformation taking place in the real world. What began as a carrot to reward companies for taking the extraordinary step of forsaking their traditional protections became a set of established and almost unvarying expectations of how a company was to respond. The line between rewarding extraordinary cooperation and punishing a company’s decision to avail itself of the traditional protections afforded by the attorney-client privilege was blurred: companies that failed to turn over privileged information—not only the product of factual investigations but in many cases, the specific advice provided by in-house and outside counsel—were viewed as “uncooperative,” if not worse.

Companies and their counsel generally viewed these incursions on the attorney-client privilege as dangerous and unprecedented. In the last two to three years, they became more vocal about their concerns.

The McNulty Memo was a clear response to the growing outcry over the government’s aggressive pursuit of waiver. It established procedures for obtaining privilege and work-product waivers from companies. It is too early to tell whether the McNulty Memo will accomplish its objectives. Many defense lawyers liken it to using a Band-Aid to treat cancer.

The Justice Department has pleaded for calm and claimed that the defense bar always exaggerated the incidence of privilege waivers. Meanwhile, legislation has been introduced in Congress that would in effect prohibit the government from even seeking privilege waivers of the sort that have been pursued in recent years. This important area of law and practice remains very much in flux.

Michael R. Bromwich is a litigation partner resident in Fried Frank’s Washington, D.C., and New York offices, where he heads the internal investigations, compliance, and monitoring practice group.