What the Filip Memo means to corporate counsel

Listen to this article

On Aug. 28, 2008, the U.S. Department of Justice (DOJ) revised the Principles of Federal Prosecutions of Business Organizations, its guidelines for investigating and prosecuting businesses. This marks the continued evolution of the DOJ’s policies towards internal investigations conducted by entities in responding to misconduct allegations.

The primary revision focuses upon the DOJ’s view towards the material generated by an organization (particularly privileged information) during an internal inquiry of business improprieties. Facing such allegations, the organization might consider directing its counsel to conduct an internal review.

Will the government seek the internal inquiry’s findings, including the privileged material?

Will the government provide credit to the entity for voluntarily producing this data?

The guidelines reiterate that “waiving the attorney-client and work product protections has never been a prerequisite … for a corporation to be viewed as cooperative.” The revisions provide that prosecutors “may not request … the disclosure” of attorney client communications and “nonfactual or core attorney work product” to obtain cooperation credit. The two exceptions are when seeking evidence to investigate communications with counsel in furtherance of a crime or when the business asserts the advice of counsel defense.

The guidelines provide that in determining cooperation credit, the “key measure” will be “has the party timely disclosed the relevant facts about the putative misconduct?” Thus, in the event that the organization decides to disclose facts contained in protected material, it will receive the same credit as if the facts were contained in non-protected material.

Accordingly, the organization’s disclosure of facts in privileged material, in and of itself, will not merit cooperation credit. The government’s assessment of an organization’s cooperation will be based upon the information’s value — not whether it is protected.

As with many policies, the devil is in the details. For example, the government reserves the right to seek non-privileged underlying data (referred to as the “relevant facts”) uncovered by a business during an internal investigation. And the DOJ might award cooperation credit to an entity if it voluntarily discloses this non-privileged underlying data. However, under the new policy, the government will not seek counsel’s protected notes or memoranda relating to this underlying data.

Inevitably, as the guidelines are administered, there will be disagreements over whether certain material should be characterized as non-protected underlying data (subject to disclosure) or privileged information (protected from disclosure). Depending upon the circumstances, this might be a fact-intensive inquiry.

The guidelines also clarified the DOJ’s views towards how a business interacts with personnel during an investigation. The DOJ will not request that an organization refrain from entering joint defense agreements. A business will not be precluded from receiving cooperation credit if it enters such an agreement. In addition, the DOJ will not request an entity to not advance attorneys’ fees for its personnel, and will not consider such advances as a factor in its prosecutorial decisions.

With these revisions, the government is attempting to achieve a balance between encouraging internal business investigations and not impeding its own law enforcement efforts. The guidelines are reflective of a continuing dialogue between the DOJ and the corporate counsel community since the DOJ’s last guidance on this topic (known as the McNulty Memorandum) approximately 20 months ago.

They are also a response to litigation bearing upon these issues (including United States v. Stein, 2008 WL 3982104 (2nd Cir., Aug. 28, 2008), a Second Circuit case involving a complex financial investigation), and proposed legislation introduced in the Senate and the House relating to the attorney-client privilege.

Although the guidelines are not law or regulation, they are still significant since they advise businesses of the DOJ’s position on internal investigations. This will assist organizations in framing their responses to misconduct allegations and in conducting internal inquiries. Given the government’s focus upon white-collar matters, this guidance is vital.

It is noteworthy that the revisions have been included within the U.S. Attorneys’ Manual, the multi-volume guidance issued to federal prosecutors around the country. Thus, there will be consistency among the different federal prosecutorial agencies in approaching businesses. This is particularly important in white-collar investigations, since there might be multiple possible venues for the commencement of such a prosecution.

Finally, the guidelines do not address whether material, provided to the government through an internal investigation, is discoverable by private third parties in related civil litigation. In the coming years, there will be an increasing number of discovery disputes on this topic.

In any event, it is clear that the revised guidelines reflect the DOJ’s philosophy that an integral part of an organization’s compliance efforts is its own self-policing. By enunciating policies in which protected material is not sought nor required for the receipt of cooperation credit, the government is encouraging businesses to respond pro-actively to compliance issues, including allegations of misconduct.

The memorandum is included in the U.S. Attorneys’ Manual-9 28.000, and is available here.

Nathan Fishbach, a shareholder at Whyte Hirschboeck Dudek S.C., served in the U.S. Attorney’s Office for over 13 years, with his last post as Interim U.S. Attorney. William Mulligan, a shareholder at Davis & Kuelthau, served as U.S. Attorney from 1974 to 1978.