[Senate Hearing 110-280]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-280
 
 EXAMINING APPROACHES TO CORPORATE FRAUD PROSECUTIONS AND THE ATTORNEY-
             CLIENT PRIVILEGE UNDER THE MCNULTY MEMORANDUM

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 18, 2007

                               __________

                          Serial No. J-110-55

                               __________

         Printed for the use of the Committee on the Judiciary



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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ARLEN SPECTER, Pennsylvania
JOSEPH R. BIDEN, Jr., Delaware       ORRIN G. HATCH, Utah
HERB KOHL, Wisconsin                 CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         JON KYL, Arizona
RUSSELL D. FEINGOLD, Wisconsin       JEFF SESSIONS, Alabama
CHARLES E. SCHUMER, New York         LINDSEY O. GRAHAM, South Carolina
RICHARD J. DURBIN, Illinois          JOHN CORNYN, Texas
BENJAMIN L. CARDIN, Maryland         SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island     TOM COBURN, Oklahoma
            Bruce A. Cohen, Chief Counsel and Staff Director
      Michael O'Neill, Republican Chief Counsel and Staff Director


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     1
    prepared statement...........................................    96
Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama....     4
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     3

                               WITNESSES

Immergut, Karin, United States Attorney, District of Oregon, 
  Department of Justice, and Chair, White Collar Subcommittee for 
  the Attorney General's Advisory Committee, Portland, Oregon....     4
Richman, Daniel, Professor, Columbia Law School, New York, New 
  York...........................................................    12
Seigel, Michael, Professor, University of Florida Fredric G. 
  Levin College of Law, Gainesville, Florida.....................    14
Thornburgh, Dick, former Attorney General of the United States 
  and Of Counsel, K&L Gates, Washington, D.C.....................    10
Weissmann, Andrew, Partner, Jenner & Block, New York, New York...    16

                         QUESTIONS AND ANSWERS

Responses of Karin Immergut to questions submitted by Senator 
  Sessions.......................................................    25
Responses of Daniel Richman to questions submitted by Senators 
  Leahy and Sessions.............................................    30
Responses of Michael Seigel to questions submitted by Senators 
  Sessions and Leahy.............................................    34

                       SUBMISSIONS FOR THE RECORD

American Bar Association, Governmental Affairs, Washington, D.C., 
  statement and attachments......................................    38
Coalition to Preserve the Attorney-Client Privilege, statement...    71
Immergut, Karin, United States Attorney, District of Oregon, 
  Department of Justice, and Chair, White Collar Subcommittee for 
  the Attorney General's Advisory Committee, Portland, Oregon, 
  prepared statement.............................................    76
Richman, Daniel, Professor, Columbia Law School, New York, New 
  York, prepared statement.......................................    99
Seigel, Michael, Professor, University of Florida Fredric G. 
  Levin College of Law, Gainesville, Florida, prepared statement.   103
Thornburgh, Dick, former Attorney General of the United States 
  and Of Counsel, K&L Gates, Washington, D.C., prepared statement   110
Veasey, E. Norman, Senior Partner, Weil, Gotshal & Manges, LLP, 
  Wilmington, Delaware, report...................................   115
Weissmann, Andrew, Partner, Jenner & Block, New York, New York, 
  prepared statement.............................................   128


 EXAMINING APPROACHES TO CORPORATE FRAUD PROSECUTIONS AND THE ATTORNEY-
             CLIENT PRIVILEGE UNDER THE MCNULTY MEMORANDUM

                              ----------                              


                      TUESDAY, SEPTEMBER 18, 2007

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:35 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Patrick J. 
Leahy, Chairman of the Committee, presiding.
    Present: Senators Leahy, Specter, and Sessions.

OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM 
                      THE STATE OF VERMONT

    Chairman Leahy. Today, the Judiciary Committee considers 
whether the Department of Justice has struck the right balance 
between robust prosecution of corporate fraud and the bedrock 
legal principle of fairness protected by the attorney-client 
privilege. I thank Senator Specter for his leadership on this 
issue, and I thank the distinguished panel of witnesses for 
being with us today.
    I am deeply concerned about the lawlessness that has 
affected this Administration's leadership at the Department of 
Justice. They have shown arrogance and asserted an 
unprecedented prerogative to rewrite the rules, often in ways 
that undermine the rule of law and disregard the finest 
traditions of impartial law enforcement and our justice system.
    They have literally sought to rewrite the rules on the 
prosecution of politically sensitive cases and on the retention 
and firing of United States Attorneys in ways that 
impermissibly and dangerously injected politics into our 
justice system. They have undermined the role of law 
enforcement by using partisanship in the hiring of career 
prosecutors, judges and other Justice employees. They have 
secretly rewritten the rules governing torture and the 
treatment of detainees in ways that call into question this 
Nation's commitment to basic human rights and American values. 
And they have secretly rewritten the rules for government 
surveillance of Americans, threatening our privacy and basic 
legal protections.
    It is long past time for the Department of Justice to 
recommit itself to the rule of law and to the principles of our 
justice system. This Committee has through its oversight begun 
to seek accountability that I hope will lead to the restoration 
of law and order within the Justice Department and throughout 
the Executive branch.
    In the area of corporate fraud prosecutions, this 
Administration has rewritten the rules. In 2003, the Department 
of Justice made it easier for prosecutors to pressure 
corporations to waive the attorney-client privilege, the 
bedrock of our whole legal system. One judge went so far as to 
dismiss charges in a prosecution of fraud at the accounting 
firm KPMG based on Government overreaching and misconduct. Now, 
it is embarrassing for the Government to lose cases, not 
because the evidence is insufficient, but because they have 
pushed beyond the law. And it is unacceptable to steamroll 
principles that protect fairness.
    Senator Specter and I made our concerns clear about Justice 
Department overreaching in this area in a hearing last fall. 
And soon after, the Justice Department rewrote the rules again, 
this time spearheaded by then-Deputy Attorney General Paul 
McNulty in what has come to be known as the ``McNulty 
Memorandum.'' And the memo added new safeguards and 
restrictions, including some that had been called for at this 
Committee's hearing, on prosecutors' ability to request the 
waiver of the attorney-client privilege.
    I said at the time that it was a step in the right 
direction. With this hearing we continue our consideration 
whether or not the Department has, in fact, found and is 
implementing the proper balance. The McNulty Memorandum has 
been in place for less than a year. We want to know whether it 
is working and whether it has reached the right balance between 
aggressive enforcement of the corporate fraud statute, which 
all of us want, but also the proper respect for the attorney-
client privilege, which we all also want.
    With nominations being made to the top positions at the 
Department of Justice of people who will be responsible for 
implementing it, we want to make sure it is being done right. 
We do not know where Judge Mukasey, who the President just 
announced as his nominee to be Attorney General, stands on this 
issue. I suspect between Senator Specter and me, we will be 
asking that question when he is up for confirmation, but we 
will ask it of other nominees.
    We want to make sure the Department strikes the right 
balance. We do not want to cripple our enforcement efforts to 
eradicate corporate fraud. We saw that the epidemic of greed, 
like Enron and Worldcom and many others, left a lot of 
employees without jobs but also bereft of their life savings, 
and it devastated the shareholders, the people to whom they owe 
a fiduciary responsibility.
    At the same time, I do not want to overreact to the 
Department's overreaching. The administration sought to 
immunize too much misconduct. Corporate misconduct should not 
be given a safe haven or immunized from accountability. Nor 
should the corporate bar, and its representatives in the 
American Bar Association, be allowed to use the legitimate 
concerns of overreaching we have identified to create favored 
status for corporate fraud defendants. We do not want to go 
back to the dark days before Sarbanes-Oxley when we were 
subject to corporate greed and actions taken in the dark.
    So we have to get it right. We demand that corporate fraud 
be pursued aggressively, but prosecutors have to do it mindful 
of fairness principles. I hope the Department will work with us 
to get it right.
    Before we go to Karin Immergut, who is the U.S. Attorney 
for the District of Oregon and also the Chair of the White-
Collar Subcommittee for the Attorney General's Advisory 
Committee, I want to yield to Senator Specter, and I am going 
to turn the gavel over to Senator Specter, who requested this 
hearing. I think it is an important one, and, again, as I have 
many, many other times in many, many other areas, I compliment 
the senior Senator from Pennsylvania for what he has done in 
this area.

STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE 
                        OF PENNSYLVANIA

    Senator Specter. [Presiding.] Well, thank you very much. I 
am not sure whether I should call you ``Mr. Chairman'' or 
``Senator Leahy'' now that the gavel has been turned over to 
me.
    Chairman Leahy. You know what to do.
    Senator Specter. And there was no restriction on the 
turnover of the gavel, so I will still call you ``Mr. 
Chairman.'' And thank you for scheduling this hearing. I think 
it is a very important hearing, and I would like to see us deal 
with the relevant issues so that our Committee would be in a 
position to come to a judgment and to mark up a bill and to 
move forward, to either vote it up or vote it down, but to have 
it considered by the Senate and ultimately by the House as 
well.
    I start on my thinking on this subject with two very basic 
propositions: First, that there is a right to counsel in the 
Constitution, a very fundamental right, and an indispensable 
part of right to counsel is the privilege to talk to your 
lawyer about confidential matters without concern that they 
will be disclosed. And the second very basic proposition is the 
burden of proof, which is on the Government. And my view, with 
some experience in the field, has been that you do not prove 
the case out of the mouth of the defendant. You just do not do 
that.
    Now, when you get involved in the complex standards as to 
when it is implied, whether the privileged information will 
benefit the investigation, of course, it is going to benefit 
the investigation. Whether it can be obtained quickly and 
completely from other sources, well, what does ``quickly'' 
mean? What does ``completely'' mean? Whether there is a 
legitimate need, it seems to me that that is totally extraneous 
to the underlying values that we are dealing with here. And 
when we have the modifications which Deputy Attorney General 
McNulty added to the Thompson Memorandum about who gives the 
approval, if it is a fact matter, the U.S. Attorney asks the 
Assistant Attorney General, unclear as to whether the 
consultation means the Assistant Attorney General can overrule 
the request. I think it probably does mean that. Or if it is a 
matter of advice, then it goes to the Deputy Attorney General. 
It is hard for me to conceive of any situation where it is 
justifiable to ask the lawyer what advice he has given the 
client. That is just really beyond my comprehension--again, 
with some experience in the field. So I hope we can flush out 
the issues and present them to the Committee and come to a 
decision.
    We have been joined by the distinguished former prosecutor 
who, I suspect, may have a view somewhat different than mine. 
He occasionally does. Senator Sessions, I will not ask you if 
you would like to make an opening statement because I know the 
answer to that. So I will just call on you.

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM THE STATE 
                           OF ALABAMA

    Senator Sessions. Thank you. I look forward to the 
witnesses, and if there are problems in the process of 
obtaining client-attorney investigative materials, I would be 
willing to listen to that; if there are abuses, I would be. But 
I am not inclined to believe that a corporation--that a 
prosecutor cannot discuss with a corporation whether or not 
they want to waive their right and provide information. I do 
not want to be in a position in which a board, a corporate 
board finds out there is wrongdoing in the corporation, 
conducts an investigation, and cannot be--a discussion cannot 
be entertained as to whether or not they might benefit from 
turning that over, that the crooks in the corporation be sent 
to jail, where they ought to be sent, and the corporation 
perhaps survive the prosecution. Those are things that to me 
are pretty realistic and deal with the way the real world is. 
But if there is a problem here, we need to find out. And if the 
Department of Justice is not handling this procedure right, 
perhaps we can make it better.
    Thank you, Mr. Chairman. I like you there as Chairman. I 
enjoyed serving under you, and I am glad to serve under you 
again.
    Senator Specter. Well, we will try to make that agreement 
come true as soon as we can, although not this morning.
    [Laughter.]
    Senator Specter. Our first witness representing the 
Department of Justice is Ms. Karin Immergut, U.S. Attorney for 
the District of Oregon, a distinguished academic career from 
Amherst, her law degree from Boalt School of Law at the 
University of California, and we will put into the record a 
very extensive, impressive resume.
    I am going to ask you, Ms. Immergut, to stick to the 5-
minute time limit, as I will everybody. This is an unusually 
heavy day. We have Judge Mukasey, whom I have a meeting with 
later this morning, and we have the D.C. voting rights bill on 
the floor. So that if the witnesses can limit it to the 
stipulated time of 5 minutes, that will give us the maximum 
time for dialog.
    Thank you for joining us, and the floor is yours.

STATEMENT OF KARIN IMMERGUT, U.S. ATTORNEY, DISTRICT OF OREGON, 
      U.S. DEPARTMENT OF JUSTICE, AND CHAIR, WHITE COLLAR 
  SUBCOMMITTEE FOR THE ATTORNEY GENERAL'S ADVISORY COMMITTEE, 
                        PORTLAND, OREGON

