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+ - THE McNULTY MEMORANDUM'S EFFECT ON THE RIGHT TO COUNSEL IN CORPORATE INVESTIGATIONS
+
+[House Hearing, 110 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+ THE McNULTY MEMORANDUM'S EFFECT ON THE RIGHT TO COUNSEL IN CORPORATE
+ INVESTIGATIONS
+
+=======================================================================
+
+ HEARING
+
+ BEFORE THE
+
+ SUBCOMMITTEE ON CRIME, TERRORISM,
+ AND HOMELAND SECURITY
+
+ OF THE
+
+ COMMITTEE ON THE JUDICIARY
+ HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED TENTH CONGRESS
+
+ FIRST SESSION
+
+ __________
+
+ MARCH 8, 2007
+
+ __________
+
+ Serial No. 110-24
+
+ __________
+
+ Printed for the use of the Committee on the Judiciary
+
+
+ Available via the World Wide Web: http://judiciary.house.gov
+
+
+ -------
+
+ U.S. GOVERNMENT PRINTING OFFICE
+
+33-811 PDF WASHINGTON DC: 2007
+---------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
+DC area (202)512-1800 Fax: (202) 512-2250 Mail Stop SSOP,
+Washington, DC 20402-0001
+
+
+
+ COMMITTEE ON THE JUDICIARY
+
+ JOHN CONYERS, Jr., Michigan, Chairman
+HOWARD L. BERMAN, California LAMAR SMITH, Texas
+RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
+JERROLD NADLER, New York Wisconsin
+ROBERT C. SCOTT, Virginia HOWARD COBLE, North Carolina
+MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
+ZOE LOFGREN, California BOB GOODLATTE, Virginia
+SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
+MAXINE WATERS, California DANIEL E. LUNGREN, California
+MARTIN T. MEEHAN, Massachusetts CHRIS CANNON, Utah
+WILLIAM D. DELAHUNT, Massachusetts RIC KELLER, Florida
+ROBERT WEXLER, Florida DARRELL ISSA, California
+LINDA T. SANCHEZ, California MIKE PENCE, Indiana
+STEVE COHEN, Tennessee J. RANDY FORBES, Virginia
+HANK JOHNSON, Georgia STEVE KING, Iowa
+LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
+BRAD SHERMAN, California TRENT FRANKS, Arizona
+ANTHONY D. WEINER, New York LOUIE GOHMERT, Texas
+ADAM B. SCHIFF, California JIM JORDAN, Ohio
+ARTUR DAVIS, Alabama
+DEBBIE WASSERMAN SCHULTZ, Florida
+KEITH ELLISON, Minnesota
+[Vacant]
+
+ Perry Apelbaum, Staff Director and Chief Counsel
+ Joseph Gibson, Minority Chief Counsel
+ ------
+
+ Subcommittee on Crime, Terrorism, and Homeland Security
+
+ ROBERT C. SCOTT, Virginia, Chairman
+
+MAXINE WATERS, California J. RANDY FORBES, Virginia
+WILLIAM D. DELAHUNT, Massachusetts LOUIE GOHMERT, Texas
+JERROLD NADLER, New York F. JAMES SENSENBRENNER, Jr.,
+HANK JOHNSON, Georgia Wisconsin
+ANTHONY D. WEINER, New York HOWARD COBLE, North Carolina
+SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
+MARTIN T. MEEHAN, Massachusetts DANIEL E. LUNGREN, California
+ARTUR DAVIS, Alabama
+
+ Bobby Vassar, Chief Counsel
+ Michael Volkov, Minority Counsel
+
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+ C O N T E N T S
+
+ ----------
+
+ MARCH 8, 2007
+
+ OPENING STATEMENT
+
+ Page
+The Honorable Robert C. Scott, a Representative in Congress from
+ the State of Virginia, and Chairman, Subcommittee on Crime,
+ Terrorism, and Homeland Security............................... 1
+The Honorable J. Randy Forbes, a Representative in Congress from
+ the State of Virginia, and Ranking Member, Subcommittee on
+ Crime, Terrorism, and Homeland Security........................ 3
+
+ WITNESSES
+
+Mr. Barry M. Sabin, Deputy Assistant Attorney General, U.S.
+ Department of Justice, Washington, DC
+ Oral Testimony................................................. 14
+ Prepared Statement............................................. 17
+Mr. Andrew Weissmann, Partner, Jenner and Block, New York, NY
+ Oral Testimony................................................. 24
+ Prepared Statement............................................. 26
+Mr. William M. Sullivan, Jr., Partner, Winston and Strawn, LLP,
+ Washington, DC
+ Oral Testimony................................................. 33
+ Prepared Statement............................................. 35
+Ms. Karen J. Mathis, President, American Bar Association,
+ Chicago, IL
+ Oral Testimony................................................. 45
+ Prepared Statement............................................. 47
+Mr. Richard T. White, Senior Vice President, Secretary, and
+ General Counsel, The Auto Club Group, Dearborn, MI
+ Oral Testimony................................................. 75
+ Prepared Statement............................................. 77
+
+ LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
+
+Prepared Statement of the Honorable Sheila Jackson Lee, a
+ Representative in Congress from the State of Texas, and Member,
+ Subcommittee on Crime, Terrorism, and Homeland Security........ 4
+
+ APPENDIX
+
+Material Submitted for the Hearing Record........................ 113
+
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+ THE McNULTY MEMORANDUM'S EFFECT ON THE RIGHT TO COUNSEL IN CORPORATE
+ INVESTIGATIONS
+
+ ----------
+
+
+ THURSDAY, MARCH 8, 2007
+
+ House of Representatives,
+ Subcommittee on Crime, Terrorism,
+ and Homeland Security
+ Committee on the Judiciary,
+ Washington, DC.
+ The Subcommittee met, pursuant to notice, at 9:33 a.m., in
+Room 2141, Rayburn House Office Building, the Honorable Bobby
+Scott (Chairman of the Subcommittee) presiding.
+ Mr. Scott. The Subcommittee will come to order.
+ I am pleased to welcome you today to this hearing before
+the Subcommittee on Crime, Terrorism, and Homeland Security, on
+``The McNulty Memorandum's Effect on the Right to Counsel in
+Corporate Investigations.''
+ As noted in the U.S. Supreme Court in Upjohn Company v.
+United States, the attorney-client privilege is the oldest of
+privileges for confidential communications known to common law.
+The purpose of the privilege is to encourage full and frank
+communications between attorneys and their clients, so that
+sound legal advice and advocacy can be given by counsel.
+ Such advice of counsel depends upon the lawyer being fully
+informed by the client. And as the court noted in Trammel v.
+U.S. in 1980, the lawyer-client privilege rests on the need for
+the advocate and the counselor to know all that relates to the
+client's reasons for seeking representation, if the
+professional mission is to be carried out.
+ And this purpose can only be effectively carried out if the
+client is free from consequences or apprehensions regarding the
+possibility of disclosure of the information.
+ This is not the case when waivers are coerced or obtained
+under duress. And there is certainly a coercive situation where
+there is fear or concern by a defendant in a criminal case,
+that he or she may not receive full leniency without a waiver
+of attorney-client privilege.
+ As long as there is reason for concern that full leniency
+may not be granted without a waiver of attorney-client
+privilege, the fact that the department does not specifically
+require a waiver is of little consolation.
+ As the court noted in the Upjohn case, an uncertain
+privilege, or one which purports to be certain but results in
+widely varying applications by courts, is little better than no
+privilege at all.
+ The attorney-client privilege is a privilege of the client,
+not the lawyer, and lawyers have an absolute responsibility to
+protect a client's privilege. Corporations are persons relative
+to constitutional rights of persons.
+ Coercing waivers of corporate attorney-client privilege has
+not always been the practice among Federal prosecutors.
+Formerly, a company could evidence its cooperation with such
+prosecutors by providing insight and access to relevant
+information and to the company's workplace and employees. The
+definition of a company's cooperation did not entail production
+of legally privileged communications or attorneys' litigation
+work product material.
+ Memoranda issued by the Department of Justice over the past
+several years, however, reveal that policies which suggest that
+corporations face an increased risk of prosecution, if they
+claim such constitutionally protected privileges.
+ The first such memorandum was issued by former deputy
+attorney general, Eric Holder in 1999. That memorandum was
+designed to provide prosecutors with factors to be considered
+when determining whether to charge a corporation with criminal
+activity, and to specifically allow prosecutors engaging the
+extent of a corporation's cooperation to consider the
+corporation's willingness to waive attorney-client and work
+product privileges.
+ The Holder memorandum was then superseded in 2003 by
+another memorandum issued by former deputy attorney general,
+Larry Thompson. The Thompson memo contained the same language
+regarding the waiver of attorney-client and work product
+privileges and also addressed the adverse weight that might be
+given to a corporation's participation in a joint defense
+agreement with its officers or employees and its agreement to
+pay their legal fees.
+ Today, the current department policies relating to
+corporate attorney-client and work product privilege waivers
+are embodied in the McNulty Memorandum issued in December of
+2006 by current deputy attorney general, Paul McNulty.
+ So, this new memorandum does state that waiver request be
+the exception rather than the rule. It continues to threaten
+the viability of the attorney-client privilege in business
+organizations by allowing prosecutors to request a waiver of
+privilege upon finding of legitimate need.
+ I fully recognize that the department faces many hurdles
+when undertaking the investigation and prosecution of corporate
+malfeasance. We only need to look at victims of the Enron
+collapse, where nearly 10,000 individuals lost their jobs,
+their pensions, their plans for the future. And we know that it
+is vital that prosecutors have the tools necessary to prosecute
+these crimes and hold accountable wrongdoers who profit at the
+expense of ordinary working Americans.
+ I also know, however, that facilitating and encouraging
+such investigations must not occur at the cost of vital
+constitutional rights of corporations or their employees.
+ I firmly believe that by protecting these well established
+and essential constitutional interests, we can only facilitate
+legitimate investigations by encouraging corporate offices and
+employees to consult with their attorneys regarding corporate
+wrongdoing in a confidential setting, but also ensure fairness
+of our criminal justice system for all Americans.
+ It is now my privilege to recognize my colleague from
+Virginia, the Ranking Member of the Committee, Randy Forbes,
+for his opening statement.
+ Mr. Forbes. Thank you, Chairman Scott. And I want to thank
+you for scheduling this important hearing.
+ I also want to thank our distinguished panel of witnesses
+for taking your time and giving us your expertise and advice
+today.
+ One year ago, on March 7, 2006, this Subcommittee conducted
+an oversight hearing on just this issue. At first glance, the
+landscape surrounding the issue of corporate waivers of
+attorney-client privilege appears to have changed with the
+Justice Department's issuance of the so-called McNulty
+Memorandum governing criminal prosecutions of corporations.
