[Senate Hearing 109-835]
[From the U.S. Government Publishing Office]
S. Hrg. 109-835
THE THOMPSON MEMORANDUM'S EFFECT ON THE RIGHT TO COUNSEL IN CORPORATE
INVESTIGATIONS
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 12, 2006
__________
Serial No. J-109-108
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
ARLEN SPECTER, Pennsylvania, Chairman
ORRIN G. HATCH, Utah PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin
JOHN CORNYN, Texas CHARLES E. SCHUMER, New York
SAM BROWNBACK, Kansas RICHARD J. DURBIN, Illinois
TOM COBURN, Oklahoma
Michael O'Neill, Chief Counsel and Staff Director
Bruce A. Cohen, Democratic Chief Counsel and Staff Director
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Feingold, Hon. Russell D., a U.S. Senator from the State of
Wisconsin, prepared statement.................................. 75
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 4
prepared statement........................................... 77
Specter, Hon. Arlen, a U.S. Senator from the State of
Pennsylvania................................................... 1
WITNESSES
Donohue, Thomas J., President and Chief Executive Officer, U.S.
Chamber of Commerce, Washington, D.C........................... 20
Mathis, Karen J., President, American Bar Association, Chicago,
Illinois....................................................... 22
McNulty, Paul J., Deputy Attorney General, Department of Justice,
Washington, D.C................................................ 2
Meese, Edwin, III, former Attorney General, Ronald Reagan
Distinguished Fellow in Public Policy, and Chairman, Center for
Legal and Judicial Studies, The Heritage Foundation,
Washington, D.C................................................ 18
Sheppard, Mark B., Partner, Sprague & Sprague, Philadelphia,
Pennsylvania................................................... 26
Weissmann, Andrew, Partner, Jenner & Block, LLP, New York, New
York........................................................... 24
QUESTIONS AND ANSWERS
Responses of Paul J. McNulty to questions submitted by Senators
Leahy and Schumer.............................................. 37
SUBMISSIONS FOR THE RECORD
Business Roundtable, Paul M. Montrone, Chairman & Chief Executive
Officer, Fisher Scientific International Inc., Chairman, Civil
Justice Reform Task Force, Washington, D.C., letter............ 56
Coalition to Preserve the Attorney-Client Privilege, joint
statement...................................................... 58
Donohue, Thomas J., President and Chief Executive Officer, U.S.
Chamber of Commerce, Washington, D.C., prepared statement...... 71
Mathis, Karen J., President, American Bar Association, Chicago,
Illinois, prepared statement and attachments................... 80
McNulty, Paul J., Deputy Attorney General, Department of Justice,
Washington, D.C., prepared statement........................... 109
Meese, Edwin, III, former Attorney General, Ronald Reagan
Distinguished Fellow in Public Policy, and Chairman, Center for
Legal and Judicial Studies, The Heritage Foundation,
Washington, D.C., prepared statement........................... 123
Sheppard, Mark B., Partner, Sprague & Sprague, Philadelphia,
Pennsylvania, prepared statement............................... 132
Thornburgh, Dick, Kirkpatrick & Lockhart Nicholson Graham LLP,
Washington, D.C., prepared statement........................... 139
Weissmann, Andrew, Partner, Jenner & Block, LLP, New York, New
York, prepared statement....................................... 144
THE THOMPSON MEMORANDUM'S EFFECT ON THE RIGHT TO COUNSEL IN CORPORATE
INVESTIGATIONS
----------
TUESDAY, SEPTEMBER 12, 2006
United States Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 9:30 a.m., in
room SD-226, Dirksen Senate Office Building, Hon. Arlen
Specter, Chairman of the Committee, presiding.
Present: Senators Specter and Leahy.
OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM
THE STATE OF PENNSYLVANIA
Chairman Specter. Good morning, ladies and gentlemen. It is
9:30. The Judiciary Committee will now proceed with this
oversight hearing on the practices of the Department of Justice
on the issue of departmental policy on calling for a waiver of
attorney-client privilege and the elimination of the corporate
practice of paying for counsel fees of their employees in the
defense of criminal charges or the investigation of criminal
charges.
There is a memorandum of the Department which provides
``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 attorney-client privilege and work product
protection,'' and then a further provision on a ``corporation's
promise of support to culpable employees and agents either
through advancing of attorney's fees,'' et cetera, all of which
goes to the ``value of a corporation's cooperation.''
This memorandum and these policies may well have the effect
of significantly modifying the traditional balance on a
criminal prosecution where the Government has the burden of
proof because of the Government's power in establishing a
criminal case, which leaves traditionally the suspect or
ultimately the accused with privileges--the attorney-client
privilege being one--and the obligation or practice of
corporation's employees to pay counsel fees, which can be so
prohibitive as to be coercive in an individual's decision on
whether or not to defend himself or herself.
The issue of privilege is one which the Government
exercises with some forcefulness on some frequency. Executive
privilege, certainly where the President were to invoke
executive privilege, who could say that the President was being
uncooperative, where we have the recurrent issue coming up in
hearings before this Committee on nominees, including Supreme
Court, where the Government says there is a privilege attached
to what goes on in the Solicitor General's office, where we
recently had Chief Justice Roberts and Justice Alito with
documents and papers which the Government insisted on
withholding, and understandably so, because of the overlying
issue of privilege.
The Southern District of New York has taken up this issue
in an opinion by Judge Lewis Kaplan, strongly worded,
condemning the Department of Justice's procedures on
constitutional grounds in the KPMG case. So we have a matter
here which involves very fundamental considerations of
constitutional rights, due process rights, Sixth Amendment
rights.
Quite a number of former key employees of the Department of
Justice, including Attorneys General, have objected to this
policy, and this Committee will be scrutinizing it to see if it
is appropriate for the Department of Justice to act.
We turn now to our first witness, the distinguished Deputy
Attorney General Paul McNulty. He served with distinction as
the United States Attorney for the Eastern District of
Virginia, handling many very important and high-profile cases.
He is a graduate of Grove City College and Capital University
School of Law.
Thank you for joining us, Deputy Attorney General McNulty,
and we look forward to your testimony.
STATEMENT OF PAUL J. MCNULTY, DEPUTY ATTORNEY GENERAL,
DEPARTMENT OF JUSTICE, WASHINGTON, D.C.
Mr. McNulty. Thank you very much, Mr. Chairman. It is good
to see you, and it is good to be here today.
Today's hearing is about duty--the duty of prosecutors and
the duty of corporate officials. It is about how those duties
are brought together to enforce the law and to protect the
integrity of the marketplace.
People of good will and great distinction have criticized
how we at the Department of Justice are fulfilling our duty.
These are smart and experienced people, and their concerns must
be taken seriously. But, Mr. Chairman, as a United States
Attorney and Deputy Attorney General for the past 5 years, I
have a little experience myself, and I would like, therefore,
to suggest five realities that I have observed in relation to
the practice of waiving attorney-client privilege in corporate
fraud prosecutions.
Reality number 1, Federal prosecutors have a duty to the
taxpayers of this country to hold corporate officials and
corporations accountable for criminal wrongdoing. Our job is to
protect the integrity of public markets, to ensure that
investors have a safe place to entrust their hard- earned
dollars. And it is not in the interests of taxpayers, and
investors in particular, for corporate fraud investigations to
drag on for years.
Reality number 2, those corporations want out from under
the dark clouds of criminal wrongdoing as quickly as possible.
The moment it becomes known that a corporation could be facing
a criminal investigation and potential prosecution, the value
of that company's stock begins to plummet, its shareholders
lose money, and the board of directors quickly recognizes its
fiduciary duty to those shareholders. It immediately sets out
to locate the cancer of corporate corruption, excise the tumor,
and get the company back on the road to good health. It is not
in the interests of shareholders for corporate criminal
investigations to drag on for years.
Reality number 3, most corporations, therefore, are anxious
to cooperate with Government investigations. Whether it is the
Holder memo, the Thompson memo, a McNulty memo, or no memo,
corporations will continue to cooperate in order to bring
criminal investigations to an end, to bring them out from under
the dark cloud of potential prosecution.
Reality number 4, there are many ways for Government
investigators to get the facts in a corporate fraud
investigation, to find out who did what when. Some ways are
faster and more productive than others. One of the most
productive ways to get the facts is for a cooperating
corporation to tell the Government what it knows. It is not the
only way for the Government to learn the truth, but, generally
speaking, disclosing the results of the company's internal
investigation is one of the best ways. Let's face it. Searching
for hot documents in rooms full of paper or on servers filled
with computer files is much slower than looking through a
three-ring binder or a CD-ROM identifying the most relevant
evidence.
As a general counsel of a Fortune 500 company recently told
me, ``If I could bring a Justice Department investigation to a
close by turning over an internal investigation and I did not
do it, my board would fire me.''
Reality number 5, once a corporation has turned over the
internal report and the prosecutor is ready to decide, indict
or not indict, the corporation will insist, will demand that
its cooperation be given full consideration along with other
relevant factors in deciding not to indict the company.
Thompson memo or no memo, the waiving of attorney-client
privilege will always be argued by a company in its defense.
And why shouldn't it be? Would it be fair to treat a company
that did not cooperate, that circled the wagons and fought the
Government every step of the way, the same as one that said to
the Government, ``We are on your side, we will help you get the
truth''? I am sure if prosecutors took that approach, my phone
would be ringing off the hook.
Mr. Chairman, Senator Leahy, three final thoughts.
First, the attorney-client privilege is an extremely
important component of our constitutional order and great legal
tradition. The Justice Department may not and will not do harm
to this principle of basic fairness. But just as drug-
trafficking defendants routinely waive their constitutional
right to a trial by jury in exchange for reduced charges, so,
too, a corporation can waive a basic right when it is in its
interests to do so.
Second, the waiving of the attorney-client privilege is
just one part of one factor out of nine factors cited in the
Thompson memorandum for consideration in deciding whether to
prosecute a company. But such a waiver can make a big
difference for the hopes and dreams of shareholders who are
anxiously waiting for their investments to bounce back.
And, third, when it comes to waiving attorney-client
privilege, we rarely have an interest in legal advice or
counsel contemporaneous with the investigation. Mr. Chairman,
we take the Sergeant Joe Friday approach--''Just the facts,
ma'am.''
The Justice Department stands ready to work with everyone
who has a suggestion for improving this waiver process. We are
currently holding discussions with several interested parties.
All we seek at the end of the day is the ability under the
right circumstances to get the facts as quickly as possible and
to fulfill our duty to the taxpayers and investors.
Thank you, Mr. Chairman.
[The prepared statement of Mr. McNulty appears as a
submission for the record.]
Chairman Specter. Thank you, Mr. McNulty.
I turn now to our distinguished Ranking Member, Senator
Leahy, for his opening statement.
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
STATE OF VERMONT
Senator Leahy. Well, thank you, Mr. Chairman. I appreciate
you having this hearing. I think it is extremely important.
The protection of communications between client and lawyer
has been fundamental to our Nation's legal justice system since
its inception, as Mr. McNulty, of course, and just about
everybody else in the room knows. The right to counsel has long
been recognized as essential to ensure fairness and justice and
equality under the law for all Americans. This administration
has taken extraordinary steps to investigate and prosecute the
press and to intimidate the press and critics and attorneys
while it has claimed unlimited privileges and an extraordinary,
unprecedented amount of secrecy for itself.
