On the brink of a brave new world: the death of privilege in corporate criminal investigations.

• Author: Zornow, David M.

1. INTRODUCTION

   The sound you hear coming from the corridors of the Department of Justice is a requiem marking the death of privilege in corporate criminal investigations. Once-celebrated goals of our legal system -- the client's rights of confidentiality and freedom from self-incrimination -- are giving way to the government's powerful demands for the swift disclosure of all evidence relevant to its investigations of corporate misconduct. With this change in prosecutorial attitude, the government effectively is deputizing "Corporate America" as an arm of law enforcement at the expense of principles that lie at the core of our adversarial system of justice. As a result, a wedge has been driven between senior management and other employees as corporations rush to meet the requests of federal prosecutors for "cooperation."

   In 1993, former United States Attorney General Richard Thornburgh articulated the federal government's evolving view toward white collar criminal defendants:

   You're trying to get every edge you can on those people who are devising increasingly more intricate schemes to rip off the public, hiring the best lawyers, providing the best defenses. So you're constantly pushing the edge of the envelope out to see if you can get an edge for the prosecution.(1) The willingness of federal prosecutors to demand the production of privileged information from corporations is the latest manifestation in this effort to "push the edge of the envelope." Federal prosecutors are no longer content to build criminal cases by relying on the powerful tools of grants of immunity and grand jury subpoenas for non-privileged evidence. Instead, they now often insist, even at the outset of an investigation, that corporations turn over privileged communications, attorney work product, and incriminating statements from corporate employees as a condition of favorable treatment in the exercise of the prosecutor's considerable discretion. Furthermore, the government now views a corporation's failure to disclose privileged information immediately as a clandestine effort to hide the truth.

   The erosion of corporate privileges by forced waivers coincides with a growing focus on corporate culpability in our criminal justice system. While prosecutions of corporations were once the exception rather than the rule, the pursuit of corporate convictions is now a primary goal of the Department of Justice. On June 16, 1999, Deputy Attorney General Eric Holder issued a memorandum, entitled "Federal Prosecution of Corporations," to all federal prosecutors ("Memorandum").(2) The Memorandum emphasizes the "great benefits" that result from the "vigorous enforcement of the criminal laws against corporate wrongdoers ... particularly in the area of white collar crime."(3) These purported benefits include "enabl[ing] the government to address and be a force for positive change of corporate culture, alter corporate behavior, and prevent, discover and punish white collar crime."(4)

   Such sentiments have been building steadily since the incorporation of the Organizational Sentencing chapter into the Federal Guidelines in 1991 ("Guidelines").(5) As one United States Attorney observed, the Guidelines clearly prescribe that the best route to corporate compliance with the law is "an enforced partnership between prosecutors and corporations."(6) In the decade since the Guidelines were enacted, this phenomenon of "enforced partnership" has begun to eclipse the idea, expressed by the Supreme Court in Upjohn v. United States,(7) that the best route to corporate compliance with the law is "full and frank communication between attorneys and their [corporate] clients."(8) Corporate privileges are weakening at the very time when, given the increased focus on corporate prosecutions, such entities are in greater need of confidential legal advice than ever before.

   The unpredictability that exists at the time privileged communications occur or work product is created, whether in the normal course of business or in the context of defending against a criminal investigation, creates a chilling effect that inhibits a company seeking legal advice. The corporation, its employees, and inside and outside counsel are left to guess whether, under the legal, financial, and public relations pressures of a criminal investigation, the company will feel compelled to waive privilege. Indeed, it may now be safe to assume that a corporation will turn over privileged information. As a result, our criminal justice system has already begun to suffer the loss of fully informed and vigorously adversarial legal representation in exchange for prosecutorial expediency.

