1101 Market Street, 11th Floor • Philadelphia, PA 19107

Phone: 215-238-6300 •

December 07, 2007

Bar Chancellor to Lawmakers: Support Attorney-Client Privilege Protection Act

Calling it a bill that would "strike the proper balance between effective law enforcement and the preservation of essential attorney-client privilege," Philadelphia Bar Association Chancellor Jane Leslie Dalton today expressed the support of the 13,000-member Association for S. 186, the "Attorney-Client Privilege Protection Act of 2007," introduced earlier this year by U.S. Sen. Arlen Specter (R-Pa.).

In a letter sent Dec. 6 to Sen. Specter and Sen. Robert P. Casey (D-Pa.) on behalf of the Association, Dalton said the legislation "would reverse the harmful provisions in the Justice Department’s 2006 'McNulty Memorandum'— and other similar federal agency policies—that are seriously eroding the attorney-client privilege, the work product doctrine, and the constitutional rights of employees."

"In our view, S. 186—and H.R. 3013, the nearly identical companion measure that the House approved overwhelmingly on November 13—would protect these fundamental rights without impairing the ability of prosecutors to gather the information they need to enforce the law," Dalton wrote.
Dalton continued:
"The Justice Department's original privilege waiver and employee rights policies, set forth in the 1999 'Holder Memorandum' and the 2003 'Thompson Memorandum,' instructed federal prosecutors to consider certain factors in determining whether corporations and other organizations should receive cooperation credit—and hence leniency—during government investigations. One of the key factors cited in these Justice Department policies—and in similar federal policies adopted by the Securities and Exchange Commission, the Environmental Protection Agency, the U.S. Sentencing Commission, the Commodity Future Trading Commission, and others—is the organization's willingness to waive attorney-client privilege and work product protections and provide this confidential information to government investigators. Another key factor in many of these policies is the company's willingness to not pay its employees' legal fees during investigations, to fire the employees for exercising their Fifth Amendment rights, or to take other punitive actions against them long before any guilt has been shown.

"After considering the concerns raised by the American Bar Association, former Justice Department officials, congressional leaders, and others, the Sentencing Commission voted unanimously in April 2006 to remove the privilege waiver provisions from the Federal Sentencing Guidelines, and that change became effective last November. In addition, the CFTC voted to reverse its privilege waiver policy in March 2007, though its harmful employee rights policies remain in place. Unfortunately, however, the Justice Department and the other federal agencies have refused to reverse or fundamentally change their harmful privilege waiver or employee rights policies. Although the Department reluctantly issued new cooperation guidelines on December 12, 2006, as part of the 'McNulty Memorandum,' the new policy falls far short of what is needed to prevent further erosion of fundamental attorney-client privilege, work product, and employee legal protections.

"The Philadelphia Bar Association is concerned that unless the Justice Department and other federal agency policies are reversed, they will continue to cause the routine compelled waiver of fundamental attorney-client privilege and work product protections. Instead of eliminating the improper practice of forcing companies and other entities to waive in return for cooperation credit, the McNulty Memorandum still allows prosecutors to demand waiver after receiving high level Department approval. More importantly, the new policy continues to encourage routine waiver by granting companies credit if they 'voluntarily' waive without being asked. Unfortunately, since the McNulty Memorandum was issued in December 2006, prosecutor demands for waiver have continued unabated, though most demands are now informal, so as not to trigger the procedural requirements of the new memorandum. Whether direct or indirect, these waiver demands are unjustified, as prosecutors only need the relevant facts to enforce the law, not the opinions and mental impressions of corporate counsel.

"By pressuring companies to waive their privileges on a routine basis, the Justice Department's McNulty Memorandum and the other similar federal policies are seriously weakening the confidential attorney-client relationship between companies and their lawyers and undermining companies' internal compliance programs. Lawyers play a key role in helping companies and their officials to comply with the law and act in the entity's best interests. To fulfill this role, lawyers must enjoy the trust and confidence of the company's officers, directors, and employees, and must be provided with all relevant information necessary to properly represent the entity. By pressuring companies to waive these fundamental protections, the McNulty Memorandum and the other similar federal policies discourage company personnel from consulting with the company lawyers, thereby impeding the lawyers’ ability to conduct thorough internal investigations and effectively counsel compliance with the law. This harms companies, employees, and the investing public as well.

"The Justice Department's McNulty Memorandum and the other similar federal agency policies also are seriously eroding employees' legal rights by pressuring companies to take unfair punitive action against them during investigations. While the McNulty Memorandum bars prosecutors from requiring companies to forgo paying their employees' legal fees in many cases, it carves out a broad exception that could easily swallow the general rule, thereby eroding employees' Sixth Amendment rights to effective legal counsel. In addition, the new memorandum and the similar policies adopted by other federal agencies deny credit to companies that choose to assist their employees with their legal defenses or decline to fire them for exercising their Fifth Amendment rights against self-incrimination. By forcing companies to punish employees long before any guilt has been shown, these policies weaken the constitutional presumption of innocence and undermine principles of sound corporate governance.

"For all of these reasons, the Philadelphia Bar Association believes that the McNulty Memorandum and the other similar federal policies are fundamentally flawed and must be reversed. Therefore, we urge you to support and cosponsor S. 186, which would bar the Justice Department and other federal agencies from pressuring companies to waive their privileges or take unfair punitive actions against their employees as conditions for receiving cooperation credit. In our view, S. 186 would strike the proper balance between effective law enforcement and the preservation of essential attorney-client privilege, work product, and employee legal protections.

"Thank you for considering our views on this critical issue," Dalton concluded.

Read the resolution of the Board of Governors.

# # #