    Ms. Immergut. Thank you, Senator. I do not know if I should 
call you ``Mr. Chair'' right now, but, Senator Specter, members 
of the Committee, thank you for the opportunity to appear here 
today to talk about the McNulty Memorandum and the corporate 
criminal charging policy at the Department of Justice. Today I 
hope to give you a career prosecutor's view about three issues: 
first, how prosecutors use waivers of-attorney-client privilege 
and work product protections out in the field; second, how the 
McNulty Memorandum is working in practice; and, third, how 
current policies protect victims and the investing public and 
could be significantly impeded by legislative efforts to 
further restrict corporate waivers.
    First, waivers generally arise when a corporation faced 
with criminal liability comes to a Federal prosecutor and says 
it wants to cooperate; and, further, in exchange for that 
cooperation, the corporation seeks leniency. At that point, the 
prosecutor would ordinarily say: Tell us what happened, who did 
it, and how did they do it. If a corporation can provide that 
factual information without waiving a privilege, that should 
typically be enough. However, because corporations generally 
gather facts through their attorneys, sometimes a corporation 
must waive its work product or attorney-client privileges in 
order to cooperate and fully disclose those facts.
    Seeking waivers of important rights is not uncommon as part 
of our work with cooperators. We routinely ask individual 
cooperators to waive their Fourth and Fifth Amendment rights. 
Privilege waivers impose no greater burden on a corporation 
than we ask of individuals every day.
    When prosecutors seek waivers, they want the facts. They 
are not typically seeking legal advice or opinion work product 
unless there is a claim that the corporation or its employees 
acted in good-faith reliance on advice of counsel, or that an 
attorney participated, even unwittingly, in the fraud.
    Since 2001, the Department has obtained more than 1,200 
corporate fraud convictions and recovered billions of dollars 
for investors and shareholders. These prosecutions have been 
governed by a set of principles first established in the 1999 
Holder Memorandum, which was then amended by the Thompson and 
the McNulty Memoranda. Those memoranda established a nine-
factor test which requires a prosecutor to evaluate the 
culpability of a corporation and to distinguish between those 
corporations which present an ongoing danger to the public and 
those which are reliable corporate citizens.
    Criticism of these principles has focused on one sub-
category of those principles: corporate waivers of attorney-
client privilege and work product protections. The McNulty 
Memorandum was issued in December of 2006 in response to 
concerns about such waivers raised by the business community, 
defense lawyers, and members of this Committee, among others. 
For the first time, the McNulty Memorandum imposed express 
restrictions on when a prosecutor may request corporate waivers 
and what they might ask for. It also established new and 
rigorous authorization requirements.
    The McNulty Memo creates a clear and simple distinction 
between requests for factual information, which may be sought 
upon a showing of need, and requests for legal advice. A 
request for legal advice is permissible only in extraordinary 
circumstances, and then only with the permission of the Deputy 
Attorney General. And even then, if a corporation refuses to 
provide that legal advice, that refusal may not be held against 
them.
    Since its adoption, the robust client safeguards contained 
in the McNulty Memorandum have resulted in only four approvals 
of waiver of privilege for factual information and no approvals 
of waiver privilege for attorney-client communications from the 
Deputy Attorney General. We believe that these results show 
that a sound policy is in place and should be allowed to work. 
Our ability to obtain waivers in certain cases has helped 
victims because it allows cases to proceed more quickly and 
allows us to preserve assets to help victims recover some of 
their losses. In addition, the investing public deserves the 
quickest possible answer to allegations of fraud in the 
marketplace.
    In contrast, we are concerned that efforts to further 
restrict corporate waivers, such as Senate bill 186, will 
diminish our efforts to police a broad range of corporate crime 
and protect victims and the investing public by limiting the 
information available to us. Furthermore, Senate bill 186 would 
establish rules for the investigation of corporate suspects 
which are different from those applicable to every other type 
of suspect. That simply is not fair.
    Mr. Chairman, Senator Specter, over the last several years, 
the Department of Justice has made huge strides in combating 
corporate corruption. With the tools Congress has provided, we 
have made tremendous progress in restoring public confidence in 
the integrity of American corporate governance and protected 
shareholders and victims. But there is still work to be done. 
The rigorous safeguards contained in the McNulty Memorandum 
have worked and deserve a chance to continue. Our future 
efforts would be compromised if Congress enacted legislation 
such as Senate bill 186.
    I thank you for this opportunity to appear before this 
Committee on this important subject, and I would be pleased to 
answer questions.
    [The prepared statement of Ms. Immergut appears as a 
submission for the record.]
    Senator Specter. We will now proceed with our customary 5-
minute round.
    Ms. Immergut, you say that if a corporation seeks leniency, 
then the issue arises as to the waiver of the privilege. It 
seems to me that the reality is just the reverse. The 
prosecutor is using the charging discretion to impose a more 
difficult prosecution, and that what the prosecution is really 
looking for is leverage, a blackjack to get the information.
    If the issue is waiver, a suspect has a right to waive. No 
problem about that. The difficulty arises in the context of the 
prosecutor seeking leverage to extract the attorney-client 
privilege waiver with using a more severe charge. Isn't that 
the practicality reality that is involved here?
    Ms. Immergut. Senator, if I understand your question, it is 
whether or not our ability to provide leniency is somehow 
forcing somebody to waive when they otherwise would not.
    Senator Specter. The question is: Doesn't the process 
really focus where the prosecutor has the discretion on 
charging and the prosecutor initiates the matter and says the 
charge will be X if you waive your privilege and it will be X 
plus Y if you do not waive your privilege, as opposed to the 
suspect coming and saying let me waive the privilege for 
leniency?
    Ms. Immergut. Frankly, the former, in my experience, 
typically is not how it works, and it is not the required 
analysis under the McNulty Memo. There are nine factors to 
consider in our corporate charging decision. Our only point, 
though, is when a corporation wants leniency, and the other 
eight factors do not necessarily inure to the corporation's 
benefit with respect to whether or not they should be charged, 
certainly then corporations would typically say, ``We want to 
cooperate. How can we cooperate?'' And, you know, ``What do we 
need to do in order for you not to charge us?'' But, again, the 
charging decision is really based on evidence and as well as 
the other eight McNulty Memorandum factors.
    Senator Specter. Ms. Immergut, you say in your opening 
statement that you are not ``seeking advice from counsel.'' 
Then you later go into a situation where you are doing 
precisely that--seeking advice.
    It seems to me just totally antithetical, contrary to the 
basic right to counsel, to under any circumstance ask a lawyer 
what advice he has given to a client.
    Ms. Immergut. Again, the McNulty Memo makes that 
distinction. The situation you have described is very much of a 
rarity, and, indeed, since McNulty has been implemented, no 
single approval for that sort of advice--
    Senator Specter. Is it really relevant that it is a rarity 
if you are undercutting the value, the sacrosanct nature of a 
lawyer's advice?
    Ms. Immergut. Senator, if I could give you an example of a 
time where one might imagine that sort of advice would be 
pertinent is if there was information that corporate officers 
had indeed sought advice from general counsel, been advised not 
to do the conduct that they engaged in, and nevertheless went 
ahead and did it. That might be a circumstance in which we 
would ask corporate counsel, if a corporation is cooperating, 
``Can we get a copy of the memo that you provided to the CEO 
who committed misconduct?'' so that we can show they were on 
notice that this was illegal conduct--it is evidence of their 
intent.
    Senator Specter. I have one final question for you. We have 
a letter from the former Chief Justice of Delaware, E. Norman 
Veasey. We will make the full letter a part of the record. But 
he cites a case that, ``When the process required by the 
McNulty Memorandum was raised by company counsel, the 
prosecutor's response was, `I don't give a flying--' about the 
policy, and further said the burden was on the company to 
appeal the waiver request up the chain of command to the 
Department of Justice.''
    Which raises the concern that, notwithstanding all of the 
protections which, handily, may not amount to much as I see 
them, as long as you have this waiver policy in effect, there 
is a high risk it is going to be disregarded at the operating 
level. What do you think about that?
    Ms. Immergut. I personally in my office have spoken to my 
Assistant U.S. Attorneys about this issue. They are very well 
aware of the importance of adhering strictly to the McNulty 
Memo. I have also been involved in training all of the U.S. 
Attorneys from around the country. I have spoken with all of 
them about the issue. And certainly if there is one perhaps 
overzealous prosecutor who is not adhering, there are, 
obviously, personnel policies that are implicated. But I know 
that the U.S. Attorneys have made this very clear to their 
Assistant U.S. Attorneys how important it is to follow the 
McNulty Memorandum.
    I believe that what you are suggesting is really a 
management and accountability issue, and I think that the 
McNulty Memo really reaches the right balance on that and has 
brought your concerns to the forefront of the Department of 
Justice, and we are making every effort now to make sure that 
we recognize the sacrosanct nature of the attorney-client 
privilege. We take that very seriously, and I can assure you 
that all of my fellow U.S. Attorneys have made that very clear 
to individual prosecutors in their offices.
    Senator Specter. Senator Sessions?
    Senator Sessions. Corporate fraud is an important thing, 
and millions of people have lost their whole life savings as a 
result of fraud by corporate officers. It is the investors and 
stockholders as well as the general public that suffers when 
fraud occurs. But it is not easy to prosecute or investigate. 
They have the best lawyers that you can find, and they utilize 
all the legitimate tools that they have. And so you get to some 
difficult circumstances, and you have to be strong, wouldn't 
you say, Ms. Immergut, that a prosecutor cannot be a weak-kneed 
person going up against a major corporation in a fraud case.
    So I do not think that the phrase you used, ``a blackjack 
against them,'' is quite a fair thing. Every drug defendant 
that can be charged with eight different drug offenses and you 
tell them they will be able to get a reduced sentence and you 
will only charge them with four if they plead guilty, it could 
be said they were blackjacked. But you cannot credibly convey 
to a corporation that you are providing leniency unless they 
know you know they have committed a crime for which they can be 
convicted. Isn't that right?
    Ms. Immergut. That is correct, Senator, that it is in the 
context of a corporation facing criminal liability that it 
wants to cooperate. So just as with an ordinary defendant when 
we ask them for information or they choose to waive very, very 
important constitutional rights, they expect some benefit from 
the Government, and whether that is charging or sentencing--
    Senator Sessions. Right, the point of which is in every 
criminal investigation context, particularly complex cases, 
there are circumstances in which the corporate lawyers know 
that the corporation has certain vulnerabilities when they have 
committed certain crimes, and they know, and they know there is 
proof, or they think maybe there is not proof to establish 
that. So the first point is that it is just nothing unusual in 
my view that a prosecutor who has in her hand evidence of 
corporate guilt on a number of different matters would use that 
as leverage to find out the full scope of all the criminal 
activity by providing some sort of leniency of a form in 
exchange for cooperation by the defendant. Is that correct?
    Ms. Immergut. That is absolutely correct. And if I might 
just add to that, Senator, there have been cases where 
corporations have come in and said that they should not be 
charged and they are innocent and explain how something 
occurred, and we say, ``Well, can you show us some documents to 
prove that?'' and it has indeed exonerated a corporation very, 
very quickly. And that is good for shareholders and good for 
the investing public.
    Senator Sessions. Well, the big losers--and I have seen a 
time or two in which you realize the people that are going to 
suffer most here are stockholders, who have no idea criminal 
activity was going on--and the board represents those, the 
corporate board. Evidence is brought to a corporate board that 
criminal wrongdoing is ongoing. They order an investigation. 
Now, we are not talking about attorney-client advice to the 
corporation for the most part. What the trend is--and it is 
perfectly reasonable--a corporation does not ask a private 
investigation to do the investigation. A corporation asks its 
counsel to do it. Right? And the reason they do that is because 
then they control the information that is attorney-client 
information. And they do not have to give it up unless they 
choose to give it up. Is that right?
    Ms. Immergut. That is absolutely correct.
    Senator Sessions. So the lawyer goes out and does the 
investigation, comes back and tells the board, ``We have got a 
real problem.'' And the Board says, ``What is this?'' ``Well, 
some of the corporate officers misbehaved.'' And the board, 
acting on behalf of the stockholders, says, ``Let's throw them 
overboard. They violated the law. We did not know they were 
violating the law. Our duty is to our stockholders to try to 
minimize the damage to this perfectly good corporation. Let's 
send these guys to the slammer.'' Right?
    Ms. Immergut. That is correct.
    Senator Sessions. And so what I am curious about, I just do 
not know how that is different than dealing with a drug 
defendant or anybody else that you deal with. What I was 
curious about, it does appear, though, that you have heard 
complaints about how this plays out in practice, and the 
Department did, last December, issue a policy that has been 
complained about, but it really is designed to provide more 
protection than has ever been given to corporate attorney-
client relationships of this kind than ever before. Isn't that 
right?
    Ms. Immergut. That is correct. We have always been able to 
request waivers, and corporations have always been able to 
choose whether or not to waive. The Holder Memo in 1999 was the 
first memo to actually just put that in as one of the guiding 
principles for charging corporations which provided 
transparency to the process. But one was always--it did not 
limit prosecutorial discretion or provide new prosecutorial 
powers.
    Senator Sessions. But they do not have to give it up.
    Ms. Immergut. Absolutely. It is a choice by the 
corporation, and also it is the corporation's privilege with 
the advice of counsel. It is not the individual employees. So 
that is, as you point out, if the shareholders want to provide 
information about individual CEOs, for example, other corporate 
officers, that is their privilege and right to waive it if they 
so choose.
    Senator Sessions. My time is up.
    Senator Specter. Thank you--have you concluded, Senator 
Sessions?
    Senator Sessions. Yes. My time is up.
    Senator Specter. Thank you very much.
    Thank you very much, Ms. Immergut, for coming in to 
testify. Besides being U.S. Attorney for Oregon, you have a 
position within the Department which has supervision over any 
U.S. Attorneys or do you have some special status in appearing 
for the Department today?
    Ms. Immergut. I serve as Chair of the Attorney General's 
Advisory Committee's Subcommittee on White Collar Crime, and in 
that capacity, I was asked to help draft the McNulty Memo 
provisions, as well as engage in training with the other U.S. 
Attorneys, as well as talk to other U.S. Attorneys about cases 
in their districts.
    Senator Specter. Well, thank you for coming in. One of the 
reasons many of us are so anxious to have Judge Mukasey 
processed through the confirmation procedures is that there are 
so few ranking confirmed members of the Department of Justice 
in the upper echelon.
    Thank you very much.
    Ms. Immergut. Thank you very much.
    Senator Specter. We will now turn to our panel of Governor 
Thornburgh, Professor Richman, Professor Seigel, and Mr. 
Weissmann.
    I could refer to Governor Thornburgh as ``Attorney General 
Thornburgh.'' He has a unique, really spectacular record of 
public service: a two-term Governor, U.S. Attorney for the 
Western District of Pennsylvania, Assistant Attorney General in 
the Criminal Division, Attorney General under two Presidents. 
He worked in the United Nations. Undergraduate degree from 
Yale, law degree from the University of Pittsburgh, and became 
U.S. Attorney in 1969 when I was district attorney of 
Philadelphia, and we used to chase the criminals into central 
Pennsylvania because they did not want to be within his 
jurisdiction or mine. So it was a different world then.
    Thank you very much for joining us, Governor, and I look 
forward to your testimony.

