Corporate Governance

From the Pages of The Pomerantz Monitor: DOJ Guidelines for Prosecuting Companies Are Overhauled

By Carolyn Moskowitz

As Adam Prussin reports in the October issue of The Pomerantz Monitor, the U.S. Department of Justice has yet another new policy for the investigation and prosecution of businesses. The latest revisions relate primarily to what constitutes a company?s ?cooperation? with an investigation and, in particular, whether the DOJ can demand that the company waive the attorney-client and work product privileges and take punitive actions against indicted employees.

The new guidelines prohibit prosecutors from insisting that a corporation waive its privileges or cut off legal fees to its employees, and even from considering whether the corporation has taken these actions on its own. According to the new guidelines, cooperation should be judged solely by the extent to which the corporation disclosed its ?knowledge? of the underlying facts. But, some have noted, if the company?s knowledge of the facts comes from an internal investigation conducted by outside counsel, the company may not be able to disclose what it knows without trampling on its own privileges.

Also, under the new policy the government may only consider whether a company has disciplined employees the company has decided were culpable, and then only as part of evaluating the company?s remedial measures or its compliance programs.

While this change may prevent the most overreaching of DOJ demands, such as were made in the infamous KPMG tax evasion case, it does creates another potential problem: suppose the company thinks that an employee is not culpable, but the DOJ thinks he is? In such a case it will take considerable fortitude for the company to continue to pay his defense costs.

Full post as published by PomTalk on October 08, 2008 (boomark / email).