+ But a closer examination of the McNulty Memorandum shows
+that many of the same questions and concerns that were raised
+at last year's hearing remain. This is disturbing to all of us.
+ I remain concerned that prosecutors may be overreaching by
+demanding that corporations waive their attorney-client
+privilege as a condition of cooperation and a decision not to
+indict a company.
+ The attorney-client privilege is deeply rooted in our
+jurisprudence and the legal profession. It encourages frank and
+open communication between clients and their attorneys, so that
+clients hopefully can receive effective advice and counsel.
+ In the corporate context, as we saw in the case of Arthur
+Andersen, the life of a corporation can turn on a prosecutor's
+exercise of discretion whether or not to charge a corporation.
+That decision can have profound consequences to our economy,
+the employees and the community, and should not turn on whether
+or not a company waives its attorney-client privilege.
+ I know that cooperation of the criminal justice system is
+an important engine of truth. To me, the important question is
+whether prosecutors seeking to investigate corporate crimes can
+gain access to the information without requiring a waiver of
+the attorney-client privilege. There is simply no reason for
+prosecutors to require privilege waivers as a routine manner.
+ I look forward to hearing from today's witnesses and to
+working with my colleague, Mr. Scott, on this important issue,
+and I yield back the balance of my time.
+ Mr. Scott. Thank you.
+ Without objection, all Members may include opening
+statements in the record at this point.
+ We have been joined by the Chairman of the full Committee,
+Mr. Conyers, and also Mr. Coble, Mr. Sensenbrenner and Mr.
+Chabot, at this point.
+ And, without objection, Members may include opening
+statements.
+ [The prepared statement of Ms. Jackson Lee follows:]
+ Prepared Statement of the Honorable Sheila Jackson Lee, a
+ Representative in Congress from the State of Texas, and Member,
+ Subcommittee on Crime, Terrorism, and Homeland Security
+
+
+
+
+ Mr. Scott. We will now go on to our witnesses.
+ Our first witness is Mr. Barry Sabin, from the Department
+of Justice. He is the deputy assistant attorney general in the
+Criminal Division for the United States Department of Justice.
+Since January of 2006, he has been responsible for overseeing
+the fraud, criminal appellate section, gang squad and capital
+case unit.
+ Prior to his current appointment, he served as a chief of
+the Criminal Division's counterterrorism section and has been a
+Federal prosecutor since 1990. He received his bachelor's and
+master's degrees from the University of Pennsylvania, his law
+degree from New York University Law School.
+ Our next witness will be Mr. Andrew Weissmann, a partner in
+the law firm of Jenner and Block's New York office, where he
+specializes in white-collar criminal and regulatory matters.
+Prior to his current position, he served for 15 years with the
+Department of Justice where he worked as assistant U.S.
+attorney and was selected to serve as the director of a special
+task force created to investigate the Enron corporate scandal.
+ Previously, he was selected by the director of the FBI to
+be a special counsel, and served as chief of the Criminal
+Division of the U.S. Attorney's Office in the Eastern District
+of New York. In recognition of his efforts in the Department of
+Justice, he received numerous awards including the Attorney
+General's Award for Exceptional Service, the highest award
+given to Federal prosecutors.
+ He is a graduate of Princeton University, a recipient of a
+Fulbright Fellowship at the University of Geneva and a graduate
+of the Colombia Law School.
+ Next, William Sullivan, a litigation partner at the law
+firm of Winston and Strawn. In this capacity he concentrates on
+corporate internal investigations, white-collar criminal
+defense and complex civil and securities litigation. He
+previously served over 10 years as assistant U.S. attorney for
+the District of Columbia. He also worked in the Manhattan
+district attorney's office and in private practice as a
+litigator in New York City.
+ He has spoken on the Government's insistence on the waiver
+of attorney-client privilege for corporations under
+investigation in front of the American Bar Association, and has
+also addressed the World Trade Organization on Sarbanes-Oxley
+issues. He received his bachelor's and master's degrees from
+Tufts University and his law degree from Cornell University.
+ Next we have Karen Mathis, president of the American Bar
+Association, and partner in the Denver office of McElroy,
+Deutsch, Mulvaney and Carpenter.
+ Prior to holding her current position with the ABA, she
+served as the association's second-highest elected office, the
+chair of its house of delegates, where she served as a member
+since 1982. She has been active in the Denver Bar Association
+and the Colorado Bar Association for many years, where she held
+offices in the young lawyers section in both associations and
+served as vice president of the Colorado Bar Association.
+ She earned a law degree from the University of Colorado
+School of Law and bachelor's from the University of Denver.
+ Our next witness will be introduced by the Chairman of the
+full Committee, Mr. Conyers.
+ Mr. Conyers. Thank you. Good morning, ladies and gentlemen.
+ It is great to see the president of the bar here again. She
+is becoming more and more regular in her appearances.
+ I am delighted to just bring to the Committee's attention
+the presence of an old friend and a distinguished witness,
+Richard White.
+ He currently is the general counsel for the Auto Club Group
+of Companies in Dearborn, Michigan, and was a founding partner
+in, I think, the largest, predominantly African-American firm
+in Michigan, Lewis, White and Clay. David Baker Lewis is still
+the head of that firm.
+ And we are delighted that you are here today.
+ He has come up from Morehouse College, Harvard University
+Law School, has been very active in the civil rights community
+in the State, and has also been commissioner of Foreign Claims
+Settlement Commission, and serves as a member of the executive
+committee and board of directors of the American Corporate
+Counsel Association.
+ I am very happy to introduce to the Committee Richard
+White.
+ Glad you are here.
+ And we look forward to some very important testimony on a
+subject that could be ignored. What we are finding out,
+Chairman Scott, is we are having legislation by memorandum, and
+we have gone through quite a few of them.
+ And I think the combination of civil rights, civil
+liberties, chamber of commerce, defense lawyers all coming
+together makes this an obvious subject for our attention and
+your scrutiny. And I thank you for the opportunity to introduce
+Richard White.
+ Mr. Scott. Well, thank you.
+ Each of our witnesses' written statements will be made part
+of the record in its entirety.
+ I would ask each of the witnesses to summarize his or her
+testimony in 5 minutes or less. To help you stay within that
+time, there is a timing light on the table. When you have 1
+minute left, the light will switch from green to yellow. And
+when finally the red light comes up, we would ask you to
+complete your testimony.
+ Deputy Assistant Attorney General Sabin?
+
+TESTIMONY OF BARRY M. SABIN, DEPUTY ASSISTANT ATTORNEY GENERAL,
+ U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC
+
+ Mr. Sabin. Chairman Scott, Ranking Member Forbes, Members
+of the Subcommittee, thank you for the opportunity to be here
+today to discuss the Department of Justice's corporate criminal
+charging policies and its respect for the attorney-client
+privilege.
+ These policies have been articulated in a memorandum issued
+by Deputy Attorney General Paul McNulty 3 months ago.
+ In connection with my testimony today regarding the McNulty
+Memorandum, I would like to underscore five key points that are
+fundamental to the department's corporate criminal charging
+policies: one, the tone of the McNulty Memorandum and its
+respect for the importance of the attorney-client privilege;
+two, developing concrete data to uniformly consider and
+implement the McNulty Memorandum; three, establishing a
+legitimate need for requesting a waiver of the attorney-client
+privilege; four, instituting a meaningful consultation and
+approval process to ensure consistent application of department
+practices; and five, an incremental approach to seeking
+information--first factual information and then legal
+opinions--from the corporate entity, if appropriate.
+ The tone of the McNulty Memorandum is critical to an
+understanding of the department's approach to corporate
+criminal charging policies. It is a tone of respect for the
+importance and longstanding nature of the attorney-client
+privilege. The department helps protect investors and ensure
+public confidence in business entities and the markets in which
+those entities participate.
+ The Department shares this common goal with the vast
+majority of corporate leaders who believe in and work hard to
+maintain integrity and honesty in corporate governance.
+ The attorney-client and work product protections serve an
+extremely important function in the U.S. legal system and can
+help responsible corporations in their efforts to comply with
+applicable law.
+ At the same time, waiver of the privilege may advance
+important interests. As articulated in the McNulty Memorandum,
+a company's disclosure of privileged information may permit the
+Government to expedite its investigation. Indeed, this may
+assist the Government and the corporation.
+ The principles of charging business organizations, now
+embodied in the McNulty Memorandum, establish a nine-factor
+test that prosecutors consider in determining, in their
+discretion, whether to charge a corporation.
+ A prosecutor must consider and weigh all of the relevant
+factors. The issue regarding cooperation is one of nine
+factors, and the waiver issue is a subfactor of cooperation.
+ It is important that this Subcommittee understand that the
+department has never instructed prosecutors to seek routine
+requests for waiver of privilege. Nor is waiver of privileged
+information a prerequisite to getting credit for cooperation by
+a corporation. Indeed, the policy now makes clear that legal
+advice, mental impressions and conclusions by counsel are
+protected and should only be sought in rare circumstances.
+ Any request for such materials must be in writing and seek
+the least intrusive waiver necessary to conduct a complete and
+thorough investigation. This means that the request must be
+narrowly tailored to meet the specific investigation need. The
+United States attorney considers that request in consultation
+with the Assistant Attorney General of the Criminal Division.
+The request and approval must be in writing, and those records
+must be maintained.
+ Prosecutors must establish a legitimate need for that
+specific information. The four-pronged test is set forth in my
+written statement.
+ This test ensures that evaluating the need for waiver is a
+thoughtful process, and that prosecutors are not requesting it
+without examining the quantum of evidence already in their
+possession and determining whether there was a real need to
+request privileged information.
+ Prosecutors must take preliminary investigative steps to
+determine whether a corporation and its employees have engaged
+in criminal activity before seeking waiver, thereby ensuring
+that prosecutors cannot seek waiver at the outset of the
+investigation.
+ To be clear, a prosecutor must take an incremental
+approach, first establishing a legitimate need and then
+submitting a narrowly tailored, written request.
+ The United States attorney, in consultation with the
+assistant attorney general of the Criminal Division, approves a
+request for factual information; the deputy attorney general
+approves requests for legal information.
+ In light of the substantial and thoughtful revisions
+contained in the McNulty Memorandum, the Department urges this
+Subcommittee, at a minimum, to allow the guidance a chance to
+work before considering any legislation.
+ In the approximately 3 months since the memorandum was
+issued, the deputy attorney general's office has not received a
+single request seeking a waiver of legal advice and strategy.
+Moreover, the Criminal Division has only received a few
+requests to seek purely factual information. In each of these
+instances, the Criminal Division has engaged in a meaningful
+dialogue regarding the requests with the district.
+ Our prosecution efforts confirm that corporate fraud is not
+a historical relic. The Department of Justice continues to
+devote significant time and resources to protecting our
+financial markets and the American investor. We remain
+committed to investigating and prosecuting corporate matters.
