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12/17/2004 |
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Leon Rodriguez Appeared in the Baltimore Business Journal The post-Enron world has changed the way that businesses respond to federal government enforcement activity. Increasingly companies strive to persuade prosecutors that they are fully cooperating and therefore merit leniency. The blueprint of this change is the "Thompson Memo," a letter dated January 2003 from former Deputy Attorney General Larry Thompson that revises some of the U.S. Department of Justice policies for prosecution of business organizations. The Thompson Memo has dramatically affected the way corporations are investigated and, more importantly how companies and their lawyers respond to those investigations Drafted in the wake of the Enron and Arthur Andersen debacles, Thompson's memo identifies the main focus of the new prosecution policy as "increased emphasis on and scrutiny of the authenticity of a corporation's cooperation," citing companies that "while purporting to cooperate with a Department investigation, in fact take steps to impede the quick and effective exposure of the complete scope of wrongdoing under investigation." Under Thompson's policy, prosecutors weigh conduct that they deem falls short of genuine and complete cooperation in favor of prosecution of the corporation. Now, almost two years after the Thompson Memo's issuance, the first generation of cases handled according to the memo's letter and spirit is winding through the justice system. Experience with day-to-day practice under the Thompson Memo shows that two particular elements of the policy's definition of cooperation is changing the way that companies respond to government investigations. Federal prosecutors have always considered self-disclosure of internal wrongdoing in weighing whether to charge an organization. But now, such disclosure may need to consist, in the Thompson Memo's words, of "a waiver of the attorney-client and work product protections, both with respect to its internal investigation and with respect to communications between specific officers, directors and employees and counsel." The policy notes that such waivers often permit the government to avoid negotiating agreements that will afford potential individual defendants leniency or immunity. Until now, most internal investigations were just that–internal–conducted by counsel for the company as a risk assessment tool and as a means to marshal evidence to fight criminal charges. Now they may serve quite the opposite function, offering government investigators a supplement or even a substitute to their investigation. Second, the policy directs prosecutors to view unfavorably the appearance that the company is, "protecting its culpable employees and agents." Specifically, the Thompson Memo states that "depending on the circumstances," a prosecutor may consider a company uncooperative that has advanced attorney fees to employees that the government views as culpable or that has provided information to such employees about an investigation pursuant to a joint defense agreement. The policy does not define the term "culpable," and it is fair to assume that the term can apply to employees involved in conduct of limited seriousness, and for whom proof of wrongdoing is not very strong. The policy therefore places considerable pressure on companies and their counsel to restrict coordination with any high-level employee who is connected to the investigation. It is this group of individuals who will see the greatest changes as a result of the Thompson Memo as companies, eager to demonstrate cooperation to prosecutors, will think twice about advancing attorneys fees to certain employees or sharing information for their defense. The carrot for corporate cooperation is indeed large. The Thompson Memo talks for the first time in terms of "granting a corporation immunity or amnesty or pretrial diversion" in exchange for its cooperation. Several companies, no doubt eager to avoid the fate of the late Arthur Andersen, have already taken advantage of these provisions. The Thompson Memo represents are calibration of relationships. While historically companies may have sought to assist even potentially culpable employees both to promote institutional morale and stability and to pursue a common defense, such community of interest will soon be the exception. Meanwhile, companies that in other days may have "gone to the mattresses" when faced with a government investigation, will now be working hard to assist the prosecutors who are probing their misconduct. |
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Ober, Kaler, Grimes & Shriver Maryland
Washington, D.C. Virginia |
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