The McNulty Memorandum: Attorneys' Fees and Waiver of Corporate Attorney-Client and Work Product Protection
The McNulty Memorandum:
Attorneys’ Fees and Waiver of Corporate
Attorney-Client and Work Product Protection
Updated October 14, 2008
American Law Division
The McNulty Memorandum: Attorneys’ Fees and
Waiver of Corporate Attorney-Client and Work Product
Corporations are criminally and civilly liable for the misconduct of their officers
and employees committed within the apparent scope of their authority for the benefit
of the corporation. Corporations frequently direct their attorneys to conduct internal
investigations to determine if the corporation is in compliance with regulatory and
other legal requirements. Much of the information gathered in these investigations
is protected by the attorney-client privilege and the attorney work product doctrine,
unless waived. Once waived, the information is often available to private civil
litigants. In addition, most corporations advance their officers and employees
attorneys’ fees relating to job related litigation.
The Justice Department enjoys prosecutorial discretion to bring criminal charges
against a corporation, its culpable officers or employees, or both. In some instances,
indictment alone can be catastrophic if not fatal for a corporation. The Thompson
Memorandum, since revised as the McNulty Memorandum, described the policy
factors to be considered in the exercise of this discretion. Two of the factors
explicitly mentioned were whether a corporation had waived its privileges and
whether it had cut off the payment of attorneys’ fees for its officers and employees.
In United States v. Stein, a federal district court in New York determined that
implementation of the policies in the Thompson Memorandum violated the Fifth
Amendment right to due process, the Sixth Amendment right to the assistance of
counsel, and the Fifth Amendment privilege against self-incrimination.
The Attorney-Client Privilege Protection Act of 2007, H.R. 3013, introduced by
Representative Scott, was reported out of Committee and passed the House under
suspension of the rules on November 13, 2007. It would bar the federal investigators,
regulators and prosecutors from demanding that corporations waive their attorney-
client or attorney work product protection or from cutting off attorneys’ fees for their
officers or employees. It would also preclude federal authorities from weighing such
conduct when deciding whether to bring criminal charges against a corporation.
Senator Specter introduced a virtually identical bill in the Senate, S. 186. He later
offered a revised version as S. 3217. Both Houses have held hearings on the matterthth
in the 109 and 110 Congresses, but adjourned without taking further action on the
This report is available in an abridged version, stripped of its footnotes and most
of its citations to authority, as CRS Report RS22588, The McNulty Memorandum In
Short: Attorneys’ Fees and Waiver of Corporate Attorney-Client and Work Product
Protection, by Charles Doyle.
In troduction ..................................................1
Attorney-Client Privilege and Work Product Protection................4
Attorney Work Product.....................................8
Deputy Attorney General Memoranda and Related Matters.............9
Proposed Rules of Evidence................................16
Legislative Activity in the 109th Congress......................22
Legislative Activity in the 110th Congress......................26
The McNulty Memorandum: Attorneys’ Fees
and Waiver of Corporate Attorney-Client and
Work Product Protection
Corporations are subject to civil and criminal liability for misconduct,
committed for their benefit, by their officers, employees and agents.1 Under most
circumstances, they enjoy the right to attorney-client privileges and attorney work
product protection in connection with government investigations of possible2
misconduct. The Justice Department’s Thompson Memorandum in describing
federal prosecution policies suggested that a corporation faced an increased risk of
prosecution if it claimed those privileges or if it paid the business-related litigation
costs of its officers and employees. The Thompson Memorandum, subsequently
superseded by the McNulty Memorandum, sparked considerable debate before
Congress and elsewhere. At least one federal court concluded that the manner of
implementing the Thompson Memorandum policy ran contrary to the dictates of the
Fifth and Sixth Amendments.3 Both Houses held hearings on the matter during thethth
109 Congress and the 110 Congress. The House Judiciary Committee has reported
out the Attorney-Client Privilege Protection Act of 2007 (H.R. 3013), H.Rept. 110-
(S. 186 and S. 3217). The 110 Congress concluded before further action could be
taken, although a related amendment to the Federal Rules of Evidence did pass.4
1 New York Central R.R. v. United States, 212 U.S. 481, 295-96 (1909); United States v.
Potter, 463 F.3d 9, 25 (1st Cir. 2006)(internal quotation marks and citations omitted)(“a
corporation may be held liable for the criminal acts of its agents so long as those agents are
acting within the scope of employment. The test is whether the agent is performing acts of
the kind which he is authorized to perform and those acts are motivated – at least in part –
by an intent to benefit the corporation. . . The legal rules imputing criminal responsibility
to corporations are built upon analogous rules for civil liability”).
2 Upjohn Co. v. United States, 449 U.S. 383, 390 (1981)(citations omitted)(“this Court has
assumed that the privilege applies when the client is a corporation and the Government does
not contest the general proposition”); cf., Hickman v. Taylor, 329 U.S. 495, 510-11 (1947).
3 United States v. Stein, 435 F.Supp.2d 330, 356-72 (S.D.N.Y. 2006), aff’d, 541 F.3d 130
(2d Cir. 2008); see also, United States v. Stein, 495 F.Supp.2d 390 (S.D.N.Y. 2007).
4 F.R.Evid. 502, P.L. 110-322, 122 Stat. 3537 (2008). The new Rule protects against
inadvertent waiver of the attorney-client privilege and the attorney work product doctrine
and authorizes protective orders for case-specific waivers in both state and federal
proceedings. As one point the proposed rule included a provision that allowed for selective
waiver of the attorney client privilege in the context of a governmental investigation, Rule
This is a brief discussion of the legislation as well as the controversy’s legal
background and chronology.
At common law, corporations were considered incapable of committing or of
being punished for the criminal misconduct.5 That perception has changed, however.
Corporate criminal liability is now a matter of legislative choice. And the view of
the courts is much the same as it was over a century ago, when the Supreme Court
We see no valid objection in law, and every reason in public policy, why
the corporation which profits by the transaction, and can only act through its
agents and officers, shall be held punishable by fine because of the knowledge
and intent of its agents to whom it has intrusted authority to act in the subject-
matter of making and fixing rates of transportation, and whose knowledge and
purposes may well be attributed to the corporation for which the agents act.
While the law should have regard to the rights of all, and to those of corporations
no less than to those of individuals, it cannot shut its eyes to the fact that the
great majority of business transactions in modern times are conducted through
those bodies, and particularly that interstate commerce is almost entirely in their
hands, and to give them immunity from all punishment because of the old and
exploded doctrine that corporation cannot commit a crime would virtually take
away the only means of effectually controlling the subject-matter and correcting
the abuses aimed at. New York Central R.R. v. United States, 212 U.S. 481, 495-
Both as a general matter and within individual criminal statutes, federal law leaves
little doubt when a criminal proscription applies to corporate entities. The Dictionary
Act provides that “[i]n determining the meaning of any Act of Congress, unless the
context indicates otherwise. . . the words ‘person’ or ‘whoever’ include corporations,
companies, associations, firms, partnerships, societies, and joint stock companies, as
well as individuals.”6 With this in mind, criminal statutes ordinarily condemn –7
“whoever,” or any “person” who – engages in the misconduct they proscribe. In
502. That feature had disappeared, however, by the time the Judicial Conference
recommended the rule to the Congress, see discussion infra at 15-6.
5 1 BLACKSTONE, COMMENTARIES ON THE LAWS OF ENGLAND 464 (1765)(transliteration
supplied)(“A corporation cannot commit treason, or felony, or other crime, in it’s corporate
capacity: though it’s members may, in their distinct individual capacities. Neither is it
capable of suffering a traitor’s, or felon’s punishment, for it is not liable to corporal
punishments, nor to attainder, forfeiture, or corruption of the blood”).
6 1 U.S.C. 1; see e.g., United States v. A & P Trucking Co., 358 U.S. 121, 124 (1958)(citing
the Dictionary Act in support of the conclusion that a partnership might be held criminally
liable for the improper transportation of explosives under a statute that applied to “whoever”
breached its proscriptions).
7 E.g., 18 U.S.C. 2 (“Whoever commits an offense against the United States . . . is
punishable as a principal”); 18 U.S.C. 371 (“If two or more persons conspire either to
commit any offense against the United States, or to defraud the United States. . . and one or
more of such persons do any act to effect the object of the conspiracy, each shall be fined
some instances, the statute goes a step further and supplies an even more expansive
When a federal criminal statute applies to corporations, the courts have
generally said that a corporation is liable for the violations committed for its benefit
by its officers, employees or agents acting, within the apparent scope of their
authority,9 even if the corporation has either generally or specifically prohibited the
misconduct in question.10 Of course, the officers, employees or agents whose
misconduct is imputed to the corporation are usually subject to criminal liability as
well.11 It is a matter of prosecutorial discretion whether to prosecute an apparently
culpable corporation, or its apparently culpable agents, employees and officers, or
under this title”); 18 U.S.C. 661 (“Whoever, within the special maritime and territorial
jurisdiction of the United States, takes and carries away, with intent to steal or purloin, any
personal property of another shall be punished as follows. . . ”).
8 E.g., 18 U.S.C. 1961(3)(“As used in this chapter . . . (3) ‘person’ includes any individual
or entity capable of holding a legal or beneficial interest in property”)(relating to
racketeering offenses); 15 U.S.C. 7, 12(c) (“The word ‘person’, or ‘persons’ . . . shall be
deemed to include corporations and associations existing under or authorized by the laws
of either the United States, laws of any of the Territories, the laws of any State, or the laws
of any foreign country”)(relating to the anti-trust laws).
9 United States v. Jorgensen, 144 F.3d 550, 560 (8th Cir. 1998); United States v. Investment
Enterprises, Inc., 10 F.3d 263, 267 (5th Cir. 1994); United States v. Paccione, 949 F.2d
1183, 1200 (2d Cir. 1991); United States v. Automated Medical Laboratories, Inc., 770 F.2d
399, 407 (4th Cir. 1985)(“The term ‘scope of employment’ has been broadly defined to
include acts on the corporation’s behalf in performance of the agent’s general line of work.
