Shift in Corporate Prosecution Ahead

Larry D. Thompson developed the current guidelines after the Arthur Andersen scandal.
Larry D. Thompson developed the current guidelines after the Arthur Andersen scandal. (By Bill O'leary -- The Washington Post)

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By Carrie Johnson
Washington Post Staff Writer
Thursday, November 30, 2006

Justice Department officials are revising controversial guidelines for criminal prosecutions of companies in response to pressure from business groups, civil liberties lobbyists and an influential lawmaker who is expected to introduce legislation on the issue early next week.

The changes, which could require local U.S. attorneys to obtain input from high-level Justice Department officials before seeking corporate indictments, could be unveiled by Deputy Attorney General Paul J. McNulty next month, according to sources briefed on the issue who spoke on condition of anonymity because the deliberations are not yet complete. The administrative revisions also may forbid government lawyers from forcing companies to stop paying attorney fees to employees ensnared in investigations, a move that was declared unconstitutional in June by a federal judge in New York.

Separately, Senate Judiciary Chairman Arlen Specter (R-Pa.) is drafting legislation that would bar prosecutors from forcing companies to waive their attorney-client privilege over internal documents in order to avoid criminal charges, a key part of the current guidelines. Specter, who has received support from Sen. Patrick J. Leahy (D-Vt.), could release the bill as early as Monday.

Debate about the appropriate use of prosecutorial power over business has simmered for years, reigniting in 2002 when the Justice Department charged Arthur Andersen LLP with obstruction of justice, a move that prompted partners and clients to flee and hastened the death of the audit firm.

Larry D. Thompson, then deputy attorney general, developed the guidelines in a memo the next year. After leaving government for a top legal job at PepsiCo, Thompson has quietly continued to defend his approach. In June, Thompson told the Texas bar association that his policy never was intended to force companies to waive their legal privilege except in "limited circumstances" in which prosecutors could not get information from other sources. Instead, Thompson said, companies should be prepared to cooperate with the government and turn over key facts about wrongdoing. He is to speak today at the Heritage Foundation, a conservative think tank in the District.

Some legal analysts argue that the push back is a reflection of increased confidence among business interests whose influence was devastated by the accounting scandals and resulting investor losses. In practice, they argued, debate over the Thompson memo is overblown because few government attorneys cross the line and demand confidential material to which they are not entitled.

Yet a strange-bedfellows coalition, including the National Association of Criminal Defense Lawyers, U.S. Chamber of Commerce, American Civil Liberties Union and National Association of Manufacturers, has formed to protest what it views as overly aggressive implementation of the guidelines. Peter H. Lawson, the chamber's congressional affairs director, and chief executive Thomas J. Donohue have visited top Justice Department officials repeatedly this year to make their case.

For business groups, the biggest concern is waiver of the attorney-client privilege to avoid prosecution, a move that puts sensitive documents and e-mail messages -- often involving communication with company lawyers -- into the hands of prosecutors, securities regulators and, ultimately, plaintiff lawyers who can use the waivers to obtain potentially damaging information in costly class-action lawsuits. Qwest Communications lost a bid in July to keep 220,000 documents from plaintiff attorneys after a federal appeals court ruled against the telecommunications company. Qwest had waived the attorney-client privilege over the documents to avoid criminal prosecution.

Defense lawyers and ACLU advocates, on the other hand, fear government practices that encourage businesses to point the finger at their own employees to save the companies from indictment. An ongoing prosecution of more than a dozen former KPMG officials over the marketing of tax shelters cast a spotlight on the issue after the accounting firm bent over backward to avoid indictment and helped implicate its own former executives.

In a letter earlier this year, a bipartisan group of former Justice Department officials, including attorneys general Griffin Bell and Richard L. Thornburgh; Clinton-era deputy attorney general Jamie S. Gorelick; and former solicitors general Theodore B. Olson, Kenneth W. Starr and Seth P. Waxman, called the memo "seriously flawed."

"You know you have a bad policy when people from across the spectrum are against it," said former deputy attorney general George J. Terwilliger III, who also signed the missive.


© 2006 The Washington Post Company

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