 STATEMENT OF DICK THORNBURGH, FORMER ATTORNEY GENERAL OF THE 
   UNITED STATES AND OF COUNSEL, K&L GATES, WASHINGTON, D.C.

    Mr. Thornburgh. Thank you, Senator Specter, and thanks to 
Chairman Leahy; my former colleague in the Department of 
Justice, Senator Sessions.
    Senator Sessions. You were my boss, I think is the right 
phrase, and I was honored to serve with you.
    Mr. Thornburgh. Well, why quibble?
    [Laughter.]
    Mr. Thornburgh. I appreciate the opportunity to speak to 
you today about the ominous dangers that the Justice 
Department's McNulty Memorandum poses to the attorney-client 
privilege, the work product doctrine, and the rights of 
individuals.
    Let me state at the outset that, in my view, the McNulty 
Memorandum is so inherently problematic that there is nothing 
to be gained by continuing to wait and see how it may be 
implemented. To the contrary, Congress should enact legislation 
such as S. 186 promptly to restore the attorney-client 
privilege, the work product doctrine, and the constitutional 
rights of individuals to their proper places in our system of 
justice.
    A year ago, almost to the day, this Committee received 
extensive oral and written testimony from Mr. Weissmann--who is 
on this panel with me--former Attorney General Edwin Meese, and 
myself, among others, on the issues at stake today. We 
emphasized then the fundamental importance of the attorney-
client privilege to our legal system generally and to corporate 
compliance programs in particular. We also explained the 
corrosive dynamic engendered by Federal cooperation policies 
that provide credit to organizations when they waive the 
privilege or work product protection. No matter what its 
procedural requirements or how reasonably the Department of 
Justice may promise to implement it, a waiver policy poses 
overwhelming temptations to target organizations, often 
desperate to save their very existence. Prosecutors do not need 
to issue express requests for privileged documents to receive 
them. The same insidious result arises from policies that offer 
credit to organizations if they take adverse actions against 
employees that prosecutors deem culpable.
    I do not question then-Deputy Attorney General Paul 
McNulty's good faith in attempting to remedy the widely 
recognized flaws of the Thompson Memorandum and its 
predecessor, the Holder Memorandum. Unfortunately, the McNulty 
Memorandum is only an incremental improvement and retains most 
of the basic flaws of its predecessors. I have set forth in 
detail the particulars of these flaws in my written statement 
to which I would refer you.
    There is no point in ``giving the Department a chance'' to 
implement the McNulty Memorandum, as some would suggest. 
Companies know what actions might win them a reprieve from 
indictment and, thus, prosecutors do not need to issue any 
express requests. The fact that companies can get cooperation 
credit for these actions is the fundamental flaw in the McNulty 
Memorandum.
    S. 186 would forbid Government lawyers from seeking waivers 
of privilege or work product, and from coercing organizations 
to take specified adverse actions against their employees. 
Importantly, S. 186 would also forbid Government lawyers from 
``condition[ing] treatment'' of an organization on whether the 
organization waived the privilege or penalized its employees, 
and from otherwise ``us[ing such actions] as a factor in 
determining whether [the] organization...is cooperating with 
the Government.'' S. 186 thus addresses the fundamental flaw in 
the McNulty Memorandum.
    Before I close, let me briefly respond to those who argue 
that legislation like S. 186 improperly or unwisely impinges on 
the discretion of Federal prosecutors.
    As you know, for a large part of my professional career, I 
either served as a Federal prosecutor myself or supervised 
other Federal prosecutors. S. 186 does not in any way impair 
Federal prosecutors from doing their proper jobs. They would 
remain free to prosecute--or refrain from prosecuting--as 
warranted by the evidence and the law. In support of such 
determinations, they could seek any communication or material 
they reasonably believe is not privileged, and they could 
accept voluntary submissions by companies of the results of 
internal investigations. They could also continue to seek other 
information through grand jury subpoenas, immunity agreements, 
and all the other tools that prosecutors have historically 
used. They simply could not seek, directly or indirectly, 
waivers of privileged information.
    In all the years that I served as a U.S. Attorney, as 
Assistant Attorney General in charge of the Criminal Division, 
and as Attorney General, requests to organizations we were 
investigating to hand over privileged information never came to 
my attention--and I would have rejected such a request if it 
had. Clearly, in order to be deemed cooperative, an 
organization under investigation must provide the Government 
with all relevant factual information and documents in its 
possession, and it should assist the Government by explaining 
the relevant facts and identifying individuals with knowledge 
of them. But in doing so, it should not have to reveal 
privileged communications or attorney work product. This 
balance is one I found workable in my years of Federal service, 
and it should be restored.
    The attorney-client privilege dates from Elizabethan times. 
In defining the privilege in the corporate context, the U.S. 
Supreme Court in the Upjohn case concluded that, and I am 
quoting, ``an uncertain privilege...is little better than no 
privilege at all.'' Just such uncertainty has been created by 
the Department of Justice, and the destruction of the privilege 
is only compounded by the McNulty Memorandum.
    Thank you for the opportunity to be here today, and I look 
forward to your questions.
    [The prepared statement of Mr. Thornburgh appears as a 
submission for the record.]
    Senator Specter. Thank you very much, Governor.
    We now turn to Professor Daniel Richman: clerk to Justice 
Marshall, previous to that clerk to Chief Judge Weinberg of the 
Second Circuit; graduate of Harvard, a degree from the Yale Law 
School, and we will put into the record his distinguished 
curriculum vitae.
    Thank you for joining us, and we look forward to your 
testimony, Professor.

