Washington, DC (March 6, 2006) – There is more evidence than ever that federal prosecutors and regulatory auditors are routinely demanding wholesale waivers of attorney-client and work-product privileges in corporate investigations, a new survey of inside and outside corporate legal counsel reveals. In today’s complex business environment, it is increasingly important that executives and managers maintain ongoing relationships of trust with their company’s lawyers – without reliable privilege protections, employees may be discouraged from seeking guidance in sensitive situations and the lawyers are more likely to be excluded from proactive (as opposed to reactive) efforts to ensure compliance with federal laws and regulations, a coalition of participating bar and business associations say.
The survey report, Decline of the Attorney-Client Privilege in the Corporate Context, was based on 676 responses by in-house counsel, and 538 outside counsel who responded to a similar questionnaire. The results were submitted to the US House of Representatives Judiciary Committee Subcommittee on Crime, Terrorism and Homeland Security in support of testimony by a coalition of business and legal groups (The Coalition to Preserve the Attorney-Client Privilege) who have united to provide urge the subcommittee in their March 6 hearings to seek protections of the attorney-client privilege from further erosion by government waiver demands. Coalition members include the Association of Corporate Counsel, the American Chemistry Council, the American Civil Liberties Union, the National Association of Criminal Defense Lawyers, the National Association of Manufacturers and the U.S. Chamber of Commerce. The American Bar Association is also coordinating their efforts with this coalition.
“The Federal Sentencing Guidelines state explicitly that if waiver is necessary to provide ‘timely and thorough disclosure of all pertinent information known to the organization,’ it may be a prerequisite for a sentencing reduction,” NACDL said in a statement submitted to the United States Sentencing Commission in support of hearings on the same subject being held by the USSC on March 15. “When waiver is prevalent and expected, corporations’ private lawyers become deputies of the government,” the association said.
Highlights of the survey’s findings include:
Nearly 75 percent of both inside and outside counsel agree that a “culture of waiver” has evolved in which government agencies expect a company under investigation to waive legal privileges.
Fifty-two percent of inside counsel and 59 percent of outside counsel believe that waiver of legal privileges as a condition of favorable treatment by the government is increasing. In the past five years, approximately 30 percent of in-house counsel and 51 percent of outside counsel confirmed that the government expected waiver in order to engage in bargaining or be eligible for more lenient treatment.
Nearly three-quarters of outside counsel said that the expectation of privilege waiver was communicated rather than implied. Of those, 26 percent said that waiver was requested as a direct and specific statement that waiver was a condition precedent for cooperation.
Similarly, about two-thirds of in-house respondents said that waiver expectations were communicated through direct or indirect statements by prosecutors or enforcement officials.
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Sixty-two percent of in-house respondents and 48 percent of outside counsel indicated that the government did not give a specific justification for a waiver request. Justifications for waiver requests however included facilitation of a quick and efficient resolution of the matter, internal policies (such as the Holder, Thompson or McCallum memoranda), and negative impact of being deemed non-cooperative under the Federal Sentencing Guidelines.
The survey and NACDL’s Statement on Attorney-Client Privilege are available on NACDL’s Web site at http://www.nacdl.org/public.nsf/whitecollar/WhiteCollar_index.
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