By: dmc-admin//January 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 Memos significance. Because of the prosecutors 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 DOJs 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 Generals 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. Attorneys 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. Attorneys 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. Attorneys 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 corporations refusal to provide privileged material depends upon the category into which it falls. The McNulty Memo does not permit the DOJ to consider a corporations 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 corporations refusal to provide material in the Category I factual category.
Obviously, because of the DOJs 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 Governments 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 corporations cooperation.
Fifth, one of the four criteria for the DOJs 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-ments 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.
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Sixth, it is significant that the McNulty Memo reversed the DOJs policy on considering the corporations 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 Generals written authorization.
This is akin to the procedure which prosecutors must follow in seeking Category II legal material, demonstrating the DOJs 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 DOJs view that the McNulty Memos revisions to the policies on seeking privileged material and considering the payment of attorneys fees will facilitate the corporations 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 DOJs message to corporations in the McNulty Memo is clear. To possibly receive favorable consideration, corporations must take initiative in reviewing allegations of corporate misconduct.