 STATEMENT OF DANIEL RICHMAN, PROFESSOR, COLUMBIA LAW SCHOOL, 
                       NEW YORK, NEW YORK

    Mr. Richman. Thank you, Senator Specter, and I would also 
like to thank Chairman Leahy for inviting me, and Senator 
Sessions as well.
    Thank you for this chance to speak to the Committee about 
the role that Congress should play in limiting negotiations 
between prosecutors and corporate counsel with respect to the 
attorney-client privilege. I would first like to highlight what 
the legislation proposed or what any of the legislation 
proposed on the table would not do. I really do not think in a 
broad range of cases it would change very much. The fact is 
that in a broad range of cases corporate counsel wants to get 
the Government inquiry off itself as soon as possible, and they 
will come in and they will speak to the Government, and they 
will turn over large amounts of information if requested, or 
perhaps not even if requested, because the quicker this moves 
on, the better for shareholders, the better for corporate 
counsel.
    I would also like to point out that any of the proposed 
legislative proposals do nothing in any explicit or, I think, 
practical way to protect officers and employees who regularly 
will speak to corporate counsel, will not have the protection 
of the attorney-client privilege for themselves, and will be 
subject to whatever corporate counsel wants to do to advance 
the corporate interests. And in many cases, as I have said, 
corporate counsel will waive the privilege. This might well be 
a problem in significant ways for individual employees. That is 
something that needs to be considered. That is something that I 
think courts are beginning to focus on, and appropriately so.
    As for cases where counsel will not come in and make the 
waiver, we should look at those. First, there will be the cases 
that the Government does pursue. Those will be a lot more 
expensive and intrusive to pursue. One thing that we really 
need to consider is what can the Government do if it wants to 
investigate alleged corporate misconduct. Perhaps it can go 
through counsel. It would be nice if they could have a textured 
discussion with counsel. That would involve counsel turning 
over documents. In the absence of that, should counsel not go 
forward and cooperate, I guess there will be search warrants, 
there will be grand jury subpoenas, at some point electronic 
surveillance. There is a whole range of spectacularly 
expensive, intrusive measures that can be done, but that the 
Government generally avoids doing in the corporate context. I 
would like to say that should this legislation pass Congress, 
or even without it, frankly, I think Congress should be putting 
a lot more money into white-collar enforcement.
    As I have noted in my written testimony, I am not qualified 
to really assess the reports coming out about underfunding of 
white-collar enforcement, but it is of grave concern to a 
number of people, and to me in particular.
    With respect to cases that do go forward, I have got to say 
that if this legislation passes, this will be really 
interesting. A pre-trial hearing has got to go into 
prosecutorial motivation. Every time a corporation is charged, 
no matter what happened in the U.S. Attorney's Office, 
corporate counsel will claim that the decision was made, in 
whole or in part, by improper consideration of their failure to 
waive. So we will have some interesting hearings. We will get 
prosecutors on the stand. I have no idea what will happen. I do 
know that it will be messy. I also know that it will deter 
prosecutors from moving forward on these cases.
    Then we have the classic cases that the legislation will 
affect and will not be prosecuted. What is that classic like? I 
do not know, and I really do not think anyone knows. The fact 
is what we are doing is essentially guessing as to how zealous, 
how committed, and with what integrity defense attorneys for 
corporations pursue their job. I know many who have just those 
qualities. I suspect there are a number who do not.
    Then we get to the question of is there a culture of 
waiver. Well, yes, I suppose there might be a culture of 
waiver. The Federal criminal justice system is based on a 
culture of waiver. No one from the Department can say that as 
clearly at some point as a professor can, but the fact is that 
is what happens. Defendants waive their rights under threat of 
severe sanctions. They waive their constitutional rights. They 
waive privileges. And there is nothing special about the 
Elizabethan origins of this or the constitutional origins of 
the Fifth Amendment. Rights get waived regularly to suit the 
Government's purposes, to suit defense counsel's purposes.
    Moving past the rhetoric, the question becomes: Is there a 
risk of abuse here? Well, yes, there is risk on both sides. I 
think there are times when U.S. Attorneys will be far too quick 
to ask for a waiver. One thing I think we can be confident 
about, though, is where they are, where there is an overly 
zealous loose cannon that starts being too quick to demand, we 
will hear corporate counsel arguing up the chain of command and 
being heard. This Committee and the Justice Department will not 
hear people from the other side where information was not 
turned over to the Government and shareholders' or workers' 
interests were hurt.
    So, in closing, I would just--oh, my time is up. I am 
sorry. I will rely on the rest of my written statement, and I 
would be happy to answer any questions.
    Senator Specter. Unlike the Supreme Court, Professor 
Richman, you may finish your sentence.
    Mr. Richman. Oh, this is quite a thrill.
    [Laughter.]
    Senator Specter. As long as it is not too complex-compound.
    Mr. Richman. I will keep it very short. I really do think 
that the fact that you have two professors here as the only 
people speaking up for the white-collar enforcement side speaks 
volumes of the odd political economy here. I do think 
shareholder interests and worker interests are very much 
affected by this. They do not have the mobilization that white-
collar counsel do, and I think this Committee should think that 
through as well.
    Thank you.
    [The prepared statement of Mr. Richman appears as a 
submission for the record.]
    Senator Specter. Well, I do not want to unduly challenge 
your impartiality, but I did not note that you served as chief 
appellate attorney and Assistant U.S. Attorney for the Southern 
District of New York, notwithstanding your lofty professorial 
status.
    [Laughter.]
    Mr. Richman. I am honored by the addition, Senator.
    Senator Specter. But you did go to the Yale Law School, so 
that is a countervailing mark.
    And Mr. Seigel, who is also a professor at the university 
of Florida, was the special attorney for the Department of 
Justice's Organized Crime and Racketeering Section of the 
Philadelphia Strike Force, and believe me, they had and have a 
lot of work to do since my days as DA. The professorial status 
has some counterbalancing factor in you two men who have had 
prosecution experience, which is really to your credit as 
experts.
    Professor Seigel had the distinction of serving to Chief 
Judge Becker of the Third Circuit, one of America's greatest 
jurists; magna cum laude from Princeton and magna cum laude 
from Harvard School.
    The floor is yours, Professor Seigel.