As a former prosecutor, like the Chairman, I understand all
too well that our democracy requires a healthy respect for the
law and that criminal wrongdoing has to be punished, and
wrongdoers who profit at the expense of ordinary Americans have
to be held accountable. That is true for all, including
corporate wrongdoers and those who violate the public's trust.
Following Enron's collapse in 2001, I authored the criminal
provisions in the Public Company Accounting Reform and Investor
Protection Act that strengthened existing criminal penalties
for corporate crime. I have since repeatedly offered stronger
criminal penalties and accountability for war profiteering and
contractor fraud. Those did not go through because the Bush
administration blocked them. But, historically--apparently one
thing we can do is war profiteering. That is allowed in the war
in Iraq today.
Historically, the attorney-client privilege has been
balanced with competing objectives, including the need to
ensure cooperation with the Government in criminal or
regulatory probes. Now, the issue, of course, Mr. McNulty, as
you have stated, is does the Department have this balance
right.
In the wake of the major corporate scandals at Enron,
WorldCom, and elsewhere, you revised your policy. We have the
Thompson memorandum, and now we have increased emphasis and
scrutiny of a corporation's cooperation with the Government.
But there is a growing number of critics of the Thompson
memorandum, including former Republican Attorneys General. They
have expressed concern that the Department's policy is too
heavy-handed and that the policy has created a dangerous
culture of waiver in our criminal justice system. Last month,
the American Bar Association adopted a resolution opposing the
Department's policy. Last Friday, the Wall Street Journal
editorial board joined the criticism of Attorney General
Gonzales and the Thompson memorandum, noting that the coercive
intimidation it represents is ``more than a PR problem'' for
the administration.
Now, I am not one who automatically joins Wall Street
Journal editorials. I think this time they are absolutely
right. As I said, I am a former prosecutor. If I had taken a
position like this when I was a prosecutor that, ``Boy, you
better cooperate or, wow, we are really going to hit you with a
lot of charges,'' the judges on the criminal bench in my State
would have referred me to the Vermont Bar Association for
sanctions. And I hope, even with a Federal bench that is very,
very beholden to this administration, that they might consider
the same thing.
Now, I hold no brook for the kind of corporate wrongdoing
and greed that has robbed a lot of our people. But just as I
wanted to make sure the people I prosecuted had their rights so
that I ended up getting a conviction that would be upheld, you
ought to do the same. And I really cannot see any reason to
tell a corporation, ``Well, you better give up all your rights
or you are in real trouble.'' And I hear this from a lot of
corporations, this idea of a CEO telling you, ``Well, if I do
not just turn everything over and waive my rights and then we
get in trouble, the board is going to fire me.'' Good Lord.
Have we gotten to that point in this country?
Erosion of the right to counsel undermines the fairness of
our criminal justice system for all Americans. I am really
worried about this, and as I said, I hold no brief for the
people who have broken this law, just as I held no brief for
the murderers and rapists and others that I prosecuted. But I
also know that we have a rule of law in this country, and
something I worry that we sometimes forget about.
Thank you, Mr. Chairman. I will put my whole statement in
the record. It is a lot stronger than that.
Chairman Specter. Without objection, it will be made a part
of the record.
[The prepared statement of Senator Leahy appears as a
submission for the record.]
Chairman Specter. Mr. McNulty, when you say that the
Department of Justice wants to do fundamental fairness, it is
really not a matter for the Department of Justice to make that
determination. That is a matter for the courts. You refer to
the experience you have had as a prosecuting attorney. I made
no reference to the experience that I have had. Senator Leahy
talks about being a prosecutor. We understand that a prosecutor
is a quasi-judicial official, but a big part of the
prosecutor's responsibility is as an advocate. So it is not for
the prosecutor to make the decision as to what is fundamental
fairness.
Now, you establish at the outset as your departmental
policy that the value of a corporation's cooperation will be
determined as to whether there will be charges. Well, charges
themselves are a substantial penalty. That is the reality. We
have a presumption of innocence in the law, but the man on the
street thinks that if an individual is charged, it is somewhere
between he must be guilty or he must have done something wrong.
But there is a heavy opprobrium attached to a charge. And the
right to counsel is just very, very fundamental.
Would you say the President was being uncooperative, Mr.
McNulty, if the President asserted executive privilege when the
Conyers Judiciary Committee in the House asked him for
materials which touch on executive privilege?
Mr. McNulty. No. I am not familiar with when it was
asserted in that instance, but I would assume that that was not
inappropriate.
Chairman Specter. Was the administration, President Bush's
administration, uncooperative when they said to Senator Leahy,
on a long letter he wrote for then-Judge Roberts's information,
that they were not going to tell him what Judge Roberts did as
an Assistant Solicitor General because it would chill the work
of the Solicitor General's office?
Mr. McNulty. No.
Chairman Specter. Was the Department of Justice being
uncooperative when similar requests for Deputy Solicitor
General Alito's materials were not turned over?
Mr. McNulty. No.
Chairman Specter. Well, of course not. When you say that
corporations want to have investigations completed promptly,
you are exactly right, but so do individuals. The reality is
that investigations drag on and on and on and on. And it may be
that many of them, if not most of them, have to drag on. But it
is a very, very heavy burden hanging over any individual to be
subject to an investigation.
Mr. McNulty, I conducted investigations as a D.A.
contemporaneously with what the Department of Justice
conducted. It was not under your watch. It was a long time ago.
But Federal prosecutors do not deserve any merit badges for
promptness, necessarily. But delays are very tough on
individuals as well as on corporations.
What is your reaction, Mr. McNulty, to the opinion of Judge
Kaplan in the Southern District on the KPMG case, saying that
there was a denial of fundamental due process and there was a
denial of the Sixth Amendment right to counsel in that case by
the Government's practices and policies?
Mr. McNulty. Well, we are litigating the Kaplan decision,
so I am going to say just a few things. There is a lot you
cannot say when it is an ongoing litigation like that. But we
have stated that we disagree with the judge's reasoning in that
case. The judge essentially concluded that the Thompson
memorandum was unconstitutional because it created a pressure
on the corporation to cut off the attorney's fees of the
defendants.
We do not believe that is the correct reading of the
Thompson memo. That case is on appeal now. So we essentially
have taken that decision up.
Chairman Specter. My time has expired. I yield to Senator
Leahy.
Mr. McNulty. Mr. Chairman, I will be happy to just keep
listening. I just want to make sure that if there was an
opportunity to respond to some of the things you said, I did
not want to--I wanted to look for an opportunity down the road
at some point here to be able to respond.
Chairman Specter. You have a further response to make?
Mr. McNulty. You made a number of different points, and I--
Chairman Specter. Take them up and respond.
Mr. McNulty. Okay. I will just say a few key things.
Chairman Specter. Sure.
Mr. McNulty. First of all, with regard to the analogy of
the executive privilege issue as it relates to this discussion,
I appreciate certainly the point that there are- -it is
important to respect the nature of confidential communications,
and in various contexts and various places, confidential
communications are critical to the way in which things operate.
We all understand that. But the fact that both instances
involve the confidentiality of communications to me is not as
significant as the distinctions between those different areas.
One, that is, the executive branch's actions, has to do
with the way in which co-equal branches of Government work
together to try to deal with these questions of getting
information from the executive branch.
In this case, we are talking about a corporation facing
criminal prosecution. One of the things lost in a lot of this
discussion is this issue, the Thompson memorandum--and before
that, by the way, the Holder memorandum, which has virtually
the identical language as the Thompson memo on this subject--
Chairman Specter. Yes, but the prior administration did not
establish it as governmental policy. Point that out at the same
time, Mr. McNulty. If you are going to refer to it, lay it all
on the table.
Mr. McNulty. Well, I am--
Chairman Specter. Well, wait a minute. It was optional with
U.S. Attorneys.
Mr. McNulty. It is optional now with U.S. Attorneys.
Chairman Specter. Excuse me?
Mr. McNulty. It is optional now with U.S. Attorneys.
Chairman Specter. Well, that is not my understanding.
That is not the way I read your policy. That is not the way
everybody else reads your policy. Big difference between what
you are doing now and what was done under Attorney General
Reno.
Mr. McNulty. With great respect to you, sir, I have to
disagree with that. This was guidance given to prosecutors-
Chairman Specter. Well, are you saying that the Thompson
memo is not binding on U.S. Attorneys around the country?
Mr. McNulty. No.
Chairman Specter. Because if you are, I think that is good
news to a lot of U.S. Attorneys.
Mr. McNulty. It is no more binding than any previous
guidance to U.S. Attorneys as to how to make decisions, which
is what--
Chairman Specter. I am not interested in any previous
guidance to U.S. Attorneys. I want to know flat-out is the
Thompson memorandum binding on U.S. Attorneys.
Mr. McNulty. It sets forth the guidance there to exercise
when making a decision. It is binding as to here are
considerations that you are take up, but it does not say you
are to demand attorney-client waiver in a particular situation.
Not at all. It is just guidance as to how to make a decision.
Chairman Specter. Well, of course it does not, but it lists
it as a prime consideration on whether they are going to be
charged.
Mr. McNulty. Yes.
Chairman Specter. Well, I take your last answer to mean
that this is policy which the U.S. Attorneys have to follow.
Mr. McNulty. That is fine. I am not trying to quibble on
that point, sir. It is just that what I am saying is that it is
not changed with regard to how we give guidance to prosecutors
in the field who are trying to work with companies on this
question. In the absence of this, you would have prosecutors on
an individual basis trying to decide, Will we prosecute the
company or not prosecute the company when we have the evidence
to do so? And that is the time this comes up. The evidence and
the ability to charge is now present. The question is: Do it or
not do it? What factors should be taken into consideration? We
give them nine.
Chairman Specter. But that is when you have the evidence,
and balance in the criminal justice system is to impose the
burden of proof on the prosecution and to require the
prosecution to gather the evidence in a context where those who
are being investigated or charged have the attorney-client
privilege as well as other privileges.
When you talk about the executive privilege between co-
equal branches, it is true, but the Senate Judiciary on
confirmation stands in a pretty good position as a co-equal
branch. When you talk about the power of the Government, it is
very, very elevated compared to the power of the individual,
and that is why they have the burden of proof, and that is why
you have the privilege against self-incrimination, and that is
why you have the attorney-client privilege, to put a balance in
the system. And the concern that I have is of the material
imbalance. Congress can protect itself with the executive
branch, but an individual, a corporate employee is very
different from the corporation. And the corporate employee's
interests are very different from the corporation. The
corporation wants to get the matter closed early for financial
reasons. The individual who has the attorney-client privilege
and who wants to have his counsel fees paid so he can defend
himself wants to stay out of jail or wants to be treated
fairly.
Do you have some further comments on the opening line of
questions?
Mr. McNulty. Thank you, sir. I will stop there.
Chairman Specter. Senator Leahy?
Senator Leahy. Well, thank you, Mr. Chairman. You know, I
sort of hear you dancing all around the question of whether it
is mandatory in U.S. Attorneys. There is not a single U.S.
Attorney in the country who does not think this is the--who
does not believe this is the policy. They feel this is the
policy. They understand this is the policy. The Thompson memo,
to follow up on what the Chairman was saying, even seems to
encourage companies to fire employees under some circumstances
to show their cooperation. Good Lord. This means you kind of
come in with a sledgehammer and hope that everybody will run
like hell.
