Chicago Bar Record

September, 2006

President’s Page

By: Kevin P. Durkin, President

The Erosion of the Attorney-Client Privilege

I am proud and honored to welcome our distinguished international guests from the world’s largest city bar associations to Chicago for the fourth conference of World City Bar Leaders. Our association was selected as the host bar for this year’s conference at the 2004 Conference in Shanghai, China. We have put together an outstanding program and more than 22 bar leaders from the world’s largest cities are registered for this three-day conference covering some of the following topics: international arbitration, human rights, international trade, update of GATS, international money laundering, independence of the judiciary, update on legal services, and, the erosion of the attorney-client privilege. T his latter topic is a growing concern for lawyers all over the world and, especially, for corporate/business lawyers in the United States.

Many heartfelt thanks to our host committee and to our many sponsors whose generous support has helped ensure the success of the Chicago Conference of World City Bar Leaders. The roster of host committee and corporate and law firm sponsors are listed in this issue of the CBA Record.

In the wake of the Enron scandal, it is not surprising that government scrutiny of corporate America has intensified. The shocking disclosures and recent convictions of corporate mismanagement, malfeasance, and deceptive business practices involving Enron and other corporate leaders have caused profound personal suffering and tremendous financial losses for millions of Americans.

In response to these scandals, congressional leaders, the Department of Justice, and government regulatory agencies have collaborated to enact more restrictive regulations in an attempt to provide greater protection for employees, shareholders, and the public. The Sarbanes-Oxley Act is an example of this effort and, according to the ABA, serves to recognize that "the effectiveness of these internal mechanisms depends in large part on the ability of the individuals with knowledge to speak candidly and confidentially with lawyers..." I think it is fair to say that there is a general consensus: employers and employees must maintain the ability to speak with Counsel about internal investigations. These investigations help companies and their governing boards identify potential violations of law, misconduct, and other malfeasance that may expose companies to civil and criminal liability.

In 1999, the Department of Justice adopted what has since been called the "Holder Amendment," which encourages federal prosecutors investigating corporations to request those companies to waive their privilege as a condition for receiving cooperation credit.

The Department of Justice expanded this policy in 2003 when it adopted the "Principles of Federal Prosecution of Business Organizations." Called the Thompson Memorandum, these principles state, in pertinent part "One factor the prosecutor may weigh in assessing the adequacy of the corporation’s cooperation is the completeness of its disclosure including, if necessary, a waiver of the attorney-client privilege and work product protection, both with respect to its internal investigation and to communications between specific officers. Such waivers permit the government to obtain statements of possible witnesses, subjects are targets without having to negotiate individual cooperation of immunity agreements...." Then, in 2004, the U.S. Sentencing Commission adopted amendments to the Federal Sentencing Guidelines, further exacerbating the problems set in motion by Holder and Thompson. In particular, the amendment to Section 8C2.5 provides that "waiver of attorney-client privilege and of work product protections is not a prerequisite to a reduction in culpability score for cooperation with government... unless such waiver is necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization."

Thus, corporations facing investigations from a federal or state regulatory agency are hard-pressed not to cooperate. The collective effect of these changes gives prosecutors significant leverage with corporations under investigation. Based on a survey conducted by the Association of Corporate Counsel, the National Association of Criminal Defense Lawyers, and the ABA, "almost 75 percent of corporate counsel respondents believe that a culture of waiver has evolved, in which governmental agencies believe that it is reasonable and appropriate for them to expect a company under investigation to broadly waive attorney-client or work product protections." Court decisions regarding the waiver are unsettling and do not provide adequate guidance or protection to corporate counsel and/or the bar on this issue.

Last March, the ABA sought to strike a reasonable balance with the Department of Justice and asked the Sentencing Commission to modify the 2004 Privilege Waiver Amendment and the Justice Department’s internal waiver policies. In early May, the ABA sent a letter to U.S. Attorney General Alberto Gonzales pointing out the problems with these policies and asking the Attorney General to adopt language modifications that would restore the attorney-client privilege by preventing prosecutors from seeking a privilege waiver during investigations. The ABA also asked Gonzales to specify the types of factual and non-privileged information that prosecutors could request from companies as a sign of cooperation and to clarify that any voluntary waiver of privilege will not be considered with assessing whether the entity provided effective cooperation.

No one is quite sure what the outcome of the ABA’s efforts will be to redirect the government’s thinking on this important issue. While the attorney-client privilege is a cornerstone of our profession, we can be certain that Congress and federal and state agencies will continue to take a more active and aggressive role in casting their nets in an attempt to discovery corporate impropriety. And in this crusade, the attorney-client privilege may be permanently disabled and/or mortally wounded. The government’s use of a big stick called "cooperation" to induce corporate lawyers to waive the attorney-client privilege and work product protections is one offer that we must continue to oppose.