+ The Department's past and current efforts to combat
+corporate fraud have assisted in some part, I believe, to
+supporting compliance in the business community. Since the
+president established the Corporate Fraud Task Force, many
+corporations have implemented effective compliance programs,
+and corporations are quicker to respond when they find fraud
+committed by the corporation.
+ It is this common ground--prosecutors committed to the fair
+administration of justice and responsible business leaders
+fulfilling their duties of honest dealing to corporate
+shareholders--that unites us in our determination that
+eliminating fraud is good for business.
+ We appreciate the opportunity to share our views with this
+Subcommittee.
+ Thank you.
+ [The prepared statement of Mr. Sabin follows:]
+ Prepared Statement of Barry M. Sabin
+
+
+
+ TESTIMONY OF ANDREW WEISSMANN, PARTNER,
+ JENNER AND BLOCK, NEW YORK, NY
+
+ Mr. Weissmann. Good morning, Chairman and Members of the
+Subcommittee and staff. I will make three points regarding the
+McNulty Memorandum.
+ The memorandum leaves completely intact the Government's
+ability to penalize a company that does not take punitive
+action against employees for the mere assertion of their
+constitutional right to remain silent.
+ Under the McNulty Memorandum, companies may be deemed by
+the Department of Justice as uncooperative, simply because they
+do not fire employees who refuse to speak with the Government,
+based on the fifth amendment.
+ By contrast, the Senate bill reintroduced this past January
+would appropriately prohibit the Government from considering an
+employee's assertion of the fifth amendment in evaluating
+whether to charge the individual's employer.
+ The issue raised by current DOJ policy is not about how so-
+called ``big business'' behaves; it is about how the Government
+does. Indeed, the current DOJ policy was recently found by
+Judge Lewis Kaplan, in the so-called KPMG tax shelter case, to
+be constitutionally impermissible. And the factual situation in
+KPMG is not unique.
+ Across the country, numerous corporations have instituted
+strict policies that call for firing employees who do not
+``cooperate'' with the Government.
+ Ironically, now that the McNulty Memorandum has largely
+eliminated the ability of prosecutors to weigh in on an
+employer's decision to advance legal fees, but left intact the
+ability to reward a company that fires employees who assert the
+fifth amendment, the Government can encourage employers to take
+the more draconian corporate measure against its employees, but
+not the lesser.
+ As a simple policy matter, whether a company punishes
+employees who assert the fifth amendment is a poor proxy for
+determining whether the entire company should be charged with a
+crime. Other factors--such as the level and pervasiveness of
+wrongdoing, a history of recidivism--are far more accurate
+measures of corporate culpability.
+ But more importantly, the DOJ policy should be altered,
+because the Government should not be fostering an environment
+where the employees risk losing their job merely for exercising
+their constitutional right.
+ A second problem is that, although the McNulty Memorandum
+states that refusal to disclose legal advice and attorney-
+client communications cannot count against a company, the same
+does not hold true for information the Government deems to be
+purely factual.
+ But information that is deemed by the McNulty Memorandum to
+be allegedly purely factual is, in fact, usually clearly
+protected by the attorney-client privilege and/or work product
+privilege. The McNulty Memorandum's examples illustrate this
+problem.
+ As examples they list as purely factual information,
+witness statements, factual interview memoranda and
+investigative facts documented by counsel.
+ But who an attorney interviews, what questions an attorney
+asks and what information is chosen as important to memorialize
+can reveal significant information about the attorney's defense
+strategy. And for this reason, courts have repeatedly held--and
+I am quoting now from one of the cases--``how a party, its
+counsel and agents choose to prepare their case, the efforts
+they undertake and the people they interview, is not factual
+information to which an adversary is entitled.''
+ The McNulty Memorandum simply ignores this case law and its
+unassailable logic and abrogates to itself the determination
+that material that has heretofore been widely deemed to be
+privileged is not entitled to protection under the memorandum.
+ Finally, one of the main flaws in the McNulty Memorandum is
+that the decision to charge a corporation is not required to be
+reviewed by Main Justice. In practice, wide variations in the
+field currently exist regarding the United States Attorney's
+Office's corporate charging practices.
+ But the lack of oversight is bewildering, given the wide
+array of relatively minor decisions that are overseen by Main
+Justice and the enormity of the potential consequences of
+charging a corporation. And this lack of oversight is
+unfortunate, since there is considerable expertise at main
+justice in examining these issues.
+ Again, it is ironic that one of the key innovations in the
+McNulty Memorandum was to have national oversight of decisions
+regarding requests for waiver of the attorney-client privilege
+in corporate investigations.
+ Yet the final decision regarding whether to charge the
+company receives no such scrutiny.
+ In conclusion, although DOJ has acted to remedy certain
+problems in its corporate charging policy, many remain. There
+is no reason to believe that those problems will disappear with
+the passage of time, since they are embedded in the McNulty
+Memorandum itself.
+ Thank you for the opportunity to address this Committee.
+ [The prepared statement of Mr. Weissmann follows:]
+ Prepared Statement of Andrew Weissmann
+
+
+
+ TESTIMONY OF WILLIAM M. SULLIVAN, JR., PARTNER, WINSTON AND
+ STRAWN, LLP, WASHINGTON, DC
+
+ Mr. Sullivan. Good morning, Chairman Scott, Ranking Member
+Forbes and Subcommittee Members and staff.
+ One year ago yesterday, this Subcommittee held hearings on
+this very issue. It stimulated an important dialogue. I was
+privileged to testify then.
+ While the McNulty Memorandum is a commendable effort to
+regulate and, perhaps, restrict Government waiver requests, it
+remains to be seen whether it constitutes a real departure from
+existing practice. I am gravely concerned that the memorandum's
+nonbinding guidelines may only serve to entrench and expand an
+internal deliberative process, predisposed to request attorney-
+client privileged information and attorney work product.
+ I urge the Members of this Subcommittee to consider how
+these policies have given Government prosecutors unnecessary,
+unconstitutional and unfair advantages when pursuing corporate
+entities, and to perhaps craft an enforceable legislative
+response to not only restore balance, but to continue to foster
+an environment in which corporations can properly rely on
+counsel in order to follow the rule of law.
+ The traditional protections for business organizations
+supported by the attorney-client privilege and work product
+doctrine are further eroding as prosecutors and regulators
+continue to demand participation in internal investigations and
+the submission of detailed reports in exchange for the mere
+prospect of leniency.
+ In my experience, waiver requests are made even before I
+have completed my client's internal investigation and, thus,
+even before I have determined that a waiver is in my client's
+best interests.
+ Prosecutors' requests for information in a factual road map
+form would also encompass a broad subject matter waiver,
+leading to possible disclosure of privileged information beyond
+the scope of the investigation, to not only law enforcement
+officials, but also to future third parties, including other
+Government agencies or opportunistic plaintiffs' attorneys.
+ The corporate clients with whom I work unequivocally desire
+to identify and eliminate suspected criminal conduct occurring
+within their ranks. They come to me, their lawyer, seeking
+advice and guidance in abiding with internal corporate
+governance policies and external laws and regulations.
+ In such discussions, I may be compelled to determine the
+existence, nature and extent of potential criminal activity. My
+obligation to the client is to make the best choice, based upon
+an informed understanding of the law and the facts.
+ The presumption of innocence should never be forgotten or
+ignored. And counsel's first responsibility should be to
+inquire as to whether misconduct in fact took place, and if so,
+whether there might exist a credible defense.
+ Naturally, clients are fearful of sharing all pertinent
+information when they believe that the details of an attorney-
+client conversation may be turned over the Justice Department
+as part of a current or future investigation into these
+activities.
+ In the worst cases, the current policies of the Department
+only serve to dampen the aggressive repression of criminal
+behavior within companies, because they, in fact, serve to
+inhibit the candid disclosure and remediation efforts by
+responsible corporate citizens and their counsel.
+ In conclusion, while ultimately the McNulty Memorandum's
+limited revisions may have been designed to appease some
+critics and potentially forestall imminent judicial and
+congressional action, they do not demonstrate an earnest
+reevaluation of Department policies regarding corporate
+criminal enforcement.
+ In fact, legislation such as the Attorney-Client Privilege
+Protection Act, recently introduced by Senator Specter, may now
+be required. But there is certainly something to be said for
+our elected representatives taking the laboring or in resolving
+policy questions.
+ Senator Specter's bill seeks to protect the attorney-client
+relationship by prohibiting all Federal agents and attorneys in
+a civil or criminal case from demanding such waivers. While the
+idea encompassed by the bill is sound, it lacks an enforcement
+mechanism to ensure meaningful restraint.
+ I encourage the consideration of a sanctions provision to
+deter the willful Government violator.
+ Ultimately and finally, perhaps the time has come for us to
+expend the same amount of energy spent on this privilege
+dialogue in establishing the standards and means with which to
+measure corporate compliance, governance and ethics programs
+and their adherence to the objectives of the Federal sentencing
+guidelines as legitimate factors for purposes of determining a
+corporation's cooperation instead of its willingness to
+jeopardize its future ability to conform to law through its
+renunciation of the attorney-client and work product
+privileges.
+ Thank you, and I look forward to your questions.
+ [The prepared statement of Mr. Sullivan follows:]
+ Prepared Statement of William M. Sullivan, Jr.
+
+
+
+ Mr. Scott. Thank you.
+ We have been joined by the gentleman from California, Mr.
+Lungren, and the gentleman from Massachusetts, Mr. Delahunt.
+Thank you for joining us.
+ Ms. Mathis?
+
+ TESTIMONY OF KAREN J. MATHIS,
+ AMERICAN BAR ASSOCIATION, CHICAGO, IL
+
+ Ms. Mathis. Thank you. Good morning, Chairman Scott,
+Ranking Member Forbes, Members of the Committee and, of course,
+your staff members.
+ My name is Karen Mathis. I am the president of the American
+Bar Association. I practice law in Denver, Colorado, with
+McElroy, Deutsch, Mulvaney and Carpenter.
+ It is a great pleasure to be back with you today and to
+speak on this very important topic to all of us, on behalf of
+the American Bar Association and its 413,000 members, who feel
+very strongly that we must support the attorney-client
+privilege and the work product doctrine.
+ It is a concern that we have about the language of the
+Justice Department's new McNulty Memorandum, and other similar
+Federal policies, that have seriously eroded these fundamental
+rights about which I want to speak with you today.
+ We are concerned about the separate provisions in McNulty
+Memorandum that erode employees' constitutional and other legal
+rights, including the right to effective legal counsel.
+ We are working in close cooperation with a broad coalition
+of legal and business groups. They range from the United States
+Chamber of Commerce to the National Association of Criminal
+Defense Lawyers to the Association of Corporate Counsel. And
+this is in an effort to reverse what we feel are very damaging
+and harmful policies.
