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Corporate attorneys are putting their feet down. After years of caving in to pressure by federal prosecutors to hand over privileged material, attorneys now are accusing the government of betraying their confidences and of jeopardizing corporate efforts to uphold the law. On May 12, the American Corporate Counsel Association (ACCA) wrote a letter of protest to Deputy Attorney General Eric Holder criticizing guidelines enunciated in an internal memo he released in June 1999 that ACCA says encourages prosecutors to force corporate suspects to waive attorney-client privilege to cooperate with the government and to avoid prosecution. ACCA President Fred Krebs says it’s an ongoing practice that’s placing corporations in an untenable situation, with privileged information being used by third parties to sue corporations. He says that ACCA is seeking a meeting with Holder to resolve the problem. The letter, written by Maud Mater, ACCA’s chairman and the general counsel of Freddie Mac, said, referring to Holder’s memo, “[T]hese statements suggest that corporations which wish to cooperate with government investigations and prosecution must abandon their attorney-client and work product privileges.” But Michael Horowitz, chief of staff to the assistant AG for the Criminal Division, denies that prosecutors require the waiver as a condition of cooperation. He refers to a statement by Asst. AG James Robinson, published in the December issue of Business Crimes Bulletin, in which Robinson said that he opposed such a policy: “These are protections the legal system appropriately considers to be very valuable to assure that corporations will have the best legal advice they can to comply with the law.” But ACCA and corporate attorneys interviewed believe that Robinson’s statement belies the truth. Instead of using subpoenas and grand jury testimony to investigate corporate wrongdoing, “the government is deputizing corporations to act on its behalf,” laments Judson Starr, of the Washington, D.C., office of Baltimore’s Venable firm and former head of the Justice Department’s Environmental Crime Section. In a March speech before an American Bar Association conference on white-collar crime, Starr said that he knew of six cases in which corporations were pressured to waive attorney-client privilege before being allowed to cooperate with the government. David Buente, of the Washington, D.C., office of Chicago’s Sidley & Austin, says that one of his corporate clients was victimized by federal prosecutors after it voluntarily revealed that an employee had falsified environmental reports to government regulators. A DEMAND FOR ALL REPORTS After an investigation by the company’s general counsel, the employee was terminated. The environmental violations were minor, Buente says. However, prosecutors then demanded all of the general counsel’s reports and used them to prosecute the company. Buente declined to identify his client. A recent report by the Bureau of National Affairs described how Columbia/HCA Health Care Corp., the target of an ongoing Justice Department investigation that partially settled for $745 million on May 18, was forced by a federal judge to provide plaintiffs in a civil suit against Columbia with documents, previously considered privileged, that Columbia had disclosed to the government. Corporate attorneys say that there are several negative repercussions of the government’s pressure to waive the privilege: It stifles frank conversations between corporate counsel and their clients, breeds distrust between employees and management, and discourages counsel from documenting the results of internal company investigations. As a result, “companies may not be able to get the information they need,” says Earl Silbert, of the Washington, D.C., office of Piper Marbury Rudnick & Wolfe L.L.P. BENEFITS OF WAIVER Others, however, believe that the benefit from the release of information outweighs any harm to corporations. Earl Devaney, inspector general of the Department of Interior, says that when he was head of the Environmental Protection Agency’s Criminal Enforcement Division, he found that both corporations and the government benefited from the company agreeing to waive attorney-client privilege. Corporations avoided the stigma of criminal charges, and the government learned about environmental misdeeds that otherwise would not have come to its attention. “It worked particularly well in civil proceedings. It was the braver soul that was willing to give up the privilege on the criminal side,” he says. David Luban, a law professor at Georgetown University who specializes in ethics, supports the government’s effort to ferret out corporate abuse through the use of privileged attorney-client information. The Supreme Court has too broadly protected such information anyway, he says, citing Upjohn Co. v. U.S., 101 S. Ct. 677, 682 (1981). Corporations, he says, often use the privilege “to stonewall and facilitate cover-ups.” Corporate counsel who say that they are pawns of prosecutors, he says, “treat litigation as if it’s a game rather than the administration of justice.” And what’s wrong with third parties using privileged material to sue corporations that caused an injustice? “If there is serious wrongdoing,” he says, “the real injustice is that we would never find out … because it would be buried under the” privilege.

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