Don't these policies compel corporate employees to waive
their right against self-incrimination or risk losing their
jobs? I mean, it is kind of an interesting choices, isn't it?
You either testify or you might lose your job. No compulsion
there.
Mr. McNulty. Now you are talking about whether or not
employees must cooperate with an internal investigation. I am
sorry, Senator Leahy. I am not sure if I understand--
Senator Leahy. The Thompson memo seems to encourage
companies to fire employees under certain circumstances to show
their cooperation--if they do not show cooperation.
Mr. McNulty. Well, what the Thompson memo says is that one
of the factors in looking at a company's conduct at the time of
deciding whether to charge it criminally or not is if it has a
compliance program. And anyone responsible for drafting a
compliance program that would pass the straight- face test
includes a discipline procedure. How do you handle people who
fail to comply with an internal investigation?
Senator Leahy. Mr. McNulty, you are probably getting into a
definition of what ``is'' is. What you are saying, in effect,
is you either cooperate and give us everything we want or you
are in deep trouble. I mean, really, it comes down to that. It
comes down to that. A corporation, if I was sitting on a board
of a corporation, of course, I would be worried because I would
see the Government coming in and saying, ``You better waive
your rights, or we are really going to get you. Not we might
just a little bit get you. If you don't waive your rights, we
are really going to get you.'' And don't you actually end up in
a perverse way where a company is going to be very concerned
about putting in some very specific guidelines and monitor
those very specific guidelines to make sure everybody is
behaving themselves, because they are afraid if they slip off
those guidelines just a little bit, the Federal Government,
with enormous resources, can play a ``gotcha'' game.
Mr. McNulty. No, I do not believe that is the intent of
this--
Senator Leahy. Okay. That is your answer. Now, the KPMG
case you said is still being litigated. Are you going to appeal
Judge Kaplan's decision?
Mr. McNulty. I believe that is what is going on, although I
don't know at this moment. I will have to check to see if we
have already filed.
Senator Leahy. Will you check and let us know whether you
have appealed? But it is your intention--
Mr. McNulty. We have appealed already.
Senator Leahy. You have appealed. All right.
You know, the Coalition to Preserve the Attorney-Client
Privilege found that 30 percent of in-house respondents and 51
percent of outside counsel for companies that have been under
investigation during the last 5 years said the Government
expected waiver of the attorney-client privilege in order to
engage in bargaining or to be eligible to receive more
favorable treatment. It gives them the impression that if you
refuse to waive the attorney-client privilege, which is, after
all, the bedrock of our constitutional legal system, it assumes
that it means the corporate defendant is not cooperating. Is
that right?
Mr. McNulty. Well, first of all, that is based upon this
information that we are requiring or compelling a waiver--I am
sorry. I am not sure I follow the question. Would you please--
Senator Leahy. Let me go to another one. My time is up. But
I will go back to that in written questions.
Yesterday was the fifth anniversary of the September 11th
attack. We find in a new study that your Department's
prosecutions have declined dramatically since September 11th. I
will not go back to on September 10th when you wanted to--when
your Department wanted to cut substantially the
counterterrorism money but take since then. In 2002, right
after, Federal prosecutors filed charges against 355 defendants
in terrorism cases. Now it is 46. Nine out of ten terrorism
cases do not go anywhere. But even those that you do list as
terrorism convictions, I remember people in my State getting
longer sentences for drunk-driving cases.
Are we cooking the books a little bit here?
Mr. McNulty. No, sir.
Senator Leahy. Well, then why--I mean, I understand we do
not catch Osama bin Laden. That is not your Department. But if
we really have this great terrorist threat, why are people
getting practically no penalties? In most States, traffic court
or stealing a couple TV sets get higher penalties. What is
going on? Is this just to make it look like we are doing
something without--and hoping that nobody will look at nothing
ever happened?
Mr. McNulty. I am not sure I understand what you are
talking about. My sense is that the penalties have been
extremely high. In fact, we have taken some criticism--
Senator Leahy. What is the lowest penalty on a terrorism
case that you have seen?
Mr. McNulty. I could not tell you off the top of my head,
but I know I have seen--
Senator Leahy. Would it surprise you if it was a matter of
months?
Mr. McNulty. It would depend upon the case itself and what
was the subject of the conviction and who the judge was that
sentenced and what was the jurisdiction--
Senator Leahy. Well, who the judge was, a lot of these
cases it is a plea bargain where the sentence is exactly what
you, the Department of Justice, recommended. Many times these
are sentences that are similar to what might be recommended in
a misdemeanor case. I mean, either you are being tough on
terrorism or you are trying to get numbers to say you have
convictions, but they are pretty minor cases.
Mr. McNulty. Can I answer the question?
Senator Leahy. Whatever you like, Mr. McNulty. You are the
Deputy Attorney General.
Mr. McNulty. We have seen sentences that go from life in
prison to much lower sentences. It all depends upon the facts
of the case and what--
Senator Leahy. How many life imprisonment?
Mr. McNulty. I do not know off the top of my head.
Senator Leahy. One? Two?
Mr. McNulty. Many more than one or two. Just Moussaoui and
Richard Reid alone would be two right there.
Senator Leahy. Okay. Three? Four?
Mr. McNulty. In Virginia, I can call on that memory much
easier. We had a life sentence for Al-Tamimi. We had a 60-year
sentence for Abu Ali. We had recently a 25-year sentence for
another Virginia jihad case. The Virginia jihad cases, 11
convictions probably averaged somewhere from 15 years to life
or 75 years, somewhere in that category. I can think of cases--
Senator Leahy. What would be the median sentence?
Mr. McNulty. I am not familiar with any study that has
looked at the sentences of--
Senator Leahy. Take a look at the Track study.
Mr. McNulty. That study recently reported on the question
of cases brought by U.S. Attorney's Offices, according to the
coding numbers, the way in which U.S. Attorney's Offices
identified terrorism cases at the time they charged them,
which, by the way, is a different way for the Department of
Justice to count or to keep track of terrorism cases. We also--
Senator Leahy. In other words, if they are really
successful, it is your case. If they don't, it is their case.
Is that it?
Mr. McNulty. No. At the time a case is brought--
Senator Leahy. Just thought I would ask.
Mr. McNulty. The case at the time it was brought, the
Assistant United States Attorney logs it in and gives it a code
number, and they have to do the best they can at that.
Sometimes when they bring a case, they think it is going to
turn out a certain way, and they coded it one way. But it does
not always turn out that way.
Senator Leahy. Were a number of the cases after September
11th--a number of the cases pending that had been coded one way
before September 11th retrospectively coded a different way?
Mr. McNulty. Nothing has been retrospectively coded. But
after September 11th, Assistant United States Attorneys had a
new category to pay special attention to when it came to
coding.
Senator Leahy. But did that mean that they coded some of
the cases after September 11th that had already been pending
with different numbers?
Mr. McNulty. No, I am not familiar with doing that.
Senator Leahy. There has never been a case like that?
Mr. McNulty. I am not familiar with that, sir. I have not
heard that.
Senator Leahy. Okay. Your answer?
Mr. McNulty. I think we are finished.
Chairman Specter. Thank you, Senator Leahy.
Mr. McNulty, in your prepared statement you have listed a
number of cases where the Government prosecuted and got jail
sentences, and I congratulate you on those cases. I think there
have been many very important cases which you have brought and
have gotten convictions and have gotten jail sentences, and the
Department is to be commended on that. And certainly your own
record as United States Attorney was an impeccable one, and
your nomination to be Deputy Attorney General was greeted very
favorably in all quarters, including on this Committee.
Senator Leahy. I supported it.
Chairman Specter. I would make just a couple of comments
about the proceedings, and that is, the heavily publicized
fines which we see on these conferences from the Department of
Justice I find very unimpressive. I think the fines are not
really very meaningful as a matter of deterrence or as a matter
of punishment. But the jail sentences are. They are really
very, very meaningful. And I would urge you to focus on that in
the disposition of cases, and not to settle the cases but to
carry them through, if necessary, in order to get the
appropriate judgment of sentence at the very end.
I am not suggesting at all being easy on corporate America.
This Committee is now considering legislation which would make
it a criminal offense for a corporate executive knowingly to
put into interstate commerce a defective product, knowing and
willfully, with results in death or serious bodily injury. And
the illustrative case on that is the Pinto case where the
evidence showed that Ford put the gas tank in the back because
it saved a few dollars as opposed to putting it in some other
location, and a calculation was made as to how many damage
cases they had and what the costs would be to the corporation.
And that definition constitutes malice under common law, which
would support prosecution for murder in the second degree.
In the Ford-Firestone case, where the evidence showed that
both Ford and Firestone knew these defective tires were on the
cars, resulting in many deaths and many, many serious injuries,
we legislated to impose criminal penalties.
And this idea of imposition of criminal responsibility has
been objected to very vociferously by the corporate community.
And I can understand that. But I would not consider trying to
structure a prosecution without the traditional burden of proof
and attorney-client privilege and privilege against self-
incrimination.
So the suggestion is not being made to you that you be soft
on corporate America, but that you respect the traditional
rights. And as I read this policy on the consideration of the
``value of a corporation's cooperation'' in charging, I think
it is coercive, may even rise to the level of being a bludgeon.
And when I referred to the individuals who want to avoid going
to jail to have their defense fees paid, it is not only going
to jail, they just want an opportunity to have fair treatment
on the adjudication to show they were not, in fact, guilty.
I would ask you to reconsider your policy as to whether the
U.S. Attorneys are bound, if there is some leeway there to go
back to the Holder standard, or what I understand to be the
Holder standard, where the memorandum had language similar to
the memorandum authored by Mr. Thompson but was not binding on
the U.S. Attorneys. They could consider it or not. Or if your
current policy is not binding on the U.S. Attorneys, to make
that specific.
Mr. McNulty. Well, Mr. Chairman, I will do that. That is
the thing I pledged to you this morning, is that we are looking
at this and will consider all possibilities.
Look, I have got the Chairman, the Ranking Member upset. I
have got former DOJ officials writing letters. We have got
everybody complaining. The easiest thing for me to do today
would be to come here and say we are just going to go ahead and
change this policy and make everybody happy. But I would not be
doing the right thing as I sit here and I think it through as
well as I possibly can as a public servant. I really believe
that the perception that is in existence here concerning what
we are doing and how this works is different from the reality.
And if I did not think that, I would not come here and say it.
And I have spent many hours trying to study this and
understand it. I did this when I was a U.S. Attorney. I had the
conversations with corporate counsel. I negotiated attorney-
client privilege waivers. I experienced that firsthand. I have
talked to many, many U.S. Attorneys about this. I chaired the
Attorney General's Advisory Committee when the McCallum memo
went out in order to coordinate the views on this subject. And
I really do not see this as the kind of coercive practice that
is being described by the groups. This is one factor to
consider when the corporation is facing criminal prosecution.
It is not an investigation issue. It is a charging issue,
because it has already been determined that the violations of
criminal law have occurred. Now the question is: Do you charge
the company or not charge the company?
And we tell the prosecutors, Look at nine factors. As U.S.