To be acting within the scope of his employment, agent must be ‘performing acts of the kind
which he is authorized to perform, and those acts must be motivated – at least in part – by
an intent to benefit the corporation’”), quoting, United States v. Cincotta, 689 F.2d 238, 241-st
10 United States v. Potter, 463 F.3d 9, 25-6 (1st Cir. 2006)(“The case law has rejected
arguments that the corporation can avoid liability by adopting abstract rules. . . . Even a
specific directive to an agent or employee or honest efforts to police such rules do not
automatically free the company for the wrongful acts of agents. Thus the principal is held
liable for acts done on his account by a general agent which are incidental or customarily
a part of a transaction which the agent has been authorized to perform. And this is the case,
even though it is established fact that the act was forbidden by the principal”); United States
v. Twentieth Century Fox, 882 F.2d 656, 660 (2d Cir. 1989)(“We agree with the District
Court that Fox’s compliance program, however extensive, does not immunize the
corporation from liability when its employees, acting within the scope of their authority, fail
to comply with the law and the consent decree. It is settled law that a corporation may be
held criminally responsible for antitrust violations committed by its employees or agents
acting within the scope of their authority”); United States v. Portac, Inc., 869 F.2d 1288,th
11 United States v. Wise, 370 U.S. 405, 416 (1962); United States v. Dotterweich, 320 U.S.
277, 283 (1943)(rejecting the contention that by establishing corporate liability Congress
intended to exempt its culpable agents with the observation that, “It is not credible that
Congress [in making it clear that the criminal prohibition applied to corporations] should
by implication have exonerated what is probably a preponderant number of persons involved
in acts of disobedience . . .”); United States v. Sain, 141 F.3d 463, 475 (3d Cir. 1998).
both the corporation and the individuals through whom it has acted.12 Because their
interests are intertwined, corporations often bear the legal costs of defending their
agents, employees and officers in litigation arising out of conduct within the apparent
scope of their employment.13 The corporation in such cases, however, is generally
entitled to reimbursement should its agent, officer or employee be convicted or
otherwise found at fault.14
Attorney-Client Privilege and Work Product Protection
The attorney-client privilege and work product protection are federal evidentiary
privileges, which means they are “governed by the principles of the common law as
. . . interpreted by the courts of the United States in light of reason and experience,”
F.R.Evid. 501, unless altered by rule or statute.
Attorne y-Clie nt.
The attorney-client privilege is one of the oldest common law privileges.15 The
purpose of the privilege is to encourage “full and frank communication between
attorneys and their clients and thereby promote broader public interests in the
observance of law and the administration of justice.”16 It protects confidential
communications with an attorney made in order to obtain legal advice or assistance.17
12 Wayte v. United States, 470 U.S. 598, 607 (1985); United States v. LaBonte, 520 U.S.
13 United States v. Stein, 435 F.Supp. at 353-55, citing inter alia, 3A FLETCHER,
CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS, §1344.10 (2002).
15 Upjohn v. United States, 449 U.S. 383, 389 (1981).
16 Swidler & Berlin v. United States, 524 U.S. 399, 403 (1998); see also, Upjohn v. United
States, 449 U.S. 383, 389 (1981); Fisher v. United States, 425 U.S. 391, 403 (1976); In re
EchoStar Communications Corp., 448 F.3d 1294, 1301-302 (Fed.Cir. 2006).
17 Fisher v. United States, 425 U.S. 391, 403 (1976); In re Grand Jury, 454 F.3d 511, 519
(6th Cir. 2006); In re Grand Jury: Under Seal, 415 F.3d 333, 338 n.3 (4th Cir. 2005)(The
privilege applies if “(1) the asserted holder of the privilege is or sought to become a client;
(2) the person to whom the communication was made (a) is a member of the bar of a court,
or his subordinate and (b) in connection with this communication is acting as a lawyer; (3)
the communication relates to a fact of which the attorney was informed (a) by his client (b)
without the presence of strangers (c) for the purpose of securing primarily either (i) an
opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d)
for the purpose of committing a crime or tort; and (4) the privilege as been (a) claimed andst
(b) not waived by the client”); United States v. Bisanti, 414 F.3d 168, 171 (1 Cir. 2005)
(“The essential elements of the claim of attorney-client privilege are as follows: (1) Where
legal advice of any kind is sought (2) from a professional legal adviser in his capacity as
such, (3) the communications relating to that purpose, (4) made in confidence (5) by the
client, (6) are at his insistance permanently protected (7) from disclosure by himself or by
the legal adviser, (8) except the protection be waived ”).
It is available to corporations as well as to individuals.18 In the case of a
corporation, it now seems beyond dispute that the privilege applies to the confidential
communications from its officers, agents, and employees to its attorney for the
purpose of supplying the corporation with legal advice or assistance.19 At one time,
however, some courts believed the privilege should be limited to the communications
of the “control group of the corporation,” those ultimately responsible for corporate
policy. The Supreme Court in Upjohn found this reading too limited.20
The case began when officials at Upjohn became concerned that some of its
officers or employees might have been involved in the business-related bribery of
foreign officials.21 Upjohn’s general counsel was instructed to conduct an
investigation.22 Following the internal investigation, Upjohn reported suspicious
payments to the Securities and Exchange Commission (SEC) and the Internal
Revenue Service (IRS).23 The company also identified which of its officers and
employees had been interviewed or had submitted responses to questionnaires as part
of the internal investigation.24 Then the IRS issued a summons demanding that
Upjohn turn over all its files on the internal investigation including responses to its
general counsel’s questionnaires and memoranda and to notes of the investigation’s
interviews conducted under his supervision.25 Upjohn refused to comply, claiming
attorney-client and attorney work product privileges and the IRS sought judicial
enforcement of its summons.26
The Sixth Circuit Court of Appeals rejected Upjohn’s attorney-client claim on
the grounds that the communications sought were not those of Upjohn’s control
group, thus not those of the client, and therefore not privileged.27 The Supreme Court
18 Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343, 348 (1985); Upjohn
Co. v. United States, 449 U.S. 383, 389-90 (1981).
19 Upjohn Co. v. United States, 449 U.S. at 390-97 (holding the privilege applicable to
employee questionnaire responses as well as interview notes and memoranda collected
during the course of an internal investigation conducted under the direction of theth
company’s general counsel); In re Allen, 106 F.3d 582, 606-7 (4 Cir. 1997); Admiralth
Insurance Co. v. U.S. District Court, 881 F.2d 1486, 1492-493 (9 Cir. 1989).
20 Upjohn Co. v. United States, 449 U.S. 383 (1981).
21 Id. at 386.
22 Id. at 386-87.
23 Id. at 387.
25 Id. at 387-88.
26 Id. at 388.
27 United States v. Upjohn Co., 600 F.2d 1223, 1225 (6th Cir. 1979)(“Upjohn claims that the
communications to counsel made by all of its employees including regular and middle
management employees as well as top management, are privileged as confidential
communications between client and attorney. To the extent that the communications were
made by officers and agents not responsible for directing Upjohn’s actions in response to
legal advice, we disagree for the simple reason that the communications were not the
found this control group test insufficiently protective. The test failed to recognize
the importance of the attorney’s fact gathering communications with the
corporation’s employees conducted in order to provide the corporate client with legal
advice or assistance.28 In doing so, it frustrated the very purpose of the privilege by
discouraging full and frank disclosures by those associated with the company who
were in a position to expose it to civil and criminal liability thereby denying counsel
the basis for sound legal advice and assistance.29 Moreover, it chilled
communications between counsel and company employees designed to ensure
company compliance with the law.30
In a situation like the one in Upjohn, the attorney represents the corporation, the
privilege that envelops the communications with the attorney belongs to the
corporation,31 and may be waived by the corporation.32 Although disclosure
28 Upjohn Co. v. United States, 449 U.S. 383, 390-91 (1981)(internal citations omitted)
(“Such a view, we think, overlooks the fact that the privilege exists to protect not only the
giving of professional advice to those who can act on it but also the giving of information
to the lawyer to enable him to give sound and informed advice. The first step in the
resolution of any legal problem is ascertaining the factual background and sifting through
the facts with an eye to the legally relevant. . . In the case of the individual client the
provider of information and the person who acts on the lawyer's advice are one and the
same. In the corporate context, however, it will frequently be employees beyond the control
group as defined by the court below – ‘officers and agents . . . responsible for directing [the
company's] actions in response to legal advice’ – who will possess the information needed
by the corporation's lawyers. Middle-level and indeed lower-level-employees can, by
actions within the scope of their employment, embroil the corporation in serious legal
difficulties, and it is only natural that these employees would have the relevant information
needed by corporate counsel if he is adequately to advise the client with respect to such
actual or potential difficulties”).
29 449 U.S. at 392 (1981)(internal citations omitted) (“The control group test adopted by the
court below thus frustrates the very purpose of the privilege by discouraging the
communication of relevant information by employees of the client to attorneys seeking to
render legal advice to the client corporation. The attorney’s advice will also frequently be
more significant to noncontrol group members than to those who officially sanction the
advice, and the control group test makes it more difficult to convey full and frank legal
advice to the employees who will put into effect the client corporation's policy”).
30 Id. (“The narrow scope given the attorney-client privilege by the court below not only
makes it difficult for corporate attorneys to formulate sound advice when their client is faced
with a specific legal problem but also threatens to limit the valuable efforts of corporate
counsel to ensure their client’s compliance with the law. In light of the vast and
complicated array of regulatory legislation confronting the modern corporation,
corporations, unlike most individuals, constantly go to lawyers to find out how to obey the
law, particularly since compliance with the law in this area is hardly an instinctive matter”).
31 Otherwise “[c]ourts have been willing to allow corporate employees to assert a personal
privilege with respect to conversations with corporate counsel, despite the fact that the
privilege generally belongs to the corporation . . . only by meeting certain requirements. .
. . First, they must show they approached [counsel] for the purpose of seeking legal advice.
Second, they must demonstrate that when they approached [counsel] they made it clear that
they were seeking legal advice in their individual rather than in their representative
capacities. Third, they must demonstrate that the [counsel] saw fit to communicate with
them in their individual capacities, knowing that a possible conflict could arise. Fourth, they
ordinarily waives the privilege, the circuits are divided over whether the privilege
may survive disclosure for limited selective purposes (selective waiver) such as the
disclosures in Upjohn to government investigators or regulators.33
The prospect of selective waiver was apparently first raised in Diversified
Industries v. Meredith, where the Eighth Circuit held voluntary disclosure to the
Securities and Exchange Commission (SEC) did not constitute a waiver of the
privilege for subsequent purposes.34 To one extent or another the District of
Columbia, First, Second, Third, Fourth and Tenth Circuits have declined to accept
the Eighth Circuit suggestion that the attorney-client privilege may be claimed
following a selective disclosure to a governmental agency.35
The existence of either a common interest or joint defense attorney-client
privilege further complicates matters, for either may arise in the course of an
investigation of allegations of corporate misconduct. The common interest privilege
is created when an attorney simultaneously represents more than one client based on
their common interest in the same matter. Under such circumstances,
“communications between each of the clients and the attorney are privileged against
third parties, and it is unnecessary that there be actual litigation in progress for this
privilege to apply.”36 Moreover, two or more clients represented by individual
attorneys may agree to work jointly in a common defense of a particular suit or case.
In such circumstances, “many courts have held that the attorney-client privilege gives
rise to a concomitant ‘joint defense privilege’ which services to protect the
confidentiality of communications, passing from one party to the attorney for another
party where a joint defense effort or strategy has been decided upon and undertaken
must prove that their conversations with [counsel] were confidential. And, fifth, they must
show that the substance of their conversations with [counsel] did not concern matters within
the company or the general affairs of the company,” United States v. International
Brotherhood of Teamsters, 119 F.3d 210, 215 (2d Cir. 1997); see also, In re Grand Juryst
Subpoena, 274 F.3d 563, 571 (1 Cir. 2001); Grand Jury Proceedings v. United States, 156th
F.3d 1038, 1041 (10 Cir. 1998); In re Bevell, Bresler & Schulman Asset Management
Corp., 805 F.2d 120, 123-25 (3d Cir. 1986).