   STATEMENT OF MICHAEL L. SEIGEL, PROFESSOR, UNIVERSITY OF 
 FLORIDA FREDRIC G. LEVIN COLLEGE OF LAW, GAINESVILLE, FLORIDA

    Mr. Seigel. Thank you very much, Senator Specter, Senator 
Sessions. Governor Thornburgh, I was special attorney 
prosecuting organized crime under your administration, among 
others, so I have worked for you as well.
    It is my privilege to testify here today. There can be no 
doubt--nobody here doubts--that the attorney-client privilege 
is a central feature in the proper functioning of our system of 
justice. One of the things I want to point out is that nothing 
we are talking about here today has any impact on the attorney-
client privilege of an individual person. That remains 
sacrosanct. We are only considering today the privilege of 
corporations that was created by the Supreme Court in the 
Upjohn case.
    Moreover, privilege, even though it may go back to 
Elizabethan times, is actually the exception. The rule is that 
the Government, standing in the shoes of the people, is 
entitled to every man's evidence when attempting to uncover the 
truth. The question today, then, is whether S. 186, with its 
categorical prohibition of corporate privilege waiver, strikes 
the right balance between the protection of client confidences 
and the need for effective law enforcement. It does not.
    Although waiver of privilege should be sought by the 
Government only as a last resort, sometimes waiver is the only 
means by which Federal investigators and prosecutors can cut to 
the heart of the alleged corporate criminality in an efficient 
and timely manner.
    Moreover, the arguments against waiver do not withstand 
scrutiny. An examination of the issue starts with corporate 
criminal liability. Such liability provides prosecutors with 
leverage to encourage corporations to cooperate in 
administrative and criminal investigations. This is of critical 
importance.
    As a former first assistant overseeing the investigation of 
the Columbia Health Care case, one of the largest health care 
fraud cases in the United States, I can personally attest that 
the prosecution of white-collar crime is slow and resource-
intensive. The crime is itself complex. It is characterized 
often by accounting tricks, fraudulent transactions, and 
deleted records. Investigators face millions of pages of 
documents. Now currently many of them are online. And there are 
sophisticated criminal defense attorneys who are hired by 
white-collar criminals and corporations to frustrate the 
prosecution at every turn. As a result, a typical case might 
take a matter of years to bring to fruition. Corporate 
cooperation reverses this dramatically. No longer foes, the 
corporation and the prosecution can team up to unmask the 
individuals who were at the center of the criminal activity. 
With corporate cooperation, the successful completion of a 
complex case can be reduced from a matter of years to a matter 
of months. This huge efficiency gain represents a significant 
public good.
    One argument against privilege waiver is that it will 
discourage companies suspecting internal criminality from 
conducting an investigation in the first place. This is 
unlikely because of the risks of regulatory and third-party 
liability. Inaction is simply not an option.
    Corporate officials also have a very personal reason to 
investigate allegations of criminal activity amongst their 
subordinates. If they do not, they could be open to personal 
criminal liability and time in jail.
    A related argument against waiver is that it causes in-
house counsel to generate less paper in the course of an 
internal investigation. In complicated cases, of course, 
counsel has no real choice but to retain sufficient records to 
support her findings. More important, this situation was 
created by Upjohn because corporate counsel can never predict, 
after Upjohn, whether otherwise privileged documents will be 
released in the future. Thus, if she is prudent, counsel will 
always attempt to minimize records generated by an internal 
investigation, regardless of DOJ waiver policy.
    The most troubling argument against privilege stems from 
the impact it is said to have on corporate employees who face 
questioning. If they are potentially guilty, they have a dismal 
set of options: silence, and likely termination; cooperation, 
and likely sanctions; and lying, avoiding potential liability 
in the short term, but having worse outcome in the future.
    Caught in this situation, the employee definitely needs 
good legal advice. If she is unsophisticated, she may think she 
is going to get that advice and that her communication with 
corporate counsel is privileged. Of course, that is not the 
case. To the extent that the law is lacking here, the culprit 
is not DOJ waiver policy. Instead, it is with the rules and 
regulations regarding when and how corporate counsel must 
advise an employee of her Upjohn rights. In my opinion, that is 
where the rules need to be examined and the protection 
strengthened.
    The bottom line is this: The attorney-client privilege 
waiver should be a last resort. I would prefer to see the 
McNulty Memorandum specifically state that. It comes close. I 
think it should specifically state that it is effectively a 
last resort. But it has taken a significant step in that 
direction, and I think it should be given a chance to work.
    Thank you.
    [The prepared statement of Mr. Seigel appears as a 
submission for the record.]
    Senator Specter. Thank you, Professor Seigel.
    Mr. Andrew Weissmann is a partner in the law firm of Jenner 
& Block. He was the Enron Task Force Director overseeing the 
prosecution of more than 30 individuals, selected by the 
Director of the FBI to be his special counsel; bachelor's 
degree from Princeton and law degree from Columbia.
    Thank you very much for joining us today, Mr. Weissmann, 
and we look forward to your testimony.

