Sentencing Panel Waives Cooperation Clause

In a move expected to ease the pressure on corporations under federal investigation to waive attorney-client privilege, the U.S. Sentencing Commission has voted to eliminate language from the Federal Sentencing Guidelines that requires corporations to waive the privilege if they want to earn credit for cooperation with investigators.

The amendment was prompted by extensive criticism that the waiver requirement chills communications between employees and corporate counsel, legal experts say.

Debold

The Sentencing Commission decision “puts pressure on the Department of Justice to rethink its position on making privilege waivers a factor that prosecutors consider in deciding whether or not to prosecute a corporation,” says David Debold, an attorney at Gibson Dunn & Crutcher, co-chair of the U.S. Sentencing Commission’s practitioner advisory group and a former assistant U.S. attorney.

The issue stems in part from changes made to the Sentencing Guidelines in 2004. Among the revisions was a provision that stated that to receive credit for cooperating with the government, a corporation isn’t required to waive the attorney-client privilege or work product protections “unless such waiver is necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization.”

At the time, the Commission said it expected such waivers to be required “on a limited basis.” However, according to a Gibson Dunn legal bulletin, prosecutors began routinely citing the language to press corporation counsel to waive privilege and reveal confidential communications and attorney work product (see bulletin in box at right).

“It’s definitely an issue that has confronted a great number of in-house and outside counsel for corporations in the past couple of years,” Debold says. “The DOJ claims it’s a rare phenomenon, but the experience of practitioners has been quite different from what the government has portrayed it to be.”

KEY THEMES

Below are "key themes" that emerged from a survey titled, "The Decline Of the Attorney-Client Privilege in the Corporate Context," which was presented to Congress

and the United States Sentencing Commission by a number of organizations, including the Association of Corporate Counsel, the U.S. Chamber of Commerce, and the Business Roundtable:

A Government Culture Of Waiver Exists:

Almost 75% of both inside and outside counsel who responded to this question expressed agreement (almost 40% agreeing strongly) with a statement that a “‘culture of waiver’ has evolved in which governmental agencies believe it is reasonable and

appropriate for them to expect a company under investigation to broadly waive attorney-client

privilege or work product protections.” (Only 1% of inside counsel and 2.5% of outside counsel

disagreed with the statement.)

Waiver Is A Condition Of Cooperation:

Fifty-two percent of in-house respondents and 59% of

outside respondents confirmed that they believe that there has been a marked increase in waiver

requests as a condition of cooperation. Consistent with that finding, roughly half of all

investigations or other inquiries experienced by survey respondents resulted in privilege waivers.

‘Government Expectation’ Of Waiver

Of Attorney-Client Privilege Confirmed:

Of the respondents

who confirmed that they or their clients had been subject to investigation in the last five years,

approximately 30% of in-house respondents and 51% of outside respondents said that the

government expected waiver in order to engage in bargaining or to be eligible to receive more

favorable treatment.

Source

The Decline Of the Attorney-Client Privilege in the Corporate Context (Published By 12 Organizations)

He noted a recent survey by a coalition that included the Association of Corporate Counsel, which showed that a majority of outside counsel who responded had been requested by the government to waive privilege (see box at left). The two most frequently cited reasons for why they should waive were the Department of Justice’s guidelines for prosecution of corporations and the recently amended provision of the Sentencing Guidelines governing sentence credit for cooperation by corporations.

While the decision should ease some of the pressure to waive the privilege, Debold says corporations will still have to consider doing so anyway. “There are a number of rationales the government can offer to encourage companies to waive privilege, in addition to the effect waiver has had on whether the company is deemed to have fully cooperated in order to receive credit under the Sentencing Guidelines,” Debold says.

Waiver of privilege is one factors used in deciding whether a corporation should be prosecuted or not. Debold says corporations will have to consider, under the facts of their specific situation, whether it’s worth the risk to hold fast on preserving the privilege. Says he: “It’s still going to be a factor unless and until the Department of Justice modifies its internal guidance to its prosecutors.”

“They’ll have to decide whether the benefits of waiver of that privilege outweigh the risks of the loss of confidentiality between employees and counsel,” he continues. “One of those risks stems from the fact that the privilege allows employees to seek confidential advice from in-house and outside lawyers on how to stay on the right side of the law.”

Without the assurance that such communications will be kept confidential, he says employees are less likely to seek such advice, which Debold says “can put corporations, their shareholders and the general public in a worse position in the long run.”