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34–117 PDF 2007

S. HRG. 109–835

THE THOMPSON MEMORANDUM’S EFFECT ON THE

RIGHT TO COUNSEL IN CORPORATE INVESTIGATIONS

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

SEPTEMBER 12, 2006

Serial No. J–109–108

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

MICHAEL O’NEILL, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Feingold, Hon. Russell D., a U.S. Senator from the State of Wisconsin, prepared statement ................................................................................................... 75

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 4

prepared statement .......................................................................................... 77

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1

WITNESSES 

Donohue, Thomas J., President and Chief Executive Officer, U.S. Chamber 

of Commerce, Washington, D.C. ......................................................................... 20

Mathis, Karen J., President, American Bar Association, Chicago, Illinois ......... 22

McNulty, Paul J., Deputy Attorney General, Department of Justice, Washington, D.C. ........................................................................................................... 2

Meese, Edwin, III, former Attorney General, Ronald Reagan Distinguished 

Fellow in Public Policy, and Chairman, Center for Legal and Judicial Studies, The Heritage Foundation, Washington, D.C. .............................................. 18

Sheppard, Mark B., Partner, Sprague & Sprague, Philadelphia, Pennsylvania 26

Weissmann, Andrew, Partner, Jenner & Block, LLP, New York, New York ..... 24

QUESTIONS AND ANSWERS 

Responses of Paul J. McNulty to questions submitted by Senators Leahy 

and Schumer ......................................................................................................... 37

SUBMISSIONS FOR THE RECORD 

Business Roundtable, Paul M. Montrone, Chairman & Chief Executive Officer, Fisher Scientific International Inc., Chairman, Civil Justice Reform 

Task Force, Washington, D.C., letter ................................................................. 56

Coalition to Preserve the Attorney-Client Privilege, joint statement ................. 58

Donohue, Thomas J., President and Chief Executive Officer, U.S. Chamber 

of Commerce, Washington, D.C., prepared statement ...................................... 71

Mathis, Karen J., President, American Bar Association, Chicago, Illinois, 

prepared statement and attachments ................................................................ 80

McNulty, Paul J., Deputy Attorney General, Department of Justice, Washington, D.C., prepared statement ....................................................................... 109

Meese, Edwin, III, former Attorney General, Ronald Reagan Distinguished 

Fellow in Public Policy, and Chairman, Center for Legal and Judicial Studies, The Heritage Foundation, Washington, D.C., prepared statement ........... 123

Sheppard, Mark B., Partner, Sprague & Sprague, Philadelphia, Pennsylvania, 

prepared statement .............................................................................................. 132

Thornburgh, Dick, Kirkpatrick & Lockhart Nicholson Graham LLP, Washington, D.C., prepared statement ....................................................................... 139

Weissmann, Andrew, Partner, Jenner & Block, LLP, New York, New York, 

prepared statement .............................................................................................. 144

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THE THOMPSON MEMORANDUM’S EFFECT ON 

THE RIGHT TO COUNSEL IN CORPORATE 

INVESTIGATIONS 

TUESDAY, SEPTEMBER 12, 2006 

UNITED STATES SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:30 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Arlen Specter, 

Chairman of the Committee, presiding. 

Present: Senators Specter and Leahy. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Chairman SPECTER. Good morning, ladies and gentlemen. It is 

9:30. The Judiciary Committee will now proceed with this oversight 

hearing on the practices of the Department of Justice on the issue 

of departmental policy on calling for a waiver of attorney-client 

privilege and the elimination of the corporate practice of paying for 

counsel fees of their employees in the defense of criminal charges 

or the investigation of criminal charges. 

There is a memorandum of the Department which provides ‘‘the 

corporation’s timely and voluntary disclosure of wrongdoing and its 

willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of attorney-client privilege and work 

product protection,’’ and then a further provision on a ‘‘corporation’s promise of support to culpable employees and agents either 

through advancing of attorney’s fees,’’ et cetera, all of which goes 

to the ‘‘value of a corporation’s cooperation.’’ 

This memorandum and these policies may well have the effect of 

significantly modifying the traditional balance on a criminal prosecution where the Government has the burden of proof because of 

the Government’s power in establishing a criminal case, which 

leaves traditionally the suspect or ultimately the accused with 

privileges—the attorney-client privilege being one—and the obligation or practice of corporation’s employees to pay counsel fees, 

which can be so prohibitive as to be coercive in an individual’s decision on whether or not to defend himself or herself. 

The issue of privilege is one which the Government exercises 

with some forcefulness on some frequency. Executive privilege, certainly where the President were to invoke executive privilege, who 

could say that the President was being uncooperative, where we 

have the recurrent issue coming up in hearings before this ComVerDate 0ct 09 2002 15:12 Mar 28, 2007 Jkt 034117 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34117.TXT SJUD1 PsN: CMORC
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mittee on nominees, including Supreme Court, where the Government says there is a privilege attached to what goes on in the Solicitor General’s office, where we recently had Chief Justice Roberts 

and Justice Alito with documents and papers which the Government insisted on withholding, and understandably so, because of 

the overlying issue of privilege. 

The Southern District of New York has taken up this issue in an 

opinion by Judge Lewis Kaplan, strongly worded, condemning the 

Department of Justice’s procedures on constitutional grounds in the 

KPMG case. So we have a matter here which involves very fundamental considerations of constitutional rights, due process rights, 

Sixth Amendment rights. 

Quite a number of former key employees of the Department of 

Justice, including Attorneys General, have objected to this policy, 

and this Committee will be scrutinizing it to see if it is appropriate 

for the Department of Justice to act. 

We turn now to our first witness, the distinguished Deputy Attorney General Paul McNulty. He served with distinction as the 

United States Attorney for the Eastern District of Virginia, handling many very important and high-profile cases. He is a graduate 

of Grove City College and Capital University School of Law. 

Thank you for joining us, Deputy Attorney General McNulty, and 

we look forward to your testimony. 

STATEMENT OF PAUL J. MCNULTY, DEPUTY ATTORNEY 

GENERAL, DEPARTMENT OF JUSTICE, WASHINGTON, D.C. 

Mr. MCNULTY. Thank you very much, Mr. Chairman. It is good 

to see you, and it is good to be here today. 

Today’s hearing is about duty—the duty of prosecutors and the 

duty of corporate officials. It is about how those duties are brought 

together to enforce the law and to protect the integrity of the marketplace. 

People of good will and great distinction have criticized how we 

at the Department of Justice are fulfilling our duty. These are 

smart and experienced people, and their concerns must be taken 

seriously. But, Mr. Chairman, as a United States Attorney and 

Deputy Attorney General for the past 5 years, I have a little experience myself, and I would like, therefore, to suggest five realities 

that I have observed in relation to the practice of waiving attorneyclient privilege in corporate fraud prosecutions. 

Reality number 1, Federal prosecutors have a duty to the taxpayers of this country to hold corporate officials and corporations 

accountable for criminal wrongdoing. Our job is to protect the integrity of public markets, to ensure that investors have a safe place 

to entrust their hard- earned dollars. And it is not in the interests 

of taxpayers, and investors in particular, for corporate fraud investigations to drag on for years. 

Reality number 2, those corporations want out from under the 

dark clouds of criminal wrongdoing as quickly as possible. The moment it becomes known that a corporation could be facing a criminal investigation and potential prosecution, the value of that company’s stock begins to plummet, its shareholders lose money, and 

the board of directors quickly recognizes its fiduciary duty to those 

shareholders. It immediately sets out to locate the cancer of corVerDate 0ct 09 2002 15:12 Mar 28, 2007 Jkt 034117 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34117.TXT SJUD1 PsN: CMORC
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porate corruption, excise the tumor, and get the company back on 

the road to good health. It is not in the interests of shareholders 

for corporate criminal investigations to drag on for years. 

Reality number 3, most corporations, therefore, are anxious to cooperate with Government investigations. Whether it is the Holder 

memo, the Thompson memo, a McNulty memo, or no memo, corporations will continue to cooperate in order to bring criminal investigations to an end, to bring them out from under the dark 

cloud of potential prosecution. 

Reality number 4, there are many ways for Government investigators to get the facts in a corporate fraud investigation, to find 

out who did what when. Some ways are faster and more productive 

than others. One of the most productive ways to get the facts is for 

a cooperating corporation to tell the Government what it knows. It 

is not the only way for the Government to learn the truth, but, generally speaking, disclosing the results of the company’s internal investigation is one of the best ways. Let’s face it. Searching for hot 

documents in rooms full of paper or on servers filled with computer 

files is much slower than looking through a three-ring binder or a 

CD-ROM identifying the most relevant evidence. 

As a general counsel of a Fortune 500 company recently told me, 

‘‘If I could bring a Justice Department investigation to a close by 

turning over an internal investigation and I did not do it, my board 

would fire me.’’ 

Reality number 5, once a corporation has turned over the internal report and the prosecutor is ready to decide, indict or not indict, the corporation will insist, will demand that its cooperation be 

given full consideration along with other relevant factors in deciding not to indict the company. Thompson memo or no memo, the 

waiving of attorney-client privilege will always be argued by a company in its defense. And why shouldn’t it be? Would it be fair to 

treat a company that did not cooperate, that circled the wagons 

and fought the Government every step of the way, the same as one 

that said to the Government, ‘‘We are on your side, we will help 

you get the truth’’? I am sure if prosecutors took that approach, my 

phone would be ringing off the hook. 

Mr. Chairman, Senator Leahy, three final thoughts. 

First, the attorney-client privilege is an extremely important 

component of our constitutional order and great legal tradition. The 

Justice Department may not and will not do harm to this principle 

of basic fairness. But just as drug-trafficking defendants routinely 

waive their constitutional right to a trial by jury in exchange for 

reduced charges, so, too, a corporation can waive a basic right 

when it is in its interests to do so. 

Second, the waiving of the attorney-client privilege is just one 

part of one factor out of nine factors cited in the Thompson memorandum for consideration in deciding whether to prosecute a company. But such a waiver can make a big difference for the hopes 

and dreams of shareholders who are anxiously waiting for their investments to bounce back. 

And, third, when it comes to waiving attorney-client privilege, we 

rarely have an interest in legal advice or counsel contemporaneous 

with the investigation. Mr. Chairman, we take the Sergeant Joe 

Friday approach—’’Just the facts, ma’am.’’ 

4

The Justice Department stands ready to work with everyone who 

has a suggestion for improving this waiver process. We are currently holding discussions with several interested parties. All we 

seek at the end of the day is the ability under the right circumstances to get the facts as quickly as possible and to fulfill our 

duty to the taxpayers and investors. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. McNulty appears as a submission for the record.] 

Chairman SPECTER. Thank you, Mr. McNulty. 

I turn now to our distinguished Ranking Member, Senator 

Leahy, for his opening statement. 

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. Well, thank you, Mr. Chairman. I appreciate you 

having this hearing. I think it is extremely important. 

The protection of communications between client and lawyer has 

been fundamental to our Nation’s legal justice system since its inception, as Mr. McNulty, of course, and just about everybody else 

in the room knows. The right to counsel has long been recognized 

as essential to ensure fairness and justice and equality under the 

law for all Americans. This administration has taken extraordinary 

steps to investigate and prosecute the press and to intimidate the 

press and critics and attorneys while it has claimed unlimited 

privileges and an extraordinary, unprecedented amount of secrecy 

for itself. 

As a former prosecutor, like the Chairman, I understand all too 

well that our democracy requires a healthy respect for the law and 

that criminal wrongdoing has to be punished, and wrongdoers who 

profit at the expense of ordinary Americans have to be held accountable. That is true for all, including corporate wrongdoers and 

those who violate the public’s trust. 