32 Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. at 348 (1985); In re Grand
Jury Proceedings, 219 F.3d 175, 184-86 (1st Cir. 2001); United States v. Dakota, 197 F.3dthth
33 In re Qwest Communications International, Inc., 450 F.3d 1179, 1186-197 (10th Cir.
34 Diversified Industries v. Meredith, 572 F.2d 596, 611 (8th Cir. 1977).
35 Permian Corp. v. United States, 665 F.2d 1214, 1219-221 (D.C. Cir. 1981); United States
v. Massachusetts Institute of Technology, 129 F.3d 681, 685-86 (1st Cir. 1997); In re John
Doe Corp., 675 F.2d 482, 489 (2d Cir. 1982); Westinghouse Electric Corp. v. Republic of
the Philippines, 951 F.2d 1414, 1425-426 (3d Cir. 1991); In re Martin Marietta Corp., 856th
F.2d 619, 623-24 (4 Cir. 1988); In re Qwest Communications International Inc., 450 F.3dth
36 Hanson v. United States Agency for International Development, 372 F.3d 286, 292 (4th
Cir. 2004); see also, United States v. Doe, 429 F.3d 450, 453 (3d Cir. 2005).
by the parties and their respective counsel.”37 The courts have generally held –
although not universally so – that communications or attorney work product
protected by a joint or common defense privileges can only be waived with the
consent of all parties.38
Attorney Work Product.
At least since the Supreme Court announced its decision in Hickman v. Taylor,39
the federal courts have recognized that an attorney’s work product gathered or
created in anticipation of litigation enjoys qualified disclosure protection. The
protection has been reenforced by rule both on the civil side40 and in criminal cases.41
“At its core, the work-product doctrine shelters the mental processes of the
attorney providing a privileged area within which he can analyze and prepare his
client’s case. . . . It is therefore necessary that the doctrine protect material prepared
by agents of the attorney as well as those prepared by the attorney himself.”42
The protection can be waived,43 but here too the circuits are divided on the
question of whether it can survive a selective waiver in the form of disclosure to a
government investigator or regulator. The Fourth Circuit and Federal Circuit have
been unwilling to say that the protection afforded attorney opinion work product
(work containing the attorney’s analysis of the law, facts and strategy reflecting the
37 United States v. Almeida, 341 F.3d 1318, 1324 (11th Cir. 2003); see also, United States
v. Austin, 416 F.3d 1016, 1021 (9th Cir. 2005); In re Grand Jury Subpoena, 274 F.3d 563,st
38 In re Grand Jury Subpoenas, 902 F.2d 244, 248(4th Cir. 1990); John Morrell & Co. v.
Local Union 304A, 913 F.2d 544, 555 (8th Cir. 1990); In re Auclair, 961 F.2d 65, 70-1 (5thst
Cir. 1992); but see, In re Grand Jury Subpoena, 274 F.3d 563, 572-73 (1 Cir. 2001)(“a
party is always free to disclose his own communications . . . a corporation may unilaterally
waive the attorney-client privilege with respect to any communications made by a corporate
officer in his corporate capacity, notwithstanding the existence of an individual attorney-
client relationship between him and the corporation’s counsel”).
39 329 U.S. 495 (1947).
40 F.R.Civ.P. 26; Upjohn v. United States, 449 U.S. 383, 396 (1981); Regional Airport
Authority v. LFG, LLC, 460 F.3d 697, 713 (6th Cir. 2006); In re Qwest Communicationsth
International, Inc., 450 F.3d 1179, 1186 (10 Cir. 2006).
41 F.R.Crim.P. 16; United States v. Nobles, 422 U.S. 225, 236-39 (1975).
42 United States v. Nobles, 422 U.S. at 238-39; see also, Hickman v. Taylor, 329 U.S. at 511-
14 (“Proper preparation of a client’s case demands that he assemble information, sift what
he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan
his strategy without undue and needless interference . . . Were such materials open to
opposing counsel on mere demand, much of what is now put down in writing would remain
unwritten . . . Inefficiency, unfairness and sharp practices would inevitably develop in the
giving of legal advice and in the preparation of cases for trial”).
43 United States v. Nobles, 422 U.S. at 239.
attorney’s mental impressions)44 is lost simply because it has been disclosed to
governmental entities.45 On the other hand, the Third Circuit has said without
equivocation that same standard used in the case of attorney-client waivers should
apply; that is, disclosure to a governmental entity constitutes complete waiver.46 The
other circuits that have considered the question have assumed positions at various
points between the two.47
Deputy Attorney General Memoranda and Related Matters
Four Deputy Attorneys General have issued memoranda to guide the exercise
of prosecutorial discretion on the question of whether criminal charges should be
brought against a corporation. Each includes provisions concerning the waiver of
attorney-client and attorney work product protection and all but one address
employee legal costs and joint defense agreements as well. They are the memoranda
44 This is distinguished from “non-opinion” or “fact” work product which consists of all
other material gathered or produced by or at the direction of an attorney in anticipation of
45 In re Martin Marietta Corp., 856 F.2d 619, 625-26 (4th Cir. 1988); In re Echostar
Communications Corp., 448 F.3d 1294, 1301-305 (Fed. Cir. 2006).
46 Westinghouse Electric Corp. v. Republic of the Philippines, 951 F.2d 1414, 1429 (3d Cir.
47 In re Qwest Communications International, Inc., 450 F.3d 1179 (10th Cir. 2006)(refusing
to acknowledge survival of the protection under the facts before it rather than as a general
rule)(“we conclude the record in this case is not sufficient to justify adoption of a selective
waiver doctrine as an exception to the general rules of waiver upon disclosure of protected
material. . . In short, Qwest’s confidentiality agreements do not support adoption of selective
waiver”); In re Columbia/HCA Healthcare Corp. Billing Practices Litigation, 293 F.3d 289th
(6 Cir. 2002)(emphasis added)(footnote 30 of the court’s opinion in brackets)(“These and
other reasons persuade us that the standard for waiving the work-product doctrine should
be no more stringent than the standard for waiving the attorney-client privilege – once the
privilege is waived, waiver is complete and final. [This is especially true as to ‘fact’ work
product . . .”]; United States v. Massachusetts Institute of Technology, 129 F.3d 681, 688st
(1 Cir. 1997)(holding the protection waived under the facts before it but noting that the
decision does not address whether “opinion” work product protection might survive
disclosure to the government); In re Steinhardt Partners, 9 F.3d 230, 235-36 (2d Cir.
1993)(holding the party waived work product production by voluntarily turning material
over to the SEC, but “declin[ing] to adopt a per se rule that all voluntary disclosures to the
government waive work product protection”); In re Chrysler Motors Corp., 860 F.2d 844,th
846 (8 Cir. 1989)(holding the party waived work product protection by voluntary
disclosure, but noting that the material did not include “opinion” work product “which
enjoys a very near absolute immunity and can be discovered only in very rare and
extraordinary circumstances”); In re Subpoena Duces Tecum, 738 F.2d 1367, 1375 (D.C.Cir.
1984)(emphasis added)(“we cannot see how the developing procedure of corporations to
employ independent outside counsel to investigate and advise them would be thwarted by
telling a corporation that it cannot disclose the resulting reports to the SEC if it wishes to
maintain their confidentiality. The same choice is open under the work product privilege.
Or the company can insist on a promise of confidentiality before disclosure to the SEC”).
of: Deputy Attorney Generals Holder,48 Thompson,49 and McNulty50 and Acting
Deputy Attorney General McCallum.51
Signed on June 19, 1999, the Holder Memorandum was designed to provide
prosecutors with factors to be considered when determining whether to charge a
corporation with criminal activity. It emphasized that “[t]hese factors are, however,
not outcome-determinative and are only guidelines.”
The factors consisted of: “1. The nature and seriousness of the offense. . . 2. The
pervasiveness of wrongdoing within the corporation. . . 3. The corporation’s history
of similar conduct. . . 4. The corporation’s timely and voluntary disclosure of
wrongdoing and its willingness to cooperate in the investigation of its agents. . .5.
The existence and adequacy of the corporation’s compliance program. . . 6. The
corporation’s remedial actions. . . 7. Collateral consequences . . . and 8. The adequacy
of non-criminal remedies. . . .”52
In the section devoted to cooperation and voluntary disclosure, the
Memorandum stated that “In gauging the extent of the corporation’s cooperation, the
48 “Bringing Criminal Charges Against Corporations,” Memorandum from the Deputy
Attorney General, to All Component Heads and United States Attorneys, dated as signed on
June 16, 1999, (Holder Memorandum), 66 BNA Criminal Law Reporter 189 (December 8,
49 “Principles of Federal Prosecution of Business Organizations,” Memorandum from Larry
D. Thompson, Deputy Attorney General, to Heads of Department Components and United
States Attorneys, dated January 20, 2003, (Thompson Memorandum), available on January
50 “Principles of Federal Prosecution of Business Organizations,” Memorandum from Paul
J. McNulty, Deputy Attorney General, to Heads of Department Components and United
States Attorneys, undated, (McNulty Memorandum), available on January 26, 2007 at
51 “Waiver of Corporate Attorney-Client and Work Product Protection,” Memorandum from
Robert D. McCallum, Jr., Acting Deputy Attorney General, to Heads of Department
Components and United States Attorneys, dated October 21, 2005, (McCallum
Memorandum) (appeared prior to being superseded in the Justice Department’s Criminal
Resource Manual, section 163, but apparently can no longer be found on the Department’s
website), available on November 15, 2007 on Westlaw as either SL031 ALI_ABA 1299 or
52 Holder Memorandum, II. Charging Corporations – Factors To Be Considered, A. General
Principle. The Sentencing Commission had declared similar considerations appropriate
organizational sentencing factors, United States Sentencing Commission Guideline Manual,
U.S.S.G. §8C2.5 (1991 ed.), 56 Fed.Reg. 22791-792 (May 16, 1991)(indicating that a
convicted organization’s culpability score should be determined by weighing a corporation’s
involvement in or tolerance of criminal activity; its prior history; any evidence of its efforts
to obstruct justice; the existence of a organizational compliance program; and the extent to
which the organization reported the criminal activity, cooperated with the investigation, and
prosecutor may consider the corporation’s willingness . . . to waive the attorney-
client and work product privileges.”53 As the Comment that followed explained:
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, both with respect to its internal
investigation and with respect to communications between specific officers, directors,
and employees and counsel. Such waivers permit the government to obtain statements
of possible witnesses, subjects, and targets, without having to negotiate individual
cooperation or immunity agreements. In addition, they are often critical in enabling
the government to evaluate the completeness of a corporation’s voluntary disclosure
and cooperation. Prosecutors, may, therefore, request a waiver in appropriate
circumstances. [This waiver should ordinarily be limited to the factual internal
investigation and any contemporaneous advice given to the corporation concerning the
conduct at issue. Except in unusual circumstances, prosecutors should not seek a
waiver with respect to communications and work product related to advice concerning
the government’s criminal investigation.] The Department does not, however,
consider waiver of a corporation’s privileges an absolute requirement, and prosecutor
should consider the willingness of a corporation to waive the privileges when
necessary to provide timely and complete information as only one factor in evaluating
the corporation’s cooperation. Holder Memorandum, VI. B. (Memorandum’s footnote
appears in brackets).