+ The Government's policy was established in 2003 in the
+Thompson Memorandum, modified, as you said, in 2006 in the
+McNulty Memorandum. And it does erode the attorney-client
+privilege and the related work product doctrine by pressuring
+companies to waive these protections--in most recent cases, in
+order to receive cooperation credit during investigations.
+ The ABA is concerned that the Department's new policy will
+continue to cause a number of profoundly negative consequences,
+and I would like to list some of those.
+ First, it will continue to lead to the routine compelled
+waiver of the attorney-client privilege and the work product
+protections. Instead of eliminating the improper practice of
+forcing companies to waive in return for cooperation credit,
+the McNulty Memorandum still allows prosecutors to demand
+waiver after receiving high-level Department approval.
+ And, like the Thompson Memorandum, it gives these companies
+credit, if they voluntarily waive without being asked.
+ Whether it is direct or indirect, these waiver demands are
+unjustified, as prosecutors only need the relevant facts to
+enforce the law, not the opinions and the mental observations
+of corporate counsel.
+ Second, the McNulty Memorandum continues to seriously
+weaken the confidential attorney-client relationship in the
+corporate context, by discouraging companies from consulting
+with their lawyers and impeding the lawyers' ability to
+effectively counsel compliance with the law.
+ Third, it will continue to undermine companies' internal
+compliance programs by discouraging them from conducting
+internal investigations designed to quickly detect and to
+remedy any misconduct.
+ For these reasons, the new memorandum will continue to
+undermine, rather than enhance, compliance with the law.
+ Last May, prior to the issuance of the McNulty Memorandum,
+the ABA sent a letter to Attorney General Gonzales, and we
+asked him to reform the Department's policies.
+ Again, last September, such concerns were conveyed to the
+Department by former senior Justice Department officials. Both
+letters are attached to our written statement. And many
+congressional leaders have also raised the issue.
+ Certainly in the hearings you referred to, Congressman
+Forbes, last March, virtually all the Members of this
+Subcommittee expressed strong concern about the preservation of
+the attorney-client privilege. And as you know, Senators
+Specter and Leahy have similarly echoed these concerns.
+ It became clear that the McNulty Memorandum would not solve
+the problem the Government and we are calling--or I should say,
+we are calling--coerced waiver. And as you know, Senator
+Specter has introduced legislation in January, Senate Bill 186.
+The ABA and this coalition strongly support that measure.
+ It is equally important that we enforce and protect
+employee legal rights, including the right to effective counsel
+and the right against self-incrimination. McNulty continues to
+erode these by pressuring the employers to take unfair punitive
+actions against employees during their investigations.
+ While the new memorandum now generally bars prosecutors
+from requiring companies to not pay their employees' attorney
+fees, in many cases it does carve out a broad exception, which
+I would be happy to address in your questions. And by forcing
+companies to punish their employees long before their guilt has
+been established, the Department's policies continue to stand
+the presumption of innocence on its head.
+ They overturn generally accepted corporate governance
+principles. And, as has previously been mentioned, they are
+constitutionally suspect under the KPMG case.
+ For all of these reasons, we urge this Subcommittee to
+investigate and to promulgate proposed legislation, similar to
+S. 186.
+ Thank you for your time.
+ [The prepared statement of Ms. Mathis follows:]
+ Prepared Statement of Karen J. Mathis
+
+
+
+ TESTIMONY OF RICHARD T. WHITE, SENIOR VICE PRESIDENT,
+SECRETARY, AND GENERAL COUNSEL, THE AUTO CLUB GROUP, DEARBORN,
+ MI
+
+ Mr. White. Good morning, Mr. Chairman, and thank you,
+Chairman Scott, Ranking Member Forbes, and Members of the
+Subcommittee and your staffs assembled. I want to thank you for
+the opportunity to appear before you this morning.
+ I am testifying both as general counsel and on behalf of
+the more than 20,000 in-house counsels from around the world
+who are my colleagues as members of the Association of
+Corporate Counsel.
+ The Association of Corporate Counsel members represent more
+than 9,000 corporate entities in the United States and in 55
+countries abroad, including public and private companies, large
+and small, profit and non-profit.
+ I want to provide you the perspective of an in-house legal
+community on the current debate about Government policies that
+are eroding the attorney-client privilege, work product
+protections and individual rights in the corporate context. In
+particular, I want to make the following basic points.
+ First, these protections are crucial to effective corporate
+compliance and ethics programs. Second, the McNulty Memorandum
+does not substantively change the Department of Justice's abuse
+of practices that have eroded these protections. And third, in
+the face of the DOJ's repeated refusal to fix these problems,
+legislation is indeed warranted.
+ Mr. Chairman, from where I sit, these protections are
+essential to corporate compliance initiatives. As in-house
+counsel, we must gain the trust of employees and encourage them
+to routinely seek and follow our legal advice.
+ Certainly, when it comes to compliance, we all want lawyers
+actively engaged in counseling employees. If employees believe
+that corporate counsel are simply conduits for delivering
+confidential information to prosecutors, attorney-client
+communications will be chilled, and compliance will ultimately
+suffer.
+ For this reason alone, preservation of these fundamental
+protections and rights should be non-negotiable. Unfortunately,
+I believe that recent Government policies have given rise to a
+culture of waiver that has put the continuing vitality of these
+longstanding doctrines in serious jeopardy.
+ As noted in my written testimony, ACC finds fault with the
+McNulty Memorandum in the following respects.
+ One, the memorandum's focus on formal written waiver
+demands essentially misses the point. My corporate colleagues
+know from experience that many Federal enforcement officials
+rely almost exclusively, in practice, on informal demands to
+persuade--indeed, at times to coerce--corporations to waive the
+attorney-client and work product protections.
+ No formal demand is necessary, given this culture of waiver
+that the DOJ and other agencies have fostered in the past few
+years.
+ Two, the McNulty Memorandum's modest changes regarding
+reimbursement of attorneys' fees do not protect employees. As
+Karen has pointed out, the prosecutors are still permitted to
+trample on employee rights when it comes to effective
+assistance of counsel, when it comes to denying employees
+information for their defense, and the refusal to allow joint
+defense arrangements with employees.
+ Three, the McNulty Memorandum's internal DOJ authorization
+procedures do not constitute meaningful and acceptable
+safeguards. On the rare occasion a prosecutor ever makes a
+written waiver demand, merely requiring authorization from
+another prosecutor in the same Department does not constitute a
+meaningful protection of the attorney-client and work product
+privileges.
+ Despite the desire and efforts of ACC members to have the
+Department of Justice itself fix the problem it created, the
+Department repeatedly has refused to address or even
+acknowledge that the problem exists.
+ Notably, even today, reports from in-house and outside
+counsel suggest that a prosecutor's conduct has not changed
+during the months since the issuance of the McNulty Memorandum.
+These reports at this juncture are anecdotal, but, indeed, from
+our standpoint, persuasive.
+ They suggest that there have been statements from a
+prosecutor that the request for a waiver predates the McNulty
+Memorandum and, therefore, is sort of grandfathered under
+Thompson. We do not believe that such artful dodges should be
+part of the system of justice that we all know and respect.
+ Above all, we strongly support a legislation that would
+prohibit Government officials from formally or informally
+requesting a waiver of these protections. There has been
+reference to Senate bill S. 186, which, as part of the
+coalition, we indeed support.
+ In the final analysis, whether the McNulty opinion and
+memorandum stands will depend on how you balance the real
+voluntary nature of the privilege in the first place. It is
+either voluntary or it is not, and should not be given up
+simply because the memorandum says that it is a precondition to
+cooperation.
+ Thank you very much.
+ [The prepared statement of Mr. White follows:]
+ Prepared Statement of Richard T. White
+
+
+
+ Mr. Scott. Thank you, Mr. White.
+ We will proceed under the 5-minute rule with questions, and
+I will begin. I recognize myself for 5 minutes.
+ Mr. Sabin, should a corporation be punished for exercising
+its constitutional right to attorney-client privilege?
+ Mr. Sabin. No.
+ Mr. Scott. If there is a difference in consideration for
+those that waive and those that do not, isn't there, therefore,
+a punishment for those that do not waive their right?
+ Mr. Sabin. No, it is a voluntary decision by the corporate
+entity whether or not to waive and disclose that information.
+ Mr. Scott. And will they be given positive, beneficial
+consideration for waiving their right to attorney-client
+privilege?
+ Mr. Sabin. Yes. A corporate entity that cooperates with the
+Government investigation and waives that privilege, as one
+subfactor of the nine factors set forth in the McNulty
+Memorandum, that would be positively considered as part of the
+overall analysis of corporate criminal charging policies.
+ Mr. Scott. And those that do not waive are not given that
+consideration, that little subfactor consideration?
+ Mr. Sabin. The distinction between category one and
+category two information, the----
+ Mr. Scott. But, I mean----
+ Mr. Sabin [continuing]. The declination of a corporate
+entity not to provide legal analysis or opinions or mental
+impressions, explicitly stated in the McNulty Memorandum, will
+not be considered against that corporate entity.
+ Mr. Scott. But, I mean, those that waive the privilege will
+be given beneficial consideration. Those that do not will not
+be given beneficial consideration. Therefore, there is a
+differential in consideration between those who waive and those
+who do not.
+ Mr. Sabin. The fact that----
+ Mr. Scott. So, those that do not are, in effect, punished.
+ Mr. Sabin. I disagree with that conclusion.
+ We consider positive cooperation as part of the analysis in
+the McNulty Memorandum as to whether, in the totality of the
+circumstances, how the Government should decide whether to
+charge or not charge a corporate entity.
+ Mr. Scott. Do you ever ask individuals to waive attorney-
+client privilege for the purpose of getting beneficial
+consideration?
+ Mr. Sabin. The McNulty Memorandum addresses the corporate
+context. It is separate relating to the individuals. I believe
+that practice has occurred, yes.
+ Mr. Scott. Did people get beneficial consideration for
+waiving their attorney-client privilege in a criminal case?
+ Mr. Sabin. I cannot speak to that, you know, grounded in
+any particular experience. But the fact that, say, a person in
+a drug case and we are investigating the extent and
+pervasiveness of that activity, or in a mafia prosecution and
+that is waived, I think that that would be a positive
+consideration for that individual, again, distinct from a
+corporate analysis.
+ Mr. Scott. If there is beneficial consideration, why would
+that not be considered coercion to waive your privilege?
+ Mr. Sabin. Because the privilege is the corporate entity's
+whether to waive or not. It is within their discretion whether
+to proceed in that fashion or not. It is not the Government
+either routinely asking for it or demanding it. That is not our
+guidance; that is not our practice.
+ Mr. Scott. Thank you.
+ Ms. Mathis, you indicated that you wanted some time to
+address the exception?
