'McNulty Memo' Triggers an Ultimatum

Legislation may be only option to solve clash over privilege waivers
The battle over the Justice Department's policy on waiver of attorney-client privilege in corporate probes seems to be heating up. Senate Judiciary Committee Chairman Patrick Leahy has issued an ultimatum to the Justice Department to change its policy, threatening to resort to "legislative options." A week ago, Sen. Arlen Specter reintroduced his bill to change the policy, and a coalition of business, civil rights and defense groups is pushing for legislation, which it says is the only practical option.

Marcia Coyle

The National Law Journal

2008-07-07 12:00:00 AM
A key senator's recent ultimatum to the U.S. Department of Justice to change its policy on waiver of attorney-client privilege in corporate investigations likely will determine the fate of pending legislation that would make those changes in the current Congress.

Shortly before the lawmakers broke for their July 4 recess, Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., said in a committee meeting that he had met with new Deputy Attorney General Mark Filip to discuss the department's guidelines -- the so-called McNulty memorandum. Filip told him that he has reviewed past policy and is working on improvements, according to Leahy.

"If there are not further developments when we return after the July 4 recess, the committee may well have to turn its attention to legislative options," said Leahy.

For a coalition of business, civil rights and defense organizations, legislation is now the only practical option to address what it says is the widespread, coercive demand for waiver as a sign of cooperation by a corporation.

"The policy has gone viral," said Stephanie Martz, director of the white-collar crime project of the National Association of Criminal Defense Lawyers, a coalition member. "It has spread to enough federal agencies that anything the Justice Department does isn't going to be enough to change the others."

The chief sponsor of the pending Senate bill to change the policy appears to agree. Sen. Arlen Specter, R-Pa., ranking minority member of the Judiciary Committee, reintroduced the "Attorney-Client Privilege Protection Act of 2008" a week ago. He called the bill "a modified version" of legislation he introduced last September.

"There is no need to wait to see how the McNulty memorandum will operate in practice," said Specter. "There is similarly no need to wait for another internal Department of Justice reform that will likely fall short and be the fifth policy in the last 10 years.

"Any such internal reform will not address the privilege waiver policies of other government agencies that refer matters to the Department of Justice and allow in through the window what isn't allowed through the door."

MCNULTY REQUIRES APPROVAL

The McNulty memo states that waiver of attorney-client and work-product protections, while not required as evidence of cooperation, could help expedite an investigation. Requests for waivers may only be made when there is a "legitimate need" for the privileged information. Depending on the type of information requested, a prosecutor must get approval of a waiver request at higher levels within the department.

The House approved a bill last year to end the waiver policy. Specter's bill would prohibit any agent or attorney of the federal government, in any criminal or civil case, to demand or request the disclosure of any communication protected by the attorney-client privilege or attorney work product. The bill would also prohibit government lawyers and agents from basing any charge or adverse treatment on whether an organization pays attorney fees for its employees or signs a joint defense agreement.

"While it was almost impossible to argue with the logic of the first bill, the language in the reintroduced bill is clearer and tighter," said Laura Stein, chairwoman of the Association of Corporate Counsel, and senior vice president and general counsel of The Clorox Co.

Martz said coalition members have met with the Justice Department's Filip and although the conversations have been "well meaning and detailed," she said, there has been no consensus on changes.

"My sense is Senator Leahy is cautious in legislating in this area where, in his view, it could have a direct impact on the way prosecutors investigate corporate crime," she said. "My view and others' view is it will have an impact only on the margins and those situations are exactly the ones we want to control," she said.

The Senate returns this week.