The U.S. Department of Justice (DOJ) last week released its fifth significant change to its attorney-client privilege waiver guidelines for organizations (Guidelines) in the last ten years. The latest Guidelines were issued to address threatened Congressional action (S. 3217 and H.R. 3013) against the DOJ's aggressive pursuit of attorney-client privilege waivers and the Second Circuit's recent decision in United States v. Stein, which upheld the dismissal of criminal tax fraud charges against former KPMG employees based upon the U.S. Attorney's interference with their constitutional right to counsel. In Stein, the prosecutors wrongly pressured KPMG to cease paying attorneys for the employee defendants, which had the effect of depriving them of a proper defense. The new Guidelines reduce the pressure on organizations to waive attorney-client privilege in federal investigations.
Organizations will no longer be required to waive the attorney-client or attorney work product privileges to show their cooperation with the government and receive more favorable prosecutorial treatment under the new Guidelines. The government's focus is on the disclosure of facts regarding the alleged misconduct. While organizations remain free to voluntarily waive attorney-client communications or work product, prosecutors may no longer ask or require organizations to waive the privileges, except in very limited circumstances.
However, organizations that conduct internal investigations through lawyers, which may confer attorney-client privilege or attorney work product protection on at least some of the information collected, may still be indirectly required to waive a portion of their privileges in order to disclose what the government deems to be all of the relevant facts. Organizations will receive cooperation credit based upon the facts disclosed, without regard to whether the facts were contained in materials protected by attorney-client privilege or attorney work product or not. If an organization does not disclose relevant facts about the alleged misconduct for any reason, including claims of privilege, it generally will not be entitled to receive the corresponding cooperation credit.
In evaluating cooperation, the Guidelines also provide that prosecutors "should" not take into account whether an organization is advancing or reimbursing attorneys' fees or providing counsel to employees, officers, or directors. Likewise, prosecutors may not request that an organization refrain from taking such action. In addition, prosecutors may not request that an organization refrain from entering into joint defense agreements.
In determining whether or not to prosecute an organization, the government may consider whether an organization has taken meaningful remedial measures. Previously, prosecutors were allowed to consider whether an organization disciplined or terminated employees in evaluating cooperation. Under the new Guidelines, prosecutors may only consider whether an organization has disciplined culpable employees, and only for the purpose of evaluating the organization's remedial measures or compliance program.
While the latest Guidelines are a step in the right direction, additional protections are still required for organizations and their employees and officers. Consequently, Congressional action should not be allowed to whither as a result of the issuance of the Guidelines.