+ Ms. Mathis. Thank you, Congressman.
+ If your staff and you would take a look at footnote three,
+which appears on page 11 of McNulty Memorandum, you will find
+that, when the totality of the circumstances show that a
+corporation's advancement of its employee's legal feess is
+intended to impede a criminal investigation, then the
+attorney--the U.S. attorney--may, on the U.S. attorney's own
+say-so, direct a corporation not to pay those attorneys' fees.
+ The effect of this footnote, sir, is that you have a back
+door to stopping a corporation from paying an employee's legal
+fees that is big enough to fly a C-140 through.
+ All you have to do as a U.S. attorney is say that, looking
+at the totality, there was intent to impede a criminal
+investigation, and then the employee's legal fees cannot be
+paid.
+ So, in this particular instance, one has to really question
+whether McNulty has advanced the cause of an individual's
+constitutional rights to legal counsel or not.
+ Mr. Scott. Thank you. I yield back.
+ Mr. Forbes?
+ Mr. Forbes. Thank you, Mr. Chairman.
+ Again, I want to thank each of you for taking your time and
+being here today. We wish we had the time to chat with you
+individually, because you bring so much expertise to the table,
+but we are limited to 5 minutes.
+ You know, one of the issues that we hear raised here this
+morning--there is a little bit larger issue that I have been
+concerned about. And that is kind of the abuse of prosecutorial
+discretion we have seen that--and it is not just on the Federal
+level, it is on the State level.
+ We have a lot of wonderful prosecutors, just like we have a
+lot of wonderful law enforcement officers, but we have to
+always look at those abuses in those situations where it is not
+justice we are looking at, it is just more prosecutions.
+ And the weight of the resources that can be brought against
+a corporation or an individual can just have enormous
+intimidation factors, and sometimes we do not always get to
+justice.
+ Mr. Weissmann, that is why I was really interested in one
+of your comments about the need for us to have more oversight
+in the charging decisions against corporations and individuals.
+I wonder if you could just elaborate on that just a moment for
+us.
+ Mr. Weissmann. Yes. First I should say, as an assistant
+United States attorney for 15 years and serving on the Enron
+task force for about 3.5 years, I got to see first hand an
+enormous array of talent at main justice and people who have
+experience in making the determination about how to treat
+corporations.
+ The problem of white-collar crime is, in many districts,
+relatively new in light of what happened at Enron, so that you
+have a number of U.S. attorneys offices now wading into a field
+that they frankly did not have a lot of experience in prior to
+Enron.
+ I think it is important to have a system where people at
+Main Justice are evaluating how those decisions are made,
+because corporations are largely national, if not
+international, in scope. And it should not be the case that a
+company has to worry about the vagaries of whether a prosecutor
+in one part of the country is going to be applying a very
+different standard than in another part of the country.
+ In many ways this applauds the Thompson memo and the Holder
+memo before it and the McNulty memo, because it is saying that
+there are valuable aspects to those policies, but I think, if
+you ask practitioners, they will tell you that they are not
+applied uniformly, by a long shot, around the country.
+ Mr. Forbes. Mr. Sullivan, I was interested in your
+testimony where it seemed to indicate that prosecutors were
+actually requesting a waiver before there was even a
+determination as to whether or not there was a crime that was
+committed.
+ Has that been your experience?
+ Mr. Sullivan. In all fairness, Mr. Forbes, prior to the
+promulgation of the McNulty memo, I had been in the first meet-
+and-greet meetings with representatives of the Government upon
+my first engagement, when I was asked if I would be sharing the
+results of my internal investigation.
+ And the questions went so far as to ask whether or not I
+was representing the corporation, or whether I was a third-
+party investigator, suggesting that from the very first, even
+if I were paid by the corporation, that I would be an
+individual who would not have a privilege relationship with
+that corporation. And the suggestion was it might be better if
+I was an independent contractor, as opposed to an advocate.
+ I took great pains in those discussions to explain to the
+Government that I could be forthright and candid with them,
+that I would proffer to them hard, factual information, that I
+would not try to spin the story, but I could do that as being
+an advocate for the corporation itself.
+ Mr. Forbes. And you could always deal with getting around
+the problem, if you wanted to, by offering the proffer in a
+situation like that, without having to provide a waiver.
+ Mr. Sullivan. I began most of these discussions by
+proffering as an attorney.
+ Post-McNulty, I have still been badgered by the Government
+demands that my corporation, my client, my company compel the
+provision of witness statements from employees under threat of
+termination.
+ Now, this is in direct opposition to the Garrity case,
+which compels that the Government cannot pursue such leverage
+or intimidation tactics with their own employees. Someone who
+refuses to speak or invoke is not going to be threatened with
+sanctions.
+ I have had such requests literally within the past month.
+ Mr. Forbes. My time is about up, but Ms. Mathis and Mr.
+White, in case we do not get another round, could you follow
+up, maybe, with something in writing if you have experienced
+the kind of prosecutorial abuse in certain situations, and what
+your recommendations might be on how we can get a balance on
+that, and suggestions for that.
+ It is something we are very much concerned about, and I do
+not know if I will have time to get your answers in, but you
+can try.
+ Ms. Mathis. Congressman, let me just, if I may, reflect on
+something that Mr. Sabin said earlier. And that is that, since
+McNulty, there have been no formal requests.
+ And what we think is happening, but there is no hard
+evidence, because it is not being kept by DOJ, is that what is
+happening now is it has gone underground, and there now are
+implicit requirements that they be waived.
+ And as the Chairman said earlier, if you are both at a
+standstill, but one person is given an advantage, whether it is
+in a golf game or around an oval track, then somebody has got
+an advantage. And the person who is left back here is left in
+the dust. And that is one of the main problems with McNulty.
+ We would be happy to supplement our testimony.
+ Mr. Forbes. Thank you.
+ Mr. White. We will be happy to do so.
+ We are getting anecdotal calls and reports from some of our
+members, who are saying that the practice is vastly different
+from the language of the McNulty Memorandum. It is more
+informal than formal.
+ Mr. Forbes. Well, thank you. My time is out.
+ Thank you, Mr. Sabin. I hope I will get some more questions
+later for you.
+ Mr. Scott. Thank you.
+ Mr. Conyers?
+ Mr. Conyers. Thank you, Mr. Chairman.
+ You know, this is a pretty one-sided hearing, in a way, for
+Mr. Sabin. You see, when bipartisanship comes together, things
+get pretty rough, don't they? Because, this is pretty----
+ Mr. Sabin. I appreciate the opportunity to be here and have
+that dialogue.
+ Mr. Conyers. Yes. Well, I want to try to lighten the
+environment for you, because I kind of sense which way this
+train is moving here.
+ And before we start, I think we are in an almost corporate
+crime wave. There is nobody that wants to get on top of some of
+the criminal activity that has been going on the last, past
+number of years than I do.
+ But the advantages and the below-the-radar activity that
+the Department can engage in is pretty clear. You can write
+this in red letter law all you want.
+ But it is what--you know, when the U.S. attorney sits down
+with an attorney defending someone, they do not read back the
+Federal Code to each other. ``You get the drift,'' as they say
+on the streets.
+ And so, what is happening right now is that we are
+overtaking a small, but important part of creating the level
+playing field. And that is what interests me so very, very
+much.
+ When you get the American Bar Association and dozens of
+organizations--progressive, conservative, corporate, civil
+rights--it seems to me--and I listen to the tenor of the
+discussion among our colleagues--we do not always get this kind
+of bipartisanship in the Judiciary Committee.
+ So, I would just like to ask Mr. White and the president of
+the Bar, is there some way we can take this medicine, you know,
+calmly and understand? Why doesn't the attorney general see the
+light here? Or will this hearing help him?
+ Mr. Sabin. Can I address that, sir?
+ Mr. Conyers. Sure.
+ Mr. Sabin. The attorney general actually spoke at the ABA
+white-collar crime gathering, conference, in San Diego last
+week and discussed the McNulty Memorandum with them.
+ I am a member of the ABA. I am going down to chat with
+their litigation section next month. We appreciate the
+opportunity to talk through these issues.
+ Mr. Conyers. That is great.
+ Mr. Sabin. We are not----
+ Mr. Conyers. Whereas, the president is right here three
+seats down from you. [Laughter.]
+ Mr. Sabin. Okay. Well, I would say that, to the extent that
+there are suggestions that practice is different from reality,
+we have not heard about that. So, if there are specific
+suggestions----
+ Mr. Conyers. Let me recognize her with the couple minutes I
+have left.
+ Are there any ways that this different--everybody is
+supporting--I mean, you support the McNulty. But the fact of
+the matter is, it is not sufficient. Is that the correct
+interpretation?
+ Ms. Mathis. Congressman, the American Bar Association
+believes, number one, in the basic jurisprudence concept of
+attorney-client privilege and all that in the common law it has
+done to backstop our judicial system and to provide very
+limited privileges.
+ But the privilege is not that broad. It does not cover
+facts. It does not cover a number of things.
+ And we think that within that privilege, and the way it has
+been structured and reviewed by our judicial officers--mainly
+judges--that it is sufficient for the purposes of Department of
+Justice.
+ It is so central to our system of Government that people be
+entitled to that, that to the extent McNulty and its
+predecessors violate those precepts, that they must be amended,
+and that, clearly, the way to do that at this point is through
+congressional legislation.
+ Mr. Conyers. Absolutely.
+ Richard White, would you like the last word?
+ Mr. White. I certainly would agree with the ABA on that
+point, and would suggest to you that the attorney-client
+privilege is a privilege that should not be for sale, either
+for positive incentives or punitive responses. It is that basic
+to our system of justice and fairness.
+ And it sort of hits me as somewhat peculiar that we would,
+under Sarbanes-Oxley and other appropriate legislative
+initiatives, require codes of conduct and ethical behavior in
+corporations and allow behavior that could be, under some
+circumstances, unethical and inappropriate to go on.
+ Legislation is not only warranted, it is absolutely
+necessary.
+ Mr. Conyers. Thank you.
+ Mr. Scott. Thank you. Thank you. The gentleman's time has
+expired.
+ The gentleman from California, Mr. Lungren?
+ Mr. Lungren. Thank you very much, Mr. Chairman.
+ I mean, this issue came up about 2 years ago when Mr.
+Delahunt and I were concerned about it in the context of the
+Sentencing Commission's recommendations, where, even though I
+believe it was a footnote, nonetheless, it was very obvious
+that there were going to be consequences as far as judges were
+concerned, following the Sentencing Commission guidelines as to
+whether or not a corporation basically gave it up--I mean, gave
+up the attorney-client privilege.
+ And we joined together, along with others, to make our
+views known to the Sentencing Commission, and the Sentencing
+Commission basically decided that they would not do that
+anymore.