Following Enron’s collapse in 2001, I authored the criminal provisions in the Public Company Accounting Reform and Investor 

Protection Act that strengthened existing criminal penalties for corporate crime. I have since repeatedly offered stronger criminal penalties and accountability for war profiteering and contractor fraud. 

Those did not go through because the Bush administration blocked 

them. But, historically—apparently one thing we can do is war 

profiteering. That is allowed in the war in Iraq today. 

Historically, the attorney-client privilege has been balanced with 

competing objectives, including the need to ensure cooperation with 

the Government in criminal or regulatory probes. Now, the issue, 

of course, Mr. McNulty, as you have stated, is does the Department 

have this balance right. 

In the wake of the major corporate scandals at Enron, 

WorldCom, and elsewhere, you revised your policy. We have the 

Thompson memorandum, and now we have increased emphasis 

and scrutiny of a corporation’s cooperation with the Government. 

But there is a growing number of critics of the Thompson memorandum, including former Republican Attorneys General. They 

have expressed concern that the Department’s policy is too heavyhanded and that the policy has created a dangerous culture of 

5

waiver in our criminal justice system. Last month, the American 

Bar Association adopted a resolution opposing the Department’s 

policy. Last Friday, the Wall Street Journal editorial board joined 

the criticism of Attorney General Gonzales and the Thompson 

memorandum, noting that the coercive intimidation it represents is 

‘‘more than a PR problem’’ for the administration. 

Now, I am not one who automatically joins Wall Street Journal 

editorials. I think this time they are absolutely right. As I said, I 

am a former prosecutor. If I had taken a position like this when 

I was a prosecutor that, ‘‘Boy, you better cooperate or, wow, we are 

really going to hit you with a lot of charges,’’ the judges on the 

criminal bench in my State would have referred me to the Vermont 

Bar Association for sanctions. And I hope, even with a Federal 

bench that is very, very beholden to this administration, that they 

might consider the same thing. 

Now, I hold no brook for the kind of corporate wrongdoing and 

greed that has robbed a lot of our people. But just as I wanted to 

make sure the people I prosecuted had their rights so that I ended 

up getting a conviction that would be upheld, you ought to do the 

same. And I really cannot see any reason to tell a corporation, 

‘‘Well, you better give up all your rights or you are in real trouble.’’ 

And I hear this from a lot of corporations, this idea of a CEO telling you, ‘‘Well, if I do not just turn everything over and waive my 

rights and then we get in trouble, the board is going to fire me.’’ 

Good Lord. Have we gotten to that point in this country? 

Erosion of the right to counsel undermines the fairness of our 

criminal justice system for all Americans. I am really worried 

about this, and as I said, I hold no brief for the people who have 

broken this law, just as I held no brief for the murderers and rapists and others that I prosecuted. But I also know that we have a 

rule of law in this country, and something I worry that we sometimes forget about. 

Thank you, Mr. Chairman. I will put my whole statement in the 

record. It is a lot stronger than that. 

Chairman SPECTER. Without objection, it will be made a part of 

the record. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

Chairman SPECTER. Mr. McNulty, when you say that the Department of Justice wants to do fundamental fairness, it is really not 

a matter for the Department of Justice to make that determination. 

That is a matter for the courts. You refer to the experience you 

have had as a prosecuting attorney. I made no reference to the experience that I have had. Senator Leahy talks about being a prosecutor. We understand that a prosecutor is a quasi-judicial official, 

but a big part of the prosecutor’s responsibility is as an advocate. 

So it is not for the prosecutor to make the decision as to what is 

fundamental fairness. 

Now, you establish at the outset as your departmental policy 

that the value of a corporation’s cooperation will be determined as 

to whether there will be charges. Well, charges themselves are a 

substantial penalty. That is the reality. We have a presumption of 

innocence in the law, but the man on the street thinks that if an 

individual is charged, it is somewhere between he must be guilty 

6

or he must have done something wrong. But there is a heavy opprobrium attached to a charge. And the right to counsel is just 

very, very fundamental. 

Would you say the President was being uncooperative, Mr. 

McNulty, if the President asserted executive privilege when the 

Conyers Judiciary Committee in the House asked him for materials 

which touch on executive privilege? 

Mr. MCNULTY. No. I am not familiar with when it was asserted 

in that instance, but I would assume that that was not inappropriate. 

Chairman SPECTER. Was the administration, President Bush’s 

administration, uncooperative when they said to Senator Leahy, on 

a long letter he wrote for then-Judge Roberts’s information, that 

they were not going to tell him what Judge Roberts did as an Assistant Solicitor General because it would chill the work of the Solicitor General’s office? 

Mr. MCNULTY. No. 

Chairman SPECTER. Was the Department of Justice being uncooperative when similar requests for Deputy Solicitor General 

Alito’s materials were not turned over? 

Mr. MCNULTY. No. 

Chairman SPECTER. Well, of course not. When you say that corporations want to have investigations completed promptly, you are 

exactly right, but so do individuals. The reality is that investigations drag on and on and on and on. And it may be that many of 

them, if not most of them, have to drag on. But it is a very, very 

heavy burden hanging over any individual to be subject to an investigation. 

Mr. McNulty, I conducted investigations as a D.A. contemporaneously with what the Department of Justice conducted. It was not 

under your watch. It was a long time ago. But Federal prosecutors 

do not deserve any merit badges for promptness, necessarily. But 

delays are very tough on individuals as well as on corporations. 

What is your reaction, Mr. McNulty, to the opinion of Judge 

Kaplan in the Southern District on the KPMG case, saying that 

there was a denial of fundamental due process and there was a denial of the Sixth Amendment right to counsel in that case by the 

Government’s practices and policies? 

Mr. MCNULTY. Well, we are litigating the Kaplan decision, so I 

am going to say just a few things. There is a lot you cannot say 

when it is an ongoing litigation like that. But we have stated that 

we disagree with the judge’s reasoning in that case. The judge essentially concluded that the Thompson memorandum was unconstitutional because it created a pressure on the corporation to cut off 

the attorney’s fees of the defendants. 

We do not believe that is the correct reading of the Thompson 

memo. That case is on appeal now. So we essentially have taken 

that decision up. 

Chairman SPECTER. My time has expired. I yield to Senator 

Leahy. 

Mr. MCNULTY. Mr. Chairman, I will be happy to just keep listening. I just want to make sure that if there was an opportunity to 

respond to some of the things you said, I did not want to—I wanted 

7

to look for an opportunity down the road at some point here to be 

able to respond. 

Chairman SPECTER. You have a further response to make? 

Mr. MCNULTY. You made a number of different points, and I— 

Chairman SPECTER. Take them up and respond. 

Mr. MCNULTY. Okay. I will just say a few key things. 

Chairman SPECTER. Sure. 

Mr. MCNULTY. First of all, with regard to the analogy of the executive privilege issue as it relates to this discussion, I appreciate 

certainly the point that there are- -it is important to respect the 

nature of confidential communications, and in various contexts and 

various places, confidential communications are critical to the way 

in which things operate. We all understand that. But the fact that 

both instances involve the confidentiality of communications to me 

is not as significant as the distinctions between those different 

areas. 

One, that is, the executive branch’s actions, has to do with the 

way in which co-equal branches of Government work together to 

try to deal with these questions of getting information from the executive branch. 

In this case, we are talking about a corporation facing criminal 

prosecution. One of the things lost in a lot of this discussion is this 

issue, the Thompson memorandum—and before that, by the way, 

the Holder memorandum, which has virtually the identical language as the Thompson memo on this subject— 

Chairman SPECTER. Yes, but the prior administration did not establish it as governmental policy. Point that out at the same time, 

Mr. McNulty. If you are going to refer to it, lay it all on the table. 

Mr. MCNULTY. Well, I am— 

Chairman SPECTER. Well, wait a minute. It was optional with 

U.S. Attorneys. 

Mr. MCNULTY. It is optional now with U.S. Attorneys. 

Chairman SPECTER. Excuse me? 

Mr. MCNULTY. It is optional now with U.S. Attorneys. 

Chairman SPECTER. Well, that is not my understanding. 

That is not the way I read your policy. That is not the way everybody else reads your policy. Big difference between what you are 

doing now and what was done under Attorney General Reno. 

Mr. MCNULTY. With great respect to you, sir, I have to disagree 

with that. This was guidance given to prosecutorsChairman SPECTER. Well, are you saying that the Thompson 

memo is not binding on U.S. Attorneys around the country? 

Mr. MCNULTY. No. 

Chairman SPECTER. Because if you are, I think that is good news 

to a lot of U.S. Attorneys. 

Mr. MCNULTY. It is no more binding than any previous guidance 

to U.S. Attorneys as to how to make decisions, which is what— 

Chairman SPECTER. I am not interested in any previous guidance 

to U.S. Attorneys. I want to know flat-out is the Thompson memorandum binding on U.S. Attorneys. 

Mr. MCNULTY. It sets forth the guidance there to exercise when 

making a decision. It is binding as to here are considerations that 

you are take up, but it does not say you are to demand attorneyVerDate 0ct 09 2002 15:12 Mar 28, 2007 Jkt 034117 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34117.TXT SJUD1 PsN: CMORC
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client waiver in a particular situation. Not at all. It is just guidance as to how to make a decision. 

Chairman SPECTER. Well, of course it does not, but it lists it as 

a prime consideration on whether they are going to be charged. 

Mr. MCNULTY. Yes. 

Chairman SPECTER. Well, I take your last answer to mean that 

this is policy which the U.S. Attorneys have to follow. 

Mr. MCNULTY. That is fine. I am not trying to quibble on that 

point, sir. It is just that what I am saying is that it is not changed 

with regard to how we give guidance to prosecutors in the field who 

are trying to work with companies on this question. In the absence 

of this, you would have prosecutors on an individual basis trying 

to decide, Will we prosecute the company or not prosecute the company when we have the evidence to do so? And that is the time this 

comes up. The evidence and the ability to charge is now present. 

The question is: Do it or not do it? What factors should be taken 

into consideration? We give them nine. 

Chairman SPECTER. But that is when you have the evidence, and 

balance in the criminal justice system is to impose the burden of 

proof on the prosecution and to require the prosecution to gather 

the evidence in a context where those who are being investigated 

or charged have the attorney-client privilege as well as other privileges. 

When you talk about the executive privilege between co- equal 

branches, it is true, but the Senate Judiciary on confirmation 

stands in a pretty good position as a co-equal branch. When you 

talk about the power of the Government, it is very, very elevated 

compared to the power of the individual, and that is why they have 

the burden of proof, and that is why you have the privilege against 

self-incrimination, and that is why you have the attorney-client 

privilege, to put a balance in the system. And the concern that I 

have is of the material imbalance. Congress can protect itself with 

the executive branch, but an individual, a corporate employee is 

very different from the corporation. And the corporate employee’s 

interests are very different from the corporation. The corporation 

wants to get the matter closed early for financial reasons. The individual who has the attorney-client privilege and who wants to have 

his counsel fees paid so he can defend himself wants to stay out 

of jail or wants to be treated fairly. 

Do you have some further comments on the opening line of questions? 

Mr. MCNULTY. Thank you, sir. I will stop there. 

Chairman SPECTER. Senator Leahy? 

Senator LEAHY. Well, thank you, Mr. Chairman. You know, I sort 

of hear you dancing all around the question of whether it is mandatory in U.S. Attorneys. There is not a single U.S. Attorney in the 

country who does not think this is the—who does not believe this 

is the policy. They feel this is the policy. They understand this is 

the policy. The Thompson memo, to follow up on what the Chairman was saying, even seems to encourage companies to fire employees under some circumstances to show their cooperation. Good 

Lord. This means you kind of come in with a sledgehammer and 

hope that everybody will run like hell. 

9

Don’t these policies compel corporate employees to waive their 

right against self-incrimination or risk losing their jobs? I mean, it 

is kind of an interesting choices, isn’t it? You either testify or you 

might lose your job. No compulsion there. 