The Memorandum also addressed the adverse weight that might be given a
corporation’s participation in a joint defense agreement with its officers or employees
and its agreement to pay their legal fees:
Another factor to be weighed by the prosecutor is whether the corporation
appears to be protecting its culpable employees and agents. Thus, while cases
will differ depending on the circumstances, a corporation’s promise of support
to culpable employees and agents either through the advancing of attorneys’ fees,
through retaining the employees without sanction for their misconduct, or
through providing information to the employees about the government’s
investigation pursuant to a joint defense agreement, may be considered by the
prosecutor in weighing the extent and value of a corporation’s cooperation. By
the same token, the prosecutor should be wary of attempts to shield corporate
officers and employees from liability by a willingness of the corporation to plead
guilty. [Some states require corporations to pay the legal fees of officers under
investigation prior to a formal determination of their guilt. Obviously, a
corporation’s compliance with governing law should not be considered a failure
to cooperate.] Holder Memorandum, VI. B. (Memorandum’s footnote, signaled
after the fee reference, in brackets).
Although several academics and defense counsel expressed concern over the
possible impact of the waiver feature of the Holder Memorandum,54 a survey of
53 Holder Memorandum, VI.A.
54 Zornow & Krakaur, On the Brink of a Brave New World: The Death of Privilege in
Corporate Criminal Investigations, 37 AMERICAN CRIMINAL LAW REVIEW 147, 156
(2000)(“Thus unfettered, federal prosecutors are authorized by Justice Department policy
to rend the fabric of confidential communications ranging from those that occurred around
the time of the conduct at issue to those that occurred during and in connection with the
United States Attorneys conducted in late 2002 indicated that waivers were rarely
On January 30, 2003, the Holder Memorandum was superseded by the
Thompson Memorandum in a manner which hardly seemed designed to the meet the
concerns of its critics. The Thompson Memorandum appeared to call for a more
aggressive stance. The Thompson Memorandum was essentially a reissuance of its
predecessor. Little of the text was new. That portion of the Memoranda devoted to
the waiver of attorney-client and work product protections, and cooperation and
voluntary disclosure in general – Part VI – was the same in both except for a new
paragraph added in the Thompson Memorandum.56 The addition said nothing about
waivers per se, but made clear the risks that a corporation ran if it failed to be
forthcoming early on or continued to support those officers or employees that
prosecutors thought culpable:
Another factor to be weighed by the prosecutor is whether the corporation,
while purporting to cooperate, has engaged in conduct that impedes the
investigation (whether or not rising to the level of criminal obstruction).
Examples of such conduct include overly broad assertions of corporate
criminal investigation itself. And once these privileges have been waived, they will likely
become fair game for plaintiffs in civil suits”); Cole, Revoking Our Privileges: Federal Law
Enforcement’s Multi-Front Assault on the Attorney-Client Privilege (and Why It Is
Misguided), 48 VILLANOVA LAW REVIEW 469, 543 (2003)(“These statements in the Holder
Memorandum go quite far toward effectively forcing a corporation to waive privilege
protections if it hopes to obtain favorable charging treatment at the hands of DOJ
prosecutors. In complex corporate criminal cases federal prosecutors have enormous
prosecutorial discretion to decide the nature and number of charges, if any, that they will
bring against the responsible corporate entity and culpable individuals. Moreover, the
manner in which that prosecutorial discretion is exercised is not subject to legal challenges
or judicial review. This combination of broad discretion and limited accountability presents
the potential for misguided policy decisions and, in the worst cases, even abuses of
governmental power”); The Erosion of the Attorney-Client Privilege and Work Product
Doctrine in Federal Criminal Investigations: A Report Prepared by the American College
of Trial Lawyers, 41 DUQUESNE LAW REVIEW 307 (2003)(“The Justice Department’s policy,
as expressed in the Holder Memo Standards, is to obtain waivers of the corporate attorney-
client and work-product privilege where, in the government’s view these protections might
keep information relevant to a criminal investigation from discovery. Indeed, there is no
pretense that the values underlying these privileges are to be sacrificed for any reason other
than to make the prosecution’s job easier”).
55 Buchanan, Effective Cooperation by Business Organizations and the Impact of Privilege
Waivers, 39 WAKE FOREST LAW REVIEW 587, 597-98 (2004); United States Sentencing
Commission, Report of the Ad Hoc Advisory Group on the Organizational Sentencing
Guidelines 98-9 (October 7, 2003).
56 See Berry, Revised Principles of Federal Prosecutions of Business Organizations: An
Overview, 51 UNITED STATES ATTORNEYS’ BULLETIN 8 (November 2003)(“One significant
‘non-revision’ of the Holder memo is noteworthy. Amidst controversy, no change in the use
of waivers of the attorney-client and work protect protections has been included in the
representation of employees or former employees; inappropriate directions to
employees or their counsel, such as directions not to cooperate openly and fully
with the investigation including, for example, the direction to decline to be
interviewed; making presentations or submissions that contain misleading
assertions or omissions; incomplete or delayed production of records; and failure
to promptly disclose illegal conduct known to the corporation. Thompson
Memorandum, VI. B.
Yet this is one of the few amendments to the Holder Memorandum. To some,
the whole scale adoption of language from the earlier Memorandum suggested a
Justice Department perception that the problem with the Holder Memorandum was
not its content but its application. The Thompson Memorandum’s description of the
changes might be read to confirm this impression:
The main focus of the revisions is increased emphasis on and scrutiny of
the authenticity of a corporation’s cooperation. Too often business organizations,
while purporting to cooperate with a Department investigation, in fact take steps
to impede the quick and effective exposure of the complete scope of wrongdoing
under investigation. The revisions make clear that such conduct should weigh
in favor of a corporate prosecution.
Moreover, where the Holder Memorandum seemed to bespeak guidance, the
Thompson appeared to sound a command. The Holder Memorandum’s introductory
remarks provided that, “These factors are, however, not outcome-determinative and
are only guidelines. Federal prosecutors are not required to reference these factors
in a particular case . . . .” The remarks might have suggested that prosecutors
enjoyed some significant degree of flexibility as to whether and how to apply the
standards it announced. The Thompson Memorandum seemed to speak with a much
more commanding tone; its introductory remarks stated that, “prosecutors and
investigators in every matter involving business crimes must assess the merits of
seeking the conviction of the business entity itself.” Thompson Memorandum
Comparable Policies Elsewhere. Nevertheless, the policies articulated in
the Holder and Thompson Memoranda are similar to the enforcement policies
announced by a substantial number of federal regulatory agencies that call for
voluntary corporate disclosure of statutory or regulatory violations.58 Some
specifically mention the waiver of the attorney-client or work product protection,59
57 Cf., United States v. Stein, 435 F.Supp.2d 330, 338 (S.D.N.Y. 2006)(“Unlike its
predecessor, however, the Thompson Memorandum is binding on all federal prosecutors”).
58 For a description of several of these see, Wray & Hur, Corporate Criminal Prosecution
in a Post-Enron World: The Thompson Memo in Theory and Practice, 43 AMERICAN
CRIMINAL LAW REVIEW 1095, 1118-135 (2006).
59 E.g., U.S. Commodity Futures Trading Commission, Division of Enforcement,
Enforcement Advisory: Cooperation Factors in Enforcement Division Sanction
Recommendations (“The three areas of a company’s conduct that bear on the Division’s
decision-making about sanctions recommendations include the following ... II. Quality of
the Company’s Efforts in Cooperating with the Division and Managing the Aftermath of the
Misconduct... 3. Did the company willing: a. waive corporate attorney-client and work
while others seem to speak with sufficient generality to justify consideration on
enforcement and sanction questions.60
Sentencing Guidelines. In May of 2004, the United States Sentencing
Commission amended Commentary in the Sentencing Guidelines that some read as
an endorsement of this new more aggressive approach. The change explicitly
described the circumstances under which a corporation’s failure to waive could have
sentencing consequences: “Waiver of attorney-client privilege and of work product
protections is not a prerequisite to a reduction in culpability score under subdivisions
(1) and (2) of subsection (g) unless such waiver is necessary in order to provide
timely and thorough disclosure of all pertinent information known to the
product protection and other corporate documents? b. waive corporate attorney-client
privilege for employee testimony? ...”); Securities Exchange Commission, Report of
Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and
Commission Statement on the Relationship of Cooperation to Agency Enforcement
Decisions, Release No. 44969 (October 23, 2001) (Seaboard Report)(“In brief form, we set
forth below some of the criteria we will consider in determining whether, and how much,
to credit self-policing, self-reporting, remediation and cooperation – from the extraordinary
step of taking no enforcement action to bringing reduced charges, seeking lighter sanctions,
or including mitigating language in documents we use to announce and resolve enforcement
actions... .In some cases, the desire to provide information to the Commission staff may
cause companies to consider choosing not to assert the attorney-client privilege, the work
product protection and other privileges, protections, and exemptions with respect to the
Commission... Did the company promptly make available to our staff the results of its
review... did the company identify possible violative conduct and evidence with sufficient
precision to facilitate prompt enforcement actions ... In this regard, the Commission does
not view a company’s waiver of a privilege as an end in itself, but only as a means (where
necessary) to provide relevant and sometimes critical information to the Commission”).
60 E.g., Federal Energy Regulatory Commission, Policy Statement on Enforcement, 113
FERC ¶ 61,068 (October 20, 2005)(“the Commission will consider these factors even for
entities that did not self-report violations, provided that cooperation was provided once the
violation was uncovered. > Did the company volunteer to provide internal investigation or
audit reports relating to the misconduct ... > Did the company ... actively encourage [its]
employees to provide the Commission with complete ... information?”); Federal Financial
Institutions Examination Council, Assessment of Civil Money Penalties, 63 Fed.Reg. 30226,
30227 (June 3, 1998)(“In determining the amount and the appropriateness of initiating a
civil money penalty assessment proceeding ... the agencies have identified the following
factors as relevant... (4) The failure to cooperate with the agency in effecting early
resolution of the problem; (5) Evidence of concealment of the violation, practice, or breach
of fiduciary duty or, alternatively, voluntary disclosure of the violation, practice or breach
of fiduciary duty”).