Attorney, I did not even consider this to be one of the big
ones. One of the big ones is, How pervasive is the criminal
conduct? Did you try to stop it? Did you have an effective
compliance effort ahead of time to try to keep this from
occurring? How far does it go up the ladder? Was the CEO
involved in it? Those are the questions that you ask when you
are trying to decide to charge the company or not.
Now, if they have cooperated, which they almost always do
because they say, look, we are an independent board of
directors with a fiduciary duty to get to the wrongdoing and
make sure that we clean this up; we are on your side, how can
we help put this behind us? That is when the issue of well, do
you know what is going on? Do you have a report that you can
hand us that says this is where the wrongdoing occurred, we
have investigated it, and we are prepared to assist you and
find out the facts.
If they are willing to do that, which any prosecutor in his
right mind would say, yes, that would be very helpful to us,
should they not get credit for that when it comes to charging
the company criminally or not charging the company? That is all
we are telling the U.S. Attorney, is consider this. The text of
the Thompson memo language itself says this is one factor to be
considered when making this decision. And that is what this
attorney-client waiver factor amounts to. We are not trying to
coerce anybody into doing it. We are giving them an option of
providing us information if they will try to persuade us not to
charge them criminally.
Chairman Specter. Just a couple more comments, and I will
yield again to Senator Leahy. Mr. McNulty, I am not upset. I
regard this as a conversation among three lawyers talking about
what ought to be done here as a matter of public policy, three
lawyers who have had some experience in the field and want to
come to a proper conclusion.
Chief Justice Roberts said that when he argued cases before
the Supreme Court, it was a conversation among equals. I was
enormously impressed with his confidence and thought that he
could be Chief Justice with that attitude when he was a lawyer.
[Laughter.]
Chairman Specter. This is just a discussion among three
lawyers. But I do not think somebody ought to get credit for
waiving a constitutional right or ought to get credit--or ought
to get a demerit or a deficit for asserting a constitutional
right. I think the response of the prosecutor ought to be
exactly neutral. If someone asserts a constitutional right,
that is ordained by a power of the Constitution, which in and
of itself has enormous magnitude and a lot of experience in
coming to that privilege and a lot of experience in applying
that privilege. Stated differently, privilege against self-
incrimination is a lot smarter than Arlen Specter. I am sure of
that.
So I would not give anybody credit for waiving it, and I
would not consider it a negative factor if it was asserted.
Mr. McNulty. But thousands of criminals today, as we sit
here, will get that very benefit for waiving a constitutional
right. Thousands of criminals today in the United States will
stand before a court at a plea bargaining hearing and say--the
court will ask in a colloquy, ``Do you understand that you are
waiving your right to a trial by jury, the right of the
Government to prove its case beyond a reasonable doubt''--the
right, the right, the right. And the defendant will say, ``Yes,
Your Honor. Yes, Your Honor, I do.'' And why is he doing that?
He is doing that because the Government is going to hold him
accountable for one of five counts or two of five counts and
drop three counts, and he prefers that than to go to trial and
risk conviction on all five counts. That is--
Chairman Specter. I think he is doing it because he is
guilty.
Mr. McNulty. Well, of course.
Chairman Specter. That is why he is saying, ``I plead
guilty,'' and when he pleads guilty, he gives up a lot of
rights. And I think he has pleaded guilty because he thinks if
he does not, it is going to be proved anyway. But if he could
defend himself and if he could go through a proceeding where
the conclusion is not guilty, which is different than innocent,
because the Government has not met its burden of proof, and he
has counsel and someone to pay for the counsel--we sometimes
lose sight of how expensive lawyers are, but when I practiced
law, my fees were so high that I could not afford to hire a
lawyer who charged those fees. Seriously. I did not earn enough
as a lawyer to pay someone the hourly rate that I had to charge
other people.
So I think when he pleads guilty, he does so because he is
guilty, and he thinks if he does not, it is going to be proved.
And, of course, it is fair on sentencing. And I think the
cooperation of an individual along the way is fair for the
judge to consider on sentencing, but not as to the charge by
the prosecutor.
Senator Leahy?
Senator Leahy. Well, Mr. McNulty, like the Chairman, I have
respect for you. I voted for you both as U.S. Attorney and
Deputy Attorney General. I appreciate your comment that you are
concerned that you have upset the Chairman and myself. You do
not have to worry about upsetting me, although I must note that
you are probably the first person in 6 years in this
administration that has given a darn whether he upset me or
not.
[Laughter.]
Senator Leahy. And I keep a daily journal. I intend to mark
this in my journal as sort of a red banner day, unique, the
first time anybody in this administration gave a darn. I will
probably put it differently in the journal that they actually
upset me.
But you and I should probably discuss this further, and I
will not take the time. We have both gone over our time here,
but I cannot tell you how concerned I am. It is not just a plea
bargain. Heck, I have been there with plea bargains, both as a
defense attorney and as a prosecutor. But there are lot of
things that go on leading up to that time, and not the least of
which is the Government has to prove they have a pretty good
case, and the person says, ``Okay, you got me.'' Now, let's
figure out what we do about it.
And then there is a certain advantage to both sides in
avoiding a trial at that time, especially in the kind of trials
you are talking about, where the Government could be spending
millions of dollars in a trial; and the other side of that, if
they are guilty, let's work it out.
But what has happened, you have corporations and somebody
says, Look, I cannot keep these people on salary because while,
in effect, not the case of the Government having to prove they
are guilty, but they are going to have to prove beyond a
reasonable doubt that they are innocent, we are just going to
cut them loose. We are going to cut them loose. They are going
to suddenly be without a salary. They are suddenly going to be
there where they really can be coerced into a plea. And you
know yourself when you are talking about some of these things
of conspiracy or obstruction of justice, you get into kind of a
gray area where, if you know that you are going to have to hire
very expensive lawyers to prove it, you may well want to look
for a plea.
What I am worried about is that--and I hold no brief for
it, whether it is corporate criminals or the person who puts on
a ski mask and points a gun in your face. But I do worry that
if the Government has made a mistake in bringing a case, they
can ruin a whole lot of people's lives, and you can have a
whole lot of people cut loose.
I look at the judge's ruling in the KPMG case and others,
and as I said, I found the Wall Street Journal editorial rather
compelling. I am really worried about this. I am really worried
that we take this attitude that the Government is always right,
and if you have been charged, you must be guilty. And I know no
matter how much you talk about the presumption of innocence, I
know every time I walked into a courtroom as a prosecutor, the
jury would always say of course they are presumed innocent, and
they are thinking, ``Yeah, right.'' You already have an
enormous number of arrows in your quiver. And I cannot imagine
a U.S. Attorney who does not consider this mandatory.
So maybe, Mr. McNulty, you and I should sit down and chat
about this some more. Your answers are not going to change
beyond what you have given here today, but I am really, really
concerned about it. I think the fact that you have a number of
very conservative Republican Attorneys General who have raised
a question about this, others across the political spectrum--
across the political spectrum have raised a question about it.
I would look at it very carefully. But maybe you and I might
chat.
Mr. McNulty. I am happy to do that and address as best I
can the worries that you do have here. We want to get it right.
We do not want to be doing something that is inappropriate or
unreasonable. But we want to do our job, and that is the
question here.
We are not interested, just to clarify, in a lot of what
would fall into attorney communications with their clients, the
advice they are giving them in terms of the ongoing
investigation. That is not sought. That is discouraged in the
memo. And occasionally--rare, rare circumstance could you have
an investigation involving perhaps a crime itself being
committed in that conversation, but that would be a very
unusual situation.
So we are not interested in a lot of what you might be
thinking would be communications that should definitely not be
touched. We are talking really here about the contents of an
internal investigation. That is the very large percentage of
what this conversation is about today--What happened? And the
company has a fiduciary duty, an incentive to find that out
fast. And, Senator Leahy, when it comes to finding that out
fast, yes, they go to employees and they begin to question
them, and they have what are called Upjohn warnings, and they
tell them right up front, ``Here is the deal. We do not
represent you. We represent the company. The attorney-client
privilege belongs to the corporation, not to any individual.
And you are free to answer these questions or not, but we do
have an internal policy at this corporation''--as all good
companies do. I imagine if you went and looked at Fortune 500
companies, you might find 500 compliance plans just like this,
which say that when we are doing an investigation, as a
condition of your employment you need to speak truthfully to
our folks.
And that will exist whether the Thompson memo is in place
or not. If today I walked out of the room and said to you, ``We
will repeal the Thompson memo,'' tomorrow corporations would
still go to people to get them to talk. They would still be
compelled to cooperate. Corporations would still have counsel
calling the Government and saying, ``How can we help resolve
this case?'' And prosecutors would still be faced with the
question. Now that you have helped me, what should we do with
you? What should we do with the company itself? Do we charge or
not charge under respondeat superior? And the company would
say, ``Well, can I write you a letter laying out the arguments
why we should not be charged?''
Senator Leahy. Mr. McNulty, I am aware of this. You know, I
had--it has been years since I was a prosecutor, but I have a
lot of friends in the corporate world. I am well aware of this.
I have a lot of friends in the prosecution world and the
defense bar. I am well aware of this. You do not have to--and I
am sure the Chairman is, too. You do not have to give us Plea
Bargaining 101. But the fact is--and you must be aware--that
the amount of concern that has been raised by the ABA, that has
been raised by former Attorneys General, that has been raised
by both the business community, the non-business community,
maybe--maybe--it may not all be as serendipitous as you seem to
indicate. That is what I am saying.
I understand what you say. A lot of what you say I do not
disagree with. But in my years here, in six different
administrations, I have never seen such concern, especially
concern toward an administration that has been very, very, I
think in many ways, lenient on the business community. I am
thinking of the war profiteering and things like that, where
your administration blocked efforts in that regard.
But what I am saying when you see the number of people,
Republicans or Democrats, who have raised concern about this
and the very prestigious people raising concerns about it, I
think it is worth taking a second look. I really do.
Chairman Specter. We have honestly taken a lot more time up
in our discussion here, and we have done so because there are
so many items on the Senate agenda that others on the Committee
could not be here. But we have also done so because I think
your U.S. Attorneys may be interested in the dialogue and may
have some effect on their thinking and the way they put the
matters into operation. So it is always useful, and we do not
have a chance to dialogue with you often publicly, Mr. Deputy
Attorney General. So we utilized the time to keep you here for
an hour, but I think to a good purpose.
It is nice sometimes when only Senator Leahy and I are here
so we have a little more time for a discussion and do not
adhere so strictly to the time limits which we customarily do.
Senator Leahy. I can tell Mr. McNulty is delighted that we
had all that extra time.
[Laughter.]
Chairman Specter. Thank you very much, Mr. McNulty.
Mr. McNulty. Thank you, Mr. Chairman. Thank you, Senator
Leahy.
Chairman Specter. We turn now to our distinguished second
panel: former Attorney General Edwin Meese; President of the
U.S. Chamber of Commerce, Tom Donohue; President Karen Mathis
of the American Bar Association; Andrew Weissmann, Esquire, of
Jenner & Block; and Mark Sheppard, Esquire, from Sprague &
Sprague.
Our lead witness is Hon. Edwin Meese, who is the Ronald
Reagan Distinguished Fellow in Public Policy and Chairman of
the Center for Legal and Judicial Studies at the Heritage
Foundation. Mr. Meese was at Governor Reagan's right hand as
his chief of staff, instrumental in Governor Reagan's election
to the Presidency, served as domestic counselor in the first
term of President Reagan, was Attorney General in the second
term. He sat at this table in 1985 for his confirmation
hearings, and I personally had the opportunity to work with him
both as domestic counselor in structuring the armed career
criminal bill and in his excellent work as Attorney General
from 1985 through the end of President Reagan's second term.
