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factors. In most cases, however, no single factor will be dispositive. Further, national law enforcement policies in various enforcement areas may require that more or less weight be given to certain of these factors than to others. Of course, prosecutors must exercise their judgment in applying and balancing these factors and this process does not mandate a particular result.
In making a decision to charge a corporation, the prosecutor generally has wide latitude in determining when, whom, how, and even whether to prosecute for violations of federal criminal law. In exercising that discretion, prosecutors should consider the following general statements of principles that summarize appropriate considerations to be weighed and. desirable practices to be followed in discharging their prosecutorial responsibilities. In doing so, prosecutors should ensure that the general purposes of the criminal law — assurance of warranted punishment, deterrence of further criminal conduct protection of the public from dangerous and fraudulent conduct, rehabilitation of offenders, and restitution for victims and affected communities — are adequately met, taking into account the special nature of the corporate “person,”
Charging a Corporation: Special Policy Concerns
General Principle: The nature and seriousness of the crime, including the risk of harm to the public from the criminal conduct, are obviously primary factors in determining whether to charge a corporation. In addition, corporate conduct, particularly that of national and multi-national corporations, necessarily intersects with federal economic, taxation, and criminal law enforcement policies. In applying these principles, prosecutors must consider the practices and policies of the appropriate Division of the Department, and must comply with those policies to the extent required.
Comment: In determining whether to charge a corporation, prosecutors should take into account federal law enforcement priorities as discussed above. See USAM § 9-27-230. In addition, however, prosecutors must be aware of the specific policy goals and incentive programs established by the respective Divisions and. regulatory agencies. Thus, whereas natural persons may be given incremental degrees of credit (ranging from immunity to lesser charges to sentencing considerations) for turning themselves in, making statements against their penal interest- and cooperating in the government’s investigation of their own- and others’ wrongdoing, the same approach may sot be appropriate in all circumstances with respect to corporations. As- an example, it is entirely proper is many investigations for a prosecutor to consider the corporation’s pre-indictment conduct, e.g.,voluntary disclousure, cooperation, remediation or restitution, in determining whether to seek as indictment. However, this would not necessarily be appropriate in an antitrust investigation, in which antitrust violations, by definition, go to the heart of the corporation’s business and for which the Antitrust Division has therefore established a firm policy, understood in the business community, that credit should not be given at the charging stage for a compliance program and that amnesty is available only to the first corporation to make full disclosure to the government. As another example, the Tax Division has a strong preference for prosecuting responsible individuals, rather than entitles, for corporate tax offenses. Thus, in determining whether or not to charge a corporation, prosecutors must consult with the Criminal. Antitrust, Tax. and Environmental and Natural Resources Divisions, if appropriate or required.
Charging a Corporation: Pervasiveness of Wrongdoing Within the Corporation
General Principle: A corporation can only act through natural persons, and it is therefore held responsible for the acts of such persons fairly attributable to it. Charging a corporation for even minor misconduct may be appropriate where the wrongdoing was pervasive and was undertaken by a large number of employees or by all the employees in a particular role within the corporation, e.g., salesmen or procurement officers, or was condoned by upper management. On the other hand, in certain limited circumstances, it may not be appropriate to impose liability upon a corporation, particularly one with a compliance program in place, under a strict respondeat superior theory for the single isolated act of a rogue employee. There is, of course, a wide spectrum between these two extremes, and a prosecutor should exercise sound discretion in evaluating the pervasiveness of wrongdoing within a corporation.
Comment; Of these factors, the most important is the role of management, Although acts of even low-level employees may result in criminal liability, a corporation is directed by its management and management is responsible for a corporate culture in which criminal conduct is either discouraged or tacitly encouraged. As stated in commentary to the Sentencing Guidelines:
Pervasiveness [is] case specific and [will] depend on the number, and degree of responsibility, of individuals [with] substantial authority … who participated in, condoned, or were willfully ignorant of the offense. Fewer individuals need to be involved for a finding of pervasiveness if those individuals exercised a relatively high degree of authority. Pervasiveness can occur either within an organization as a whole or within a unit of an organization. See USSG §8C2.5, comment. (n. 4),
Charging a Corporation: The Corporation’s Past History
General Principle: Prosecutors may consider a corporation’s history of similar conduct, including prior criminal, civil, and regulatory enforcement actions against it, in determining whether to bring: Criminal charges.