61 69 Fed.Reg. 29021 (May 19, 2004); United States Sentencing Commission Guidelines
Manual, U.S.S.C. §8C2.5, Commentary Note 12 (2004 ed.).
Although apparently crafted at least in part to ease corporate anxiety,62 it seemed
to have the opposite effect.63 The following August, the American Bar Association
voted to recommend that the Commentary be changed to state that waiver should not
be considered a sentencing factor.64 The Commission instead removed from the
Commentary the language quoted above that it had added in 2004.65
Then on October 21, 2005 came the McCallum Memorandum. It made no
revision in the Thompson Memorandum, but briefly addressed the manner in which
the Thompson Memorandum’s policy on waiver was to be implemented. The
various United States Attorneys were instructed to prepare written guidelines for
supervisory approval of requests for corporate waivers.66 The effort did little to
62 United States Sentencing Commission, Reason for the Amendment, 69 Fed.Reg. 29024
(May 19, 2004).
63 Brown, Reconsidering the Corporate Attorney-Client Privilege: A Response to the
Compelled-Voluntary Waiver Paradox, 34 HOFSTRA LAW REVIEW 897, 937 (2006)
(“Whatever faint distinctions existed between the two Memos, the ultimate result appears
to be the same, at least from the perspective of the corporate bar, namely, routine demands
by DOJ for waiver, which corporations feel compelled to provide... The amendment to the
U.S. Sentencing Guidelines, suggesting that waiver could be a prerequisite to the reduction
of a corporation’s culpability score under certain circumstances, added further credence to
this perception”); McLucas, Shapiro & Song, The Decline of the Attorney-Client Privilege
in the Corporate Setting, 96 JOURNAL OF CRIMINAL LAW AND CRIMINOLOGY 621, 634
(2006)(“The U.S. Sentencing Commission has validated the DOJ view of waiver of the
attorney-client privilege by recent amendments to the Organizational Sentencing Guidelines.
In particular, recently amended Commentary to §8C2.5 ... [in which] the exception is likely
to swallow the rule; prosecutors will make routine requests for waivers and organizations
will be forced to routinely grant them”).
64 American Bar Association Task Force on Attorney-Client Privilege, Report to the House
of Delegates 4 n.4 (2006)
65 71 Fed.Reg. 28073 (May 15, 2006)(“The Commission added this sentence to address
some concerns regarding the relationship between waivers and §8C2.5(g), and at the time
stated that ‘[t]he Commission expects that such waivers will be required on a limited basis.’
Subsequently, the Commission received public comment and heard testimony at public
hearings ... that the sentence at issue could be misinterpreted to encourage waivers”).
66 “To ensure that federal prosecutors exercise appropriate prosecutorial discretion under
the principles of the Thompson Memorandum, some United States Attorneys have
established review processes for waiver requests that require federal prosecutors to obtain
approval from the United States Attorney or other supervisor before seeking a waiver of the
attorney-client privilege or work product protection. Consistent with this best practice, you
are directed to establish a written waiver review process of your district or component. The
United States Attorneys’ Manual will be amended to reflect this policy. Such waiver review
processes may vary from district to district (or component to component), so that each
United States Attorney or component head retains the prosecutorial discretion necessary,
consistent with their circumstances, to seek timely, complete, and accurate information from
business organizations,” McCallum Memorandum.
Proposed Rules of Evidence.
In January, 2006, then Chairman of the House Judiciary Committee asked the
Judicial Conference to consider a rule which would protect against inadvertent
waiver of the attorney-client privilege, would permit protective court orders to limit
the consequences of disclosure of privileged material during discovery, and selective
waivers in the case of governmental investigations.68 On May 15, 2006, the Federal
Advisory Committee on Evidence opened for comment a proposed evidentiary rule
amendment crafted, among other things, to resolve the split in the circuits and to
afford corporations some relief in the form of selective waivers.69 The proposed new
Federal Rule of Evidence, proposed Rule 502, would have provided that disclosure
of protected attorney-client or work product information to governmental
investigators or regulators would not constitute a waiver of those protections with
respect to third parties.70
The selective waiver feature of the rule, however, proved to be highly
controversial and was dropped from the proposed rule the Judicial Conference
recommended to the Congress.71 Congress ultimately accepted the recommendation
67 McLucas, Shapiro & Song, The Decline of the Attorney-Client Privilege in the Corporate
Setting, 96 JOURNAL OF CRIMINAL LAW AND CRIMINOLOGY 621, 633 (2006)(“The
McCallum Memo ensures that each U.S. Attorney across the country will be ready to strike
with a demand for a privilege waiver. Significantly, it does not require consistency or
predictability across offices in making these demands – an issue that is particularly
troublesome for corporations doing business in a global marketplace”).
68 Letter from Chairman F. James Sensenbrenner, Jr. to Director Leonidas Ralph Mecham,
Administrative Office of the United States Courts, dated January 23, 2006, available on
October 11, 2008 at [http://www.uscourts.gov/rules/2006-01-23-Sensenbrenner.pdf].
69 Memorandum from the Honorable Jerry E. Smith, Chair of the Advisory Committee on
Evidence Rules to the Honorable David F. Levi, Chair of the Standing Committee on Rules
of Practice and Procedure, relating to a Report of the Advisory Committee on Evidence
Rules and dated May 15, 2006, available on October 11, 2008 at
70 “In a federal or state proceeding, a disclosure of a communication or information covered
by the attorney-client privilege or work product protection – when made to a federal public
office or agency in the exercise of its regulatory, investigative, or enforcement authority –
does not operate as a waiver of the privilege or protection in favor of non-governmental
persons or entities. The effect of disclosure to a state or local government agency, with
respect to non-governmental persons or entities is governed by applicable state law.
Nothing in this rule limits or expands the authority of a government agency to disclose
communications or information to other government agencies or as otherwise authorized or
required by law,” proposed F.R.Evid. 502(c).
71 Letters from Judge Lee H. Rosenthal, Chair of the Comm. On Rules and Procedure of the
Judicial Conference of the United States to Senators Patrick J. Leahy and Arlen Specter as
well as Representatives John Conyers, Jr., and Lamar Smith, each dated January 26, 2007,
at 6, available on October 11, 2008 at
and enacted a rule with only inadvertent waiver and protective order components.72
Constitutional Concerns. In summer of 2006, a court in the Southern
District of New York held that implementation of the Thompson Memorandum’s
policy with regard to a corporation’s reimbursement of the attorneys’ fees of its
employees and pressure on them to make incriminating statements violated the Fifth
Amendment substantive due process rights of the employees, their Fifth Amendment
privilege against self-incrimination, as well as their Sixth Amendment right to the73
assistance of counsel.
The case began with the criminal tax investigation of an accounting firm and its
employees. After issuing subject letters to more than twenty of the firm’s officers74
and employees, prosecutors met with the firm’s attorneys. At the meeting the firm
indicated that intended to “clean house,” that it had already taken some personnel
actions, that it meant to cooperate fully with the government’s investigation, and that
its objective was to avoid indictment of the firm and the fate of Arthur Andersen by75
acting so as to protect the firm and not the employees and officers targeted. The
firm indicated that it had been its practice to cover the litigation costs of its
employees but that it would not pay the fees of employees who refused to cooperate
with the government’s investigation or who invoked their Fifth Amendment76
privilege. Prosecutors referred to the Thompson Memorandum and the Sentencing
Guidelines and indicated they would take into account any instances where the firm77
was legally obligated to pay attorneys’ fees. They also indicated, however, that
misconduct should not be rewarded and that prosecutors would examine “under a78
microscope” the payment of any fees that were not legally required.
In consultation with prosecutors, the firm sent the subjects of the investigation
form letters informing them that attorneys’ fees would be capped at $400,000 and79
that fees would be cut off for any employee charged with criminal wrongdoing.
Thereafter prosecutors advised the firm’s attorney when one of the firm’s employees
72 F.R.Evid. 502, P.L. 110-322, 122 Stat. 3537 (2008). See also, S.Rept. 110-264 (2008).
73 United States v. Stein, 435 F.Supp.2d 330, 356-72 (S.D.N.Y. 2006); United States v.
Stein, 440 F.Supp.2d 315, 337-38 (S.D.N.Y. 2006).
74 United States v. Stein, 435 F.Supp.2d at 341.
75 Id. See also, United States v. Stein, 440 F.Supp.2d 315, 337 (S.D.N.Y. 2006)(“Many
companies faced with allegations of wrongdoing are under intense pressure to avoid
indictment, as an indictment – especially of a financial services firm – threatens to destroy
the business regardless of whether the firm ultimately is convicted or acquitted. That is
precisely what happened to Arthur Andersen & Co., one of the world’s largest accounting
firms, which collapsed almost immediately after it was indicted – and the Supreme Court’s
eventual reversal of its conviction did not undo the damage. So any entity facing such
catastrophic consequences must do whatever it can to avoid indictment”).
76 Id. at 342.
77 Id. at 342-43.
78 Id. at 344.
79 Id. at 345-46.
proved uncooperative; the firm then advised the employees that they would be fired
and their attorneys’ fees cut off if they did not cooperate; and did so in cases of those
employees who remained recalcitrant.80 The firm then entered into a deferred
prosecution agreement with prosecutors for the eventual dismissal of charges under
which it agreed to waive indictment; pay a $456 million fine; accept restrictions on
its practice; waive all privileges including but not limited to attorney-client and
attorney work product; and provide the government with extensive cooperation in its
investigation and prosecution of the firm’s former officers and employees.81
The by-then indicted former officers and employees moved to have their
indictments dismissed on constitutional grounds.82 The court agreed that
constitutional violations had occurred but declined at least temporarily to dismiss the
indictments under the understanding that the government had agreed that it would
accept, without prejudice to the firm in its deferred prosecution agreement or
otherwise, any fee arrangement that the firm should come to with its former officers
and employees.83 It subsequently dismissed the indictment against 13 of the
defendants, but declined to do so with respect to three others who had left the firm
sometime previously and therefore had been the victims of the misconduct the court
Substantive Due Process. With regard to the constitutional provisions
implicated in the Stein decision, the Fifth Amendment guarantees that “No person
shall ... be deprived of life, liberty, or property, without due process of law,” nor “be
compelled in any criminal case to be a witness against himself,” U.S.Const. Amend.
V. The Sixth Amendment promises that “in all criminal prosecutions, the accused
shall enjoy the right ... to have the assistance of counsel for his defence,” U.S.Const.
The Fifth Amendment due process clause and its twin in the Fourteenth
Amendment house both procedural and substantive components.85 The courts have
said that the substantive due process component of the due process clauses provides
protection against the denial of any fundament right to life, liberty, or property by
80 Id. at 347.
81 Id. at 349.
82 Id. at 350.
83 Id. at 382.
84 United States v. Stein, 495 F.Supp. 390, 425-28 (S.D.N.Y. 2007).
85 Reno v. Flores, 507 U.S. 292, 301 (1993)(“Respondents’ ‘substantive due process’ claim
relies upon our line of cases which interprets the Fifth and Fourteenth Amendments’
guarantee of ‘due process of law’ to include a substantive component, which forbids the
government to infringe certain fundamental liberty interests at all, no matter what process
is provided, unless the infringement is narrowly tailored to serve a compelling state
interest’); see also, Washington v. Glucksberg, 521 U.S. 702, 719 (1997); Collins v. Harker
Heights, 503 U.S. 115, 1992 (1992).
