Specter Pushes Bill to Curb Corporate Prosecutors

September 19, 2007
The Deal
By Bill McConnell

Despite pleas by a Department of Justice official and two legal scholars to slow down, the Senate Judiciary Committee's top Republican is pushing for a quick vote on legislation that would limit federal prosecutors' ability to pressure cooperation from companies under investigation for corporate fraud.

Sen. Arlen Specter, the committee's ranking Republican and author of legislation that would restrict federal prosecutors' ability to weigh a company's willingness to waive attorney-client privilege when deciding to bring charges against the firm, said during a hearing on his bill Tuesday that further delay is unnecessary. The Pennsylvania lawmaker wants the panel to be "in position to come to a judgment to [vote on] the bill and come to a judgment soon ... and have it considered by the Senate and the House as well."

Specter dismissed calls to wait until the Senate has a chance to ask the nominee for U.S. attorney general, retired Federal Judge Michael Mukasey, for his view on the matter. That nomination will become embroiled in disputes over the White House's anti-terrorism surveillance practices and other political disagreements and will only delay action on his bill, the lawmaker said.

Specter faces an uphill battle. The Judiciary Committee's chairman, Sen. Patrick Leahy, has not expressed a view on Specter's bill but appears inclined to allow a committee vote. On Tuesday Leahy opened a hearing on the bill, then quickly turned the gavel over to Specter, who chaired the remainder of the proceeding.

A collection of former U.S. attorneys general including Richard Thornburg and Edwin Meese from the Reagan White House, are supporting Specter's initiative, as are business and civil liberties groups. Rep. Bobby Scott, D-Va., has introduced a companion bill in the House, but Specter has no co-sponsors from his chamber. Tuesday the only active participant from the Judiciary Committee, aside from Leahy, was Sen. Pete Sessions, R-Texas, a former Justice Department prosecutor who opposes the bill.

Specter's bill is aimed at rolling back Justice Department practices aimed at coercing companies to cooperate with corporate fraud investigations that were initiated in the wake of the Enron scandal. Specifically, the legislation would bar prosecutors from weighing a company's willingness to waive its right to confidential communication with its lawyers when deciding to bring charges.

Specter said that the right to privilege communications between defendants and their attorneys is a "sacrosanct" constitutional right.

Businesses, along with civil liberties groups, complain that federal prosecutors have abused their authority to file criminal charges as leverage to bully companies into waiving their Fifth Amendment right to confidential communications with their lawyers. Companies also have routinely been pressured to fire or deny legal fees to employees who refused to cooperate with investigations, they say.

The dispute intensified in 2003 when then-Deputy Attorney General Larry Thompson spelled out procedures for white-collar crime investigations. Thompson told prosecutors to weigh companies' cooperation when deciding whether to bring charges.

Thompson wrote that the level of cooperation should be judged by companies' willingness to waive the attorney-client privilege and provide corporate documents relevant to the investigation and restrict payment of legal fees of employees under investigation. Companies also would get points for firing employees who refuse to waive their individual Fifth Amendment rights.

In response to protests, ex-Deputy Attorney General Paul McNulty last December revised the guidelines with two major changes. First, payment of employees' legal fees no longer would be a factor in judging a company's willingness to cooperate. Second, local prosecutors were required to obtain approval from a deputy attorney general in Washington before asking a firm to waive confidentiality rights.

Business groups say McNulty's revisions have not stopped prosecutorial abuses and the threat gives companies incentive to abandon employees who are being investigated in return for lenient treatment. McNulty left the government for private practice in August.

The coalition of business and civil liberties groups endorsing Specter's bill cited a report on prosecutors' practices following McNulty's revisions that was prepared by former Delaware Supreme Court Chief Justice E. Norman Veasey as evidence the reforms did not go far enough.

In the report, Veasey quoted one prosecutor as saying, "I don't give a flying -- -- " about being required to seek Washington's approval and told lawyers for a company under investigation that if they didn't like the demand to waive confidentiality they had to appeal up DOJ's ranks. Other company lawyers told Veasey that prosecutors said they had no intention of requesting supervisors' permission to seek privilege waivers.

However, Karin Immergut, a U.S. Attorney in Portland, Ore., and chair of a panel advising the attorney general's office on white-collar crime, disputed the notion that McNulty's endeavor has encouraged continued abuses and warned that stripping prosecutors of the right to consider confidentiality waivers when deciding to bring charges or not could cause investigations to drag on for years.

Since McNulty revised the guidelines, she knows of only four instances in which requests to seek privileged documents containing factual information pertaining to an investigation were permitted by Washington. There have been none in which prosecutors have asked permission to find out how companies' lawyers were advising their clients.

The statistics "simply do not support a finding of widespread abuse," she said. "Legislative action is simply not needed."

Specter's bill, she warned, "creates two sets of rules, one more favorable for corporations and their employees and another for everybody else."

Daniel Richman, a professor at Columbia Law School, added that the "highly speculative" effect of Specter's proposal "counsels against legislative action at this time."

Richman noted that employees' rights to confidentiality are not absolute. The "company controls the privilege" and employees should be informed "they lack legal protection in this regard."

Michael L. Seigel, a professor at the University of Florida College of Law, agreed. "Privilege is actually the exception, not the rule," he said.

"The rule is that the government, acting on behalf of the people, is entitled to 'every man's evidence' when attempting to uncover the truth."

Despite those admonitions, Specter said he was committed to moving forward: "I think this is a matter for congressional judgment."