Forum - Part
II
Are the McNulty
Memo’s changes significant?
By
Nathan A. Fishbach
Jan.
15, 2007
 |
|
Nathan
A. Fishbach
|
In
determining whether the McNulty Memo is important, it is necessary
to distinguish what it is — and what it is not.
The
McNulty Memo is internal guidance to prosecutors. It is not a
law or a regulation. If a federal prosecutor does not follow it,
a corporation has virtually no remedy. It applies only to federal
prosecutors — not to their state and local counterparts.
However,
this does not diminish the McNulty Memo’s significance. Because
of the prosecutor’s substantial discretion, a policy directive
— like the McNulty Memo — guiding prosecutors in their
charging decisions, provides valuable insights to corporations
since it assists them in analyzing (and framing their responses
to) allegations of corporate misconduct.
Moreover,
even though the McNulty Memo is only internal guidance to prosecutors
(and not a statute or regulation which must be followed as a matter
of law), it is important that prosecutors consider the McNulty
factors to maintain credibility in reaching consistent charging
decisions.
Second,
the McNulty Memo is noteworthy in that it sets forth the DOJ’s
internal processes for evaluating whether privileged material
should be sought. The McNulty Memo recognizes that Category II
legal material is quite intrusive into the attorney-client relationship
and accordingly, “should only be sought in rare circumstances.”
Indeed, Category II material can be sought only if the Category
I factual material “provides an incomplete basis to conduct
a thorough investigation.”
Before
seeking Category II legal material, the Deputy Attorney General’s
written approval is needed. Given the sensitivity of Category
II legal material and the rigorous review process before such
material can be sought, it is expected that prosecutors will be
circumspect prior to seeking internal authorization to obtain
this material.
A
parallel can be seen in the high threshold which a prosecutor
must meet and the numerous internal hoops through which a prosecutor
must jump within DOJ prior to being permitted to apply to a court
for an order authorizing electronic surveillance. This internal
review process is a factor in deterring prosecutors from regularly
seeking DOJ permission to petition a court for such an order.
With
respect to Category I factual material, the DOJ uses a less rigorous
process when considering whether such material should be sought.
The U.S. Attorney’s Office can seek this material as long
as the U.S. Attorney personally approves the request. Unlike Category
II legal material, the approval of DOJ headquarters is not needed.
However, the U.S. Attorney’s Office must consult with DOJ
headquarters and maintain copies of waiver requests and authorizations
in its files.
Moreover,
prior to the issuance of the McNulty Memo, each U.S. Attorney’s
Office (and DOJ department) was “directed to establish a
written waiver review process” for seeking the production
of privileged material. See Memorandum from Deputy Attorney General
Robert Mc-Callum, to Heads of Dept. Components, U.S. Attorneys,
Waiver of Corporate Attorney-Client and Work Product Protec-tion
(Oct. 21, 2005), available at www.abanet.org/poladv/priorities/privilegewaiver/mccallummemo212005.pdf.
It
was recognized that “[s]uch waiver review processes may vary
from district to district (or component to component).” Id.
With the McNulty Memo, the determination of whether there is a
“legitimate need” for the privileged material must fit
within the four McNulty “legitimate need” criteria.
Thus,
even though DOJ approval is not needed for Category I factual
material, it is expected that the McNulty Memo will encourage
greater consistency among prosecutorial offices in deciding whether
there is a “legitimate need” since the same four criteria
will be used in all DOJ offices.
In
addition, with the McNulty Memo, the scope of the request for
privileged information is further refined. When seeking the production
of privileged documents, prosecutors are now directed to “seek
the least intrusive waiver to conduct a complete and thorough
investigation.”
Third,
the impact of a corporation’s refusal to provide privileged
material depends upon the category into which it falls. The McNulty
Memo does not permit the DOJ to consider a corporation’s
refusal to provide Category II legal material, highlighting the
sensitive nature of such documents. By contrast, the McNulty Memo
permits a prosecutor to consider a corporation’s refusal
to provide material in the Category I factual category.
Obviously,
because of the DOJ’s different treatment of these two categories
of material, there will inevitably be discussions between prosecutors
and corporations as to which category governs the particular documents
at issue. In civil litigation, it is not uncommon for the parties
to debate over whether certain documents are privileged. During
a criminal investigation, the discussions (between prosecutors
and corporations) over documents differ in that they will generally
occur in the pre-litigation setting without a presiding judicial
officer to adjudicate the dispute.
Fourth,
the fact that the DOJ must meet certain criteria prior to seeking
privileged material does not preclude a corporation from voluntarily
waiving the privilege on its own. This strategy might be taken
by the corporation as a way to exhibit its cooperation with the
Government’s investigation.
Under
this scenario, if the corporation is ultimately charged and convicted,
the Sentencing Guidelines (the advisory criterion for federal
sentencing) permits a court to consider whether a corporation
cooperated with the Government. A court might view the submission
of privileged material to the Government as a demonstration of
the corporation’s cooperation.
Fifth,
one of the four criteria for the DOJ’s determination of whether
there is a “legitimate need” for privileged material
is “the collateral consequences to a corporation of a waiver.”
For example, by providing privileged material to the Government
in addressing criminal allegations, non-governmental third parties
engaged in civil litigation with the corporation might claim that
the corporation waived the attorney-claim privilege.
The
McNulty Memo does not address the impact that the possibility
of such a third party claim will have on the Govern-ment’s
decision to seek privileged materials from the corporation.
Inevitably,
there will be litigation on the manner that privileged material
can be provided to the Government without waiving the privilege
as to third parties. Pragmatic Practices for Protecting Privilege,
ACC 2006 Annual Meeting, CLO Executive Leadership Series (Washington
D.C. Oct. 23, 2006) at 37-39.
Sixth,
it is significant that the McNulty Memo reversed the DOJ’s
policy on considering the corporation’s payment of the attorneys’
fees of their employees. Previously, corporations faced a dilemma
as to whether such payments should be made. Now, under those rare
circumstances where prosecutors want to consider such payments,
they must follow a rigorous approval process, obtaining the Deputy
Attorney General’s written authorization.
This
is akin to the procedure which prosecutors must follow in seeking
Category II legal material, demonstrating the DOJ’s view
of the sensitivity of information relating to attorneys’
fees.
Seventh,
the McNulty Memo reiterates the DOJ philosophy that corporations
should do their own self-policing. The DOJ expects that when allegations
of corporate misconduct arise, the corporation should address
them. It is the DOJ’s view that the McNulty Memo’s revisions
to the policies on seeking privileged material and considering
the payment of attorney’s fees will facilitate the corporation’s
internal compliance reviews.
Conclusion
The
McNulty Memo represents a continuation of the dialogue between
the DOJ and the corporate community as to factors which the Government
considers when deciding whether to charge a corporation. It is
valuable to corporate counsel since it provides a window into
the prosecutors’ thought process in making charging decisions,
thereby providing a framework for corporate responses to misconduct
allegations.
Just
as it was in the Thompson Memo, the DOJ’s message to corporations
in the McNulty Memo is clear. To possibly receive favorable consideration,
corporations must take initiative in reviewing allegations of
corporate misconduct.