Mr. MCNULTY. Now you are talking about whether or not employees must cooperate with an internal investigation. I am sorry, 

Senator Leahy. I am not sure if I understand— 

Senator LEAHY. The Thompson memo seems to encourage companies to fire employees under certain circumstances to show their cooperation—if they do not show cooperation. 

Mr. MCNULTY. Well, what the Thompson memo says is that one 

of the factors in looking at a company’s conduct at the time of deciding whether to charge it criminally or not is if it has a compliance program. And anyone responsible for drafting a compliance 

program that would pass the straight- face test includes a discipline procedure. How do you handle people who fail to comply 

with an internal investigation? 

Senator LEAHY. Mr. McNulty, you are probably getting into a 

definition of what ‘‘is’’ is. What you are saying, in effect, is you either cooperate and give us everything we want or you are in deep 

trouble. I mean, really, it comes down to that. It comes down to 

that. A corporation, if I was sitting on a board of a corporation, of 

course, I would be worried because I would see the Government 

coming in and saying, ‘‘You better waive your rights, or we are 

really going to get you. Not we might just a little bit get you. If 

you don’t waive your rights, we are really going to get you.’’ And 

don’t you actually end up in a perverse way where a company is 

going to be very concerned about putting in some very specific 

guidelines and monitor those very specific guidelines to make sure 

everybody is behaving themselves, because they are afraid if they 

slip off those guidelines just a little bit, the Federal Government, 

with enormous resources, can play a ‘‘gotcha’’ game. 

Mr. MCNULTY. No, I do not believe that is the intent of this— 

Senator LEAHY. Okay. That is your answer. Now, the KPMG case 

you said is still being litigated. Are you going to appeal Judge 

Kaplan’s decision? 

Mr. MCNULTY. I believe that is what is going on, although I don’t 

know at this moment. I will have to check to see if we have already 

filed. 

Senator LEAHY. Will you check and let us know whether you 

have appealed? But it is your intention— 

Mr. MCNULTY. We have appealed already. 

Senator LEAHY. You have appealed. All right. 

You know, the Coalition to Preserve the Attorney-Client Privilege 

found that 30 percent of in-house respondents and 51 percent of 

outside counsel for companies that have been under investigation 

during the last 5 years said the Government expected waiver of the 

attorney-client privilege in order to engage in bargaining or to be 

eligible to receive more favorable treatment. It gives them the impression that if you refuse to waive the attorney-client privilege, 

which is, after all, the bedrock of our constitutional legal system, 

it assumes that it means the corporate defendant is not cooperating. Is that right? 

10

Mr. MCNULTY. Well, first of all, that is based upon this information that we are requiring or compelling a waiver—I am sorry. I 

am not sure I follow the question. Would you please— 

Senator LEAHY. Let me go to another one. My time is up. But I 

will go back to that in written questions. 

Yesterday was the fifth anniversary of the September 11th attack. We find in a new study that your Department’s prosecutions 

have declined dramatically since September 11th. I will not go back 

to on September 10th when you wanted to—when your Department 

wanted to cut substantially the counterterrorism money but take 

since then. In 2002, right after, Federal prosecutors filed charges 

against 355 defendants in terrorism cases. Now it is 46. Nine out 

of ten terrorism cases do not go anywhere. But even those that you 

do list as terrorism convictions, I remember people in my State getting longer sentences for drunk-driving cases. 

Are we cooking the books a little bit here? 

Mr. MCNULTY. No, sir. 

Senator LEAHY. Well, then why—I mean, I understand we do not 

catch Osama bin Laden. That is not your Department. But if we 

really have this great terrorist threat, why are people getting practically no penalties? In most States, traffic court or stealing a couple TV sets get higher penalties. What is going on? Is this just to 

make it look like we are doing something without—and hoping that 

nobody will look at nothing ever happened? 

Mr. MCNULTY. I am not sure I understand what you are talking 

about. My sense is that the penalties have been extremely high. In 

fact, we have taken some criticism— 

Senator LEAHY. What is the lowest penalty on a terrorism case 

that you have seen? 

Mr. MCNULTY. I could not tell you off the top of my head, but 

I know I have seen— 

Senator LEAHY. Would it surprise you if it was a matter of 

months? 

Mr. MCNULTY. It would depend upon the case itself and what 

was the subject of the conviction and who the judge was that sentenced and what was the jurisdiction— 

Senator LEAHY. Well, who the judge was, a lot of these cases it 

is a plea bargain where the sentence is exactly what you, the Department of Justice, recommended. Many times these are sentences 

that are similar to what might be recommended in a misdemeanor 

case. I mean, either you are being tough on terrorism or you are 

trying to get numbers to say you have convictions, but they are 

pretty minor cases. 

Mr. MCNULTY. Can I answer the question? 

Senator LEAHY. Whatever you like, Mr. McNulty. You are the 

Deputy Attorney General. 

Mr. MCNULTY. We have seen sentences that go from life in prison to much lower sentences. It all depends upon the facts of the 

case and what— 

Senator LEAHY. How many life imprisonment? 

Mr. MCNULTY. I do not know off the top of my head. 

Senator LEAHY. One? Two? 

Mr. MCNULTY. Many more than one or two. Just Moussaoui and 

Richard Reid alone would be two right there. 

11

Senator LEAHY. Okay. Three? Four? 

Mr. MCNULTY. In Virginia, I can call on that memory much easier. We had a life sentence for Al-Tamimi. We had a 60-year sentence for Abu Ali. We had recently a 25-year sentence for another 

Virginia jihad case. The Virginia jihad cases, 11 convictions probably averaged somewhere from 15 years to life or 75 years, somewhere in that category. I can think of cases— 

Senator LEAHY. What would be the median sentence? 

Mr. MCNULTY. I am not familiar with any study that has looked 

at the sentences of— 

Senator LEAHY. Take a look at the Track study. 

Mr. MCNULTY. That study recently reported on the question of 

cases brought by U.S. Attorney’s Offices, according to the coding 

numbers, the way in which U.S. Attorney’s Offices identified terrorism cases at the time they charged them, which, by the way, is 

a different way for the Department of Justice to count or to keep 

track of terrorism cases. We also— 

Senator LEAHY. In other words, if they are really successful, it 

is your case. If they don’t, it is their case. Is that it? 

Mr. MCNULTY. No. At the time a case is brought— 

Senator LEAHY. Just thought I would ask. 

Mr. MCNULTY. The case at the time it was brought, the Assistant 

United States Attorney logs it in and gives it a code number, and 

they have to do the best they can at that. Sometimes when they 

bring a case, they think it is going to turn out a certain way, and 

they coded it one way. But it does not always turn out that way. 

Senator LEAHY. Were a number of the cases after September 

11th—a number of the cases pending that had been coded one way 

before September 11th retrospectively coded a different way? 

Mr. MCNULTY. Nothing has been retrospectively coded. But after 

September 11th, Assistant United States Attorneys had a new category to pay special attention to when it came to coding. 

Senator LEAHY. But did that mean that they coded some of the 

cases after September 11th that had already been pending with different numbers? 

Mr. MCNULTY. No, I am not familiar with doing that. 

Senator LEAHY. There has never been a case like that? 

Mr. MCNULTY. I am not familiar with that, sir. I have not heard 

that. 

Senator LEAHY. Okay. Your answer? 

Mr. MCNULTY. I think we are finished. 

Chairman SPECTER. Thank you, Senator Leahy. 

Mr. McNulty, in your prepared statement you have listed a number of cases where the Government prosecuted and got jail sentences, and I congratulate you on those cases. I think there have 

been many very important cases which you have brought and have 

gotten convictions and have gotten jail sentences, and the Department is to be commended on that. And certainly your own record 

as United States Attorney was an impeccable one, and your nomination to be Deputy Attorney General was greeted very favorably 

in all quarters, including on this Committee. 

Senator LEAHY. I supported it. 

Chairman SPECTER. I would make just a couple of comments 

about the proceedings, and that is, the heavily publicized fines 

12

which we see on these conferences from the Department of Justice 

I find very unimpressive. I think the fines are not really very 

meaningful as a matter of deterrence or as a matter of punishment. 

But the jail sentences are. They are really very, very meaningful. 

And I would urge you to focus on that in the disposition of cases, 

and not to settle the cases but to carry them through, if necessary, 

in order to get the appropriate judgment of sentence at the very 

end. 

I am not suggesting at all being easy on corporate America. This 

Committee is now considering legislation which would make it a 

criminal offense for a corporate executive knowingly to put into 

interstate commerce a defective product, knowing and willfully, 

with results in death or serious bodily injury. And the illustrative 

case on that is the Pinto case where the evidence showed that Ford 

put the gas tank in the back because it saved a few dollars as opposed to putting it in some other location, and a calculation was 

made as to how many damage cases they had and what the costs 

would be to the corporation. And that definition constitutes malice 

under common law, which would support prosecution for murder in 

the second degree. 

In the Ford-Firestone case, where the evidence showed that both 

Ford and Firestone knew these defective tires were on the cars, resulting in many deaths and many, many serious injuries, we legislated to impose criminal penalties. 

And this idea of imposition of criminal responsibility has been 

objected to very vociferously by the corporate community. And I can 

understand that. But I would not consider trying to structure a 

prosecution without the traditional burden of proof and attorneyclient privilege and privilege against self-incrimination. 

So the suggestion is not being made to you that you be soft on 

corporate America, but that you respect the traditional rights. And 

as I read this policy on the consideration of the ‘‘value of a corporation’s cooperation’’ in charging, I think it is coercive, may even rise 

to the level of being a bludgeon. And when I referred to the individuals who want to avoid going to jail to have their defense fees paid, 

it is not only going to jail, they just want an opportunity to have 

fair treatment on the adjudication to show they were not, in fact, 

guilty. 

I would ask you to reconsider your policy as to whether the U.S. 

Attorneys are bound, if there is some leeway there to go back to 

the Holder standard, or what I understand to be the Holder standard, where the memorandum had language similar to the memorandum authored by Mr. Thompson but was not binding on the 

U.S. Attorneys. They could consider it or not. Or if your current 

policy is not binding on the U.S. Attorneys, to make that specific. 

Mr. MCNULTY. Well, Mr. Chairman, I will do that. That is the 

thing I pledged to you this morning, is that we are looking at this 

and will consider all possibilities. 

Look, I have got the Chairman, the Ranking Member upset. I 

have got former DOJ officials writing letters. We have got everybody complaining. The easiest thing for me to do today would be 

to come here and say we are just going to go ahead and change this 

policy and make everybody happy. But I would not be doing the 

right thing as I sit here and I think it through as well as I possibly 

13

can as a public servant. I really believe that the perception that is 

in existence here concerning what we are doing and how this works 

is different from the reality. And if I did not think that, I would 

not come here and say it. 

And I have spent many hours trying to study this and understand it. I did this when I was a U.S. Attorney. I had the conversations with corporate counsel. I negotiated attorney-client privilege 

waivers. I experienced that firsthand. I have talked to many, many 

U.S. Attorneys about this. I chaired the Attorney General’s Advisory Committee when the McCallum memo went out in order to coordinate the views on this subject. And I really do not see this as 

the kind of coercive practice that is being described by the groups. 

This is one factor to consider when the corporation is facing criminal prosecution. It is not an investigation issue. It is a charging 

issue, because it has already been determined that the violations 

of criminal law have occurred. Now the question is: Do you charge 

the company or not charge the company? 

And we tell the prosecutors, Look at nine factors. As U.S. Attorney, I did not even consider this to be one of the big ones. One of 

the big ones is, How pervasive is the criminal conduct? Did you try 

to stop it? Did you have an effective compliance effort ahead of 

time to try to keep this from occurring? How far does it go up the 

ladder? Was the CEO involved in it? Those are the questions that 

you ask when you are trying to decide to charge the company or 

not. 