+ So, the second phase of it is the Justice Department. And I
+see we have one, two, three, four separate memoranda that have
+been in succession on this--Mr. Holder's, Mr. Thompson's, Mr.
+McNulty's, Mr. McCallum's.
+ And I guess I would ask one question to the four non-DOJ
+representatives here, and just, hopefully, a very short answer,
+because I only have 5 minutes, as well.
+ Is there any improvement that you see as a result of the
+memorandum? That is, is the McNulty iteration of these
+memoranda an improvement for the Department?
+ Mr. Weissmann?
+ Mr. Weissmann. The short answer is that, in theory, it is
+an improvement; and in practice I have seen no change at all.
+ Mr. Lungren. Mr. Sullivan?
+ Mr. Sullivan. Frankly, it is a little early to tell.
+ On the waiver side, there has not been any specific
+request. On the indemnification side there have been requests
+made to me to retain employees under threat of termination in
+order to compel their statements. That is a violation,
+unacceptable.
+ Mr. Lungren. Ms. Mathis?
+ Ms. Mathis. It is not an improvement, Congressman. And one
+particular reason that it is not is, it has taken what might
+have been a formal request of a waiver--in other words, in the
+light of day--and it has put it back into an implicit request
+for waiver, where it is not as clear to see, nor will data be
+kept on it.
+ But as the other witnesses have indicated, it is still
+ongoing, it is still pervasive.
+ Mr. Lungren. Mr. Weissmann?
+ Mr. Weissmann. I would agree with Ms. Mathis, that it is
+not an improvement. It is an attempt, but that is about all
+that it is. And our feedback is from our folks out in the
+field, that the practice continues underground.
+ Mr. Lungren. Mr. Sabin, I mean, based on that I have got
+one person who believes it is an improvement in words, but not
+in theory, another who said it's being violated, one who said
+it is not an improvement and another one who said it is not an
+improvement.
+ The very fact that Mr. McNulty felt it necessary to issue a
+new memorandum, and then, with the memorandum that accompanied
+the memorandum from Mr. McNulty, in which he said, we have
+heard from responsible corporate officials recently about the
+challenges they face in discharging their duties to the
+corporation, while responding in a meaningful way to a
+Government investigation.
+ Many of those associated with the corporate legal community
+have expressed concern that our practices may be discouraging
+full and candid communications between corporate employees and
+legal counsel.
+ To the extent this is happening, it was never the intention
+of the Department for our corporate charging principles to
+cause such a result. And then indicates that they are,
+therefore, promulgating this new memorandum.
+ What was the purpose of the memoranda? That is, the new
+memoranda? What do you say about those who say that, either it
+is insufficient, or that, while sufficient on its terms, it is
+being violated in its practice, or thirdly, that all it has
+done is driven these decisions underground?
+ And I guess the last way to ask that last part is, what are
+you doing to enforce this? If, in fact, you believe in this
+memorandum, what would you do to respond to the complaint that,
+in fact, the memorandum is being observed in its breach?
+ Mr. Sabin. We believe that the McNulty memorandum strikes
+the right balance with respect to our ability to thoughtfully
+and aggressively investigate corporate wrongdoing. We believe
+that it is an improvement.
+ And back to Congressman Conyers' point, in terms of the
+long view of history, I believe that the Department's attempts
+to transparently and thoughtfully articulate the manner in
+which it goes about its corporate criminal charging decisions
+will be viewed as sound and well-placed and well-grounded.
+ The prosecutors around the country--not only in Main
+Justice, but in the 93 U.S. attorneys offices--take their
+duties and responsibilities to enforce those laws and protect
+the American investing public extremely seriously.
+ We are not seeking to obtain waivers as a routine matter.
+We are not seeking to abrogate constitutional violations.
+ We are seeking to ensure that we have full and complete
+understanding of a factual nature, in order to make appropriate
+charging decisions as to the corporate and business entity.
+ With respect to our means of enforcing it, we have had
+training and guidance, and continue to have such distributed to
+prosecutors, investigators and regulators around the country.
+Indeed, today, out in Salt Lake City, the securities fraud
+working group that is discussing with those entities how to
+ensure that there is complete and full and accurate compliance
+with it.
+ Prosecutors understand those duties and responsibilities.
+And when guidance is provided by the Department's leadership,
+it is expected to be followed.
+ To the extent that folks here have suggested that it has
+gone underground, or that there is something going on below the
+radar screen, we welcome the referral of those specific matters
+to obtain concrete, specific data to address that kind of
+either implicit or ``wink-wink, nod-nod'' activity.
+ To the extent that what we have had in terms of specific
+data, is that prosecutors do care about what has been said--the
+career prosecutors around the country in economic crime
+sections and fraud sections, in the Criminal Division's Fraud
+Section, at Main Justice--the ability to enter into a real
+understanding of how to implement it and enforce it.
+ We ask for that time to make sure that it is done
+thoughtfully and appropriately.
+ We have had five matters where we have had specific
+requests for factual information, category one type, narrowly
+tailored requests for the waiver of information. And we have
+had that meaningful dialogue between the Criminal Division and
+the respective U.S. attorneys office.
+ Mr. Lungren. Thank you, Mr. Chairman.
+ I would just say that, I think you understand there is a
+bipartisan concern that, as we go after corporate corruption,
+we do not in any way create a prosecutorial culture of coerced
+waiver, because we happen to believe, on a bipartisan basis,
+that the attorney-client privilege is so important to the
+working of justice, the protection of American citizens, but
+also to promote actual legal compliance within a corporate
+structure.
+ And I think you are going to find, on a bipartisan basis,
+we are going to continue to look at this and to see how it
+falls out. So, I thank you.
+ Mr. Sabin. I appreciate those comments, Congressman. And we
+agree. I agree absolutely with what you just stated.
+ Mr. Scott. The gentleman from Massachusetts?
+ Mr. Delahunt. I thank the Chairman.
+ And I, again, concur with the observations by the gentleman
+from California. I am sure you are aware that Mr. Lungren and I
+actually penned an opinion piece.
+ But he has asked the questions--he has preempted me,
+because those really were the questions that I was going to
+pose.
+ Let me acknowledge to Mr. White and Ms. Mathis that, from
+my perspective, you know, the attorney-client privilege is such
+a core value of American jurisprudence, that even if it should
+lead to great frustration, it has to be respected. This is so
+vital to our system of justice.
+ But let me pursue with Mr. Sabin. I mean, as a prosecutor--
+and I know that Mr. Lungren was a former attorney general--we
+are very familiar with human nature.
+ And human nature being what it is, aggressive prosecutors,
+who are passionate about a particular case or an investigation,
+eventually, in my opinion, will slip into that gray area where
+all of the training and all of the guidance simply do not, will
+not accomplish the kind of enforcement that I am sure you would
+like to see in terms of compliance. So, that is my problem.
+ Now, if you want to talk about a sanction and maybe civil
+liability, personal liability, the ability to sue the
+Government, you know, that is a different kind of enforcement.
+ Guidance and training is wonderful. But when there is a
+clear sanction--and I am not talking an administrative
+sanction, necessarily, but a sanction that could be brought in
+a court of law by a corporation--for those cases that seem to
+drift away from the explicit guidelines enumerated, now, that
+is a different situation.
+ I would suggest that, if you went back to Justice and did a
+survey of assistant U.S. attorneys and others that are involved
+in this decision-making process, there would be real reluctance
+to accept that sanction--again, a real sanction. Because, I
+think it was Mr. White that--well, maybe it was actually
+yourself--that talked about, you know, reality and practice,
+there is a divergence there.
+ And that is what I am particularly sensitive to, and I am
+sure members of this panel are, and as Mr. Lungren indicated,
+we will continue to monitor. But my own initial inclination is
+that--without revealing it in detail--is that Senators Specter
+and Leahy have an answer that I think respects the history of
+American jurisprudence.
+ Mr. Sabin, you are more than welcome to comment. The last
+time I think you were here, we were discussing cockfighting, if
+I remember. [Laughter.]
+ Mr. Sabin. Mr. Delahunt, you have a good recollection.
+ Mr. Delahunt. Right. You were rather well-informed on
+that---- [Laughter.]
+ Mr. Sabin. Well, I actually came up on a different topic.
+But since the other panel members were engaging in that, I
+think the Committee----
+ Mr. Delahunt. You are a renaissance man in terms of----
+[Laughter.]
+ Mr. Sabin. I appreciate the kind words that you say there.
+ The Department appreciates that concern. I am aware of your
+op-ed with Congressman Lungren. I am aware of your prior
+prosecutorial background, as well as Congressman Lundgren.
+ We respect and understand the concern that has been
+articulated.
+ I would suggest that, let us look at the concrete, tangible
+data. Let us look at how it is implemented. Let's look----
+ Mr. Delahunt. I understand. But, you know what? I mean,
+again the reality is, this data will only come in anecdotal
+form. And you welcome--and I am sure of your bona fides--
+referrals.
+ But in the real world with defense counsel to make those
+references, there is a variety of motives that would dictate
+against that.
+ I guess what I am suggesting is that it is really
+impossible in terms of defining a methodology that would give
+us that accurate data. And my own sense is that we just have to
+go on our sense of what the reality is and trying to understand
+human nature.
+ Mr. Sabin. And I believe that prosecutors will follow
+Department directives, consistent with their ethical duties and
+responsibilities, to uphold the highest traditions and
+principle of the Justice Department.
+ Mr. Delahunt. And I am sure the vast majority will. I am
+not suggesting otherwise.
+ But we all know that there is always a percentage that will
+be so aggressive, that will extend--will go beyond the
+parameters and the boundaries that have been defined.
+ And in our system of justice, the one thing that we cannot
+compromise is the integrity of the system, because when we
+begin to do that, we erode the confidence of the American
+people in our justice system.
+ Mr. Sabin. Don't disagree, sir.
+ Mr. Scott. Thank you. Thank you.
+ The gentleman from Texas, Mr. Gohmert?
+ Mr. Gohmert. Thank you, Mr. Chairman. I appreciate the
+opportunity for having this hearing. And I appreciated the
+Chairman of the full Committee's comments about the
+bipartisanship here in this Committee. We are pleased the
+Democrats would join us on this issue. And, anyway--a little
+inside joke. [Laughter.]
+ Mr. Scott. Moving right along----
+ Mr. Gohmert. But moving right along.
+ Mr. Delahunt. That was a very futile attempt at humor from
+somebody from Texas. [Laughter.]
+ Mr. Gohmert. But one of the things that has concerned me
+the last week is noting that perhaps just an inquiry about
+anything that may have to do with cases pending may be deemed
+as an ethics violation, or perhaps an obstruction of justice.
+ So, I hope that the holding of this hearing does not rise
+to that level that we are all potentially obstructing.