We appreciate your taking the time to join us, Mr. Meese,
and we look forward to your testimony.
STATEMENT OF EDWIN MEESE III, FORMER ATTORNEY GENERAL, RONALD
REAGAN DISTINGUISHED FELLOW IN PUBLIC POLICY, AND CHAIRMAN,
CENTER FOR LEGAL AND JUDICIAL STUDIES, THE HERITAGE FOUNDATION,
WASHINGTON, D.C.
Mr. Meese. Thank you, Mr. Chairman. As you point out, I am
an official of the Heritage Foundation. For the record, may it
be noted that the Heritage Foundation takes no Government
money, nor does contract work, and is a nonpartisan public
policy research and education institution here in Washington,
D.C.
Let me also say that I have submitted written testimony,
which I ask be made part of the record, and I will summarize
it.
Chairman Specter. Without objection, it will be made a part
of the record, as will all the written statements.
Mr. Meese. Mr. Chairman, I have spent almost 48 years of my
professional career, most of that time involved in one or
another with law enforcement. I have been a career prosecutor
for many years. I have educated prosecutors, and I have
directed prosecutors. And I say that to provide some
perspective as to my testimony this morning.
First of all, let me say that I have great respect for
Deputy Attorney General McNulty, who just testified, as well as
for Robert McCallum, who was the author of a revised version of
the so-called Thompson memorandum, both of whom are men of
great integrity and great professionalism and ethical conduct.
I must point out, as I think has already been referred to,
however, by the Committee, that there are literally thousands
of Assistant United States Attorneys throughout the country,
and it is important that they receive the proper guidance in
terms of the application of constitutional rights. And so I
commend the Committee for convening this hearing and,
interestingly enough, having it chaired and having the Ranking
Member be former prosecutors themselves.
I believe that the abrogation of the attorney-client
privilege in any form would be a threat to constitutional
rights, would be bad policy, unwise practice, and would be
counterproductive to both compliance with the law and with just
criminal proceedings. Let me mention four reasons why I believe
that to be true.
First of all, the attorney-client privilege is most needed,
I believe, in corporate investigations and corporate
prosecutions. In an age of overcriminalization, particularly in
regard to business conduct, there is a real question of whether
a certain course of conduct is or is not a violation of law.
Likewise, there is often a dispute over whether a specific
action should be a crime in any event. And so as Senator Leahy
said, these type of cases involved often a gray area. And so
for that reason, effective legal representation and legal
counsel is extremely critical.
Secondly, I believe that abrogating the attorney-client
privilege is counterproductive to the compliance with the law.
We want corporations to get the best legal advice. We want them
to conduct investigations where there is whistleblower
indications or other reasons to believe that there is a
possibility of improper conduct taking place. And so I think it
would be unjust then to have the results of their seeking legal
advice and conducting an investigation in-house to then, in
order to ensure compliance, have that turned around and used as
evidence against them.
Thirdly, I believe it would be wrong for the Government to
have the power to coerce business firms into not providing
legal counsel or not continuing the employment of employees who
they believe to be innocent of criminal activity.
And, fourth, I think that if you abrogate the attorney-
client privilege, you encourage corporate officials to keep
information from their counsel, which, both from the standpoint
of good lawyering as well as the standpoint of compliance with
the law, would be necessary.
The remedy I suggest--and it is included in more detail in
my written testimony--is, first of all, let me point out I
think the work of Robert McCallum and the memo that he issued
in 2005 is a significant reform. But I also believe it does not
go far enough. In that regard, I would suggest that the
memorandum be amended to eliminate any reference to waiver of
attorney-client privilege or work product protections in the
context of determining whether to indict a business
organization. In the same manner and in the same context, I
think that all references in the memorandum to a company's
payment of its employees' legal fees or continuing their
employment should be eliminated.
Secondly, I think that the written policies should
explicitly state that requests for waiver will not be approved
except in exceptional circumstances, and exceptional
circumstances should generally be limited to those that would
bring into operation what is well established as the crime
fraud exception to the attorney-client privilege.
Third, I would suggest that in the meantime, prior to those
reforms, that the Justice Department should make available to
the public specific uniform national policies and procedures
governing waive requests and that this become a national
standard.
And, finally, in order to promote the responsible use of
waiver requests, I believe the Justice Department should
collect and publish statistics on how often waiver is
requested, how often business organizations agree to those
requests, and how often organizations waive even apart from any
requests by prosecutors.
I think that these suggestions would enable the public
generally as well as the Congress to understand more about how
this particular problem is being handled by the Department.
Thank you.
[The prepared statement of Mr. Meese appears as a
submission for the record.]
Chairman Specter. Thank you very much, Mr. Meese.
We now turn to the President and CEO of the U.S. Chamber of
Commerce, Thomas Donohue. Mr. Donohue established in the
Chamber the Institute for Legal Reform. He serves on the
Product's Council for the 21st Century Workforce and the
President's Advisory Committee for Trade Policy. He has his
bachelor's degree from St. John's University and a master's
from Adelphi.
Thank you for coming in today, Mr. Donohue, and the floor
is yours.
STATEMENT OF THOMAS J. DONOHUE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, U.S. CHAMBER OF COMMERCE, WASHINGTON, D.C.
Mr. Donohue. Thank you, Mr. Chairman, and a special thanks
to you and Senator Leahy and others for organizing this
hearing. And thank you for saying a bit about my background.
You all know that I am the one person here who is not a lawyer,
but spend more time talking to corporate leaders than most.
I am here this morning on behalf of the Chamber, and I am
also testifying on behalf of the Coalition to Preserve the
Attorney-Client Privilege, which includes most of the legal and
business associations in this country.
I am here to ask the Committee, either through oversight of
the Department of Justice or by enacting legislation, to
invalidate provisions of the DOJ's Thompson memorandum and
similar policies at other Federal agencies, like the SEC, that
prevent executives and employees from freely, candidly, and
confidentially consulting their attorneys. We want you to help
fix this problem.
While the intention of the former Deputy Attorney General
Larry Thompson--who, by the way, now serves on our board of
directors--to crack down on corporate wrongdoing was laudable
and appropriate, the policies set forth in the Thompson
memorandum violate fundamental constitutional and long-
recognized rights in this country in their implementation by
U.S. Attorneys and their colleagues around the country.
They obstruct--rather than facilitate--corporate
investigations, and they were developed--and implemented--
without the involvement of Congress or the judiciary.
This would perhaps be just another classic case of a
Federal agency overstepping its bounds if the consequences were
not so profound.
The attorney-client privilege is a cornerstone of America's
judicial system. This privilege even predates the Constitution,
as you have indicated.
The Thompson memorandum violates this right by requiring
companies to waive their privilege in order to be seen as fully
cooperative with Federal investigators. This has effectively
served notice to the business community, and to the attorneys
that represent them, that if you are being investigated by the
Department and you want to stay in business, you better waive
your attorney-client privilege.
A company that refuses to waive its privileges risks being
labeled as ``uncooperative,'' which all but guarantees that
they will not get a favorable settlement. The ``uncooperative''
label severely damages a company's brand, its shareholder
value, its relationship with suppliers and customers, and its
very ability to survive.
Being labeled ``uncooperative'' also drastically increases
the likelihood that a company will be indicted, and one need
only look to the case of Arthur Andersen to see what happens to
a business that faced the death blow-- notwithstanding the fact
that the Supreme Court found later on that it was all handled
badly.
Once indicted, a company is unlikely to survive even
defending itself in a trial or make the outcome of that trial
relevant. Keep this fact in mind the next time you hear a
Justice official use the phrase ``voluntary waiver.''
The enforcement agencies argue that waiver of attorney-
client privilege is necessary for improving compliance and
conducting effective and thorough investigations.
The opposite may be true. An uncertain or unprotected
attorney-client privilege actually diminishes compliance with
the law.
If company employees responsible for compliance with
complicated statutes and regulations know that their
conversations with attorneys are not protected, many will
simply choose not to talk to their attorneys.
The result is that the company may fall out of compliance--
not intentionally--but because of a lack of communication and
trust between the company's employees and its attorneys.
Similarly, during an investigation, if employees suspect that
anything they say to their attorneys can be used against them,
they won't say much at all.
That means that both the company and the Government will be
unable to find out what went wrong, to punish wrongdoers, and
to correct the company's compliance system.
And there is one other major consequence. Once the
privilege is waived, third-party private plaintiff lawyers can
gain access to attorney-client conversations and use them to
sue the company or obtain massive settlements.
Despite our coalition's repeated attempts to work with the
Justice Department to remedy these problems, Justice has
refused to acknowledge the problem or has argued that the
attorney-client privilege waiver is only very rarely formally
requested in an investigation. However, to debate the frequency
of ``formal'' waiver requests or ``voluntary waivers'' is to
engage in a senseless game of semantics.
As the CEO of the country's largest business association
and as a member of three public company boards, I know how the
game is played by prosecutors. As long as the Department of
Justice exercises policies that threaten companies with
indictment if they do not waive their privilege willingly,
whether in the front line formal request or not.
Efforts to reform the Thompson memorandum have been
ineffective. Last year, Associate Attorney General McCallum put
out another memo, but what his memo said, Mr. Chairman, is 93
U.S. Attorneys, using the Thompson memorandum, which I also
read and we read as compelling, they can put together their own
interpretation of that policy. I am not sure that is a great
idea, as the former Attorney General indicated.
I will end now by saying it does nothing to change the
internal policies that penalize companies when the Justice
Department and the SEC comes to visit.
What perhaps is most disturbing, as I wrap up here, is that
the Thompson memorandum was developed without any input of the
gentlemen sitting here or your colleagues or without any input
of the courts.
Compromise reforms or half-baked ideas for softening the
memo are not going to fix this. I call on the Congress and your
Committee to use your influence--and you happen also to have a
very important seat on the Appropriations Committee--to get a
little more attention to this matter. You know, the coalition
got a letter back from the Justice Department and it said,
well, they were not going to do anything about this because the
Congress told them to get real tough on corporate crime. If we
take away the rights of protection from corporations and
corporate officials, when do we take it away from Congressmen
and religious leaders and individual citizens? And that is what
we are here about, Mr. Chairman.
Thank you very much.
[The prepared statement of Mr. Donohue appears as a
submission for the record.]
Chairman Specter. Thank you, Mr. Donohue.
Our next witness is Ms. Karen Mathis, President of the
American Bar Association; been active with the ABA for more
than 30 years, member of the ABA Board; bachelor's degree from
the University of Denver, law degree from the University of
Colorado.
Thank you for coming in today, Ms. Mathis, and we look
forward to your testimony.
STATEMENT OF KAREN J. MATHIS, PRESIDENT, AMERICAN BAR
ASSOCIATION, CHICAGO, ILLINOIS
Ms. Mathis. Thank you. Good morning, Chairman and Ranking
Member. Thank you so much for allowing me to be here to testify
with you. As you indicated, I am the President of the American
Bar Association, and I am a practicing lawyer in Denver,
Colorado.