   This essay discusses the death of privilege in corporate criminal investigations from the vantage point of the criminal defense attorney. Section II examines the rationale underlying three important privileges, as well as the traditional application of these privileges in criminal investigations of corporate misconduct. Section III describes how, in corporate criminal investigations, these three privileges have yielded in the face of increasingly aggressive federal prosecutorial tactics. Section IV highlights the major concerns facing corporate counsel in conducting a criminal investigation, while Section V describes how both Congress and the courts have, in some instances, curbed the prosecutorial stampede into privileged areas. The essay concludes that, though the requiem may be premature, the criminal defense function in cases of potential corporate misconduct has already been unmistakably compromised.

2. THE RATIONALES FOR THREE IMPORTANT PRIVILEGES

   1. The Attorney-Client Privilege

      All communications between a client and an attorney for the purpose of obtaining or providing legal advice are confidential.(9) The attorney-client privilege is based on the notion that both clients and society are served when the client is able to obtain "fully informed legal advice"(10) from a lawyer. Because the client will be discouraged from communicating openly with the attorney unless there is a promise that the communication will remain secret, the privilege is enforced to encourage an atmosphere of openness.(11) The privilege applies no less to corporations than to individuals.(12)

   2. The Attorney Work Product Doctrine

      Under the attorney work product doctrine, "an attorney is not required to divulge, by discovery or otherwise, facts developed by his efforts in preparation of the case or opinions he has formed about any phase of the litigation."(13) Fact work product may be obtained by an adversary only "upon a showing of both a substantial need and an inability to secure the substantial equivalent of the materials by alternate means without undue hardship."(14) Opinion work product consists of the attorney's "mental impressions, conclusions, opinions or legal theories"(15) relative to the client's case, and is "virtually undiscoverable."(16) The work product doctrine is based on "the public policy underlying the orderly prosecution and defense of legal claims"(17) -- the notion that, in an adversary system, an attorney should not be obliged to share her work with her client's adversary. If an attorney's work product were discoverable, the attorney would be discouraged from memorializing thoughts on paper.(18)

      The attorney-client privilege and the work product doctrine facilitate the participation of attorneys in our legal system in the role of confidential legal advisors. There are a host of benefits both to clients and society which spring from the participation of attorneys in this role. Generally, clients are afforded an opportunity to understand both their fights and responsibilities under the law. Specifically, clients may obtain guidance about the legality of past and prospective behavior as well as advice concerning the details of the legal system if an investigation or proceeding is imminent. In Upjohn, the Court stated that corporate attorneys are needed both to "formulate sound advice when their client is faced with a specific legal problem" as well as to "ensure their client's compliance with the law."(19)

      From the standpoint of society, as clients gain an increased understanding of the law, compliance with legal rules is encouraged and the rules themselves are refined as clients act on them.(20) In addition, because attorneys are bound by strong ethical obligations and are "part of the judicial system charged with upholding the law,"(21) the interests of society are in a real sense represented behind the cloak of privileges. The adversary system is served as well, as clients are afforded the opportunity to have a fully developed legal case presented on their behalf in any dispute. Finally, the constitutional right to counsel is fulfilled.(22)

   3. Fifth Amendment Privilege Against Self-Incrimination

      There are many justifications for the constitutional privilege against self-incrimination.(23) One rationale is to avoid subjecting a criminal defendant to the "cruel trilemma" of "self-accusation, perjury or contempt."(24) Another rationale is to shelter the individual from being coerced by an overzealous prosecutor to confess his wrongs.(25) Yet another rationale stems from the "inviolability of the human personality and of the right of each individual `to a private enclave where he may lead a private life.'"(26)

      Though two of these rationales arguably apply to corporations, the Supreme Court has held firmly that the privilege against self incrimination is not available to corporations.(27) Moreover, though corporate employees are entitled to the full protection of the privilege against self-incrimination, the Supreme Court has held that current employees may not assert the privilege with respect to corporate documents in their possession, even if the documents tend to incriminate them personally.(28) This is because, as current employees of the corporation, they are only custodians of the corporate materials and have no...