  STATEMENT OF ANDREW WEISSMANN, PARTNER, JENNER & BLOCK, NEW 
                         YORK, NEW YORK

    Mr. Weissmann. Good morning, Senators Specter and Sessions, 
members of the Committee, and staff.
    The advisability of a statutory solution to the 
infringement of the attorney-client privilege by DOJ must be 
examined in the context of the unique nature of corporate 
criminal law.
    First, the mere indictment of a company risks a death 
sentence as well as severe consequences to hundreds or even 
thousands of innocent people. Indeed, a criminal indictment 
carries the risk that the market will impose a death sentence--
even before the company can go to trial and have its day in 
court. One of the lessons corporate America took from the 
Arthur Andersen case, where I served as the lead trial 
attorney, is to avoid an indictment at all costs.
    Second, a corporation of any significant size will 
inevitably be subject to criminal investigation at some point 
during its existence. This is so because under the current 
standard of corporate criminal liability, a company can be 
found liable based on the actions of a single, low-level 
employee where 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. If an 
employee commits such a crime, then no matter how many policies 
the company has to thwart the criminal conduct, the company can 
be prosecuted. This standard I note of vicarious liability is 
not the creation of congressional statute, nor, indeed, of a 
Supreme Court ruling, which has never addressed this issue. It 
is the product of a series of appellate rulings that have 
defined the scope of corporate criminal law.
    In light of these precepts, prosecutors have enormous 
leverage. To avoid indictment, corporations will go to great 
lengths to be deemed ``cooperative'' with a Government 
investigation. KPMG is a prime example, as Judge Kaplan found. 
The Bristol Myers case is another example. There, the company 
agreed, among other things, to endow a chair at the 
prosecutor's alma mater in order to resolve an investigation 
short of indictment.
    The pressures on a company are, accordingly, not analogous 
to those on an individual in our criminal justice system. An 
individual is subject to liability for conduct that she 
controls absolutely; not so, a corporation. A company can face 
indictment based on the conduct of any one of thousands of 
employees, and regardless of its efforts to detect and deter 
the conduct at issue. An individual also does not risk a death 
sentence before she ever stands trial. And the potential 
collateral consequences to an individual, although they can be 
severe, can pale in comparison to the scope of such 
consequences in a corporate setting.
    Let me turn to some of the DOJ policies that I believe have 
been wanting and how the Senate bill will fix those.
    The McNulty Memorandum does not require the decision to 
charge a corporation to be viewed at Main Justice. Such a lack 
of national oversight is bewildering given the wide array of 
relatively minor decisions that are overseen by Main Justice 
and the enormity of the potential consequences of charging a 
company. It is ironic that one of the key innovations in the 
McNulty Memorandum was oversight of the decisions regarding 
requests for waiver. Yet, the ultimate decision regarding 
whether to charge a company receives no such scrutiny.
    Moreover, although the theory of the McNulty Memorandum is 
a good one, in practice individual prosecutors interpret its 
factors markedly differently. There is reason to believe that 
little has been done to train prosecutors on the McNulty 
Memorandum's dictates and to measure diligently compliance with 
its provisions. My own experience suggests as much. In one 
case, I was told that a company would be deemed cooperative by 
waiving the privilege and disclosing the material without 
making the prosecutor jump through the McNulty Memorandum 
hoops.
    Further, the McNulty Memorandum leaves intact the 
Government's ability to penalize a company that does not take 
punitive action against employees who are invoking the right to 
remain silent. By contrast, the Senate bill would prohibit the 
government from considering an employee's assertion of the 
Fifth Amendment.
    Ironically, then, the Government can encourage employers to 
take the more Draconian corporate measure against its 
employees--namely, firing them--but not to weigh in on the 
decision whether to advance legal fees.
    Finally, the McNulty Memorandum continues to exert undue 
pressure on companies to waive the privilege because 
prosecutors can still penalize a company for refusing to waive. 
Although refusal to disclose legal advice cannot account 
against a company, the same does not hold true with respect to 
``purely factual information.'' But the McNulty Memorandum's 
examples of purely factual information illustrates the problem. 
The memorandum defines as ``purely factual'' witness 
statements, interview memoranda, and factual summaries and 
reports documented by counsel. But those specific matters have 
been found by numerous courts to be precisely what is protected 
by the attorney-client and work product doctrines.
    My own experience prosecuting corporate crime belies the 
notion that a prosecutor must have such waivers in order to 
prosecute successfully such cases. There are myriad ways for a 
company that seeks to cooperate to provide the Government with 
valuable information without waiving the privilege. A company 
can direct the Government to documents and witnesses who will 
further its investigation. It can also give the Government an 
attorney proffer of salient facts. None of that requires the 
company to waive the attorney-client privilege.
    Thank you.
    [The prepared statement of Mr. Weissmann appears as a 
submission for the record.]
    Senator Specter. Thank you very much, Mr. Weissmann.
    We will admit, without objection, three statements in 
support of S. 186 from the American Bar Association, former 
Delaware Chief Justice Veasey, and from the Coalition to 
Preserve Attorney-Client Privilege.
    Governor Thornburgh, it has been a long time since I was a 
prosecutor, but you served as Attorney General through 1991. 
What is the origin, the genesis of all of this activity by the 
Department of Justice to extract waivers of the privilege?
    Mr. Thornburgh. I do not know. I have been curious about 
that myself. I would doubt that any of my distinguished 
colleagues with experience in the Department of Justice, 
including Senator Sessions, ever had occasion to request waiver 
of the attorney-client privilege in the course of white-collar 
crime investigations. As I said, that was not an item on the 
checklist of prosecutors when I served in the Department of 
Justice. But somehow or other, during the 1990s and resulting 
in the Holder and Thompson Memorandums, it became a practice 
that was frequently indulged in. And to a certain extent, I 
suppose, regardless of what legislative remedies might be 
undertaken, the genie is already out of the bottle, and it will 
be difficult to constrain the far-flung apparatus of Federal 
prosecutions totally from sneaking in a request of this kind or 
making a threat of the type that has been envisioned as time 
goes on.
    As I said, I think that the attorney-client privilege has 
been upheld for corporations in these types of investigations 
in very express language in the Supreme Court in the Upjohn 
case, with a notation that it must be clearly understood that 
that privilege exists, and that if it is rendered uncertain, it 
vitiates its usefulness.
    Senator Specter. I think you are right on the genie being 
out of the bottle. Once it is in use, the tremendous power of 
the prosecutor arises largely from his charging authority.
    Mr. Thornburgh. Yes.
    Senator Specter. A judge cannot add charges.
    Professor Seigel, you comment about exceptions. The 
Government is entitled to everyone's evidence. We are all 
familiar with that. But there are many limitations on that 
besides the attorney-client privilege, husband-wife privilege, 
coerced confessions since Brown v. Mississippi in 1938, Miranda 
we all know about, privilege against self-incrimination. A 
defendant does not have to testify. No comment about it.
    I think that what the Committee may be most interested in, 
and the Senators, is how tough it would be on the prosecution 
to convict the guilty without this waiver approach.
    Mr. Weissmann prosecuted 30 individuals in the Enron case. 
Were you able to do that without extracting waivers, Mr. 
Weissmann?
    Mr. Weissman. Well, there were some waivers in connection 
with the Enron case, but that was under the Thompson Memorandum 
where it was actually affirmatively encouraged to exact such 
waivers. But I think the result in those cases would have been 
exactly the same.
    Senator Specter. Could you have had the same success? Well, 
that is the question. Maybe you have already answered. I guess 
you have already answered. Could you have gotten the success 
without the waiver?
    Mr. Weissman. I believe so.
    Senator Specter. Professor Richman, you have been very 
candid in saying that the enactment of S. 186, as you put it, 
would not change much, that there would be invasive procedures, 
and you listed search warrants and subpoenas and surveillance. 
Well, that is all part of the existing process. But what leads 
you to the conclusion so that I can quote you more elaborately 
when we have the markup on the bill that, as you put it, the 
passage of 186 would not change very much?
    Mr. Richman. Senator Specter, I think there is a very large 
range of cases where the Government either comes calling to 
defense counsel or defense counsel comes to the Government, 
assuming that there eventually will be Government action, and 
wants to get this matter moving as soon as possible. There has 
been--
    Senator Specter. Well, if the corporation comes or the 
individuals come and they say, ``We want to waive it,'' that is 
fine.
    Mr. Richman. Yes. That is what I was--the only point I was 
making is I think that class of cases is very large, and what 
is more, the class of cases not included, the ones where 
corporations do not waive for their own reasons, I am worried 
about those. I think that is a considerable group of cases. I 
think those are precisely the ones where defense counsel may 
either have conducted no investigation or be not very candid 
with the Government.
    I would not want the Government to be very quick to take 
his word for it, and the problem that this proposal will create 
is there will be this choice that the Government has of 
investing massive resources into the investigation or taking 
his word for it.
    Senator Specter. There is no duty to be candid with the 
Government.
    Mr. Richman. No, there is not, but there also is exposure 
to criminal liability. One of the odd things about the Federal 
system or any criminal justice system, as you know better than 
anyone, is the threat of prosecution goes far.
    Senator Specter. Well, you let the chips fall where they 
may. Our focus is very narrow on the attorney-client privilege.
    How about it, Professor Seigel? You have heard Prosecutor 
Thornburgh testify. You have heard Prosecutor Weissmann 
testify, Prosecutor Richman testify. Are you going to file a 
dissent that this bill's enactment would not impede convicting 
the guilty?
    Mr. Seigel. Yes, I do disagree with that, for a couple of 
reasons. First, I think that although right now under the 
existing dynamic with McNulty, a lot of corporations do come 
in, and because there has been criminality in their midst at 
relatively high levels, and they look at the other McNulty 
factors, they are likely to be charged, and so they have a 
large incentive to cooperate. And if the only way they can 