Now, if they have cooperated, which they almost always do because they say, look, we are an independent board of directors with 

a fiduciary duty to get to the wrongdoing and make sure that we 

clean this up; we are on your side, how can we help put this behind 

us? That is when the issue of well, do you know what is going on? 

Do you have a report that you can hand us that says this is where 

the wrongdoing occurred, we have investigated it, and we are prepared to assist you and find out the facts. 

If they are willing to do that, which any prosecutor in his right 

mind would say, yes, that would be very helpful to us, should they 

not get credit for that when it comes to charging the company 

criminally or not charging the company? That is all we are telling 

the U.S. Attorney, is consider this. The text of the Thompson memo 

language itself says this is one factor to be considered when making this decision. And that is what this attorney-client waiver factor amounts to. We are not trying to coerce anybody into doing it. 

We are giving them an option of providing us information if they 

will try to persuade us not to charge them criminally. 

Chairman SPECTER. Just a couple more comments, and I will 

yield again to Senator Leahy. Mr. McNulty, I am not upset. I regard this as a conversation among three lawyers talking about 

what ought to be done here as a matter of public policy, three lawyers who have had some experience in the field and want to come 

to a proper conclusion. 

Chief Justice Roberts said that when he argued cases before the 

Supreme Court, it was a conversation among equals. I was enormously impressed with his confidence and thought that he could be 

Chief Justice with that attitude when he was a lawyer. 

[Laughter.] 

14

Chairman SPECTER. This is just a discussion among three lawyers. But I do not think somebody ought to get credit for waiving 

a constitutional right or ought to get credit—or ought to get a demerit or a deficit for asserting a constitutional right. I think the 

response of the prosecutor ought to be exactly neutral. If someone 

asserts a constitutional right, that is ordained by a power of the 

Constitution, which in and of itself has enormous magnitude and 

a lot of experience in coming to that privilege and a lot of experience in applying that privilege. Stated differently, privilege against 

self-incrimination is a lot smarter than Arlen Specter. I am sure 

of that. 

So I would not give anybody credit for waiving it, and I would 

not consider it a negative factor if it was asserted. 

Mr. MCNULTY. But thousands of criminals today, as we sit here, 

will get that very benefit for waiving a constitutional right. Thousands of criminals today in the United States will stand before a 

court at a plea bargaining hearing and say—the court will ask in 

a colloquy, ‘‘Do you understand that you are waiving your right to 

a trial by jury, the right of the Government to prove its case beyond a reasonable doubt’’—the right, the right, the right. And the 

defendant will say, ‘‘Yes, Your Honor. Yes, Your Honor, I do.’’ And 

why is he doing that? He is doing that because the Government is 

going to hold him accountable for one of five counts or two of five 

counts and drop three counts, and he prefers that than to go to 

trial and risk conviction on all five counts. That is— 

Chairman SPECTER. I think he is doing it because he is guilty. 

Mr. MCNULTY. Well, of course. 

Chairman SPECTER. That is why he is saying, ‘‘I plead guilty,’’ 

and when he pleads guilty, he gives up a lot of rights. And I think 

he has pleaded guilty because he thinks if he does not, it is going 

to be proved anyway. But if he could defend himself and if he could 

go through a proceeding where the conclusion is not guilty, which 

is different than innocent, because the Government has not met its 

burden of proof, and he has counsel and someone to pay for the 

counsel—we sometimes lose sight of how expensive lawyers are, 

but when I practiced law, my fees were so high that I could not 

afford to hire a lawyer who charged those fees. Seriously. I did not 

earn enough as a lawyer to pay someone the hourly rate that I had 

to charge other people. 

So I think when he pleads guilty, he does so because he is guilty, 

and he thinks if he does not, it is going to be proved. And, of 

course, it is fair on sentencing. And I think the cooperation of an 

individual along the way is fair for the judge to consider on sentencing, but not as to the charge by the prosecutor. 

Senator Leahy? 

Senator LEAHY. Well, Mr. McNulty, like the Chairman, I have respect for you. I voted for you both as U.S. Attorney and Deputy Attorney General. I appreciate your comment that you are concerned 

that you have upset the Chairman and myself. You do not have to 

worry about upsetting me, although I must note that you are probably the first person in 6 years in this administration that has 

given a darn whether he upset me or not. 

[Laughter.] 

15

Senator LEAHY. And I keep a daily journal. I intend to mark this 

in my journal as sort of a red banner day, unique, the first time 

anybody in this administration gave a darn. I will probably put it 

differently in the journal that they actually upset me. 

But you and I should probably discuss this further, and I will not 

take the time. We have both gone over our time here, but I cannot 

tell you how concerned I am. It is not just a plea bargain. Heck, 

I have been there with plea bargains, both as a defense attorney 

and as a prosecutor. But there are lot of things that go on leading 

up to that time, and not the least of which is the Government has 

to prove they have a pretty good case, and the person says, ‘‘Okay, 

you got me.’’ Now, let’s figure out what we do about it. 

And then there is a certain advantage to both sides in avoiding 

a trial at that time, especially in the kind of trials you are talking 

about, where the Government could be spending millions of dollars 

in a trial; and the other side of that, if they are guilty, let’s work 

it out. 

But what has happened, you have corporations and somebody 

says, Look, I cannot keep these people on salary because while, in 

effect, not the case of the Government having to prove they are 

guilty, but they are going to have to prove beyond a reasonable 

doubt that they are innocent, we are just going to cut them loose. 

We are going to cut them loose. They are going to suddenly be 

without a salary. They are suddenly going to be there where they 

really can be coerced into a plea. And you know yourself when you 

are talking about some of these things of conspiracy or obstruction 

of justice, you get into kind of a gray area where, if you know that 

you are going to have to hire very expensive lawyers to prove it, 

you may well want to look for a plea. 

What I am worried about is that—and I hold no brief for it, 

whether it is corporate criminals or the person who puts on a ski 

mask and points a gun in your face. But I do worry that if the Government has made a mistake in bringing a case, they can ruin a 

whole lot of people’s lives, and you can have a whole lot of people 

cut loose. 

I look at the judge’s ruling in the KPMG case and others, and 

as I said, I found the Wall Street Journal editorial rather compelling. I am really worried about this. I am really worried that we 

take this attitude that the Government is always right, and if you 

have been charged, you must be guilty. And I know no matter how 

much you talk about the presumption of innocence, I know every 

time I walked into a courtroom as a prosecutor, the jury would always say of course they are presumed innocent, and they are thinking, ‘‘Yeah, right.’’ You already have an enormous number of arrows in your quiver. And I cannot imagine a U.S. Attorney who 

does not consider this mandatory. 

So maybe, Mr. McNulty, you and I should sit down and chat 

about this some more. Your answers are not going to change beyond what you have given here today, but I am really, really concerned about it. I think the fact that you have a number of very 

conservative Republican Attorneys General who have raised a 

question about this, others across the political spectrum—across 

the political spectrum have raised a question about it. I would look 

at it very carefully. But maybe you and I might chat. 

16

Mr. MCNULTY. I am happy to do that and address as best I can 

the worries that you do have here. We want to get it right. We do 

not want to be doing something that is inappropriate or unreasonable. But we want to do our job, and that is the question here. 

We are not interested, just to clarify, in a lot of what would fall 

into attorney communications with their clients, the advice they 

are giving them in terms of the ongoing investigation. That is not 

sought. That is discouraged in the memo. And occasionally—rare, 

rare circumstance could you have an investigation involving perhaps a crime itself being committed in that conversation, but that 

would be a very unusual situation. 

So we are not interested in a lot of what you might be thinking 

would be communications that should definitely not be touched. We 

are talking really here about the contents of an internal investigation. That is the very large percentage of what this conversation is 

about today—What happened? And the company has a fiduciary 

duty, an incentive to find that out fast. And, Senator Leahy, when 

it comes to finding that out fast, yes, they go to employees and they 

begin to question them, and they have what are called Upjohn 

warnings, and they tell them right up front, ‘‘Here is the deal. We 

do not represent you. We represent the company. The attorney-client privilege belongs to the corporation, not to any individual. And 

you are free to answer these questions or not, but we do have an 

internal policy at this corporation’’—as all good companies do. I 

imagine if you went and looked at Fortune 500 companies, you 

might find 500 compliance plans just like this, which say that 

when we are doing an investigation, as a condition of your employment you need to speak truthfully to our folks. 

And that will exist whether the Thompson memo is in place or 

not. If today I walked out of the room and said to you, ‘‘We will 

repeal the Thompson memo,’’ tomorrow corporations would still go 

to people to get them to talk. They would still be compelled to cooperate. Corporations would still have counsel calling the Government and saying, ‘‘How can we help resolve this case?’’ And prosecutors would still be faced with the question. Now that you have 

helped me, what should we do with you? What should we do with 

the company itself? Do we charge or not charge under respondeat 

superior? And the company would say, ‘‘Well, can I write you a letter laying out the arguments why we should not be charged?’’ 

Senator LEAHY. Mr. McNulty, I am aware of this. You know, I 

had—it has been years since I was a prosecutor, but I have a lot 

of friends in the corporate world. I am well aware of this. I have 

a lot of friends in the prosecution world and the defense bar. I am 

well aware of this. You do not have to—and I am sure the Chairman is, too. You do not have to give us Plea Bargaining 101. But 

the fact is—and you must be aware—that the amount of concern 

that has been raised by the ABA, that has been raised by former 

Attorneys General, that has been raised by both the business community, the non-business community, maybe—maybe—it may not 

all be as serendipitous as you seem to indicate. That is what I am 

saying. 

I understand what you say. A lot of what you say I do not disagree with. But in my years here, in six different administrations, 

I have never seen such concern, especially concern toward an adVerDate 0ct 09 2002 15:12 Mar 28, 2007 Jkt 034117 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34117.TXT SJUD1 PsN: CMORC
17

ministration that has been very, very, I think in many ways, lenient on the business community. I am thinking of the war profiteering and things like that, where your administration blocked efforts in that regard. 

But what I am saying when you see the number of people, Republicans or Democrats, who have raised concern about this and 

the very prestigious people raising concerns about it, I think it is 

worth taking a second look. I really do. 

Chairman SPECTER. We have honestly taken a lot more time up 

in our discussion here, and we have done so because there are so 

many items on the Senate agenda that others on the Committee 

could not be here. But we have also done so because I think your 

U.S. Attorneys may be interested in the dialogue and may have 

some effect on their thinking and the way they put the matters 

into operation. So it is always useful, and we do not have a chance 

to dialogue with you often publicly, Mr. Deputy Attorney General. 

So we utilized the time to keep you here for an hour, but I think 

to a good purpose. 

It is nice sometimes when only Senator Leahy and I are here so 

we have a little more time for a discussion and do not adhere so 

strictly to the time limits which we customarily do. 

Senator LEAHY. I can tell Mr. McNulty is delighted that we had 

all that extra time. 

[Laughter.] 

Chairman SPECTER. Thank you very much, Mr. McNulty. 

Mr. MCNULTY. Thank you, Mr. Chairman. Thank you, Senator 

Leahy. 

Chairman SPECTER. We turn now to our distinguished second 

panel: former Attorney General Edwin Meese; President of the U.S. 

Chamber of Commerce, Tom Donohue; President Karen Mathis of 

the American Bar Association; Andrew Weissmann, Esquire, of 

Jenner & Block; and Mark Sheppard, Esquire, from Sprague & 

Sprague. 

Our lead witness is Hon. Edwin Meese, who is the Ronald 

Reagan Distinguished Fellow in Public Policy and Chairman of the 

Center for Legal and Judicial Studies at the Heritage Foundation. 

