New Guidelines for Prosecution of Business Organizations Increase Protections for Defendants
George J. Terwilliger, III

DOWNLOAD PDF: Revised DOJ Guidelines Principles of Federal Prosecution of Business Organizations

DOWNLOAD PDF: Complete Appellate Decision

Deputy Attorney General Mark R. Filip recently announced new DOJ guidelines for the prosecution of business organizations.

 

The new guidelines mark a significant change in federal practice by declaring that "a corporation need not disclose and prosecutors may not request" the disclosure of attorney-client communications or attorney work product "as a condition for the corporation's eligibility to receive cooperation credit." Prior versions of the guidelines allowed prosecutors to request such waivers from organizations under investigation and to consider whether such waivers were made in determining whether the corporation received cooperation credit.

 

The New Guidelines Recognize That an Effective Attorney-Client Relationship Promotes Compliance with the Law

 

The new guidelines commendably recognize the critical importance of the attorney-client privilege and work product doctrine to effective compliance with the law:

The value of promoting a corporation's ability to seek frank and comprehensive legal advice is particularly important in the contemporary global business environment, where corporations often face complex and dynamic legal and regulatory obligations imposed by the federal government and also by states and foreign governments. The work product doctrine serves similarly important goals.

Principles of Federal Prosecution of Business Organizations, 9-28.710 (Aug. 28, 2008).
 
Prior versions of the guidelines allowed prosecutors to request waivers of attorney-client communications and attorney work product, thereby discouraging organizations from having full and frank conversations with counsel for fear that such conversations would have to be disclosed upon prosecutors' request. This effect was compounded by the near-universal rule in federal appellate courts that a waiver of the attorney-client privilege and work product protection, even on request of the government, amounted to a waiver to civil plaintiffs as well.

 

The New Guidelines Also Promote Rights of Former and Current Officers and Employees

Several other aspects of the revised guidelines serve to protect the rights of current or former officers or employees of the organization. Just as prosecutors are no longer permitted to make charging decisions based on the waiver of attorney-client privileges or protections, prosecutors are also now forbidden from making charging decisions based on whether an organization has advanced legal fees to former or current employees (unless it rises to the level of obstruction of justice), whether a corporation has entered into a joint defense agreement, or whether the corporation has sanctioned culpable employees.

 

The Advancement of Attorneys' Fees Issue Was Likely Driven by Recent Court Decisions against the United States

 

The new prohibition on prosecutors' consideration of payment of legal fees is likely related to the dismissal of the United States' criminal case against several former KPMG executives arising out of tax advice that allowed clients to avoid paying billions in taxes. In July 2007, a federal district judge dismissed the indictment against 13 of the former executives, finding that the United States violated the executives' constitutional rights by pressuring KPMG to limit, and eventually deny, payment of attorneys' fees to the employees' counsel. Operating within its previously applicable guidelines, the DOJ had advised KPMG that if it paid such attorneys' fees, KPMG's cooperation would not be sufficient to avoid a criminal disposition.

 

Coincidentally, the same day that Deputy Attorney General Filip announced the new guidelines, a federal appellate court upheld the dismissal of the indictment in the KPMG case.

 

Copies of the new DOJ guidelines and the appellate decision affirming the dismissal of the indictment against the 13 KPMG executives can be found in the Downloads section above, or by following these links:

• Click here to read the complete revised DOJ guidelines (PDF)
  
  
• Click here to read the complete appellate decision (PDF)

 

White & Case LLP's White Collar Practice Group will continue to provide updates regarding law enforcement's FCPA policies and practices.

 

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