Corporate Governance

From the Pages of The Pomerantz Monitor

By Carolyn Moskowitz

In the November 2007 Pomerantz Monitor, Pomerantz Partner Adam Prussin reported on reverberations of the decision in the KPMG tax shelter case. The district court dismissed the charges against 13 former KPMG employees, holding that the Department of Justice?s then-existing guidelines for the prosecution of business organizations, set forth in the ?Thompson Memorandum? were unconstitutional. Under the Thompson Memo, the DOJ took into account, in deciding whether to indict a corporation, whether or not it was being "cooperative" with the government by taking such actions as waiving its attorney-client privilege and cutting off funds for the defense costs of the individual defendants. Typically, companies advance the defense costs of their employees charged with a crime in connection with their employment activities. Once such funds are cut off, individual defendants can be financially crushed. That is exactly what happened in KPMG, and which the judge cited as a violation of defendants' rights.

DOJ prosecutors have argued that it was precisely the type of pressure permitted by the Thompson Memo that played a key role in achieving convictions in the Worldcom, Enron, Adelphia and Homestore cases: each time, key players were forced to plead guilty and to testify against others.

Congress has taken a stand in favor of attorney-client privilege. On November 13, 2007, after the last issue of The Pomerantz Monitor went to press, Congress overwhelmingly approved The Attorney-Client Privilege Protection Act of 2007. The same legislation is now pending in the Senate Judiciary Committee.

Full post as published by PomTalk on November 27, 2007 (boomark / email).