Chairman Specter. Ms. Mathis, is your button on for the
microphone?
Ms. Mathis. Thank you. Can you hear me now, Senator? And
were you able to hear me earlier?
Chairman Specter. Yes. Go ahead.
Ms. Mathis. I am here today on behalf of the American Bar
Association and its more than 410,000 members. The American Bar
Association strongly supports the attorney-client privilege and
the work product doctrine. We are concerned about the
provisions of the Department of Justice's Thompson memorandum
and related Federal governmental policies that have seriously
eroded these fundamental rights.
We are working in close cooperation with a broad coalition
which includes legal and business leaders, ranging from the
U.S. Chamber of Commerce to the American Civil Liberties Union,
in an effort to reverse these governmental waiver policies. We
are concerned about the separate provisions of the Thompson
memorandum that erode employees' constitutional and other legal
rights, including the right to effective legal counsel.
The Justice Department policy outlined in the 2003 Thompson
memorandum erodes the attorney-client privilege and the related
work product doctrine by requiring companies to waive these
protections in most cases in order to receive cooperation
credit during investigations.
The ABA is concerned that the Department's waiver policy
has caused a number of profoundly negative effects.
First, it has resulted in the routinely compelled waiver of
attorney-client privilege and work product protections. The
policy states that the waiver is not mandatory and should not
be required in every situation. However, most prosecutors
regularly require companies to waive in return for cooperation
credit. There is a growing culture of waiver, and it was
confirmed by a recent survey of over 1,200 corporate counsel,
which was conducted by the Association of Corporate Counsel,
the National Association of Criminal Defense Lawyers, and the
American Bar Association.
Second, the policy seriously weakens the attorney-client
privilege and work product doctrine. It discourages companies
from consulting with their lawyers, and it impedes lawyers'
ability to effectively counsel compliance with the law.
Third, the policy undermines companies' internal compliance
programs by discouraging them from conducting internal
investigations designed to quickly detect and remedy
misconduct.
For these reasons, the ABA believes that the Department's
waiver policy undermines rather than enhances compliance with
the law.
In an effort to persuade the Department to reconsider and
revise its policies, the ABA sent a letter to Attorney General
Gonzales in May recommending specific revisions, and we have
included that in our written testimony. In its July response
letter, the Department failed to address many of the specific
concerns raised and simply restated the existing policy. We
have included that in our submission.
Last week, a group of ten prominent former senior Justice
Department officials from both parties, as the Senators have
indicated, sent a letter to General Gonzales and raised many of
the same concerns. This remarkable letter came from the people
who ran the Department, and their widespread concerns should be
of concern and interest to the Senators.
The ABA urges this Committee, exercising its oversight
judgment and authority, to send a strong message to the
Department that the Thompson memorandum is improperly
undermining attorney-client privilege and work product
protections, and it must be changed to protect these
fundamental rights.
This memorandum also contains language that violates
employees' legal rights by pressuring their employers to take
certain punitive actions against them during investigations. In
particular, it instructs prosecutors to deny cooperation credit
to companies that assist or support their so-called culpable
employees or agents in several ways: by paying for their legal
counsel, by participating in a joint defense or information-
sharing agreement, by sharing relevant information with the
employees, or by declining to fire or sanction them for
exercising their Fifth Amendment rights.
The ABA strongly opposes these provisions. By forcing
companies to conclude that their employees are culpable, long
before guilt has been proven or assessed, the policy reverses
the presumption of innocence principle.
The ABA urges the Committee to encourage the Justice
Department to eliminate these employee-related provisions from
the Thompson memorandum, and we believe that this change and
the other reforms we have discussed earlier in this testimony
would strike a proper balance between effective law enforcement
and the preservation of essential attorney-client, work
product, and employee legal protections.
I would like to thank the Committee, the Chairman, and the
Ranking Member on behalf of the ABA for allowing us to present
this testimony and refer you to our more complete written
testimony.
Thank you, Senators.
[The prepared statement of Ms. Mathis appears as a
submission for the record.]
Chairman Specter. Thank you very much, Ms. Mathis.
Our next witness is Mr. Andrew Weissmann, partner of Jenner
& Block in New York. He had been in the Department of Justice
and was the prosecutor of more than 30 individuals relating to
the Enron Task Force, where he was the Enron Task Force
Director. He is currently actively engaged in criminal defense
work, has a bachelor's degree from Princeton and a law degree
from Columbia.
Thank you for coming in today, Mr. Weissmann, and we look
forward to your testimony.
STATEMENT OF ANDREW WEISSMANN, PARTNER, JENNER & BLOCK, LLP,
NEW YORK, NEW YORK
Mr. Weissmann. Good morning, Chairman Specter and Ranking
Member Leahy. I would like to make two points regarding the
Thompson memorandum.
First, there have been and there still are wide differences
across the country regarding when and how to seek a waiver of
the attorney-client privilege in white-collar investigations.
The Thompson memorandum gives a green light to Federal
prosecutors to seek waivers of the attorney-client privilege.
But it offers no guidance about when it is appropriate to do
so. The considerable variances in implementation of the
Thompson memorandum often subject corporations, which are
national in scope, to the vagaries and unreviewed decisions of
individual prosecutors. Thus, although the theory of the
Thompson memorandum is a good one--that is, setting forth the
criteria that should guide all Federal prosecutors in deciding
when to seek to charge corporations--in practice the
interpretation and implementation of the factors is left to the
unguided determinations of individual prosecutors. Even
assuming, as I do, the good faith and dedication to public
service of all Federal prosecutors, they are not receiving the
necessary guidance to diminish the wide variations that
currently exist.
Many prosecutors have interpreted the Thompson memorandum
to mean that it is appropriate at the very outset of the
criminal investigation--unlike what the Deputy Attorney General
said previously, these are not determinations that are made
after criminal--a criminal determination is made that there is
a corporation that is guilty but, rather, made at the
beginning--that it is appropriate to seek at that point a
blanket waiver of all attorney-client communications other than
the current communications with the corporation about how to
defend the case. That waiver can include disclosure of all
reports prepared by counsel of its interviews of company
employees as part of an internal investigation, as well as
production of counsel's notes taken at any interview, whether
of a company employee or a third party. And this request for a
waiver occurs even though the Government can interview those
witnesses themselves, or if the Government was present for the
interviews, and easily could replicate the information by
rolling up its sleeves and doing the interviews of the
witnesses on their own.
On the other hand, other prosecutors take a more surgical
approach and proceed incrementally, only seeking a full waiver
where it is truly important to the investigation and other
interim steps have failed. This latter approach is, of course,
far more responsible and, in my opinion, the DOJ should
promulgate guidance strictly cabining prosecutors' discretion
to seek immediate blanket waivers and curtailing the
solicitation of waivers that are simply a shortcut for the
Government to obtain information they could obtain anyway
directly.
The second point I would like to make is that I think that
the issues being addressed here today by the Committee are
symptoms of a larger problem with the current state of the law
regarding criminal corporate liability. There are two principal
forces at work. As has been mentioned, the first is the
prevailing understanding that a corporate indictment could be
the equivalent of a death sentence. One of the lessons
corporate America took away from Arthur Andersen's demise in
2002 is to avoid an indictment at all costs. A criminal
indictment carries potentially devastating consequences,
including the risk that the market will impose a swift death
sentence, even before the company can go to trial and have its
day in court. In the post- Enron world, a corporation will,
thus, rarely risk being indicted by a grand jury at the behest
of the Department of Justice. The financial risks are simply
too great.
The second principle at work is the current standard of
criminal corporate law under Federal common law. A corporation
can be held criminally liable as a result of the criminal
actions of a single, low-level employee if only two conditions
are met: the employee acted within the scope of her employment,
and the employee was motivated, at least in part, to benefit
the corporation. No matter how large the company and no matter
how many policies a company has instituted in an attempt to
thwart the criminal conduct at issue, if a low-level employee
nevertheless commits a crime, the entire company can be
prosecuted.
In light of the Draconian consequences of an indictment and
the fact that the Federal common law criminal standard can be
so easily triggered, the Thompson memorandum offers prosecutors
enormous leverage.
A rethinking of the criminal corporate law is in order. The
standard for criminal liability should take into account a
company's attempts to deter the criminal conduct of its
employees. Holding the Government to the additional burden of
establishing that a company did not implement reasonably
effective policies and procedures to prevent misconduct would
both dull the threat inherent in the Thompson memorandum as
well as help correct the imbalance in power between the
Government and the corporation facing possible prosecution for
the acts of an errant employee. A more stringent criminal
standard, one that ties criminal liability to a company's lack
of an effective compliance program, would have the added
benefit of maximizing the chances that criminality will not
take root in the first place, since corporations will be
greatly incentivized to create and monitor strong and effective
compliance programs. The objectives of a law-abiding society,
of the criminal law, and even of the Thompson memorandum
itself, would thus be well served.
Thank you very much for the opportunity to testify.
[The prepared statement of Mr. Weissmann appears as a
submission for the record.]
Chairman Specter. Thank you, Mr. Weissmann.
Our final witness is Mr. Mark Sheppard, partner in the law
firm of Sprague & Sprague. The Committee had asked Mr. Sprague,
Richard Sprague, to testify, but he could not do so because he
is on trial. Mr. Sprague had been first assistant district
attorney during my tenure and is one of America's outstanding
lawyers and specializes in criminal defense work now.
Mr. Sheppard was recognized as a Pennsylvania Super Lawyer
in the area of white-collar criminal defense, a bachelor's
degree from Lehigh and graduated with honors from Dickinson
School of Law.
We appreciate your coming down today, Mr. Sheppard, and the
floor is yours.
STATEMENT OF MARK B. SHEPPARD, PARTNER, SPRAGUE & SPRAGUE,
PHILADELPHIA, PENNSYLVANIA
Mr. Sheppard. Thank you, Mr. Chairman, and Mr. Sprague
sends his regards and is sorry he could not be here.
Good morning, Chairman Specter and Ranking Member Leahy.
Before I get into it--and I thank you for getting into my
background--I have practiced white-collar criminal defense work
for the past 19 years, where I have represented both
corporations and individual directors, officers, and employees
in Federal grand jury investigations.
I want to begin my remarks by thanking you for giving me
the opportunity to be here to discuss my concerns about the
deleterious effect of the ``cooperation'' provisions of the
Thompson memorandum and similar Federal enforcement policies,
including the Securities and Exchange Commission's Seaboard
Report. These policies have so drastically altered the
enforcement landscape that they threaten the very foundation of
our adversarial system of justice.
This threat is brought about by the confluence of two
recent trends: increasing governmental scrutiny of even the
most routine corporate decision making and untoward
prosecutorial emphasis upon waiver of long-recognized legal
protections as the yardstick by which corporate cooperation is
to be measured. These policies and, in particular, those which
inexorably lead to the waiver of the attorney-client and work
product privilege upset the constitutional balance envisioned
by the Framers, impermissibly intrude upon the employer-
employee relationship, and in real life result in the coerced
waiver of cherished constitutional rights.
The Thompson memorandum purports to set forth the
principles to guide Federal prosecutors as they make the
decision whether to charge a particular business organization.
As the Chairman pointed out, while the majority of those
principles are minor revisions of DOJ policy, the memorandum
makes clear that corporate enforcement policy in the post-Enron
era will be decidedly different in one very important aspect,
and as the memo states: The main focus of the revisions in the
Thompson memorandum is increased emphasis on and scrutiny of
the authenticity of a corporation's cooperation.
