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For several years, members of the corporate defense bar have been bellyaching about an erosion of attorney-client privilege. Now, as a result of the Bush administration’s aggressive stance on corporate crime, consternation has reached a fevered pitch. Defense attorneys are concerned that their ability to adequately represent their clients will be compromised by allowing government investigators access to confidential material. Perhaps more important, waiving attorney-client privilege arms plaintiffs’ lawyers with potentially damaging evidence to use against companies in civil litigation. In response, the white-collar bar is backing a legislative proposal that would allow corporations to turn over privileged material to the Securities and Exchange Commission, without fear that it will wind up being used against them in shareholder suits. At the American Bar Association’s annual convention on white-collar crime, held March 6 and 7, defense lawyers reported that waivers of attorney-client privilege are now routinely requested when companies enter negotiations with the government to avoid criminal prosecution. Also, according to defense attorneys, waivers are increasingly demanded by prosecutors at the outset of investigations, before other options for gathering information have even been considered. “The attorney-client privilege, once sacrosanct, cannot be viewed that way any longer,” says O’Melveny & Myers partner Alejandro Mayorkas, former U.S. Attorney for the Central District of California in Los Angeles. Justice Department officials maintain that a company’s willingness to waive attorney-client privilege is simply one of many considerations prosecutors weigh when deciding whether to seek charges against a business organization. “DOJ policy does not require a waiver,” Southern District of New York prosecutor Shirah Neiman said when addressing the ABA conference. “Defense counsel can work with prosecutors to get them the pertinent information in some other way.” Still, many white-collar defense attorneys report having been asked to waive attorney-client privilege in an initial meeting with prosecutors. “That topic is now raised as one of the first series of requests made by prosecutors, before any discussion of the facts,” says Skadden, Arps, Slate, Meagher & Flom partner Keith Krakaur, a former federal prosecutor in the Eastern District of New York. “I think it significantly impairs the attorney-client relationship.” The push for privileged documents is part of a series of measures transforming the traditional role of corporate counsel. Defense lawyers are concerned that they may be unable to conduct vigorous internal inquiries if it becomes a foregone conclusion that the fruits of their work will end up in the hands of a prosecutor. “If the government is eventually going to demand your privileged work, why provide them a road map?” asks Williams & Connolly white-collar defense partner John Villa. In addition, once attorney-client privilege has been waived, it cannot be resurrected to shield material from plaintiffs’ lawyers. In an attempt to ease the dilemma and aid its own probes, the SEC recently proposed a legislative amendment that would allow entities to turn over privileged material to the SEC but not waive the privilege for good. “In many cases, persons or entities would be willing to share privileged information with the commission’s staff if they could otherwise maintain the privileged and confidential nature of the information,” SEC Enforcement Director Stephen Cutler told the House Financial Services Committee Feb. 26. A DOJ spokesman said last week that the Justice Department is not considering a similar proposal. One obvious barrier to a congressional action that would cover disclosures to the Justice Department as well as to the SEC is that the Justice Department itself conducts both criminal and civil litigation in many areas, including health care, antitrust and government contracts. For the moment, corporations under DOJ scrutiny frequently find themselves facing a legal Scylla and Charybdis — a possible criminal indictment, or millions of dollars in civil exposure. At a November 2002 hearing of the U.S. Sentencing Commission, Tyco International Ltd. General Counsel William Lytton put the predicament bluntly. “I am perfectly happy to give over and waive the attorney-client privilege to the Department of Justice … except that it is later going to be used to line the pockets of a rabid plaintiffs’ bar,” said Lytton, who joined Tyco in September 2002 as part of a management overhaul following the indictment of several Tyco executives. One major source of anxiety at the ABA convention was a memorandum issued by Deputy Attorney General Larry Thompson in January articulating considerations for bringing criminal charges against business organizations. Modeled on principles drawn up in 1999 by then-Deputy Attorney General Eric Holder Jr., the guidelines have been criticized for placing undue emphasis on the waiver of attorney-client privilege. Both the Thompson and Holder guidelines state that “one factor the prosecutor may weigh in assessing the adequacy of a corporation’s cooperation is the completeness of its disclosure including, if necessary, a waiver of the attorney-client and work product protections.” Corporate defense lawyers say the guidance sends a message that prosecutors should seek waivers as a matter of course. “You put it in writing, you make it a factor,” says W. Neil Eggleston, co-chair of the white-collar defense group at D.C.’s Howrey Simon Arnold & White. “Pretty soon it won’t be a factor companies can say no to and still get the benefits of cooperating.” Justice Department officials counter that the Thompson memo does not create a mandatory waiver of attorney-client privilege, but concede that individual prosecutors have discretion over when to seek privileged material. “The department does not consider waiver of a corporation’s attorney-client and work product protection an absolute requirement,” says Criminal Division spokesman Bryan Sierra. “There are a variety of factors for prosecutors to weigh when assessing cooperation. This is just one of them.” “The problem is if you give prosecutors a tool, they will almost never exercise good judgment in not using it,” says Eggleston, one-time prosecutor in the Southern District of New York and associate White House counsel from 1993 to 1994. Ironically, the controversial guidelines evolved in response to requests from the corporate defense bar several years ago. After the release of the Holder memo, the Justice Department engaged in a series of meetings with defense lawyers on the issue of attorney-client privilege. Several white-collar lawyers say the defense bar was disappointed none of their proposed revisions were included. Rather, the new Thompson memo instructs prosecutors to increase “emphasis on and scrutiny of the authenticity of a corporation’s cooperation.” The guidance rankles many defense lawyers. “The notion that prosecutors are being instructed as a matter of Justice Department policy to question whether counsel is dealing in good faith is a troubling one,” says Krakaur, the Skadden Arps partner. “The language calls into question the integrity of the defense bar.”

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