+ But, anyway, I have been concerned about the sentencing
+guidelines. Some of us remember when those were put in place,
+and the Supreme Court held that, absolutely, of course they are
+constitutional.
+ And some of you, I am sure, remember an awful lot of
+Federal judges were very upset about that, but they got used to
+them. And then I did not hear a lot of complaints.
+ And then the Supreme Court, since it is so consistent and
+they are so magnanimous in their incredible view of the law,
+came back and said, well, I do not know what we were thinking
+before, but it does not look constitutional to us now.
+ But the problem is, you know, is the right of waivers were
+exacerbated in 2004. To have that even come up as a
+consideration, a waiver of the attorney-client privilege come
+up in a sentencing scenario--well, you talk about a chilling
+effect on the claiming of attorney-client privilege.
+ And so, I have been a little out of the justice loop over
+the last few years, running for Congress and being here, and I
+am not familiar with whether or not there has been any effect,
+been any consideration at all, in the sentencing aspects,
+especially in view of Booker throwing out the guidelines.
+ As you are probably aware, we have considered the last
+couple of years, some people have been proponents of inserting
+legislative guidelines. I have been one of those that were
+encouraging, when we were in the majority, let us hold up. I am
+hearing Federal judges say they are not sure they need them.
+Let us see how the data goes from the sentencing, and determine
+whether or not we really need to interpose like that.
+ I still am not sure about that.
+ I would like, maybe starting right to left.
+ Mr. White, any comments, anything of which you are aware,
+cases in which you are aware, that the non-waiver of attorney-
+client privilege may have been considered in any way in the
+sentencing aspect, because I am sure you would agree, that
+would have a dramatic chilling effect if it were. Right?
+ Mr. White. Well, it would.
+ But, Congressman, from a practical standpoint, the chilling
+effect occurs long before sentencing. From a practical
+standpoint, the chilling effect occurs when I have employees
+who are reluctant to come forward in a code of conduct, ethical
+program, because they are concerned that what they say to me
+will be silver-plated over to----
+ Mr. Gohmert. Well, and I understand that. A lot of people
+have covered those issues. And I only have a few minutes, and I
+was wanting to get to the sentencing guidelines aspect.
+ Mr. White. I think there are probably----
+ Mr. Gohmert. But has it been----
+ Mr. White. Sorry. I think there are probably others who, on
+the group here. I have not gotten directly involved in the
+sentencing aspect. And I think that Ms. Mathis and, perhaps,
+some of the outside counsel would have more to say about that.
+ Mr. Gohmert. Thank you for your candor, Mr. White.
+ Mr. White. I will just pass to them. Thank you.
+ Mr. Gohmert. Thank you.
+ Ms. Mathis?
+ Ms. Mathis. Congressman, I think it is instructive to note
+that, after the U.S. Sentencing Commission decided to
+voluntarily withdraw their guidelines about privilege waiver,
+that the Commodity Futures Trading Commission did the same
+thing.
+ So, I will tell you that my sense is that, by not coercing
+or asking for the voluntary waiver of the privilege, that it
+has not had a deleterious effect on the Sentencing Commission.
+ The other point that I would make is that this is a little
+bit like shadow boxing, if I may, because the Department has
+said that, since McNulty, there have only been five requests
+for category one waivers, and there have been no requests for
+category two waivers.
+ Now, if no one is asking for these waivers, then the
+question really does arise: What is wrong with legislation,
+which straight-out says that no agent or attorney of the United
+States may pressure a company or another organization to
+disclose confidential information protected by the attorney-
+client privilege or work product doctrine, or to take some of
+these very draconian measures against its own employees?
+ It is a rhetorical question.
+ Mr. Gohmert. Well, my time is up and I still have not
+gotten an answer on whether or not--because, even though it is
+not a part of the guidelines, the guidelines are affected, as
+we have heard before. It doesn't mean that it is not being
+utilized. And so, maybe, if we have another round, I can get
+somebody to answer my question.
+ Thanks.
+ Mr. Scott. Did you want to continue responding?
+ Mr. Sullivan. I am happy to continue. I second what Ms.
+Mathis----
+ Mr. Gohmert. Thank you, Mr. Chairman.
+ Mr. Sullivan. I second what Ms. Mathis has said about the
+guidelines and the CFTC. I had a role in submitting information
+for purposes of the CFTC's report.
+ I will try to directly answer your question by saying, in
+my experience, the sentencing guidelines, by virtue of the
+revision, there has not been a significant, or any impact,
+frankly, on any clients that I have had.
+ If I may say one more thing. I am very aware of the buzzer.
+I have heard that before. I think we may be able to simplify
+this dialogue from the perspective of outside counsel.
+ I am not here to suggest--and I don't think any of my
+brethren are, either--that waiver is not sometimes good and
+useful. The 1989 Salomon Brothers case, where the law firm of
+Wachtell Lipton decided to waive, in the face of pervasive and
+horrific facts, began the process.
+ There are times to waive. If you have got a billion-dollar
+restatement and you represent the corporation, you might want
+to assist the Government for purposes of finding the
+individual, culpable wrongdoers.
+ My point is, it is the corporation's privilege. It should
+be the corporation's decision. There should be no attempt to
+coerce on the part of the Government, and there should be no
+penalty for not waiving. It should be neutral, except if you
+choose to voluntarily waive; then you should be provided a
+benefit.
+ Mr. Weissmann. I have nothing to add, because I agree with
+Mr. White. The issue for corporate criminal liability is one
+that arises at the charging phase, because for a company it is
+all about not being charged.
+ And given the enormous hammer that the Government has, if
+there is a factor, whether it is to penalize or to reward based
+on a waiver, whether it be category one or category two, they
+are going to waive, because it is not viewed as voluntary. They
+are going to do everything they can to get every possible
+benefit, because the indictment can kill the company.
+ Mr. Sabin. One aspect that has not been discussed is
+deferred prosecution agreements, that the idea that there is
+this kind of cooperation, voluntary disclosure, or even limited
+disclosure with respect to the privilege, allows the Government
+to make informed decisions and to address not necessarily in
+charging with an actual criminal charge, but to have a deferred
+prosecution agreement as a result of that voluntary
+cooperation.
+ So that addresses sort of the sentencing phase, which never
+actually gets to a sentencing phase, because you have a
+compliance agreement, you have a monitor. Depending upon the
+specific circumstances of a deferred prosecution agreement,
+that is one of the sort of spans between the charging nature
+and the sentencing phase.
+ And the Department is continually working through those
+relationships with experienced and sophisticated corporate
+defense counsel.
+ Mr. Scott. Thank you.
+ Mr. Forbes and I had about one additional question, and
+then part of my question.
+ Let me just make a statement that, Mr. Sabin, I think you
+indicated that there is, in fact, a difference in treatment
+between those who waive and those who don't, creating a
+differential.
+ And that did not come as a surprise to everybody, because
+everybody knew that to begin with.
+ And I have always been intrigued by the idea that you
+cannot charge extra for using a credit card. However, you can
+give a cash discount if you pay cash, creating a differential
+between those who pay cash and those who use credit cards.
+ But somehow you eliminate that problem by, if you call it a
+discount, it is okay. If you call it a punishment or a
+surcharge, then that is not okay.
+ The fact of the matter is, so long as there is a
+differential, you can call it what you want. The people who do
+not get--who do not waive are, in fact, put at a disadvantage,
+and some would call that punishment for not having waived.
+ And if everybody knows that that differential is there, you
+do not have to say it, that's pressure.
+ Now, my question is, to kind of put these kind of things in
+perspective, what difference does it make to a corporation to
+get the cooperation? How much less of a penalty may they get?
+What are we talking about in terms of qualifying for the
+benefit?
+ Mr. Sabin. Again, I reiterate, we are not--the Department
+of Justice is not pressuring corporations into waiving the
+privilege. We respect the privilege----
+ Mr. Scott. Everybody knows there is a differential between
+those who do and those who do not.
+ Mr. Sabin. We reward cooperation for category one
+information that has been provided, voluntary disclosure
+information that has provided.
+ In many instances, that is crucial information to ferret
+out the wrongdoing that is undertaken by individuals in the
+corporate entity.
+ Again, I go back to the larger picture. It is a nine-factor
+analysis, and cooperation is just one factor. And the waiver of
+the privilege and the shielding of culpable agents and
+employees are subparts of that totality of the circumstances
+analysis.
+ So, all those factors go into informed prosecutorial
+decision-making.
+ Mr. Scott. I guess my question was, what difference does it
+make to a corporation to get that cooperative designation, as
+opposed to not getting that designation? How much benefit is it
+to the corporation?
+ Mr. Sabin. And again, that is going to be fact-dependent
+upon----
+ Mr. Scott. Well, I mean----
+ Mr. Sabin [continuing]. Specific facts----
+ Mr. Scott. Are you talking about the fine will be cut in
+half, they will not get time in jail? I mean, what difference
+does it make for----
+ Mr. Sabin. I am not going to make a broad assertion as to
+the nature and extent of that.
+ Mr. Scott. Okay, well, then let me----
+ Mr. Sabin. It is going to depend upon the specific facts
+and circumstances involved. And then you go to the
+pervasiveness of the misconduct, the complicity of management
+in the misconduct, the history of the corporation relating to
+that. All those factors go into the prosecutorial decision-
+making.
+ Mr. Scott. Let me hear from some of the corporate counsel,
+because those are the ones that are considering whether or not
+it is worth waiving.
+ Mr. Sullivan?
+ Mr. Sullivan. Thank you, Chairman Scott.
+ The key issue for corporate counsel, for purposes of
+engaging with the Government in the light of potential
+misconduct, is to avoid a corporate indictment.
+ My testimony did not discuss, but written materials do, why
+I think--and this is probably a topic for another hearing--my
+corporation should only in exceedingly rare circumstances ever
+be indicted.
+ But nevertheless, the corporate company's indictment has
+dramatic, draconian ramifications. Its business suffers. Its
+stock price falls. Employees leave--well before conviction,
+well before there has been a determination of guilt beyond a
+reasonable doubt.
+ So, that is the dynamic that corporate counsel fight to
+preclude, almost at all costs.
+ And as I said before, if bad facts are pervasive, you need
+to engage to avoid an indictment. That is the Wachtell-Salomon
+case.
+ If there is gray area, as I said in my opening statement,
+my obligation is to understand that the preponderance of--I am
+sorry--that the guilt beyond reasonable doubt and the
+presumption of innocence still applies in these contexts. And I
+need to understand the facts and to establish a credible
+defense.
+ It is the gray area cases where, if I choose not to waive,
+I should not be penalized.
+ Mr. Scott. Mr. White?
+ Mr. White. Mr. Chairman, if a company is asked to waive,
+even before the investigation is complete, the value or the
+differential that you were talking about of waiving or not,
+cannot even be assessed by the company.