“oppressive,” “egregious or arbitrary” governmental action.86 Given its sweeping
potential breadth, the courts have been reluctant to recognize new claims to its
safeguards.87 They have noted that the component affords no protection against
private deprivations,88 imposes no affirmative duties upon government entities,89 and
protects only legally recognized entitlements not expectations or anticipated
benefits.90 Moreover, when “a particular Amendment provides an explicit textual
source of constitutional protection against a particular sort of government behavior
that Amendment, not the more generalized notion of substantive due process, must
be the guide for analyzing these claims.”91
When substantive due process is found to include a particular fundamental right,
infringement by government action may only survive if it is narrowly tailored to
serve a compelling governmental interest.92 Faced with the question of whether a
particular type of government action is oppressive, egregious or arbitrary for
substantive due process purposes, courts have often referred to the Rochin standard:
government action cannot be said to violate substantive due process unless it first
shocks the conscience of the court.93
86 Cuyahoga Falls v. Buckeye Community Hope Foundation, 538 U.S. 188, 198 (2003);
Sacramento v. Lewis, 523 U.S. 833, 846 (1998); Collins v. Harker Heights, 503 U.S. 115,
126 (1992); DeShaney v. Winnebago County Dept. of Social Services, 489 U.S. 189, 196
87 Washington v. Glucksberg, 521 U.S. 702, 720 (1997) (“we have always been reluctant
to expand the concept of substantive due process because guideposts for responsible
decisionmaking in this unchartered area are scarce and open-ended. By extending
constitutional protection to an asserted right or liberty interest, we, to a greatest extent, place
the matter outside the area of public debate and legislative action. We must therefore
exercise the utmost care whenever we are asked to break new ground in this field, lest the
liberty protected by the Due Process Clause be subtly transformed into the policy
preferences of the Members of this Court”); see also, Collins v. Harker Heights, 503 U.S.
88 Castle Rock v. Gonzales, 545 U.S. 748, 755 (2005); DeShaney v. Winnebago Country
Dept. of Social Services, 489 U.S. 189, 195 (1989).
89 Collins v. Harker Heights, 503 U.S. 115, 126 (1992).
90 Castle Rock v. Gonzales, 545 U.S. at 756; Board of Regents v. Roth, 408 U.S. 564, 577
91 Sacramento v. Lewis, 523 U.S. 833, 842 (1998); see also, Albright v. Oliver, 510 U.S.
92 Reno v. Flores, 507 U.S. at 302; Collins v. Harker Heights, 503 U.S. at 125.
93 Chavez v. Martinez, 538 F.3d 760, 774 (2003)(“Convictions based on evidence obtained
by methods that are so brutal and so offensive to human dignity that they shock the
conscience violate the Due Process Clause. Rochin v. California, 342 U.S. 165, 172, 174
(1952)”); Sacramento v. Lewis, 523 U.S. 833, 847 n.8 (1998); Collins v. Harker Heights,
(D.C. Cir. 2006); United States v. Guidry, 456 F.23d 493, 506-507 (5 Cir. 2006); Ramos-st
Piñero v. Puerto Rico, 453 F.3d 48, 53 (1 Cir. 2006); Brittain v. Hansen, 451 F.3d 982, 991thth
(9 Cir. 2006); Graves v. Thomas, 450 F.3d 1215, 1220 (10 Cir. 2006); Pabon v. Wright,
459 F.3d 241, 250-51 (2d Cir. 2006); County Concrete Corp. v. Roxbury, 442 F.3d 159, 169
The Stein court concluded that a criminal defendant has a substantive due
process right “to obtain and use in order to prepare a defense resources lawfully
available to him or her, free of knowing or reckless government interference.”94 It
also found that the Thompson Memorandum and the pressure the prosecutors exerted
upon the accounting firm to cut off the payment of attorneys’ fees for the firm’s
former employees impinged upon the right.95 While the court conceded that the
government had a compelling interest in investigating and prosecuting crime and in
preventing obstruction of those efforts, it felt the means chosen to serve its interests
were insufficiently tailored to satisfy strict scrutiny:
The first difficulty is that the Thompson Memorandum does not say that
payment of legal fees may cut in favor of indictment only if it is used as a means
to obstruct an investigation. Indeed, the text strongly suggests that advancement
of defense costs weighs against an organization independent of whether there
is any circling of the wagons... If the government means to take the payment of
legal fees into account in making charging decisions only where the payments are
part of an obstruction scheme – and thereby narrowly tailor its means to its ends
– it would be easy enough to say so. But that is not what the Thompson
The concerns do not end here. The argument that payment of legal fees to
employees and former employees is relevant to gauging the extent of a
company’s cooperation also is problematic... [I]t simply cannot be said that
payment of legal fees for the benefit of employees and former employees
necessarily or even usually is indicative of an unwillingness to cooperate fully.
This is especially unlikely after employees have been indicted and fired, as is the
situation here. Id. at 363-64 (emphasis in the original).
The government faired no better with its Sixth Amendment argument.
Assistance of Counsel. The Sixth Amendment assures the criminally
accused the right to assistance of counsel “in all criminal prosecutions.” It is said the
right generally attaches once “prosecution has been commenced, that is, at or after
the initiation of adversary judicial criminal proceedings – whether by way of formal
charge, preliminary hearing, indictment, information, or arraignment.”96 Once
attached, the right includes the right to counsel of the defendant’s choosing, subject
to several limitations.97 Among those limitations is the fact that an accused has no
(3d Cir. 2006); Skokos v. Rhoades, 440 F.3d 957, 962 (8th Cir. 2006); Montgomery v.th
Stefaniak, 410 F.3d 933, 939 (7 Cir. 2005).
94 United States v. Stein, 435 F.Supp.2d at 361-62.
95 Id. at 362 (The court calculated that “even a minimal defense of this case could well cost
$500,000 to $1 million, if not significantly more”).
96 Texas v. Cobb, 532 U.S. 162, 166 (2001); see also, McNeil v. Wisconsin, 501 U.S. 171,
97 Wheat v. United States, 486 U.S. 153, 159 (1988)(“The Sixth Amendment right to choose
one’s own counsel is circumscribed in several important respects. Regardless of his
persuasive powers, an advocate who is not a member of the bar may not represent clients
(other than himself) in court. Similarly, a defendant may not insist on representation by an
attorney he cannot afford or who for other reasons declines to represent the defendant. Nor
may a defendant insist on the counsel of an attorney who has a previous or ongoing
right to secure counsel of his choice using funds subject to confiscation, or as the
Supreme Court stated, “[a] defendant has no Sixth Amendment right to spend another
person’s money for services rendered by an attorney, even if those funds are the only
way that that defendant will be able to retain the attorney of his choice.”98
The government contended that its conduct could not constitute a violation of
the Sixth Amendment because (1) it had occurred before indictment and thus before
the right to counsel had attached and (2) the employees had no Sixth Amendment
right to pay for their counsel of choice with someone else’s money. Attachment was
no obstacle, replied the court, when the motive or at least the clearly foreseeable
result was to impede the employee’s criminal defense after they were indicted.99 As
for the Supreme Court’s someone-else’s-money comment, it referred to defendants
using the government’s money, money to which they had neither right nor
expectation. Here, the court said the defendants had every reason to expect that the
firm would have assumed their legal expenses, but for the government’s
The government’s conduct so struck at the heart of the adversarial nature of the
criminal justice system that it commanded redress without reference to proof of
actual prejudice to its victims.101
relationship with an opposing party, even when the opposing party is the government”); see
also, United States v. Gonzalez-Lopez, 126 S.Ct. 2557, 2561 (2006).
98 Caplin & Drysdale v. United States, 491 U.S. 617, 626 (1989); see also, United States v.
Monsanto, 491 U.S. 600, 614-615 (1989).
99 United States v. Stein, 435 F.Supp.2d at 366.
100 Id. at 367 (“Thus, both the expectation and any benefits that would have flowed from
that expectation – the legal fees at issue now – were, in every material sense, their property
not that of a third party”).
101 Id. at 368-73 (noting the similarity to Gonzalez-Lopez, and observing that the “Thompson
Memorandum discourages and, as a practical matter, often prevents companies from
providing employees and former employees with the financial means to exercise their
constitutional rights to defend themselves. This is so even where companies obstruct
nothing and, to the contrary, do everything within their power to make a clean breast of the
facts to the government and to take responsibility for any offenses they may have
committed. It undermines the proper functioning of the adversary process that the
constitution adopted as a mode of determining guilt or innocence in criminal cases. The
actions of prosecutors who implement it can make matters even worse, as occurred here”).
See also, United States v. Stein, 495 F.Supp.2d 390, 426-27 (S.D.N.Y. 2007)(“The
Department of Justice, in promulgating the aspects of the Thompson Memorandum here at
issue, and the USAO in the respects discussed above and in Stein I, deliberately or callously
prevented many of these defendants from obtaining funds for their defense that they lawfully
would have had absent the government’s interference. They thereby foreclosed these
defendants from presenting the defense they wished to present, and in some cases, even
deprived them of counsel of their choice. This is intolerable in a society that holds itself out
to the world as a paragon of justice”).
Self-Incrimination. The court resolved the self-incrimination issue in a
separate decision following defendants’ suppression motions.102 Here the
government was a bit more successful, for although the court found a violation in
some instances it declined to do so in others.
As a general rule statements secured under governmental threat of job103
termination are inadmissible in subsequent criminal proceedings. During the
course of the Stein case investigation, several employees had initially refused to talk
to authorities. Prosecutors then brought the matter to the attention of the firm’s
attorneys and employees were told to cooperate or payment of their attorneys’ fees104
would be discontinued and if still employed they would be fired. In some cases,
the coercion resulted in involuntary statements; in others the employees made105
voluntary statements for reasons of their own notwithstanding the pressure.
To the government’s argument that no Fifth Amendment consequences flowed
from the conduct of the firm, a private non-governmental actor, the court found the106
firm’s conduct attributable to the government. Yet in the end only two of the nine
challenged statements were suppressed.107
Legislative Activity in the 109th Congress.
