Attorney Work Product Waivers Should Be Requested Less Frequently

April 2006

In April 2006, a coalition of businesses, lawyers, and civil libertarians won a needed change when the U.S. Sentencing Commission voted unanimously to delete language in the sentencing guidelines that encouraged government prosecutors to require waivers of the attorney-client privilege and work product protections in order to qualify for leniency in sentencing.   

The current sentencing guidelines, which were the result of 2004 modifications, apply to corporations convicted of federal offenses.  The guidelines determine the fine that the court should impose.  The factors include: 

1. The seriousness of the offense
2. Whether the corporation has an effective compliance program
3. Whether the corporation has a history of administrative, civil , or criminal infractions, and
4. Whether the corporation self reported the violation and cooperated in the government's investigation.   

One of the 2004 revisions was a provision stating that credit for cooperation would require a waiver of the attorney-client and work-product privileges if "such waiver is necessary in order to provide timely and thorough discussion of all pertinent information known to the organization."  Supported by this language and the similar language of the Thompson guidelines (discussed below), prosecutors routinely press corporations to reveal confidential attorney work-product.   

As a result of a growing number of court rulings which indicate that waivers of attorney work product privileges can not be selective, these government privilege waivers have significant adverse impacts on related civil litigation.  Being unwilling to turn one's internal investigation over to adverse civil litigants has nothing to do with whether one is truly endeavoring to cooperate in a criminal matter. 

Somewhat related to this is the government's stance that a company's indemnification of legal expenses of accused employees represents evidence that the corporation is failing to properly discipline employees responsible for the wrongdoing.  From the government's perspective, being forced to pay for legal fees pursuant to an indemnification agreement is apparently tantamount to failing to punish or discipline a wayward employee.  Based on this government pressure, some companies have cut-off such funding to employees (regardless of contractual obligations that may require otherwise) under pressure from the Justice Department.   

The Thompson Memorandum

The government's current prosecution guidelines come from a January 20, 2003 memorandum by former Deputy Attorney General Larry Thompson, entitled "Principals of Federal Prosecution of Business Organizations".  Under the "Thompson Guidelines", Federal prosecutors now consider the following nine factors when deciding to criminally prosecute a corporation.  (The items discussed above which are of particular interest are underscored): 

1. The nature and seriousness of the offense, including the risk of harm to the public;
2. The pervasiveness of the wrongdoing within the corporation, including the complicity in, or condonation of, the wrongdoing by corporate management;
3. The corporation's history of similar conduct, including prior criminal, civil and regulatory actions against it;
4. The corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including the waiver of corporate attorney-client and work product protection;
5. The existence and adequacy of the corporation's compliance program;
6. The corporation's remedial actions, including any efforts to implement an effective corporate compliance program or to improve an existing one, to replace responsible management, to discipline or terminate wrongdoers, to pay restitution, and to cooperate with relevant government agencies;
7. Collateral consequences, including disproportionate harm to shareholders, pension holders and employees not proven personally culpable and impact on the public arising from the prosecution;
8. The adequacy of the prosecution of individuals responsible for the corporation's malfeasance;
9. The adequacy of remedies such as civil or regulatory enforcement actions. 

The Thompson Memorandum, which affects the Justice Department's decision to bring criminal charges, is not altered directly by the Sentencing Commission's actions. However, the change will hopefully soften the DOJ's current harsh stance.   

Fulcrum Inquiry is a forensic accounting firm that assists in litigation-related calculations and financial investigations.