According to the memorandum, ``authentic'' cooperation
includes the willingness to provide prosecutors with the work
product of corporate counsel from an internal investigation
undertaken after a problem was detected. Authentic cooperation
also includes providing prosecutors with the privileged notes
of interviews with corporate employees who may have criminal
exposure, yet have little or no choice to refuse a request to
speak with corporate counsel. This means that employees
effectively give statements to the Government without ever
having a chance to assert their Fifth Amendment right.
Incredibly, the Thompson memorandum is explicit in this goal of
performing an end-run around the Constitution. It states,
``Such waivers permit the Government to obtain statements of
possible witnesses, subjects, and targets without having to
negotiate individual cooperation or immunity agreements.''
Further, ``authentic'' cooperation includes disclosure of the
legal advice provided to corporate executives before or during
the activity in question. Lastly, and from my perspective as a
practitioner, I believe the most troubling aspect of the
Thompson memorandum, is the impact that it has on the ability
of corporate employees to gain access to separate and competent
legal counsel. The memorandum specifically denounces these
longstanding corporate practices such as the advancement of
legal fees, the use of joint defense agreements, and permitting
separately represented employees to access the very records and
information that they need to defend themselves.
Despite these Draconian outcomes, corporations are
complying with these demands in ever increasing numbers. And
while no one of the nine elements of cooperation outlined in
the memorandum purports to be dispositive, each is, in fact,
mandatory. In the current climate, few, if any, public
companies can afford the risk of possible indictment and the
myriad of collateral consequences, not the least of which is
the diminution of shareholder value. Indeed, the words from the
front lines are frightening, as one attorney recently noted:
The balance of power in America now weighs heavily in the hands
of Government prosecutors. Honest, good companies are scared to
challenge Government prosecution for fear of being labeled
``uncooperative'' and singled out for harsh treatment.
Even before Sarbanes-Oxley, internal investigations were
standard operating procedure. The reports generated by these
investigations, including analysis by the company's counsel and
statements by their employees who may choose not so speak with
prosecutors, are a veritable road map. As such, they are simply
too tempting a source of information for a Federal prosecutor
to ignore.
It is my experience that occasionally, although not
routinely, Federal prosecutors can be convinced to conduct
their investigations without these privileged road maps.
Indeed, law enforcement, as the Chairman pointed out, has a
number of arrows in its quiver and certainly does not need the
waiver of the attorney-client privilege in order to do its job.
The Thompson memorandum, however, makes clear that these
standard elements of cooperation where the facts can be
provided without legal conclusions or the mental impressions of
counsel are provided, these are simply not enough. Prosecutors
are now empowered to expect that corporate counsel act as their
deputies. Counsel is expected to encourage employees to give
statements without asserting their Fifth Amendment rights,
without obtaining independent counsel, all with little regard
paid to the potential conflict of interest it poses for the
corporate attorney and the employee. If the employee refuses,
he may be terminated with no apparent recognition of the
inherent unfairness of meting out punishment for the invocation
of a constitutional right.
Too often, employees must face this Hobson's choice without
the benefit of separate counsel. That is because employees face
the prospect that the corporation will refuse to advance legal
fees. The effectiveness assistance of counsel in the
investigatory stage is essential, and the Government knows
this. I fear that under the guise of cooperation, prosecutors
are seeking to deprive employees of counsel of their choosing
in the hope that counsel chosen by the corporation will tow the
party line.
I can still vividly recall a conversation I had as a young
associate with one of the recognized deans of the Philadelphia
Federal criminal defense bar.
Chairman Specter. Mr. Sheppard, how much more time will you
need?
Mr. Sheppard. Ten seconds. I am wrapping up now, Mr.
Chairman. He told me, much to my dismay at the time, that much
of white-collar practice is ``done on bended knee.'' That
statement was a recognition of the awesome power and resources
of the Federal Government. It was possible, however, to
effectively represent your client. In today's corporate
environment, I and my fellow practitioners feel that this may
no longer be possible.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Sheppard appears as a
submission for the record.]
Chairman Specter. Thank you, Mr. Sheppard.
Senator Leahy is on a tight time schedule, so I will yield
to him for his questions first.
Senator Leahy. Thank you, Mr. Chairman. I appreciate the
usual courtesy.
Mr. Meese, you and I have known each other for a long time,
and I am glad to see you here. Can you think of any
circumstances during your tenure with the Department of Justice
where the Department requested or required a waiver of the
attorney-client privilege from a cooperative corporate
defendant in a criminal case?
Mr. Meese. To the best of my knowledge and recollection,
Senator, I cannot remember any such instance. To the best of my
recollection, the issue never came up during the time that I
was in the Department, and it was certainly not a part of the
policy of the Department to require such a waiver.
Senator Leahy. Would you have been pretty surprised if
somebody had made such a request to you as Attorney General?
Mr. Meese. I believe that I would, yes. I have always felt
that the best way to proceed in any criminal matter is to have
the best possible lawyers on both sides. This usually resulted
in a settlement of the case in many instances, but also you had
the protection of the potential defendant as well as the best
interests of the prosecution in going forward.
Senator Leahy. Also, your case is more apt to stand up on
appeal, too.
Mr. Meese. That, too.
Senator Leahy. Lastly, I looked at the letter you and
several other senior Justice Department officials--you asked
the Attorney General to stop the practice of requiring
organizations to waive the attorney-client privilege and work
product protections, and I read the letter to say because you
felt the practice discouraged corporate employees from
consulting with the lawyers about how to comply with the law.
Aren't there ways for the Government to obtain cooperation
from a corporation without waiving the attorney-client
privilege and work product doctrine?
Mr. Meese. I believe there are, and I think this is
something where, in certain cases, corporate counsel would
recommend certain things to be done to cooperate without
waiving the attorney-client privilege, such as agreements as to
certain documents that would be turned over with the
understanding that that did not constitute a waiver of the
privilege in general.
Senator Leahy. Notwithstanding the testimony this morning,
I get the impression talking to U.S. Attorneys around the
country that they think this is pretty much a black-letter rule
from the Department of Justice. And if the policy is not
changed, what impact do you think this is going to have on
corporate compliance with our laws and regulations?
Mr. Meese. Well, Senator, I think that it would have a
positive impact to change the rule because I really do think
that many companies now are hesitant to involve corporate
counsel in investigations and in taking positive steps to
ensure compliance. And so I think that changing the rule would
be positive rather than negative in terms of the ultimate
objective, which is not to prosecute corporations. It is to get
compliance with the law.
Senator Leahy. Mr. Weissmann, you are the former director
of the Enron Task Force. Do you recall any case where a
corporation received leniency when the corporation did not
waive the attorney-client privilege?
Mr. Weissmann. Yes, that has happened.
Senator Leahy. And when is that?
Mr. Weissmann. I am sorry?
Senator Leahy. You do recall that happening?
Mr. Weissmann. Yes.
Senator Leahy. Okay. So do you believe that there are
effective ways for the Government to obtain cooperation without
a corporation waiving the attorney-client privilege?
Mr. Weissmann. There are. There are a number of steps a
careful prosecutor can take to obtain information that is
useful for an investigation that will have no or limited impact
on either the work product or attorney-client privilege, for
instance, turning over so-called hot documents, directing the
Government to particular witnesses who might be useful. But it
is not necessary for the corporate counsel to turn over their
own notes of that interview.
Senator Leahy. So what former Attorney General Meese was
saying, if you have got good lawyers on both sides, they are
going to work their way through this labyrinth.
Let me ask just one last question before time runs out. In
the case of Garrity v. New Jersey, the Supreme Court held that
the Government could not force police officers to make
statements that could be used against them criminally by
threatening to fire them if they did not testify. This sort of
follows up on some things that Mr. McNulty said earlier.
In your mind, are there potential Garrity-like concerns
with the Department's cooperation policies since employees can
be required to cooperate with an internal investigation and the
corporation can be required in turn by the Government to waive
the attorney-client privilege? Am I pushing this too far, or do
you see a Garrity problem?
Mr. Weissmann. I do see a Garrity problem. For many years,
I know that various Federal prosecutors have always stayed far
away from the so-called Garrity issue because they were
concerned about the actions of the private company being
imputed, being taken as the actions of the State, which would
then run afoul of Garrity. That is why KPMG was surprising and
the United States v. Stein decision was surprising, because it
appeared from that case that the line was crossed where the
Government had asked the private actor to do something at their
behest.
Senator Leahy. Do the others agree? Or anybody disagree, I
should say. Attorney General Meese, do you agree with what Mr.
Weissmann said on Garrity?
Mr. Meese. In general, yes.
Senator Leahy. Mr. Donohue, I realize you are not a lawyer,
but do you agree?
Mr. Donohue. Senator, what I can tell you is that in many
cases prosecutors in a very careful way have raised the issue
of protection of privilege. They have raised the issue of
dismissal of employees. They have raised the issue of not
protecting employees even when it is contractually agreed on
legal fees. As many of your witnesses have said today, the
Department of Justice is a very strong organization.
Senator Leahy. Ms. Mathis, do you agree with Mr. Weissmann
on Garrity?
Ms. Mathis. Yes, the ABA does agree, Senator. And, further,
we have given you in our written testimony a number of ways in
which we believe that a diligent prosecutor can get to the
relevant information.
Senator Leahy. And, Mr. Sheppard, do you agree with Mr.
Weissmann on Garrity?
Mr. Sheppard. Yes, I do, Senator Leahy.
Senator Leahy. It probably will not surprise you to know I
also agree.
[Laughter.]
Ms. Mathis. Senator, if I may just add for the record, the
ABA does not as a rule comment on particular cases, and I
should clarify that we agree with the principle stated by the
Court.
Senator Leahy. And I fully understood that, and I have read
your testimony and fully agree.
Thank you, Mr. Chairman.
Chairman Specter. Thank you, Senator Leahy.
Mr. Meese, I know that you are a zealous protector of
separation of power, and as this Committee focuses on these
issues and considers legislation, we have the option of making
a recommendation to the Department, letting the Department
exercise its own discretion, which is very broad. We have the
option of awaiting the outcome of the litigation in the
Southern District of New York. The Court may make a definitive
order. It may be upheld on appeal. Or we can legislate.
With your broad experience, what would your recommendation
be?
Mr. Meese. Mr. Chairman, I would hope that this hearing
itself might have a salutary effect upon the Department to see
how strongly not only the Committee in terms of both the
Chairman and Ranking Member, but also what I would consider a
broad array of the legal and business community feel about this
particular action. And so I hope that that in itself might be
helpful. I would hope that that would be the case, including
perhaps a recommendation from the Committee itself in a more
formal manner to the Department of Justice.
Perhaps the Court may have some decision in this matter. I
would hope that legislation would be the last resort. But I
think that if there were no other remedy availing, it would be
appropriate inasmuch as it is a proper function of Congress to
enforce--or to implement by legislation basic constitutional
rights, which I believe this is one.
Chairman Specter. So you would say that the Congress would
be acting appropriately, but as a last resort, if everything
else fails?
Mr. Meese. That would be my position, yes, sir.