provide the information necessary to cooperate is to waive 
privilege, that is what they do.
    What I think--and I think maybe I disagree here with 
Professor Richman a little bit--is that the proposed 
legislation would change that dynamic and that a fair number of 
those companies would realize that an alternative potentially 
successful strategy would be to stonewall because without the 
ability of the Government to say give me more or we need more 
before we can give you credit for cooperation, the company is 
going to say we will give you everything that is not 
privileged, which might be very little, and now that we have 
fully cooperated you cannot charge us. And when the prosecution 
goes forward--and I think Professor Richman was referring to 
this in his testimony. If the prosecutor decides to charge a 
company--
    Senator Specter. There is no basis for their saying the 
prosecutor cannot charge them because they view their 
cooperation as full.
    Mr. Seigel. But if they get charged, Senator, they will 
presumably, if there is any teeth in the legislation, be able 
to file a motion to dismiss based upon their view that the 
prosecutor charged them because they refused to turn over 
attorney-client privilege.
    Senator Specter. They can say whatever they like, but they 
cannot necessarily prove it.
    Senator Sessions?
    Senator Sessions. I do not understand what we are doing 
here. Mr. Seigel, I will ask you, we have got a lot of laws, 
and maybe this is just one too many. I think Mr. Richman 
suggested it is going to cause more litigation and hearings and 
appeals than we can imagine for not much benefit. But I will 
ask maybe the two of you here. Whose rights are we talking 
about being violated?
    As you raised, Mr. Seigel, the only question that comes to 
my mind is that perhaps a corporate employee being interviewed 
by corporate counsel might not assert privileges that he would 
otherwise assert if he were being interviewed by the FBI and 
somehow give up information that incriminates him-or herself. 
But I do not see this problem with the corporation. It seems to 
me that the gist of this legislation is to say that if the 
corporation wants to go to the prosecutor and offer to give up 
all their material as a good-faith statement that they are 
determined to eliminate fraud and corruption and the chips fall 
where they may, which is what we want corporations--
    Mr. Seigel. All of which is a public good.
    Senator Sessions. I mean, I do not see how--but this 
legislation would simply say the prosecutor could not initiate 
it. The prosecutor could not say let me tell you what you 
really need to do, because we are heading toward charges 
against you, is come on forward and tell us--you have done an 
internal investigation, you give us all that, and we will take 
that as a good-faith effort and try to consider that as we go 
forward.
    Isn't that the only difference in--do they--
    Mr. Seigel. The prosecutor could not initiate it, and as I 
understand the bill, the prosecutor could not take into account 
the failure of the company not to do that when weighing their 
cooperation, which is odd because the way--the cooperation is 
information. So whether they have parted with information, the 
information the corporation has is likely privileged because 
the corporation chose to have lawyers do their investigation. 
So by saying that you cannot weigh whether or not they have 
given over privileged information I do think shifts the balance 
of power back to corporations to hold that information and 
still claim cooperation.
    Senator Sessions. What if the prosecutor just looked at 
them with steely eyes and said, I know you have done an 
investigation, we have got 150 subpoenas ready to issue, we 
have got a grand jury that is ready to hear that, and that is 
what our plans are right now?
    Mr. Seigel. Yes, right. And I think--
    Senator Sessions. And then you end up with a--this is a 
threat.
    Mr. Seigel. Well, I think it could be--
    Senator Sessions. This was a request for the documents.
    Mr. Seigel. That is right. It could--
    Senator Sessions. We could have hearings and appeals of all 
of that. Is that possible?
    Mr. Seigel. That is possible. Or either the corporation 
will get the message and hand this stuff over, anyway, in which 
case this was all pretty much a waste. Or it will hold tight, 
and if it gets indicted, we will have to have hearings over the 
motivation of the prosecution, which seems to be something that 
we always try to avoid if we can.
    Going back to the individual employees, my point is there 
ought to be--the ABA Rules of Responsibility are not very well 
written in this area, and there ought to be--if we are worried 
about the little guy--which is, frankly, who I am worried 
about, the taxpayer, the shareholder. If we are worried about 
the little guy, then we need to look at the rules regarding 
when corporate counsel advises the individual employee, look, I 
do not represent you, what you say to me is not held in 
confidence vis-a-vis you, it is not your choice, it is the 
corporation's choice; and if you have anything that is going to 
incriminate yourself, go get yourself a lawyer. That to me is 
where the rules potentially--
    Senator Sessions. And that is not required by lawyer ethics 
clearly at this point in--
    Mr. Seigel. Not clearly. I think most--
    Senator Sessions. Mr. Weissmann, I will just give you a 
chance to respond to any of that, and also the question: In 
most corporate counsel investigations, do they give those kind 
of warnings to the employees, that I am not your lawyer, that 
what you tell me, if the corporation decides, could be given to 
the authorities?
    Mr. Weissman. Yes, that is standard. Those are so-called 
Upjohn warnings and every employee is told that.
    I think the issue, though, here is that the Senate bill 
certainly leaves a company free to voluntarily turn over 
whatever it wants to the Government on its own. The problem 
here is that the current status is that even without a 
request--and certainly there are requests, but even without 
one, companies read what was the Thompson Memo and now the 
McNulty Memo, and they know exactly what they have to do. That 
is precisely what Judge Kaplan, a distinguished jurist, found 
in the KPMG case, which was that KPMG, although it was clearly 
on notice from the Southern District of New York prosecutor as 
to what it needs to do, it did not, in fact, need to even be 
told because it could read the memo and realize that its only 
way out of the situation, before the Government even said it 
had a case, was to turn over everything it could.
    And so what happened there is Judge Kaplan equated the 
actions of the company with the actions of Government because 
it found that the company was merely an amanuensis of the 
Government and was just doing its bidding.
    So what I would say here is that while there has been a lot 
of talk about the damage to shareholders and to the little guy, 
that equally weighs in on the other side, which is that there 
is nothing worse for shareholders and the low-level employee 
than a baseless civil suit and an unwarranted criminal 
investigation.
    So I think if you are looking out for the small player in 
this, you can equally view this as a very bad thing that is 
going on right now.
    Senator Sessions. Well, I would agree that an 
overaggressive prosecutor could perhaps utilize an intimidation 
factor, a threat of an indictment or publication of wrongdoing 
when there is not sufficient proof of it. That could hurt a 
corporation. It could hurt stockholders unfairly and unjustly. 
But my impression is that the McNulty Memo is really designed 
to deal with that in a real way, requiring approval all the way 
up the chain of command before anything like this could be 
done, and it certainly tightened up the procedure. But to 
deny--to create a statutory right in the middle of a corporate 
investigation that could cause all kinds of problems for not 
much benefit I am uneasy about.
    Thank you.
    Senator Specter. Thank you very much, Senator Sessions, and 
thank you, Governor Thornburgh and Professor Richman and 
Professor Seigel and Mr. Weissmann. I think the testimony has 
been very helpful.
    Mr. Thornburgh. Could I add just one comment? I am somewhat 
puzzled that if the concerns are for all the trouble we are 
putting the prosecutors to, to make their case, the expense 
that is involved, the concern for the little guy, why is the 
Department so timid? Why don't they just come forward with a 
proposal that would abolish the attorney-client privilege for 
corporations and get that result?
    It seems to me that is really what you are talking about 
here, is a kind of incremental process of nibbling away at a 
time-honored and sacrosanct privilege when the real desire is 
to expedite investigations, make the prosecutor's job easier, 
and protect in so-called fashion the rights of the little guy, 
as they have been styled by this panel. I think that is 
something worth asking Judge Mukasey about when he appears 
before you.
    Senator Specter. I am meeting with him in a few minutes.
    Mr. Thornburgh. Maybe he favors the abolishment of the 
attorney-client privilege for corporations.
    Mr. Seigel. I would go on the record not favoring that. I 
think it is in the hands of defense counsel, and that is where 
it should be.
    Senator Specter. It would not enhance his chances for 
confirmation if he adopted the bold Thornburgh approach.
    [Laughter.]
    Senator Specter. If he agreed to rescind the practice, I 
think it would enhance it.
    Mr. Thornburgh. I quite agree. That is what I was getting 
at.
    [Laughter.]
    Mr. Richman. Senator Specter, one note on that. Judge 
Mukasey is a man of extraordinary judgment, and I really think 
there are good reasons to wait and see how he runs this 
Department. It is a long-awaited arrival--at least for those of 
us hoping for his confirmation.
    Senator Specter. Well, I am not prepared to wait and see. 
We have been considering this matter at some length. There was 
a suggestion made that we defer this hearing until we had a new 
Attorney General, and that is going to take a long time, and it 
may not be a question of when but if, where you have a lot of 
demands made for production of a lot of records on the 
Terrorist Surveillance Program and the production of White 
House witnesses and all the records about the U.S. Attorneys. 
My experience, limited as it is, is not to wait but to try to 
make an analysis and come to a conclusion and to move ahead.
    But I think this hearing today provides us with a 
sufficient basis to make a judgment. We have had very 
distinguished witnesses on both sides of this issue. And I 
understand what Professor Seigel has said, but when Professor 
Richman testifies as he did and you have Mr. Weissmann's 
experience on Enron and, candidly, most of all, what a 
prosecutor like Dick Thornburgh has had to say, with experience 
at all levels and a sense of wonderment, I have been in the 
Senate all during the period this program apparently was 
developed and had not heard about it until the outcry has come 
up recently. And I think this is a matter for congressional 
judgment, and I intend to press it.
    Thank you very much--
    Mr. Richman. Senator, can I add one thing? I just want to 
clarify my testimony. I do not think that this measure will 
have no effect whatsoever. The point is that those who will 
avail itself of its protection are the guilty ones.
    Senator Specter. I do not consider your last statement 
recanting your earlier testimony.
    [Laughter.]
    Senator Specter. Thank you very much.
    [Whereupon, at 11:55 a.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]

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