Mr. Meese was at Governor Reagan’s right hand as his chief of 

staff, instrumental in Governor Reagan’s election to the Presidency, 

served as domestic counselor in the first term of President Reagan, 

was Attorney General in the second term. He sat at this table in 

1985 for his confirmation hearings, and I personally had the opportunity to work with him both as domestic counselor in structuring 

the armed career criminal bill and in his excellent work as Attorney General from 1985 through the end of President Reagan’s second term. 

We appreciate your taking the time to join us, Mr. Meese, and 

we look forward to your testimony. 

18

STATEMENT OF EDWIN MEESE III, FORMER ATTORNEY GENERAL, RONALD REAGAN DISTINGUISHED FELLOW IN PUBLIC POLICY, AND CHAIRMAN, CENTER FOR LEGAL AND JUDICIAL STUDIES, THE HERITAGE FOUNDATION, WASHINGTON, D.C. 

Mr. MEESE. Thank you, Mr. Chairman. As you point out, I am 

an official of the Heritage Foundation. For the record, may it be 

noted that the Heritage Foundation takes no Government money, 

nor does contract work, and is a nonpartisan public policy research 

and education institution here in Washington, D.C. 

Let me also say that I have submitted written testimony, which 

I ask be made part of the record, and I will summarize it. 

Chairman SPECTER. Without objection, it will be made a part of 

the record, as will all the written statements. 

Mr. MEESE. Mr. Chairman, I have spent almost 48 years of my 

professional career, most of that time involved in one or another 

with law enforcement. I have been a career prosecutor for many 

years. I have educated prosecutors, and I have directed prosecutors. And I say that to provide some perspective as to my testimony 

this morning. 

First of all, let me say that I have great respect for Deputy Attorney General McNulty, who just testified, as well as for Robert 

McCallum, who was the author of a revised version of the so-called 

Thompson memorandum, both of whom are men of great integrity 

and great professionalism and ethical conduct. I must point out, as 

I think has already been referred to, however, by the Committee, 

that there are literally thousands of Assistant United States Attorneys throughout the country, and it is important that they receive 

the proper guidance in terms of the application of constitutional 

rights. And so I commend the Committee for convening this hearing and, interestingly enough, having it chaired and having the 

Ranking Member be former prosecutors themselves. 

I believe that the abrogation of the attorney-client privilege in 

any form would be a threat to constitutional rights, would be bad 

policy, unwise practice, and would be counterproductive to both 

compliance with the law and with just criminal proceedings. Let 

me mention four reasons why I believe that to be true. 

First of all, the attorney-client privilege is most needed, I believe, 

in corporate investigations and corporate prosecutions. In an age of 

overcriminalization, particularly in regard to business conduct, 

there is a real question of whether a certain course of conduct is 

or is not a violation of law. Likewise, there is often a dispute over 

whether a specific action should be a crime in any event. And so 

as Senator Leahy said, these type of cases involved often a gray 

area. And so for that reason, effective legal representation and 

legal counsel is extremely critical. 

Secondly, I believe that abrogating the attorney-client privilege is 

counterproductive to the compliance with the law. We want corporations to get the best legal advice. We want them to conduct investigations where there is whistleblower indications or other reasons to believe that there is a possibility of improper conduct taking place. And so I think it would be unjust then to have the results of their seeking legal advice and conducting an investigation 

19

in-house to then, in order to ensure compliance, have that turned 

around and used as evidence against them. 

Thirdly, I believe it would be wrong for the Government to have 

the power to coerce business firms into not providing legal counsel 

or not continuing the employment of employees who they believe to 

be innocent of criminal activity. 

And, fourth, I think that if you abrogate the attorney-client privilege, you encourage corporate officials to keep information from 

their counsel, which, both from the standpoint of good lawyering as 

well as the standpoint of compliance with the law, would be necessary. 

The remedy I suggest—and it is included in more detail in my 

written testimony—is, first of all, let me point out I think the work 

of Robert McCallum and the memo that he issued in 2005 is a significant reform. But I also believe it does not go far enough. In that 

regard, I would suggest that the memorandum be amended to 

eliminate any reference to waiver of attorney-client privilege or 

work product protections in the context of determining whether to 

indict a business organization. In the same manner and in the 

same context, I think that all references in the memorandum to a 

company’s payment of its employees’ legal fees or continuing their 

employment should be eliminated. 

Secondly, I think that the written policies should explicitly state 

that requests for waiver will not be approved except in exceptional 

circumstances, and exceptional circumstances should generally be 

limited to those that would bring into operation what is well established as the crime fraud exception to the attorney-client privilege. 

Third, I would suggest that in the meantime, prior to those reforms, that the Justice Department should make available to the 

public specific uniform national policies and procedures governing 

waive requests and that this become a national standard. 

And, finally, in order to promote the responsible use of waiver requests, I believe the Justice Department should collect and publish 

statistics on how often waiver is requested, how often business organizations agree to those requests, and how often organizations 

waive even apart from any requests by prosecutors. 

I think that these suggestions would enable the public generally 

as well as the Congress to understand more about how this particular problem is being handled by the Department. 

Thank you. 

[The prepared statement of Mr. Meese appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Meese. 

We now turn to the President and CEO of the U.S. Chamber of 

Commerce, Thomas Donohue. Mr. Donohue established in the 

Chamber the Institute for Legal Reform. He serves on the Product’s Council for the 21st Century Workforce and the President’s 

Advisory Committee for Trade Policy. He has his bachelor’s degree 

from St. John’s University and a master’s from Adelphi. 

Thank you for coming in today, Mr. Donohue, and the floor is 

yours. 

20

STATEMENT OF THOMAS J. DONOHUE, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, U.S. CHAMBER OF COMMERCE, WASHINGTON, D.C. 

Mr. DONOHUE. Thank you, Mr. Chairman, and a special thanks 

to you and Senator Leahy and others for organizing this hearing. 

And thank you for saying a bit about my background. You all know 

that I am the one person here who is not a lawyer, but spend more 

time talking to corporate leaders than most. 

I am here this morning on behalf of the Chamber, and I am also 

testifying on behalf of the Coalition to Preserve the Attorney-Client 

Privilege, which includes most of the legal and business associations in this country. 

I am here to ask the Committee, either through oversight of the 

Department of Justice or by enacting legislation, to invalidate provisions of the DOJ’s Thompson memorandum and similar policies 

at other Federal agencies, like the SEC, that prevent executives 

and employees from freely, candidly, and confidentially consulting 

their attorneys. We want you to help fix this problem. 

While the intention of the former Deputy Attorney General Larry 

Thompson—who, by the way, now serves on our board of directors—to crack down on corporate wrongdoing was laudable and appropriate, the policies set forth in the Thompson memorandum violate fundamental constitutional and long-recognized rights in this 

country in their implementation by U.S. Attorneys and their colleagues around the country. 

They obstruct—rather than facilitate—corporate investigations, 

and they were developed—and implemented— without the involvement of Congress or the judiciary. 

This would perhaps be just another classic case of a Federal 

agency overstepping its bounds if the consequences were not so profound. 

The attorney-client privilege is a cornerstone of America’s judicial system. This privilege even predates the Constitution, as you 

have indicated. 

The Thompson memorandum violates this right by requiring 

companies to waive their privilege in order to be seen as fully cooperative with Federal investigators. This has effectively served notice to the business community, and to the attorneys that represent 

them, that if you are being investigated by the Department and 

you want to stay in business, you better waive your attorney-client 

privilege. 

A company that refuses to waive its privileges risks being labeled 

as ‘‘uncooperative,’’ which all but guarantees that they will not get 

a favorable settlement. The ‘‘uncooperative’’ label severely damages 

a company’s brand, its shareholder value, its relationship with suppliers and customers, and its very ability to survive. 

Being labeled ‘‘uncooperative’’ also drastically increases the likelihood that a company will be indicted, and one need only look to 

the case of Arthur Andersen to see what happens to a business 

that faced the death blow— notwithstanding the fact that the Supreme Court found later on that it was all handled badly. 

Once indicted, a company is unlikely to survive even defending 

itself in a trial or make the outcome of that trial relevant. Keep 

21

this fact in mind the next time you hear a Justice official use the 

phrase ‘‘voluntary waiver.’’ 

The enforcement agencies argue that waiver of attorney-client 

privilege is necessary for improving compliance and conducting effective and thorough investigations. 

The opposite may be true. An uncertain or unprotected attorneyclient privilege actually diminishes compliance with the law. 

If company employees responsible for compliance with complicated statutes and regulations know that their conversations 

with attorneys are not protected, many will simply choose not to 

talk to their attorneys. 

The result is that the company may fall out of compliance—not 

intentionally—but because of a lack of communication and trust between the company’s employees and its attorneys. Similarly, during 

an investigation, if employees suspect that anything they say to 

their attorneys can be used against them, they won’t say much at 

all. 

That means that both the company and the Government will be 

unable to find out what went wrong, to punish wrongdoers, and to 

correct the company’s compliance system. 

And there is one other major consequence. Once the privilege is 

waived, third-party private plaintiff lawyers can gain access to attorney-client conversations and use them to sue the company or obtain massive settlements. 

Despite our coalition’s repeated attempts to work with the Justice Department to remedy these problems, Justice has refused to 

acknowledge the problem or has argued that the attorney-client 

privilege waiver is only very rarely formally requested in an investigation. However, to debate the frequency of ‘‘formal’’ waiver requests or ‘‘voluntary waivers’’ is to engage in a senseless game of 

semantics. 

As the CEO of the country’s largest business association and as 

a member of three public company boards, I know how the game 

is played by prosecutors. As long as the Department of Justice exercises policies that threaten companies with indictment if they do 

not waive their privilege willingly, whether in the front line formal 

request or not. 

Efforts to reform the Thompson memorandum have been ineffective. Last year, Associate Attorney General McCallum put out another memo, but what his memo said, Mr. Chairman, is 93 U.S. Attorneys, using the Thompson memorandum, which I also read and 

we read as compelling, they can put together their own interpretation of that policy. I am not sure that is a great idea, as the former 

Attorney General indicated. 

I will end now by saying it does nothing to change the internal 

policies that penalize companies when the Justice Department and 

the SEC comes to visit. 

What perhaps is most disturbing, as I wrap up here, is that the 

Thompson memorandum was developed without any input of the 

gentlemen sitting here or your colleagues or without any input of 

the courts. 

Compromise reforms or half-baked ideas for softening the memo 

are not going to fix this. I call on the Congress and your Committee 

to use your influence—and you happen also to have a very imporVerDate 0ct 09 2002 15:12 Mar 28, 2007 Jkt 034117 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34117.TXT SJUD1 PsN: CMORC
22

tant seat on the Appropriations Committee—to get a little more attention to this matter. You know, the coalition got a letter back 

from the Justice Department and it said, well, they were not going 

to do anything about this because the Congress told them to get 

real tough on corporate crime. If we take away the rights of protection from corporations and corporate officials, when do we take it 

away from Congressmen and religious leaders and individual citizens? And that is what we are here about, Mr. Chairman. 

Thank you very much. 

[The prepared statement of Mr. Donohue appears as a submission for the record.] 

Chairman SPECTER. Thank you, Mr. Donohue. 

Our next witness is Ms. Karen Mathis, President of the American Bar Association; been active with the ABA for more than 30 

years, member of the ABA Board; bachelor’s degree from the University of Denver, law degree from the University of Colorado. 

Thank you for coming in today, Ms. Mathis, and we look forward 

to your testimony. 

STATEMENT OF KAREN J. MATHIS, PRESIDENT, AMERICAN 

BAR ASSOCIATION, CHICAGO, ILLINOIS 

Ms. MATHIS. Thank you. Good morning, Chairman and Ranking 

Member. Thank you so much for allowing me to be here to testify 

with you. As you indicated, I am the President of the American Bar 

Association, and I am a practicing lawyer in Denver, Colorado. 