Both the House and Senate Judiciary Committees held hearings on the policyth108
reflected in the Thompson Memorandum during the 109 Congress. They heard
contentions from some witnesses that
!The policy represented a departure from past practices, since
historically Justice Department requests for waivers of corporate
attorney-client and work product protection were unheard of.109
102 United States v. Stein, 440 F.Supp.2d 315 (S.D.N.Y. 2006).
103 Garrity v. New Jersey, 385 U.S. 493, 496-500 (1967); United States v. Waldon, 363 F.3d
1103, 1112 (11th Cir. 2004); Modrowski v. Dept. of Veterans Affairs, 252 F.3d 1344,1350
104 United States v. Stein, 440 F.Supp.2d at 330-33.
106 Id. at 337 (“the government, both through the Thompson Memorandum and the actions
of the [United States Attorney’s Office], quite deliberately coerced, and in any case
significantly encouraged, [the firm] to pressure its employees to surrender their Fifth
Amendment rights. There is a clear nexus between the government and specific conduct of
which the Moving Defendants complain”).
107 Id. at 338.
108 White Collar Enforcement: Attorney-Client Privilege and Corporate Waivers: Hearing
Before the Subcomm. on Crime, Terrorism, and Homeland Security of the House Comm. onth
the Judiciary, 109 Cong., 2d Sess. (2006)(House Hearings); The Thompson
Memorandum’s Effect on the Right to Counsel in Corporate Investigations: Hearing Beforeth
the Senate Committee on the Judiciary, 109 Cong., 2d Sess. (2006)(Senate Hearings).
109 House Hearings 13-4 (testimony of former U.S. Attorney General Thornburgh).
!“A culture of waiver has evolved in which government agencies
believe it is reasonable and appropriate to them to expect a company
under investigation to broadly waive.”110
!Although characterized as “voluntary disclosures” or “waivers,” in
reality a company faced with a Justice Department request often has
no alternative but to comply.111
!Company officials responsible for regulatory compliance are less
likely to seek the advice of counsel if they believe those
!“[D]uring an investigation, if employees suspect that anything they
say to their attorneys can be used against them, they won’t say
!Even if a company should prove innocent of any criminal or
regulatory wrongdoing, it may have lost the privilege against third
party civil plaintiffs by virtue of its disclosure to the government.114
The Justice Department’s perspective was a bit different. Its officials responded
!The Holder and Thompson Memoranda emerged in an environment
of corporate scandal. Congress suggested, and the Department
agreed, that enormous companies and their executives simply
because of their wealth, position and influence should not be
considered above the law but should instead be held accountable if
they engage in criminal conduct.115
110 House Hearings 13 (testimony of former U.S. Attorney General Thornburgh).
111 House Hearings 17 (testimony of U.S. Chamber of Commerce, President and CEO
Thomas J. Donohue) (“A company that refuses to waive its privilege risks being labeled as
uncooperative, which all but guarantees that it will not get a chance to come to a settlement
or receive, if it needs to, leniency in sentencing or fines. But it goes far beyond that, Mr.
Chairman. The uncooperative label can severely damage a company’s brand, its shareholder
value, [its] relationship with suppliers and customers, and [its] very ability to survive”); see
also, Senate Hearings (statement of Karen J. Mathis, President of the American Bar
115 Senate Hearing (statement of Deputy Attorney General Paul J. McNulty).
!The Memoranda reflected an articulation of the principles that good
prosecutors had long used in the context of a potential corporate
!The Department believed that waivers need not be, and had not
been, routinely sought.117
!The Memoranda balance “the legitimate interests furthered by the
privilege, and the societal benefits of rigorous enforcement of the
laws supporting ethical standards of conduct.”118
!Waiver was one, but only one, factor considered in the exercise of
!The Department would support establishment of a selective waiver
provision that would allow companies to continue to claim the
attorney-client and work product protection against third parties
notwithstanding disclosure to the government.120
In the final days of the 109th Congress, Senator Specter introduced S. 30 which,
among other things, would have prohibited federal authorities from requesting a
waiver of organizational attorney-client or work product protection or predicating the
adverse exercise of prosecutorial discretion on the absence of such a waiver or the
payment of attorneys’ fees for their employees or officers.121
The McNulty Memorandum, announced December 12, 2006, supersedes the
Thompson and McCallum Memoranda.122 While it incorporates a great deal of the
substance of its predecessors, the McNulty Memorandum rewrites the principles and
commentary that address corporate attorney-client and work product protection
waivers as well as those covering the payment of employee litigation costs.
It drops the specific reference to the waivers from the general statement of
factors to be weighed when considering whether to charge a corporation.123
117 Id. 7.
118 House Hearing 6 (testimony of Assoc. Attorney General Robert D. McCallum, Jr.)
120 Senate Hearing (statement of Deputy Attorney General Paul J. McNulty).
121 152 Cong. Rec. S11439, S11740 (daily eds. December 7 and 8, 2006).
122 Department of Justice, U.S. Deputy Attorney General Paul J. McNulty Revises Charging
Guidelines for Prosecuting Corporate Fraud, Press Release December 12, 2006, available
on January 26, 2007 at [http://www.usdoj.gov/opa/pr/2006/December/06_odag_828.html].
123 “. . . In conducting an investigation, determining whether to bring charges and
negotiating plea agreements, prosecutors should consider the following factors in reaching
Earlier Memoranda stated that waiver was not an “absolute” requirement for the
favorable exercise of prosecutorial discretion,124 suggesting to some that it was a
requirement under most circumstances. The McNulty Memorandum suggests that
prosecutors’ waiver requests are to be considered the exception rather than the rule:
Prosecutors may only request waiver of attorney-client or work product
protections when there is a legitimate need for the privileged information to
fulfill their law enforcement obligations. A legitimate need for the information
is not established by concluding it is merely desirable or convenient to obtain
privileged information. The test requires a careful balancing of important policy
considerations underlying the attorney-client privilege and work product doctrine
and the law enforcement needs of the government’s investigation.
Whether there is a legitimate need depends upon:
(1) the likelihood and degree to which the privileged information will benefit the
(2) whether the information sought can be obtained in a timely and complete
fashion by using alternative means that do not require waiver;
(3) the completeness of the voluntary disclosure already provided; and
(4) the collateral consequences to a corporation of a waiver. McNulty
Memorandum, VII. B. 2.
Moreover, the McNulty Memorandum divides attorney-client and work product
material into two categories. Category I consists of factual information. Category
II material is described in much the same manner as opinion work product material
(It “might include the protection of attorney notes, memoranda or reports containing
counsel’s mental impressions, conclusions legal determinations reached as a result
of an internal investigation, or legal advice given to corporation”), McNulty
Memorandum, VII. B.2. The Memorandum cautions prosecutors that only in rare
circumstances should they seek the waiver of Category II material, id. A request for
Category I must be approved by the United States Attorney in consultation with the
head of the Department’s Criminal Division; a request for Category II information
requires prior approval of the Deputy Attorney General, id. A corporation’s refusal
to waive cannot be considered in the exercise of prosecutorial discretion, id.
It also adds an explicit provision concerning attorneys’ fees, declaring that,
“Prosecutors generally should not take into account whether a corporation is
advancing attorneys’ fees to employees or agents under investigation and
indictment,” id. at VII.B.3. On the other hand, it notes that, “In extremely rare cases,
the advancement of attorneys’ fees may be taken into account when the totality of the
circumstances show that it was intended to impede a criminal investigation ...
approval must be obtained from the Deputy Attorney General before prosecutors may
consider this factor in their charging decisions,” id. at VII.B.3. n.3.
a decision as to the proper treatment of a corporate target. . . the corporation’s timely and
voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of
its agents, including, if necessary, the waiver of corporate attorney-client and work product
protection (see section VI, infra),” Thompson Memorandum, II.A.4 (language omitted in
McNulty Memorandum in italics; see McNulty Memorandum, III.A.4).
124 Holder and Thompson Memoranda, VI.B.
Legislative Activity in the 110th Congress.
The House and Senate Judiciary Committees held hearings during the 110th
Congress which focused on the McNulty Memorandum and upon related legislative
Senator Specter introduced the Attorney-Client Privilege Protection Act of 2007
(S. 186) early in the 110th Congress,126 which reappeared in revised form later in the
Congress (S. 3217). S. 186 as introduced was identical to S. 30 (109th Cong.) that the
Senator introduced at the end of the earlier Congress.127 It was also identical to H.R.
3013 offered in the House by Representative Scott128 and virtually identical to the
version of that bill passed by the House.129 The bills would have barred the Justice
Department and other federal investigative, regulatory or prosecutorial agencies from
requesting that an organization:
!waive its attorney-client privilege or attorney work product
!decline to pay the legal expenses of an employee;
!avoid joint defense, information sharing or common interest
agreements with its employees;
!refrain from disclosing information concerning an investigation or
enforcement action to employees; or
125 The McNulty Memorandum’s Effect on the Right to Counsel in Corporate Investigations:
Hearing Before the Subcomm. on Crime, Terrorism, and Homeland Security of the Housethst
Comm. on the Judiciary, 110 Cong., 1 Sess. (2007)(House Hearings II); Examining
Approaches to Corporate Fraud Prosecutions and the Attorney-Client Privilege Under theth
McNulty Memorandum: Hearing Before the Senate Comm. on the Judiciary, 110 Cong.,st
126 153 Cong. Rec. S181-183 (daily ed. January 4, 2007)(text at S183).
127 154 Cong. Rec. S6294-295 (daily ed. June 26, 2008).
128 The House Judiciary Committee reported H.R. 3013 without amendment, H.Rept. 110-
445 (2007)(the text of the substance of the bill, i.e., proposed 18 U.S.C. 3014, begins on
page 8 of the report).
129 153 Cong. Rec. H13562-564 (daily ed. November 13, 2007)(text at H13563).
130 The bill defines the “attorney-client privilege” as currently understood under the federal
law, that is as “the attorney-client privilege as governed by the principles of the common
law, as they may be interpreted by the courts of the United States in the light of reason and
experience, and the principles of article V of the Federal Rules of Evidence,” proposed 18
U.S.C. 3014(a)(1). It similarly defines “attorney work product” as “materials prepared by,
or at the direction of an attorney in anticipation of litigation, particularly any such materials
that contain a mental impression, conclusion, opinion, or legal theory of that attorney,”
proposed 18 U.S.C. 3014(a)(2).
!terminate or discipline an employee for the employee’s exercise of
a legal right or prerogative with respect to a governmental inquiry,
proposed 18 U.S.C. 3014(b).
They would have also precluded using such organizational activity as the basis in
whole or in part for a civil or criminal charge against the organization, id.
The bills would have allowed the government to request information it believes
is beyond the scope of the attorney-client privilege or the attorney work product
protection, proposed 18 U.S.C. 3014(c). And they would not prevent an
organization, on its own initiative, from sharing the results of an internal
investigation with authorities, proposed 18 U.S.C. 3014(d).