Chairman Specter. Mr. Meese, the Committee is now wrestling
with another privilege issue. We have not given you notice of
this question, but I would like to get your view on it, if you
care to comment. We are considering the reporter's shield
privilege, and it arises in the context of the investigation on
the so-called disclosure of the CIA agent Valerie Plame, and
its emphasis was focused by the incarceration of a reporter,
Judith Miller, for some 85 days.
The investigation proceeded after there was no longer the
national security interest, and we are making a delineation. We
are going to have a hearing to try to define more fully the
national security interest to give protection to the Government
on that issue so that the privilege would not extend that far.
And it is complicated as to how we do that, but we are working
on it.
But absent national security, do you think that it is a
wise matter for public policy to have a Federal shield law, as
so many States do?
Mr. Meese. Well, Senator, Mr. Chairman, it is difficult to
generalize from that particular case because, from what I know
about it, this should never have come about. Again, this is
only my knowledge from reading the news media, which from time
to time cannot be totally relied upon. But I think from what I
have learned, this should never have proceeded that far. I
consider this a flawed investigation and prosecution, because
it appeared from at least the facts that seemed to be available
that no crime had been committed, which should have been
determined by the prosecutor in the first 48 hours simply by
reading the law and having the facts available. And so had that
been done, that is when the prosecutor should have folded his
tent and disappeared. Therefore, this would never have come
about, the kinds of interrogations as well as the unfortunate--
what I consider the unfortunate subsequent interrogations of
many witnesses, which led ultimately to charges totally
unrelated to the original crime under investigation, alleged
crime under investigation. So it is a little hard to generalize
from this case.
I have concerns about a general shield law for the news
media that may go to the ultimate finding of guilt or
innocence, and to say that in no case can a news media
journalist be questioned as to their sources of information can
be as damaging to defendants by keeping them from having
sources of information and evidence that would be valuable in
terms of defending themselves against charges, as well as in
legitimate prosecutions.
So I have real concerns about shield laws as a blanket
prevention of obtaining information. I would rather have
something a little more flexible, leaving it up to the judge
under the circumstances to determine whether a shield law would
be appropriate rather than an absolute blanket shield.
Chairman Specter. With respect to your statement about the
investigation went too far, the special prosecutor has been
quoted as saying that it was important to protect the ability
of the Government to get honest testimony. We intend to do
oversight on that matter at the appropriate time. But when you
talk about the ability of the Government to get honest answers,
it has a ring of similarity to the justification for the policy
that we are discussing today, where the Government wants to
find out the facts. And we agree, everybody agrees the
Government ought to find out the facts. It is just how you do
it, and how you do it respecting the traditional balance on the
criminal justice system.
But do you think there is any justification, at least as
reported--and that is all we can go on at the present time--to
structure a continuing grand jury investigation to uphold the
integrity of the Government's finding out what the facts are?
Mr. Meese. Well, the purpose of a grand jury investigation
should be obviously what the Constitution sets it up for, and
that is, a protection for both the people, the Government and
the potential defendant, to make sure there is adequate
evidence to go forward with a prosecution. And it seems to me
that that should be the purpose--that that should be in a sense
the limited purpose or confine the purpose of investigation,
not simply as a fishing expedition for the Government. And to
the best of my knowledge, that was the way in which grand jury
investigations were conducted during the time I was Attorney
General.
Chairman Specter. Mr. Donohue, in your experience what has
been the effect of the policy of the Department of Justice? I
want to introduce into the record, without objection, the
testimony of former Attorney General Dick Thornburgh, who was
supposed to testify here today, but advised that there is an
emergency session of the Third Circuit. And Mr. Thornburgh's
essential conclusions are, in a sentence, ``In my view,
they''--referring to the so-called Thompson memorandum
policies--''are not necessary for effective law enforcement,
and they can actually undermine corporate compliance.
Accordingly, these criteria should be dropped or substantially
revised.''
My question to you: Has this policy had a chilling effect
or discouraged corporations from internal investigations?
Mr. Donohue. Just one comment first, and then I will answer
that question directly. The American business community, and
particularly the Chamber, has no tolerance and no love for
people that intentionally and maliciously break the law in the
business context. It is bad for business.
What has happened since the Thompson memorandum, we have
emboldened Federal prosecutors--and, by the way, after that,
State representatives--to a series of behaviors that they say
are acceptable for two reasons: first of all, they have the
Thompson memorandum; and, second of all, they have been told by
the Congress and by the press and by the American people to
root out all of this behavior that they long thought was going
on with large companies.
And I think what it has done is created an atmosphere in
which the conduct or the management of corporations is becoming
more and more difficult, because if you look at the regulatory
process, the antitrust process, all those things we live under,
we have to deal with our lawyers every day. And as people begin
to wonder every time they have, you know, a problem that if
they are visiting with their lawyer and those notes that lawyer
is taking, where are they going to end up? ``Can I ask you,
counsel, a really tough question? I got a big problem in my
mind. I am dealing with my boss. I am dealing with outside
forces. I am dealing with my investors. I need to talk to
you.''
And I believe that we are playing so much defense in the
corporate boardrooms that we have taken our eye off running the
companies and we are spending all of our time talking to more
and more lawyers. This is a lawyers' retirement act, and I am
glad for them. But we need to take a look here and say what are
we doing to the fundamental ability to drive this economy to
employ people and to lead the world's economy, and we are
making some big mistakes here, sir.
Chairman Specter. Is it deterring internal corporate
investigations?
Mr. Donohue. I believe it is.
Chairman Specter. Are corporations changing their policy
about paying attorney's fees for individuals under
investigation?
Mr. Donohue. I think there are a lot of corporations, as
you are, watching the current case. Some of the attorney fee
payments are guaranteed in employment contracts. Some have been
the normal practice of sort of keeping company and employee
together for mutual defense. And some are just thoughtful
understandings of what it can cost what has been a good
employee to defend himself for a week or a month or for 3
years. And people can be easily bankrupt and, therefore, as you
well indicated, coerced into actions that they otherwise would
not take.
Let me just say, Mr. Chairman, the environment in corporate
boardrooms and in the CEO's office and in the general counsel's
office has changed fundamentally in this country, and not for
the better.
Chairman Specter. Thank you.
Ms. Mathis, when the ABA submitted a letter to the
Department of Justice seeking to have some modifications in
this policy, were you satisfied with the Department's response?
Ms. Mathis. Respectfully, Senator, we were not. We received
a response that was very general in its nature, that reflected
much of what Deputy Attorney General McNulty testified to
today. It did not deal with the specifics of our letter, nor
did it deal with the specifics in the attachment to the letter,
which sets forth a number of manners in which we believe
prosecutors can obtain the information they need for their
prosecutions without violating attorney-client privilege, the
work product doctrine, or even the rights of employees.
Chairman Specter. May I suggest that the ABA try again in
light of the testimony here today, perhaps referencing
executive privilege, which you have heard Mr. McNulty's
testimony on. Work product, the Department of Justice is a
staunch defender of work product in the Solicitor General's
office, withheld all sorts of documents, and I think
appropriately so in the Roberts confirmation, in the Alito
confirmation. And those are certainly analogous. Give some
consideration to trying again.
Mr. Weissmann, in your task force on Enron, to what extent
did you utilize the approach of the so-called Thompson
memorandum?
Mr. Weissmann. Well, our understanding is it was required,
so we used it consistently because we had to. There were--
Chairman Specter. You used it consistently, and did you get
waivers of the attorney-client privilege?
Mr. Weissmann. We did, and I would say that we did it, what
I would hope was strategically and in a limited way in the
manner that I described earlier, which was it wasn't necessary
at the outset--
Chairman Specter. It was not necessary?
Mr. Weissmann. It was not necessary at the outset to ask
for blanket waivers, and we did not.
Chairman Specter. You did?
Mr. Weissmann. No, we did not ask for blanket waivers up
front.
Chairman Specter. Was it necessary to ask for the waivers
which you did ask for?
Mr. Weissmann. I think that there is one area where it was,
and that is when you are investigating an underlying
transaction. To take one example, in Enron there was a
transaction involving moving the losses from one business
segment to a winning business segment. And knowing what people
at the time said to their lawyers within Enron was very useful
information.
I would point out in that situation, most companies are
more than happy to turn that over because they are usually
going to rely on an attorney-client defense, having an advice-
of-counsel defense.
Chairman Specter. Taking the situation as a whole, do you
think that it was a fair practice to do what you did in Enron
with respect to the Thompson memo?
Mr. Weissmann. I do, but I do think that there should be
greater guidance, because I know that the practices that we
used were ones that we devised on our own, and it did not come
from any guidance from the Department to require prosecutors
across the country to be so surgical.
Chairman Specter. So you did not need the greater guidance,
but you think that as a matter of policy, the DOJ practice
needs more guidance for the attorneys in the field?
Mr. Weissmann. Yes.
Chairman Specter. Mr. Sheppard, tell us a little bit more
about the ``bend your knees'' concept. Is it really that bad?
And do you only have to go so far as bending your knees?
Mr. Sheppard. There are times when I have been flat on my
back, Senator, on behalf of my clients.
Chairman Specter. A powerhouse lawyer like Richard Sprague
bending his knees, that does not comport with the Richard
Sprague I know--not that he has arthritis, but I don't think he
bends at the knees before anybody.
Mr. Sheppard. He does not, Mr. Chairman. He sends me to do
those things.
[Laughter.]
Chairman Specter. Well, that certainly should earn you a
raise, which Mr. Sprague can afford to give you.
Mr. Sheppard. In answer to your question, Mr. Chairman, I
think the concern that I have the most here is that the
decision by the corporation needs to be the decision of the
corporation. It really cannot be at the very outset and at the
earliest parts of the investigation a decision that is made by,
in essence, the prosecutor. Deputy Attorney General McNulty's
comments about when these factors come into play do not comport
at all with my experience.
From the very minute that a problem arises in the corporate
context, these considerations, and particularly the cooperation
considerations in the Thompson memorandum, figure prominently
in every decision that corporate counsel makes and in every
decision that the individuals who may be represented by
separate counsel need to make.
For me, I think the answer is it should be the employee's
decision, it should be the corporation's decision on whether
they want to cooperate and how they should do so. It is not the
decision that should be made by the prosecutor on pain of a
corporate death sentence.
Chairman Specter. Well, thank you all very much. The
Committee is going to pursue this issue. It is true that we
have had a large, large number of complaints about it, just a
tremendous number of complaints. And we have members of this
Committee who have had considerable experience in the criminal
justice system, and the criminal justice system has evolved
over centuries, common law practice, and then the formulation
of the Constitution and the Bill of Rights and many, many, many
decisions and a lot of experience. And the attorney-client
privilege is rockbed in the judicial system. And the practice
of paying attorney's fees is also a very common practice and
relied upon, and there is no doubt that it would weigh heavily
on a judgment any individual would do when faced with an
investigation as to whether he or she could afford the cost of
defending himself or herself.
So we have to be very cautious on significant changes in
that structure, and I think that these factors do constitute
significant changes. And perhaps former Attorney General Ed
Meese has given us the right formula. Let's see if we can solve
the problem without legislation, but as a last resort, it is up
to the Congress of the United States to determine what is
appropriate in the administration of criminal justice in this
country.
Thank you all very much. That concludes our hearing.
[Whereupon, at 11:33 a.m., the Committee was adjourned.]
Questions and answers and submissions for the record
follow.]
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