Chairman SPECTER. Ms. Mathis, is your button on for the microphone? 

Ms. MATHIS. Thank you. Can you hear me now, Senator? And 

were you able to hear me earlier? 

Chairman SPECTER. Yes. Go ahead. 

Ms. MATHIS. I am here today on behalf of the American Bar Association and its more than 410,000 members. The American Bar 

Association strongly supports the attorney-client privilege and the 

work product doctrine. We are concerned about the provisions of 

the Department of Justice’s Thompson memorandum and related 

Federal governmental policies that have seriously eroded these fundamental rights. 

We are working in close cooperation with a broad coalition which 

includes legal and business leaders, ranging from the U.S. Chamber of Commerce to the American Civil Liberties Union, in an effort 

to reverse these governmental waiver policies. We are concerned 

about the separate provisions of the Thompson memorandum that 

erode employees’ constitutional and other legal rights, including 

the right to effective legal counsel. 

The Justice Department policy outlined in the 2003 Thompson 

memorandum erodes the attorney-client privilege and the related 

work product doctrine by requiring companies to waive these protections in most cases in order to receive cooperation credit during 

investigations. 

The ABA is concerned that the Department’s waiver policy has 

caused a number of profoundly negative effects. 

First, it has resulted in the routinely compelled waiver of attorney-client privilege and work product protections. The policy states 

that the waiver is not mandatory and should not be required in 

23

every situation. However, most prosecutors regularly require companies to waive in return for cooperation credit. There is a growing 

culture of waiver, and it was confirmed by a recent survey of over 

1,200 corporate counsel, which was conducted by the Association of 

Corporate Counsel, the National Association of Criminal Defense 

Lawyers, and the American Bar Association. 

Second, the policy seriously weakens the attorney-client privilege 

and work product doctrine. It discourages companies from consulting with their lawyers, and it impedes lawyers’ ability to effectively counsel compliance with the law. 

Third, the policy undermines companies’ internal compliance programs by discouraging them from conducting internal investigations designed to quickly detect and remedy misconduct. 

For these reasons, the ABA believes that the Department’s waiver policy undermines rather than enhances compliance with the 

law. 

In an effort to persuade the Department to reconsider and revise 

its policies, the ABA sent a letter to Attorney General Gonzales in 

May recommending specific revisions, and we have included that in 

our written testimony. In its July response letter, the Department 

failed to address many of the specific concerns raised and simply 

restated the existing policy. We have included that in our submission. 

Last week, a group of ten prominent former senior Justice Department officials from both parties, as the Senators have indicated, sent a letter to General Gonzales and raised many of the 

same concerns. This remarkable letter came from the people who 

ran the Department, and their widespread concerns should be of 

concern and interest to the Senators. 

The ABA urges this Committee, exercising its oversight judgment and authority, to send a strong message to the Department 

that the Thompson memorandum is improperly undermining attorney-client privilege and work product protections, and it must be 

changed to protect these fundamental rights. 

This memorandum also contains language that violates employees’ legal rights by pressuring their employers to take certain punitive actions against them during investigations. In particular, it instructs prosecutors to deny cooperation credit to companies that assist or support their so-called culpable employees or agents in several ways: by paying for their legal counsel, by participating in a 

joint defense or information-sharing agreement, by sharing relevant information with the employees, or by declining to fire or 

sanction them for exercising their Fifth Amendment rights. 

The ABA strongly opposes these provisions. By forcing companies 

to conclude that their employees are culpable, long before guilt has 

been proven or assessed, the policy reverses the presumption of innocence principle. 

The ABA urges the Committee to encourage the Justice Department to eliminate these employee-related provisions from the 

Thompson memorandum, and we believe that this change and the 

other reforms we have discussed earlier in this testimony would 

strike a proper balance between effective law enforcement and the 

preservation of essential attorney-client, work product, and employee legal protections. 

24

I would like to thank the Committee, the Chairman, and the 

Ranking Member on behalf of the ABA for allowing us to present 

this testimony and refer you to our more complete written testimony. 

Thank you, Senators. 

[The prepared statement of Ms. Mathis appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Ms. Mathis. 

Our next witness is Mr. Andrew Weissmann, partner of Jenner 

& Block in New York. He had been in the Department of Justice 

and was the prosecutor of more than 30 individuals relating to the 

Enron Task Force, where he was the Enron Task Force Director. 

He is currently actively engaged in criminal defense work, has a 

bachelor’s degree from Princeton and a law degree from Columbia. 

Thank you for coming in today, Mr. Weissmann, and we look forward to your testimony. 

STATEMENT OF ANDREW WEISSMANN, PARTNER, JENNER & 

BLOCK, LLP, NEW YORK, NEW YORK 

Mr. WEISSMANN. Good morning, Chairman Specter and Ranking 

Member Leahy. I would like to make two points regarding the 

Thompson memorandum. 

First, there have been and there still are wide differences across 

the country regarding when and how to seek a waiver of the attorney-client privilege in white-collar investigations. The Thompson 

memorandum gives a green light to Federal prosecutors to seek 

waivers of the attorney-client privilege. But it offers no guidance 

about when it is appropriate to do so. The considerable variances 

in implementation of the Thompson memorandum often subject 

corporations, which are national in scope, to the vagaries and 

unreviewed decisions of individual prosecutors. Thus, although the 

theory of the Thompson memorandum is a good one—that is, setting forth the criteria that should guide all Federal prosecutors in 

deciding when to seek to charge corporations—in practice the interpretation and implementation of the factors is left to the unguided 

determinations of individual prosecutors. Even assuming, as I do, 

the good faith and dedication to public service of all Federal prosecutors, they are not receiving the necessary guidance to diminish 

the wide variations that currently exist. 

Many prosecutors have interpreted the Thompson memorandum 

to mean that it is appropriate at the very outset of the criminal investigation—unlike what the Deputy Attorney General said previously, these are not determinations that are made after criminal—a criminal determination is made that there is a corporation 

that is guilty but, rather, made at the beginning—that it is appropriate to seek at that point a blanket waiver of all attorney-client 

communications other than the current communications with the 

corporation about how to defend the case. That waiver can include 

disclosure of all reports prepared by counsel of its interviews of 

company employees as part of an internal investigation, as well as 

production of counsel’s notes taken at any interview, whether of a 

company employee or a third party. And this request for a waiver 

occurs even though the Government can interview those witnesses 

themselves, or if the Government was present for the interviews, 

25

and easily could replicate the information by rolling up its sleeves 

and doing the interviews of the witnesses on their own. 

On the other hand, other prosecutors take a more surgical approach and proceed incrementally, only seeking a full waiver where 

it is truly important to the investigation and other interim steps 

have failed. This latter approach is, of course, far more responsible 

and, in my opinion, the DOJ should promulgate guidance strictly 

cabining prosecutors’ discretion to seek immediate blanket waivers 

and curtailing the solicitation of waivers that are simply a shortcut 

for the Government to obtain information they could obtain anyway 

directly. 

The second point I would like to make is that I think that the 

issues being addressed here today by the Committee are symptoms 

of a larger problem with the current state of the law regarding 

criminal corporate liability. There are two principal forces at work. 

As has been mentioned, the first is the prevailing understanding 

that a corporate indictment could be the equivalent of a death sentence. One of the lessons corporate America took away from Arthur 

Andersen’s demise in 2002 is to avoid an indictment at all costs. 

A criminal indictment carries potentially devastating consequences, 

including the risk that the market will impose a swift death sentence, even before the company can go to trial and have its day in 

court. In the post- Enron world, a corporation will, thus, rarely risk 

being indicted by a grand jury at the behest of the Department of 

Justice. The financial risks are simply too great. 

The second principle at work is the current standard of criminal 

corporate law under Federal common law. A corporation can be 

held criminally liable as a result of the criminal actions of a single, 

low-level employee if only two conditions are met: the employee 

acted within the scope of her employment, and the employee was 

motivated, at least in part, to benefit the corporation. No matter 

how large the company and no matter how many policies a company has instituted in an attempt to thwart the criminal conduct 

at issue, if a low-level employee nevertheless commits a crime, the 

entire company can be prosecuted. 

In light of the Draconian consequences of an indictment and the 

fact that the Federal common law criminal standard can be so easily triggered, the Thompson memorandum offers prosecutors enormous leverage. 

A rethinking of the criminal corporate law is in order. The standard for criminal liability should take into account a company’s attempts to deter the criminal conduct of its employees. Holding the 

Government to the additional burden of establishing that a company did not implement reasonably effective policies and procedures to prevent misconduct would both dull the threat inherent in 

the Thompson memorandum as well as help correct the imbalance 

in power between the Government and the corporation facing possible prosecution for the acts of an errant employee. A more stringent criminal standard, one that ties criminal liability to a company’s lack of an effective compliance program, would have the 

added benefit of maximizing the chances that criminality will not 

take root in the first place, since corporations will be greatly 

incentivized to create and monitor strong and effective compliance 

programs. The objectives of a law-abiding society, of the criminal 

26

law, and even of the Thompson memorandum itself, would thus be 

well served. 

Thank you very much for the opportunity to testify. 

[The prepared statement of Mr. Weissmann appears as a submission for the record.] 

Chairman SPECTER. Thank you, Mr. Weissmann. 

Our final witness is Mr. Mark Sheppard, partner in the law firm 

of Sprague & Sprague. The Committee had asked Mr. Sprague, 

Richard Sprague, to testify, but he could not do so because he is 

on trial. Mr. Sprague had been first assistant district attorney during my tenure and is one of America’s outstanding lawyers and 

specializes in criminal defense work now. 

Mr. Sheppard was recognized as a Pennsylvania Super Lawyer 

in the area of white-collar criminal defense, a bachelor’s degree 

from Lehigh and graduated with honors from Dickinson School of 

Law. 

We appreciate your coming down today, Mr. Sheppard, and the 

floor is yours. 

STATEMENT OF MARK B. SHEPPARD, PARTNER, SPRAGUE & 

SPRAGUE, PHILADELPHIA, PENNSYLVANIA 

Mr. SHEPPARD. Thank you, Mr. Chairman, and Mr. Sprague 

sends his regards and is sorry he could not be here. 

Good morning, Chairman Specter and Ranking Member Leahy. 

Before I get into it—and I thank you for getting into my background—I have practiced white-collar criminal defense work for the 

past 19 years, where I have represented both corporations and individual directors, officers, and employees in Federal grand jury investigations. 

I want to begin my remarks by thanking you for giving me the 

opportunity to be here to discuss my concerns about the deleterious 

effect of the ‘‘cooperation’’ provisions of the Thompson memorandum and similar Federal enforcement policies, including the Securities and Exchange Commission’s Seaboard Report. These policies have so drastically altered the enforcement landscape that 

they threaten the very foundation of our adversarial system of justice. 

This threat is brought about by the confluence of two recent 

trends: increasing governmental scrutiny of even the most routine 

corporate decision making and untoward prosecutorial emphasis 

upon waiver of long-recognized legal protections as the yardstick by 

which corporate cooperation is to be measured. These policies and, 

in particular, those which inexorably lead to the waiver of the attorney-client and work product privilege upset the constitutional 

balance envisioned by the Framers, impermissibly intrude upon the 

employer-employee relationship, and in real life result in the coerced waiver of cherished constitutional rights. 

The Thompson memorandum purports to set forth the principles 

to guide Federal prosecutors as they make the decision whether to 

charge a particular business organization. As the Chairman pointed out, while the majority of those principles are minor revisions 

of DOJ policy, the memorandum makes clear that corporate enforcement policy in the post-Enron era will be decidedly different 

in one very important aspect, and as the memo states: The main 

27

focus of the revisions in the Thompson memorandum is increased 

emphasis on and scrutiny of the authenticity of a corporation’s cooperation. 