+ So a knowing and/or intelligent waiver really does not take
+place at that level. You just waive or you do not get the
+benefit slash punishment.
+ Mr. Scott. Thank you.
+ Mr. Forbes?
+ Mr. Forbes. Thank you, Mr. Chairman.
+ Once again, I just want to thank all of you.
+ And, Mr. Sabin, thanks for holding up under fire here. We
+want to make sure you know that we appreciate the great job
+that you and your office do in so many areas. We are just
+trying to get that balance and make sure we are protecting
+these rights.
+ Mr. Sullivan gave a great summary of the whole waiver
+issue, I think, just a few moments ago.
+ Mr. Sullivan. Thank you, Mr. Forbes.
+ Mr. Forbes. And we really thank you for that.
+ And I think what Mr. White and you are both saying is that,
+really, in a corporate situation the indictment really is the
+sentence. And so, by the time you get there, the game is pretty
+much up.
+ Mr. Sabin, we have talked about the concrete evidence that
+you would like to have, and I think everybody knows, they are
+not going to be able to get you that. And maybe that is
+something that your office could look at. Maybe you are doing
+it.
+ But even getting data like the number, or keeping track of
+the number of waivers that are taking place, and doing them by
+district, so that maybe that gives us some patterns we can look
+at. And maybe you are doing that. I don't----
+ Mr. Sabin. That is explicit in the memorandum----
+ Mr. Forbes. That was the----
+ Mr. Sabin [continuing]. To maintain written records and to
+have those records available----
+ Mr. Forbes. Maybe----
+ Mr. Sabin [continuing]. Both in the U.S. Attorney's
+Office----
+ Mr. Forbes. If we could get a look at those at some point
+in time, maybe that kind of could help us, sir, see----
+ Mr. Sabin. Well, I am not going to----
+ Mr. Forbes [continuing]. The numbers. I understand.
+ Mr. Sabin. But I am----
+ Mr. Forbes. I am just throwing it out, what helps.
+ Ms. Mathis, a final question for you. We are trying to get
+that pendulum swing right. We do not want to go as far as our
+friend, Mr. Delahunt, was raising in terms of civil penalties.
+ I know the ABA supports Senator Specter's legislation.
+ What is the mechanism for enforcement in that legislation,
+and what does the ABA recommend as an enforcement mechanism
+that strikes that proper balance?
+ Ms. Mathis. Congressman, let me talk about it in general
+principles, because my understanding is that Senate bill S. 186
+does not specifically have an enforcement mechanism.
+ Mr. Forbes. But are you okay with that? I mean, do you feel
+that just having it in the legislation will be enough without
+any enforcement mechanism?
+ Ms. Mathis. The ABA's position is that, it is important for
+the Congress, both houses, to put their own stamp on
+legislation, and that what you feel comfortable with is what
+you should do.
+ But with regard to these types of prosecutorial misconduct,
+the common law has handled them often, by allowing the judicial
+officer--the judge in the case--to determine. And so, that is a
+general precept that the ABA is supportive of.
+ However, if your legislation provides specific sanctions,
+we would be happy to work with your staff to look at what would
+fit within the normal contextual balance, as you point out,
+between the prosecutorial duties, and also the attorney-client
+privilege.
+ Mr. Forbes. But you are pretty comfortable with leaving it
+up to the way the common law has handled it with discretion to
+the judge.
+ Ms. Mathis. Yes, so the judge could deal with it, yes.
+ Mr. Forbes. Thank you all so much. Mr. Chairman, thank you.
+ Mr. Scott. Thank you.
+ Mr. Gohmert, do you have other questions?
+ Mr. Gohmert. Yes.
+ Mr. Scott. Okay, thank you.
+ Mr. Gohmert. Thanks.
+ I thought the gentleman's analogy about gas prices with use
+of credit card, use of cash, was a great illustration.
+ And I guess what I was trying to get to earlier, I
+understood all the other testimony. But if it were to come up
+at all in sentencing that this person either waived or didn't
+waive, then there's potential for effect there.
+ But just quickly, on the issue of sanctions, and Ms.
+Mathis, I think you made a great point that, it seems in so
+many areas of the law, if you just give the judge the power of
+enforcement, then it takes care of itself.
+ In Texas, several--and I had felonies and I had major civil
+litigation as a judge. But I liked the discovery rule that
+finally it came to, because there had been so much abuse.
+ But a discovery rule that gave the judge latitude to either
+prevent witnesses from testifying as a form of sanction,
+prevent certain evidence from coming in as a form of sanction,
+or in the worst case scenarios, forcing--just outright
+dismissal.
+ What do you think about some form of sanction in a rule
+like that? If I could get comments.
+ Ms. Mathis?
+ Ms. Mathis. Congressman, it seems that those are exactly
+the kind of sanctions in terms of increasing bad effects,
+consequences, of the request for a waiver or the use of
+material that came from a waiver.
+ I also concur with the statements that Mr. Sullivan has
+made earlier. It may well be in a corporation's best interest,
+but it should be in their interest to waive.
+ But if a judge were to find that there was pressure for
+them to waive, then it would need to be done early. And I think
+that is something we have to remember, that it may not be at
+the point of going into a trial. It may be at the point of
+indictment.
+ And so, we would have to think about how would a judicial
+officer be involved prior to that indictment coming to the
+fore.
+ Mr. Gohmert. Well, if it were prior to indictment, or at
+the time of potential indictment, I am not sure I can envision
+different degrees. You know, either you get to indict or you do
+not. And I understood the great point about sometimes an
+indictment is a death penalty to a corporation.
+ Do you agree that different degrees of sanctions would be
+good for the judge to have?
+ Ms. Mathis. In general, I am all for the judicial officer
+being able to have the full spectrum of opportunities for
+sanctions.
+ Mr. Gohmert. Yes. Not just a death penalty, throw the case
+out or leave it. Yes.
+ But at the time of potential indictment, do you see any
+other degrees that I am missing, other than either you don't
+get to return the indictment or you do? Are there any other
+measures that could be taken?
+ Ms. Mathis. I am going to pass that one, if I may, to Mr.
+White.
+ Mr. Gohmert. Mr. White?
+ Mr. White. Thank you, Karen.
+ I am not sure I appreciate the pass, but I will give a pass
+at it. [Laughter.]
+ Again, I will hearken back to one thing that Karen did say,
+and that is that we believe--I believe--that there is enough
+not only intellect, but commitment--and apparently bipartisan
+commitment--to establish an appropriate enforcement principle,
+whether the principle is one of referring to the discretion of
+the court to do certain things on a pre-indictment basis,
+should it be found that there's been some form of coercion, and
+that a right as trusted and as vulnerable as the right to
+attorney-client confidentiality has been breached.
+ It would seem to me that that could become even a separate
+matter for inquiry in an appropriate prosecutorial way.
+ And I would suggest to you that there may even be ethical
+requirements for prosecutors who are aware that another
+prosecutor may have violated a constitutional right of someone
+to have the duty to step forward and do something about it.
+That is on a pre-indictment basis.
+ On a post-indictment basis, you know, the bell has already
+rung. And it would seem to me that a court could take notice of
+inappropriate behavior and act accordingly, either suppress
+certain evidence or impose certain sanctions, or some of the
+other things that you mentioned.
+ Mr. Gohmert. Mr. Sabin, do you see different degrees of
+potential sanction, even at the early indictment stage?
+ Mr. Sabin. I would not concede that there is factual
+evidence that prosecutorial misconduct is occurring in this
+area, such that there should be a need for sanctions to be in
+play.
+ We have the Office of Professional Responsibility for
+egregious misconduct violations, if and when they should occur.
+ But to go back to the premise, I would strongly disagree
+that there is, as suggested here, some kind of concerted or
+widespread prosecutorial misconduct, requiring this Congress
+or----
+ Mr. Gohmert. And I appreciate that, Mr. Sabin.
+ And I understand that. And I actually appreciate the DOJ
+taking this effort in order to try to minimize the potential
+for that kind of problem.
+ But it still did not answer my question of whether or not,
+given that is the position, I do not have anything factual to
+start at this point.
+ I am just saying, if there were a rule, would you like to
+have input? Are there different degrees of sanctions at the
+indictment stage?
+ Mr. Sabin. Sure, in the theoretical----
+ Mr. Gohmert. Do you realize you may not be in the DOJ come,
+you know, January or February of 2009.
+ Mr. Sabin. I am a career prosecutor, sir. So, I look
+forward to a long----
+ Mr. Gohmert. Well, you must have missed the hearing that
+was going on this week. [Laughter.]
+ But that potential is out there.
+ Mr. Sabin. The ability to link it to a judicial officer,
+when that, I do not see in the pre-indictment stage, other than
+in a grand jury context with a judge overseeing the grand jury
+having authority for some kind of misconduct, would have a
+triggering mechanism for a judicial officer to be involved.
+ Absent that, how does a court get involved in something
+that is merely an ongoing investigation? I do not see how you
+can link those two, at that investigatory phase, link it up
+with a judicial officer.
+ Mr. Sullivan. Mr. Gohmert, if I may?
+ Mr. Gohmert. Well, I have to yield back to the Chairman at
+this point. I am out of time. But if the Chairman allows.
+ Mr. Sullivan. Thank you, Mr. Chairman.
+ In answer to your question and Mr. Sabin's response, I
+think at the pre-indictment phase, if there were a sanctions
+provision and it can be showed that an aggressive prosecutor
+violated that sanctions provision, you could move to dismiss
+the indictment.
+ You could allege in that motion that improper
+considerations were undertaken and adverse inferences were
+drawn by the refusal of the corporation to waive, that the
+request to waive itself was improper.
+ You could submit that, even post-indictment, if such a
+motion would fail, that information obtained, or potentially to
+be obtained, through that request would be excluded for
+purposes of the prosecution's case in chief.
+ You could also suggest that the violating prosecutor be
+subjected to OPR--internal OPR investigatory review--as well as
+Bar sanctions, in accordance with the Bar jurisdictions where
+that person is admitted.
+ So, I think there are a variety of efforts to be undertaken
+for purposes of chilling a willfully aggressive prosecutor who
+seeks to violate Senator Specter's proposal.
+ Mr. Gohmert. Thank you, Mr. Sullivan. Appreciate that
+answer.
+ Mr. Scott. I would like to thank the witnesses for their
+testimony.
+ Members will have an additional--if they have additional
+written questions, we will submit them to you, and ask you to,
+if we submit any additional questions, respond as quickly as
+possible.
+ Without objection, the hearing record will remain open for
+1 week for the submission of additional materials.
+ And without objection, the Committee stands adjourned.
+ [Whereupon, at 11:10 a.m., the Subcommittee was adjourned.]
+ A P P E N D I X
+
+ ----------
+
+
+ Material Submitted for the Hearing Record
+
+
+
+
+
+