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Fear that federal prosecutors will continue to pressure corporations under investigation to waive attorney-client privilege and work-product protections is hampering corporate compliance efforts, say two surveys of corporate lawyers released this spring. According to Susan Hackett, general counsel of the Association of Corporate Counsel in Washington, D.C., pushing companies to waive these rights in exchange for leniency has had the unintended result of undermining the working relationship between client and counsel. “Prosecutors’ efforts are having the perverse opposite effect on our efforts to promote accountability and transparency,” she says. “The message they’re sending is to shut up and go for deep cover. [Clients] are not going to seek out their lawyer anymore when their lawyer could well become Exhibit A for the prosecution.” The U.S. Department of Justice did not return calls seeking comment. ACC surveyed 3,000 in-house lawyers, receiving 363 responses. Thirty percent of respondents said their clients had “personally experienced” an erosion in protections afforded by attorney-client privilege and the work-product doctrine since Enron’s collapse. A companion survey, conducted by the Washington, D.C.-based National Association of Criminal Defense Lawyers, found even higher numbers. The association’s White Collar Crime Project surveyed outside counsel and found that 47.6 percent had experienced loss of privilege. Project director Stephanie Martz says the risk of losing the privilege makes for less candor and reluctance to put things in writing. “Our efforts are made particularly difficult when lawyers have to begin interviews with employees with Miranda warnings,” says Martz. “That’s no way to seriously probe for problems and try to solve them.” What’s at stake, in part, are the sentence-reduction points given for cooperation with investigators. Commentary accompanying the Federal Sentencing Guidelines that went into effect in November 2004 says that failure to waive attorney-client privilege and work-product protections will not be held against an entity or individual “unless such waiver is necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization.” That’s a giant “unless,” says Andrew Good of Boston’s Good & Cormier, who often represents corporate officers in criminal matters. “The practical reality is that the [Justice Department] policy is to penalize corporate defendants who do not waive attorney-client privilege,” he says. “You get a more lenient deal if you do and a less favorable deal if you don’t; the exception swallows the rule.” Corporations can avoid being charged at all or reduce their potential culpability by waiving their attorney-client privilege and work-product protections, according to a January 2003 memo written by then-deputy attorney general Larry Thompson to department heads. Thompson, who is now senior vice president for government affairs, general counsel, and secretary of Purchase, N.Y.-based PepsiCo, was not available for comment. The surveys, designed by ACC, indicate that in-house and outside counsel have similar views on the issue. About 96 percent of respondents agreed that the privilege improves a lawyer’s ability to monitor, enforce, and improve a company’s compliance initiatives. The crux of any attorney-client relationship is trust, says Laura Stein, GC of Oakland-based The Clorox Co. and chairwoman of ACC’s advocacy committee. “It is crucial to encourage employees of the client to feel comfortable discussing even the most sensitive matters,” says Stein. “[This] will lead to greater compliance.” Ninety-three percent of in-house counsel believe that their senior-level corporate clients rely on the privilege. Barry Nagler, GC of Pawtucket, R.I.-based Hasbro Inc., explains why. “In-house counsel are uniquely engaged in the front-end of decision making and can prevent bad things from happening,” he says. “But you can’t stop what you don’t know.” NACDL and ACC filed separate amicus briefs in the appeal by accounting firm Arthur Andersen from its criminal conviction for obstruction of justice. That conviction was based on advice the firm got from an in-house counsel. A version of this story first appeared in The National Law Journal, a sibling publication of Corporate Counsel.

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