According to the memorandum, ‘‘authentic’’ cooperation includes 

the willingness to provide prosecutors with the work product of corporate counsel from an internal investigation undertaken after a 

problem was detected. Authentic cooperation also includes providing prosecutors with the privileged notes of interviews with corporate employees who may have criminal exposure, yet have little 

or no choice to refuse a request to speak with corporate counsel. 

This means that employees effectively give statements to the Government without ever having a chance to assert their Fifth Amendment right. Incredibly, the Thompson memorandum is explicit in 

this goal of performing an end-run around the Constitution. It 

states, ‘‘Such waivers permit the Government to obtain statements 

of possible witnesses, subjects, and targets without having to negotiate individual cooperation or immunity agreements.’’ Further, 

‘‘authentic’’ cooperation includes disclosure of the legal advice provided to corporate executives before or during the activity in question. Lastly, and from my perspective as a practitioner, I believe 

the most troubling aspect of the Thompson memorandum, is the 

impact that it has on the ability of corporate employees to gain access to separate and competent legal counsel. The memorandum 

specifically denounces these longstanding corporate practices such 

as the advancement of legal fees, the use of joint defense agreements, and permitting separately represented employees to access 

the very records and information that they need to defend themselves. 

Despite these Draconian outcomes, corporations are complying 

with these demands in ever increasing numbers. And while no one 

of the nine elements of cooperation outlined in the memorandum 

purports to be dispositive, each is, in fact, mandatory. In the current climate, few, if any, public companies can afford the risk of 

possible indictment and the myriad of collateral consequences, not 

the least of which is the diminution of shareholder value. Indeed, 

the words from the front lines are frightening, as one attorney recently noted: The balance of power in America now weighs heavily 

in the hands of Government prosecutors. Honest, good companies 

are scared to challenge Government prosecution for fear of being 

labeled ‘‘uncooperative’’ and singled out for harsh treatment. 

Even before Sarbanes-Oxley, internal investigations were standard operating procedure. The reports generated by these investigations, including analysis by the company’s counsel and statements 

by their employees who may choose not so speak with prosecutors, 

are a veritable road map. As such, they are simply too tempting a 

source of information for a Federal prosecutor to ignore. 

It is my experience that occasionally, although not routinely, 

Federal prosecutors can be convinced to conduct their investigations without these privileged road maps. Indeed, law enforcement, 

as the Chairman pointed out, has a number of arrows in its quiver 

and certainly does not need the waiver of the attorney-client privilege in order to do its job. 

The Thompson memorandum, however, makes clear that these 

standard elements of cooperation where the facts can be provided 

28

without legal conclusions or the mental impressions of counsel are 

provided, these are simply not enough. Prosecutors are now empowered to expect that corporate counsel act as their deputies. 

Counsel is expected to encourage employees to give statements 

without asserting their Fifth Amendment rights, without obtaining 

independent counsel, all with little regard paid to the potential conflict of interest it poses for the corporate attorney and the employee. If the employee refuses, he may be terminated with no apparent recognition of the inherent unfairness of meting out punishment for the invocation of a constitutional right. 

Too often, employees must face this Hobson’s choice without the 

benefit of separate counsel. That is because employees face the 

prospect that the corporation will refuse to advance legal fees. The 

effectiveness assistance of counsel in the investigatory stage is essential, and the Government knows this. I fear that under the 

guise of cooperation, prosecutors are seeking to deprive employees 

of counsel of their choosing in the hope that counsel chosen by the 

corporation will tow the party line. 

I can still vividly recall a conversation I had as a young associate 

with one of the recognized deans of the Philadelphia Federal criminal defense bar. 

Chairman SPECTER. Mr. Sheppard, how much more time will you 

need? 

Mr. SHEPPARD. Ten seconds. I am wrapping up now, Mr. Chairman. He told me, much to my dismay at the time, that much of 

white-collar practice is ‘‘done on bended knee.’’ That statement was 

a recognition of the awesome power and resources of the Federal 

Government. It was possible, however, to effectively represent your 

client. In today’s corporate environment, I and my fellow practitioners feel that this may no longer be possible. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Sheppard appears as a submission for the record.] 

Chairman SPECTER. Thank you, Mr. Sheppard. 

Senator Leahy is on a tight time schedule, so I will yield to him 

for his questions first. 

Senator LEAHY. Thank you, Mr. Chairman. I appreciate the 

usual courtesy. 

Mr. Meese, you and I have known each other for a long time, and 

I am glad to see you here. Can you think of any circumstances during your tenure with the Department of Justice where the Department requested or required a waiver of the attorney-client privilege 

from a cooperative corporate defendant in a criminal case? 

Mr. MEESE. To the best of my knowledge and recollection, Senator, I cannot remember any such instance. To the best of my recollection, the issue never came up during the time that I was in the 

Department, and it was certainly not a part of the policy of the Department to require such a waiver. 

Senator LEAHY. Would you have been pretty surprised if somebody had made such a request to you as Attorney General? 

Mr. MEESE. I believe that I would, yes. I have always felt that 

the best way to proceed in any criminal matter is to have the best 

possible lawyers on both sides. This usually resulted in a settlement of the case in many instances, but also you had the protection 

29

of the potential defendant as well as the best interests of the prosecution in going forward. 

Senator LEAHY. Also, your case is more apt to stand up on appeal, too. 

Mr. MEESE. That, too. 

Senator LEAHY. Lastly, I looked at the letter you and several 

other senior Justice Department officials—you asked the Attorney 

General to stop the practice of requiring organizations to waive the 

attorney-client privilege and work product protections, and I read 

the letter to say because you felt the practice discouraged corporate 

employees from consulting with the lawyers about how to comply 

with the law. 

Aren’t there ways for the Government to obtain cooperation from 

a corporation without waiving the attorney-client privilege and 

work product doctrine? 

Mr. MEESE. I believe there are, and I think this is something 

where, in certain cases, corporate counsel would recommend certain things to be done to cooperate without waiving the attorneyclient privilege, such as agreements as to certain documents that 

would be turned over with the understanding that that did not constitute a waiver of the privilege in general. 

Senator LEAHY. Notwithstanding the testimony this morning, I 

get the impression talking to U.S. Attorneys around the country 

that they think this is pretty much a black-letter rule from the Department of Justice. And if the policy is not changed, what impact 

do you think this is going to have on corporate compliance with our 

laws and regulations? 

Mr. MEESE. Well, Senator, I think that it would have a positive 

impact to change the rule because I really do think that many companies now are hesitant to involve corporate counsel in investigations and in taking positive steps to ensure compliance. And so I 

think that changing the rule would be positive rather than negative in terms of the ultimate objective, which is not to prosecute 

corporations. It is to get compliance with the law. 

Senator LEAHY. Mr. Weissmann, you are the former director of 

the Enron Task Force. Do you recall any case where a corporation 

received leniency when the corporation did not waive the attorneyclient privilege? 

Mr. WEISSMANN. Yes, that has happened. 

Senator LEAHY. And when is that? 

Mr. WEISSMANN. I am sorry? 

Senator LEAHY. You do recall that happening? 

Mr. WEISSMANN. Yes. 

Senator LEAHY. Okay. So do you believe that there are effective 

ways for the Government to obtain cooperation without a corporation waiving the attorney-client privilege? 

Mr. WEISSMANN. There are. There are a number of steps a careful prosecutor can take to obtain information that is useful for an 

investigation that will have no or limited impact on either the work 

product or attorney-client privilege, for instance, turning over socalled hot documents, directing the Government to particular witnesses who might be useful. But it is not necessary for the corporate counsel to turn over their own notes of that interview. 

30

Senator LEAHY. So what former Attorney General Meese was 

saying, if you have got good lawyers on both sides, they are going 

to work their way through this labyrinth. 

Let me ask just one last question before time runs out. In the 

case of Garrity v. New Jersey, the Supreme Court held that the 

Government could not force police officers to make statements that 

could be used against them criminally by threatening to fire them 

if they did not testify. This sort of follows up on some things that 

Mr. McNulty said earlier. 

In your mind, are there potential Garrity-like concerns with the 

Department’s cooperation policies since employees can be required 

to cooperate with an internal investigation and the corporation can 

be required in turn by the Government to waive the attorney-client 

privilege? Am I pushing this too far, or do you see a Garrity problem? 

Mr. WEISSMANN. I do see a Garrity problem. For many years, I 

know that various Federal prosecutors have always stayed far 

away from the so-called Garrity issue because they were concerned 

about the actions of the private company being imputed, being 

taken as the actions of the State, which would then run afoul of 

Garrity. That is why KPMG was surprising and the United States

v. Stein decision was surprising, because it appeared from that case 

that the line was crossed where the Government had asked the private actor to do something at their behest. 

Senator LEAHY. Do the others agree? Or anybody disagree, I 

should say. Attorney General Meese, do you agree with what Mr. 

Weissmann said on Garrity? 

Mr. MEESE. In general, yes. 

Senator LEAHY. Mr. Donohue, I realize you are not a lawyer, but 

do you agree? 

Mr. DONOHUE. Senator, what I can tell you is that in many cases 

prosecutors in a very careful way have raised the issue of protection of privilege. They have raised the issue of dismissal of employees. They have raised the issue of not protecting employees even 

when it is contractually agreed on legal fees. As many of your witnesses have said today, the Department of Justice is a very strong 

organization. 

Senator LEAHY. Ms. Mathis, do you agree with Mr. Weissmann 

on Garrity? 

Ms. MATHIS. Yes, the ABA does agree, Senator. And, further, we 

have given you in our written testimony a number of ways in 

which we believe that a diligent prosecutor can get to the relevant 

information. 

Senator LEAHY. And, Mr. Sheppard, do you agree with Mr. 

Weissmann on Garrity? 

Mr. SHEPPARD. Yes, I do, Senator Leahy. 

Senator LEAHY. It probably will not surprise you to know I also 

agree. 

[Laughter.] 

Ms. MATHIS. Senator, if I may just add for the record, the ABA 

does not as a rule comment on particular cases, and I should clarify 

that we agree with the principle stated by the Court. 

Senator LEAHY. And I fully understood that, and I have read 

your testimony and fully agree. 

31

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you, Senator Leahy. 

Mr. Meese, I know that you are a zealous protector of separation 

of power, and as this Committee focuses on these issues and considers legislation, we have the option of making a recommendation 

to the Department, letting the Department exercise its own discretion, which is very broad. We have the option of awaiting the outcome of the litigation in the Southern District of New York. The 

Court may make a definitive order. It may be upheld on appeal. Or 

we can legislate. 

With your broad experience, what would your recommendation 

be? 

Mr. MEESE. Mr. Chairman, I would hope that this hearing itself 

might have a salutary effect upon the Department to see how 

strongly not only the Committee in terms of both the Chairman 

and Ranking Member, but also what I would consider a broad 

array of the legal and business community feel about this particular action. And so I hope that that in itself might be helpful. 

I would hope that that would be the case, including perhaps a recommendation from the Committee itself in a more formal manner 

to the Department of Justice. 

Perhaps the Court may have some decision in this matter. I 

would hope that legislation would be the last resort. But I think 

that if there were no other remedy availing, it would be appropriate inasmuch as it is a proper function of Congress to enforce—

or to implement by legislation basic constitutional rights, which I 

believe this is one. 

Chairman SPECTER. So you would say that the Congress would 

be acting appropriately, but as a last resort, if everything else fails? 

Mr. MEESE. That would be my position, yes, sir. 

Chairman SPECTER. Mr. Meese, the Committee is now wrestling 

with another privilege issue. We have not given you notice of this 

question, but I would like to get your view on it, if you care to comment. We are considering the reporter’s shield privilege, and it 

arises in the context of the investigation on the so-called disclosure 

of the CIA agent Valerie Plame, and its emphasis was focused by 

the incarceration of a reporter, Judith Miller, for some 85 days. 