H.R. 3013, as passed by the House, included two subsections in proposed 18
U.S.C. 3014 that the S. 186 did not. One dealt with statutory authority elsewhere for
federal officials to demand access to material covered by the attorney-client and
attorney work product privileges, proposed 18 U.S.C. 3014(e).131 The second would
have permitted federal prosecutors, in determining whether to bring criminal charges
against a corporation, to consider the fact the corporation had provided counsel for
an employee, entered into a joint defense agreement with an employee, or shared
information relating to investigation with an employee – but only when those
activities are themselves federal crimes, proposed 18 U.S.C. 3014(f).132 The
language of the two appeared first when the bill was brought to the House floor under
suspension of the rules. The brief statements preceding its passage did not explain
or even mention the new subsections.133
It was not entirely clear what subsection 3014(e) intended to preserve when it
referred to “any other federal statute that may authorize, in the course of an
examination or inspection, an agent or attorney of the United States to require or
compel the production of attorney-client privilege material.” Many federal statutes
131 “This Act does not affect any other federal statute that may authorize, in the course of
an examination or inspection, an agent or attorney of the United States to require or compel
the production of attorney-client privilege material or attorney work product,” proposed 18
132 “It is not conditioning a charging decision under subsection (b)(2) of this section [which
generally prohibits conditioning such decisions on the fact a corporation has provided
counsel for its employees, or entered into a joint defense agreement with them, or shared
information concerning an investigation with them] to charge an organization or person
affiliated with that organization for conduct described in subparagraphs (B), (C), or (D) of
that subsection [relating to providing counsel, joint defense agreements and sharing
information, respectively] under a federal law which makes that conduct in itself an
offense,” proposed 18 U.S.C. 3014(f).
133 The new subsections made explicit assurances that appear in the House Judiciary
Committee report which recommended passage of H.R. 3013 as introduced: “Finally, the
measure is not intended to limit any statutory authority of an agent or attorney of the United
States to access material protected by attorney client privilege or attorney work product.
Nor is it designed to prohibit an agent or attorney from charging an entity or individual
under a Federal statute that makes the conduct in itself an independent offense,” H.Rept.
authorize the examination or inspection of corporate records and other materials.
Few, if any, federal statutes state in so many words that federal inspectors may
examine otherwise privileged attorney-client or work product material. In fact, if
privilege is mentioned at all, the statute is likely to preserve the privileged material
Use of the phrase “any other federal statute that may authorize” indicated that
the authors of the subsection were referring to statutes which grant general authority
that on a given occasion “may” extend to compelled access to privileged material.
Use of the term “in the course of an examination or inspection” suggested that the
exception likely would not have extended to situations where the material was sought
through an administrative or grand jury subpoena or through a civil investigative
demand. Finally, reference to “privileged” material narrowed the category further
and belied any intent to include material which on its face seems “privileged” but
which because of the “crime or fraud” or some other exception cannot be classified
as such. It was difficult to see what remains.
The second subsection seemed designed to permit prosecutors, when pondering
whether to charge a corporation, to consider whether the company had provided
counsel, or entered into joint defense agreements, or shared information, as part of
a scheme to suborn perjury, destroyed evidence, or otherwise engaged in conduct that
was separately prosecutable as an obstruction of justice.
The testimony of hearing witnesses and views of commentators largely
addressed other features of the legislative proposals and of the McNulty
Memorandum. Some applauded the changes in the Memorandum and questioned the
justification for the legislative proposals on several grounds, e.g.:
!the McNulty Memorandum changes the tone of the policy,
abandoning the aggressive implications of the Thompson
Memorandum in favor of statements that confirm the Department’s
recognition and respect for the importance of the attorney-client
!the Memorandum establishes a strict procedure for waiver requests
and generally bars prosecutors from holding against a company its
payment the legal expenses of an employee;136
134 E.g., 42 U.S.C. 2996h(d)(“Notwithstanding the provisions of this section or section
2996g of this title, neither the Corporation nor the Comptroller General shall have access
to any reports or records subject to the attorney-client privilege”); 7 U.S.C. 2143(a)(6)(B)
(“No rule, regulation, order, or part of this chapter shall be construed to require a research
facility to disclose . . . to the Institutional Animal Committee during its inspection, trade
secrets or commercial or financial information which is privileged or confidential”).
135 Testimony of Deputy Assistant Attorney General Barry M. Sabin, House Hearings II at
136 Prepared Statement of Deputy Assistant Attorney General Barry M. Sabin, House
Hearings II at 19-22.
!the Memorandum strikes the proper balance between the public’s
interest in vigorous investigation and prosecute white collar crime
and fairness to corporations and their officers and employees;137
!experience since the issuance of the McNulty Memorandum refute
the suggestion of widespread prosecutorial abuse; “legislative action
is simply not needed;”138
!although the bills have no explicit enforcement mechanism and the
courts are generally reluctant to impose sanctions in the absence of
statutory authority, the bills’ proposals are likely to bring forth a
“cottage industry of prosecutorial abuse claims” that may deter the
prosecution of worthy cases;139
!even if the Memorandum fosters an environment in which
employees must waive their Fifth Amendment privilege or be fired,
it results in no more than a situation in which the guilty suffer;140
!the legislative proposals will make prosecution of white collar crime
more difficult because they reduce the incentive for corporate
cooperation and thereby encourage “stonewalling.”141
Others found the McNulty Memorandum troubling and applauded the legislative
proposals for several reasons of their own, e.g.:
!the McNulty Memorandum will continue to result in routine
compelled waiver of the attorney-client privilege and the work
137 Testimony of Professor Michael Seigel, Senate Hearings II at 1. Since the relevant
Senate hearings from the 110th Congress are not yet publicly available, the citations to
Senate hearing testimony here and elsewhere refer to the pages in the witness’s prepared
statements available on November 16, 2007 at [http://judiciary.senate.gov].
138 Testimony of United States Attorney Karin Immergut, Senate Hearings II at 6.
139 Testimony of Professor Daniel Richman, Senate Hearings II at 2; see also, Testimony
of United States Attorney Karin Immergut, Senate Hearings II at 7.
140 Testimony of Professor Michael Seigel, Senate Hearings II at 5-6 (“The bulk of that
leverage, of course, would come from the threat of the ultimate sanction: termination. Only
an employee truly mired in criminality would suffer this consequence rather than
141 Testimony of United States Attorney Karin Immergut, Senate Hearings II at 8.
142 Testimony of American Bar Association President Karen J. Mathis, House Hearings II
at 45; testimony of former Attorney General Dick Thornburgh, Senate Hearings II at 1-2;
153 Cong. Rec. H.13564 (daily ed. November 13, 2007)(American Bar Association letter
in support of H.R. 3013).
!the policy improvements contained in the McNulty Memorandum
are not binding and lack an enforcement mechanism;143
!the Memorandum continues to allow prosecutors to encourage
companies to fire employees who fail to waive their Fifth
! the Memorandum affords inadequate, partial attorney-client and
attorney work product protection by assigning less stringent approval
levels for waivers involving “factual” information which reveal
client statements and attorney strategy;145
!the Memorandum addresses only Justice Department investigation
and prosecution practices, whereas the legislative proposals reach
the practices of other agencies as well;146
!the legislative proposals would not unduly impinge upon the
prerogatives of federal prosecutors; to a limited extent, they bar
interference with the attorney-client privilege, a mainstay of the
Anglo-American system of justice since Elizabethan times and one
whose presence has not heretofore been considered an unwarranted
impediment to prosecution;147
!the proposals would “uphold the finest traditions of the DoJ by
allowing it to strike harsh blows but fair ones in combating corporate
Senator Specter addressed some of these observations in S. 3217. S. 3217
expressly excluded from its protections certain terrorists organizations, illicit drug
cartels, and crime-for-profit entities.149 Where the earlier bar applied to federal
143 Testimony of William M. Sullivan, Jr., Esq., House Hearings II at 33-4; see also,
Restricting Prosecutors’ Powers: Increasing Oversight to Reinstate Corporate Interests, 92
IOWA LAW REVIEW 1523, 1548 (2007).
144 Testimony of Andrew Weissmann, Esq., House Hearings II at 24; see also, Griffin,
Compelled Cooperation and the New Corporate Criminal Procedure, 82 NEW YORK
UNIVERSITY LAW REVIEW 311, 378 (2007)(“Even setting aside whether the end of fighting
corporate crime can be achieved via the Thompson and McNulty Memoranda, the means
here violate important Fifth Amendment protections”).
145 Testimony of Andrew Weissmann, Esq., House Hearings II at 24-5.
146 Statement of Richard T. White, Chairman of the Board of Directors of the Association
of Corporate Counsel, House Hearings II at 89.
147 Testimony of former Attorney General Dick Thornburgh, Senate Hearings II at 2.
148 Testimony of Andrew Weissmann, Esq., Senate Hearings II at 4.
149 Proposed 18 U.S.C. 3014(a)(3)(“The term ‘organization’ does not include – (A) a
continuing criminal enterprise, as defined in section 408 of the Controlled Substances Act
(21 U.S.C. 848); (B) any group of individuals whose primary purpose is to obtain money
through illegal acts; or ( C ) any terrorist organization, as defined in section 2339B”).
criminal and civil matters and investigations alone, S. 3217 covered administrative
adjudications and proceedings as well.150 Where the earlier bills condemned
governmental demands that an organization abandon its privileges, S. 3217 also
removed any claim of those privileges from the permissible array of prosecutorial
considerations.151 Where the earlier bills permitted authorities to request information
that they might reasonably consider beyond the scope of the privileges, S. 3217 also
permitted them to seek information otherwise within the reach of a federal grand jury
subpoena, privilege considerations notwithstanding, or to seek information whose
privilege status was unknown to them.152
S. 3217 would have carried forward, with some modification, the subsections
added to the House bill just before its passage there. The exception it afforded to
instances, in which a statute “that may authorize” authorities to compel disclosure of
privileged material, was revised to cover statutes “that authorize” compulsory
150 Proposed 18 U.S.C. 3014(b).
151 Proposed 18 U.S.C. 3014(b)(2)(“In any Federal investigation or criminal or civil
enforcement matter, including any form of administrative proceeding or adjudication, an
agent or attorney of the United States shall not consider any conduct described in
subparagraph (B)[claiming attorney-client or work product privileges, paying attorneys’ fees
for employees, entering into joint defense agreements with employees, and refusing to fire
employees who claim their constitutional or other rights] in – (i) making a civil or criminal
charging or enforcement decision relating to an organization, or a current or former
employee or agent of such organization; (ii) determining whether an organization, or a
current or former employee or agent of such organization, is cooperating with the
Gove rnme nt”).
152 Proposed 18 U.S.C. 3014(c)(“Nothing in this section shall be construed to prohibit an
agent or attorney fo the United States from requesting or seeking any communication or
material that – (1) an agent or attorney of ordinary sense and understanding would not know
is subject to a claim of attorney-client privilege or attorney work product; (2) an agent or
attorney of ordinary sense and understanding would reasonably believe is not entitled to
protection under the attorney-client privilege or attorney work product doctrine; or (3)
would not be privileged from disclosure if demanded by a subpoena duces tecum issued by
a court of the United States in aid of a grand jury investigation”).
153 Proposed 18 U.S.C. 3014(e).