THE MCNULTY MEMO The DOJ s New Policies Concerning

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					THE MCNULTY MEMO:
The DOJ’s New Policies Concerning Waiver of the Attorney-Client Privilege and Work Product Doctrine Protections in Federal Prosecutions David A. Schooler and Jennifer G. Daugherty Larson · King, LLP On December 12, 2006, the United States Department of Justice (“DOJ”) issued new guidelines for federal prosecutors charging and investigating misconduct on the part of business organizations. The new policies are embodied in the “McNulty Memorandum,” named after Deputy Attorney General Paul McNulty who released the guidelines. Much commentary on this very recent Memorandum calls the guidelines an improvement over previous procedures outlined in the Department’s Thompson Memorandum. However, the McNulty Memorandum does not eliminate the DOJ practice of requiring companies to waive their attorney-client and work product privileges in return for “cooperation credit,” but rather now requires high-level DOJ approval before such requests for waiver can be made. So, what exactly is the McNulty Memo, and how does it change any existing rules concerning attorney-client privileges and work product protections? The following is a basic primer on McNulty Memorandum. Q. A. What generally is the McNulty Memorandum? The Memorandum is a document of guidelines released by Deputy Attorney General Paul McNulty. It contains revised DOJ policies concerning the federal prosecution of business organizations. The Memorandum replaces earlier guidelines issued in 2003 by then-Attorney General Larry Thompson (the “Thompson Memorandum”). Why were new policies issued in the McNulty Memorandum? Much judicial and congressional criticism of the Thompson Memorandum’s guidelines on federal prosecution of corporations had arisen in the past couple of years. As noted above, many believe the McNulty Memorandum is only a slight improvement over the Thompson guidelines. Why was the Thompson Memorandum originally issued and what did it entail? In the wake of Enron, the DOJ instituted policies for imposing criminal penalties against corporations. The Thompson Memorandum identified various factors to be considered by federal prosecutors when making charging determinations. In determining whether the business “appear[ed] to be protecting its culpable employees and agents”—a consideration in assessing cooperation on the part of the entity—the prosecutors were to utilize the following factors: 1) whether the business was advancing legal fees or indemnifying culpable employees; and, 2)

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whether the business waived the attorney-client and attorney work product doctrine protections for any internal investigation. The Thompson Memorandum made clear that those corporations perceived as not having fully cooperated with a government investigation would be more likely to face criminal indictment, prosecution, and sanctions. Q. A. What was the practical effect of these considerations under the Thompson Memorandum? Prosecutors began routinely conditioning leniency of charges and mitigation for business entities on cooperation in the internal government investigation – namely, providing work product material and waiving the attorney-client privilege. Many times the prosecutor would verbally request a waiver of the attorney-client privilege at the beginning of an investigation without a written record of it. How are the Thompson Memorandum and McNulty Memorandum the same? Generally, the McNulty guidelines follow prior DOJ policies. The McNulty Memorandum still treats business entities like individual defendants. It still allows for cooperation credit and at some level allows for waiver requests. How does the McNulty Memorandum differ from the Thompson Memorandum? The McNulty Memo differs two key ways. First, the revised guidelines provide a procedure for prosecutors’ waiver requests, but do not eliminate them. Federal prosecutors may now only request privileged and protected materials when there is a “legitimate need” for such information. This need is determined by considering the following: 1) likelihood the information will assist the government in its investigation; 2) whether the information can be obtained in a timely manner by means that do not require waiver; 3) usefulness and completeness of information already disclosed; and, 4) consequences to company resulting from waiver of both attorney-client and work product privileges. Significantly, a request for such information must now be approved by a higher-level authority, depending on what information is sought. The appropriate persons from whom authority is granted are outlined in the Memorandum. Next, prosecutors cannot generally now consider a company’s indemnification or advancement of attorney fees to employees when evaluating the company’s cooperation. Only in extremely rare cases where the totality of circumstances show that advancement of fees or indemnification is intended to impede the government investigation will prosecutors be able to consider this for cooperation purposes. However, as in waiver requests, prosecutors must now seek higher-level approval before considering this factor in charging a business.

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Practically speaking, are these changes significant? Most commentary thus far says no. Many believe the McNulty’s guidelines do not do enough to protect corporations from the erosion of the attorney-client and work product doctrine privileges. Only time will tell how these new guidelines will play out and how the higher-level approval requirement will impact investigations and charges. If the McNulty Memorandum does not do much to salvage the erosion of attorneyclient privilege, will anything? On December 7, 2006, Senator Arlen Specter introduced the Attorney-Client Protection Act of 2006. This legislation would completely prohibit prosecutors from seeking information protected by the attorney-client and work product privileges in return for leniency in making charging decisions and prosecution. The ABA, among other groups, assisted in crafting it. The goal of this legislation was to wholly override the Thompson Memorandum and its progeny. However, the McNulty Memorandum was released on December 12, 2006—right after the Specter legislation was introduced. Although Specter filed the measure on the eve of adjournment of Congress, he vowed to reintroduce it soon. What happens with the McNulty Memo and Specter legislation remains to be seen.

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