Justice softens hardball tactics with corporations

[July 10, 2008]  WASHINGTON (AP) -- The Justice Department has agreed to back off hardball tactics to force corporations to turn over confidential communications between their attorneys and company executives under scrutiny by prosecutors.

The new rules, outlined Wednesday in a Justice Department letter to the Senate, further ease tough steps taken after the Enron-era scandals to root out white-collar crime. They come after years of lobbying by business and legal groups that argued such sanctions were coercive and unconstitutional.

At issue are corporations' efforts to avoid being branded as uncooperative during investigations -- potentially leading prosecutors to seek indictments that would publicly scar even innocent businesses forever.

"We will no longer measure cooperation by waiver of the attorney-client privilege," Attorney General Michael Mukasey told the Senate Judiciary Committee on Wednesday morning.

Hours later, the Justice Department's No. 2 official, Deputy Attorney General Mark Filip, sent the panel a letter outlining the changes that "the department intends to make in the coming weeks."

They include:

-Measuring cooperation by how much a business voluntarily turns over facts and evidence -- not by the company automatically waiving attorney-client privileges.

-Barring prosecutors from considering whether a corporation is paying attorneys' fees in assessing its level of cooperation.

-Barring prosecutors from determining cooperation by looking at whether a corporation has disciplined certain employees also under scrutiny.

"I think we all very much share an appreciation for the foundational role that the attorney-client privilege plays in our legal system, including our system of criminal justice," Filip wrote in the letter to Sens. Patrick Leahy, D-Vt., and Arlen Specter, R-Pa.

The rules represent a softening of tactics adopted in December 2006 that sought even then to strike a compromise between limiting prosecutors while still aggressively pursuing corporate fraud.

Specter has threatened legislation to protect communication and information between attorneys and their corporate clients. The Justice Department's new rules seek to make such legislation unnecessary.

At Wednesday morning's hearing, Specter said "the matter of the attorney-client privilege is very, very significant."

"When I was a prosecutor, I wouldn't have thought of asking someone to waive their privilege, and yet that is being done here," said Specter, who served as Philadelphia's district attorney in the 1970s.

"And it may be in the corporation's interest to waive the privilege to have a reduction in charges or a reduction on sentencing, but there are individuals who have that privilege within the corporation who ought not to be coerced into waiving the privilege."

[Associated Press; By LARA JAKES JORDAN]

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