The investigation proceeded after there was no longer the national security interest, and we are making a delineation. We are 

going to have a hearing to try to define more fully the national security interest to give protection to the Government on that issue 

so that the privilege would not extend that far. And it is complicated as to how we do that, but we are working on it. 

But absent national security, do you think that it is a wise matter for public policy to have a Federal shield law, as so many 

States do? 

Mr. MEESE. Well, Senator, Mr. Chairman, it is difficult to generalize from that particular case because, from what I know about it, 

this should never have come about. Again, this is only my knowledge from reading the news media, which from time to time cannot 

be totally relied upon. But I think from what I have learned, this 

should never have proceeded that far. I consider this a flawed investigation and prosecution, because it appeared from at least the 

facts that seemed to be available that no crime had been comVerDate 0ct 09 2002 15:12 Mar 28, 2007 Jkt 034117 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34117.TXT SJUD1 PsN: CMORC
32

mitted, which should have been determined by the prosecutor in 

the first 48 hours simply by reading the law and having the facts 

available. And so had that been done, that is when the prosecutor 

should have folded his tent and disappeared. Therefore, this would 

never have come about, the kinds of interrogations as well as the 

unfortunate—what I consider the unfortunate subsequent interrogations of many witnesses, which led ultimately to charges totally 

unrelated to the original crime under investigation, alleged crime 

under investigation. So it is a little hard to generalize from this 

case. 

I have concerns about a general shield law for the news media 

that may go to the ultimate finding of guilt or innocence, and to 

say that in no case can a news media journalist be questioned as 

to their sources of information can be as damaging to defendants 

by keeping them from having sources of information and evidence 

that would be valuable in terms of defending themselves against 

charges, as well as in legitimate prosecutions. 

So I have real concerns about shield laws as a blanket prevention 

of obtaining information. I would rather have something a little 

more flexible, leaving it up to the judge under the circumstances 

to determine whether a shield law would be appropriate rather 

than an absolute blanket shield. 

Chairman SPECTER. With respect to your statement about the investigation went too far, the special prosecutor has been quoted as 

saying that it was important to protect the ability of the Government to get honest testimony. We intend to do oversight on that 

matter at the appropriate time. But when you talk about the ability of the Government to get honest answers, it has a ring of similarity to the justification for the policy that we are discussing 

today, where the Government wants to find out the facts. And we 

agree, everybody agrees the Government ought to find out the 

facts. It is just how you do it, and how you do it respecting the traditional balance on the criminal justice system. 

But do you think there is any justification, at least as reported—

and that is all we can go on at the present time—to structure a 

continuing grand jury investigation to uphold the integrity of the 

Government’s finding out what the facts are? 

Mr. MEESE. Well, the purpose of a grand jury investigation 

should be obviously what the Constitution sets it up for, and that 

is, a protection for both the people, the Government and the potential defendant, to make sure there is adequate evidence to go forward with a prosecution. And it seems to me that that should be 

the purpose—that that should be in a sense the limited purpose or 

confine the purpose of investigation, not simply as a fishing expedition for the Government. And to the best of my knowledge, that 

was the way in which grand jury investigations were conducted 

during the time I was Attorney General. 

Chairman SPECTER. Mr. Donohue, in your experience what has 

been the effect of the policy of the Department of Justice? I want 

to introduce into the record, without objection, the testimony of 

former Attorney General Dick Thornburgh, who was supposed to 

testify here today, but advised that there is an emergency session 

of the Third Circuit. And Mr. Thornburgh’s essential conclusions 

are, in a sentence, ‘‘In my view, they’’—referring to the so-called 

33

Thompson memorandum policies—’’are not necessary for effective 

law enforcement, and they can actually undermine corporate compliance. Accordingly, these criteria should be dropped or substantially revised.’’ 

My question to you: Has this policy had a chilling effect or discouraged corporations from internal investigations? 

Mr. DONOHUE. Just one comment first, and then I will answer 

that question directly. The American business community, and particularly the Chamber, has no tolerance and no love for people that 

intentionally and maliciously break the law in the business context. 

It is bad for business. 

What has happened since the Thompson memorandum, we have 

emboldened Federal prosecutors—and, by the way, after that, State 

representatives—to a series of behaviors that they say are acceptable for two reasons: first of all, they have the Thompson memorandum; and, second of all, they have been told by the Congress 

and by the press and by the American people to root out all of this 

behavior that they long thought was going on with large companies. 

And I think what it has done is created an atmosphere in which 

the conduct or the management of corporations is becoming more 

and more difficult, because if you look at the regulatory process, 

the antitrust process, all those things we live under, we have to 

deal with our lawyers every day. And as people begin to wonder 

every time they have, you know, a problem that if they are visiting 

with their lawyer and those notes that lawyer is taking, where are 

they going to end up? ‘‘Can I ask you, counsel, a really tough question? I got a big problem in my mind. I am dealing with my boss. 

I am dealing with outside forces. I am dealing with my investors. 

I need to talk to you.’’ 

And I believe that we are playing so much defense in the corporate boardrooms that we have taken our eye off running the companies and we are spending all of our time talking to more and 

more lawyers. This is a lawyers’ retirement act, and I am glad for 

them. But we need to take a look here and say what are we doing 

to the fundamental ability to drive this economy to employ people 

and to lead the world’s economy, and we are making some big mistakes here, sir. 

Chairman SPECTER. Is it deterring internal corporate investigations? 

Mr. DONOHUE. I believe it is. 

Chairman SPECTER. Are corporations changing their policy about 

paying attorney’s fees for individuals under investigation? 

Mr. DONOHUE. I think there are a lot of corporations, as you are, 

watching the current case. Some of the attorney fee payments are 

guaranteed in employment contracts. Some have been the normal 

practice of sort of keeping company and employee together for mutual defense. And some are just thoughtful understandings of what 

it can cost what has been a good employee to defend himself for 

a week or a month or for 3 years. And people can be easily bankrupt and, therefore, as you well indicated, coerced into actions that 

they otherwise would not take. 

Let me just say, Mr. Chairman, the environment in corporate 

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fice has changed fundamentally in this country, and not for the better. 

Chairman SPECTER. Thank you. 

Ms. Mathis, when the ABA submitted a letter to the Department 

of Justice seeking to have some modifications in this policy, were 

you satisfied with the Department’s response? 

Ms. MATHIS. Respectfully, Senator, we were not. We received a 

response that was very general in its nature, that reflected much 

of what Deputy Attorney General McNulty testified to today. It did 

not deal with the specifics of our letter, nor did it deal with the 

specifics in the attachment to the letter, which sets forth a number 

of manners in which we believe prosecutors can obtain the information they need for their prosecutions without violating attorney-client privilege, the work product doctrine, or even the rights of employees. 

Chairman SPECTER. May I suggest that the ABA try again in 

light of the testimony here today, perhaps referencing executive 

privilege, which you have heard Mr. McNulty’s testimony on. Work 

product, the Department of Justice is a staunch defender of work 

product in the Solicitor General’s office, withheld all sorts of documents, and I think appropriately so in the Roberts confirmation, in 

the Alito confirmation. And those are certainly analogous. Give 

some consideration to trying again. 

Mr. Weissmann, in your task force on Enron, to what extent did 

you utilize the approach of the so-called Thompson memorandum? 

Mr. WEISSMANN. Well, our understanding is it was required, so 

we used it consistently because we had to. There were— 

Chairman SPECTER. You used it consistently, and did you get 

waivers of the attorney-client privilege? 

Mr. WEISSMANN. We did, and I would say that we did it, what 

I would hope was strategically and in a limited way in the manner 

that I described earlier, which was it wasn’t necessary at the outset— 

Chairman SPECTER. It was not necessary? 

Mr. WEISSMANN. It was not necessary at the outset to ask for 

blanket waivers, and we did not. 

Chairman SPECTER. You did? 

Mr. WEISSMANN. No, we did not ask for blanket waivers up front. 

Chairman SPECTER. Was it necessary to ask for the waivers 

which you did ask for? 

Mr. WEISSMANN. I think that there is one area where it was, and 

that is when you are investigating an underlying transaction. To 

take one example, in Enron there was a transaction involving moving the losses from one business segment to a winning business 

segment. And knowing what people at the time said to their lawyers within Enron was very useful information. 

I would point out in that situation, most companies are more 

than happy to turn that over because they are usually going to rely 

on an attorney-client defense, having an advice-of-counsel defense. 

Chairman SPECTER. Taking the situation as a whole, do you 

think that it was a fair practice to do what you did in Enron with 

respect to the Thompson memo? 

Mr. WEISSMANN. I do, but I do think that there should be greater 

guidance, because I know that the practices that we used were 

35

ones that we devised on our own, and it did not come from any 

guidance from the Department to require prosecutors across the 

country to be so surgical. 

Chairman SPECTER. So you did not need the greater guidance, 

but you think that as a matter of policy, the DOJ practice needs 

more guidance for the attorneys in the field? 

Mr. WEISSMANN. Yes. 

Chairman SPECTER. Mr. Sheppard, tell us a little bit more about 

the ‘‘bend your knees’’ concept. Is it really that bad? And do you 

only have to go so far as bending your knees? 

Mr. SHEPPARD. There are times when I have been flat on my 

back, Senator, on behalf of my clients. 

Chairman SPECTER. A powerhouse lawyer like Richard Sprague 

bending his knees, that does not comport with the Richard Sprague 

I know—not that he has arthritis, but I don’t think he bends at the 

knees before anybody. 

Mr. SHEPPARD. He does not, Mr. Chairman. He sends me to do 

those things. 

[Laughter.] 

Chairman SPECTER. Well, that certainly should earn you a raise, 

which Mr. Sprague can afford to give you. 

Mr. SHEPPARD. In answer to your question, Mr. Chairman, I 

think the concern that I have the most here is that the decision by 

the corporation needs to be the decision of the corporation. It really 

cannot be at the very outset and at the earliest parts of the investigation a decision that is made by, in essence, the prosecutor. Deputy Attorney General McNulty’s comments about when these factors come into play do not comport at all with my experience. 

From the very minute that a problem arises in the corporate context, these considerations, and particularly the cooperation considerations in the Thompson memorandum, figure prominently in 

every decision that corporate counsel makes and in every decision 

that the individuals who may be represented by separate counsel 

need to make. 

For me, I think the answer is it should be the employee’s decision, it should be the corporation’s decision on whether they want 

to cooperate and how they should do so. It is not the decision that 

should be made by the prosecutor on pain of a corporate death sentence. 

Chairman SPECTER. Well, thank you all very much. The Committee is going to pursue this issue. It is true that we have had 

a large, large number of complaints about it, just a tremendous 

number of complaints. And we have members of this Committee 

who have had considerable experience in the criminal justice system, and the criminal justice system has evolved over centuries, 

common law practice, and then the formulation of the Constitution 

and the Bill of Rights and many, many, many decisions and a lot 

of experience. And the attorney-client privilege is rockbed in the judicial system. And the practice of paying attorney’s fees is also a 

very common practice and relied upon, and there is no doubt that 

it would weigh heavily on a judgment any individual would do 

when faced with an investigation as to whether he or she could afford the cost of defending himself or herself. 

36

So we have to be very cautious on significant changes in that 

structure, and I think that these factors do constitute significant 

changes. And perhaps former Attorney General Ed Meese has 

given us the right formula. Let’s see if we can solve the problem 

without legislation, but as a last resort, it is up to the Congress of 

the United States to determine what is appropriate in the administration of criminal justice in this country. 

Thank you all very much. That concludes our hearing. 

[Whereupon, at 11:33 a.m., the Committee was adjourned.] 

Questions and answers and submissions for the record follow.]

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