Comment: A corporation, like a natural person, is expected to learn from its mistakes, A history of similar conduct may be probative of a corporate culture that encouraged, or at least condoned, such conduct, regardless of any compliance programs. Criminal prosecution of a corporation may be particularly appropriate where the corporation previously had been subject to non-criminal guidance, warnings, or sanctions, or previous criminal charges, and it either had not taken adequate action to prevent future unlawful conduct or had continued to engage in the conduct in spite of the warnings or enforcement actions taken against it. In making this determination, the corporate structure itself, e.g., subsidiaries or operating divisions, should be ignored, and enforcement actions taken against the corporation or any of its divisions, subsidiaries, and affiliates should be considered. See USSG § 8C2.5(c) & comment.(n. 6).
Charging a Corporation: The Value of Cooperation
General Principle: In determining whether to charge a corporation, that corporation’s timely and voluntary disclosure of wrongdoing and its cooperation with the government’s investigation may be relevant factors. In gauging the extent of the corporation’s cooperation, the prosecutor may consider, among other things, whether the corporation made a voluntary and timely disclosure, and the corporation’s willingness to. provide relevant evidence and to identify the culprits within the corporation, including senior executives.
Comment: In investigating wrongdoing by or within a corporation, a prosecutor is likely to encounter several obstacles resulting from the nature of the corporation itself. It will often be difficult to determine which individual took which action on behalf of the corporation. Lines of authority and responsibility may be shared among operating divisions or departments, and records and personnel may be spread throughout the United States or even among several countries. Where the criminal conduct continued over an extended period of time, the culpable or knowledgeable personnel may have been promoted, transferred, or fired, or they may have quit or retired. Accordingly, a corporation’s cooperation may be critical in identifying the culprits and locating, relevant evidence. Relevant considerations in determining whether a corporation has cooperated are set forth below.
Qualifying for Immunity, Amnesty or Pretrial Diversion
In some circumstances, granting a corporation immunity or amnesty or pretrial diversion may be considered in the course of the government’s investigation. In such circumstances, prosecutors should refer to the principles governing non-prosecution agreements generally. See USAM § 9-27.600-650. These principles permit a non-prosecution agreement in exchange for cooperation when a corporation’s “timely cooperation appears to be necessary to the public interest and other means of obtaining the desired cooperation are unavailable or would not be effective.” Prosecutors should note that in the case of national or multi-national corporations, multi-district or global agreements may be necessary. Such: agreements may only be entered into with the approval of each affected district or the appropriate Department official. See USAM §9-27,641.
In addition, the Department, in conjunction with regulatory agencies and other executive branch departments, encourages corporations, as part of their compliance programs, to conduct internal investigations and to disclose their findings to the appropriate authorities. Some agencies, such as the Securities and Exchange Commission and the Environmental Protection Agency, as well as the Department’s Environmental and Natural Resources Division, have formal voluntary disclosure programs in which self-reporting, coupled with remediation and additional criteria, may qualify the corporation for amnesty or reduced sanctions. Even in the absence of a formal program, prosecutors may consider a corporation’s timely and voluntary disclosure in evaluating the adequacy of the corporation’s compliance program and its management’s commitment to the compliance program. However, prosecution and economic policies specific to the industry or statute may require prosecution notwithstanding a corporation’s willingness to cooperate. For example, the Antitrust Division offers amnesty only to the first corporation to agree to cooperate. This creates a strong incentive for corporations participating in anti-competitive conduct to be the first to cooperate. In addition, amnesty, immunity, or reduced sanctions may not be appropriate where the corporation’s business is permeated with fraud or other crimes.
Waiving Attorney-Client and Work Product Protections2
The attorney-client and work product protections serve an extremely important function in the U.S. legal system. The attorney-client privilege is one of the oldest and most sacrosanct privileges under U.S. law. See Upjohn v. Untied States, 449 U.S. 383, 389 (1976). As the Supreme Court has stated “its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” Id The work product doctrine also serves similarly important interests.
Waiver of attorney-client and work product protections is not a prerequisite to a finding that a company has cooperated in the government’s investigation. However, a company’s disclosure of privileged information may permit the government to expedite its investigation. In addition, the disclosure of privileged information may be critical in enabling the government to evaluate the accuracy and completeness of the company’s voluntary disclosure.
Prosecutors may only request waiver of attorney-client or work product protections when there is a. legitimate need for the privileged information to fulfill their law enforcement obligations, A legitimate need for the information is not established by concluding it is merely desirable or convenient to obtain privileged information. The test requires a careful balancing of important policy considerations underlying the attorney-client privilege and work product doctrine and the law enforcement needs of the government’s investigation.
Whether there is a legitimate need depends upon:
the likelihood and degree to which the privileged information will benefit the government’s investigation;
whether the information sought can be obtained in a timely and complete fashion by using alternative means that do not require waiver:
the completeness of the voluntary disclosure already provided; and
the collateral consequences to a corporation of a waiver.
If a legitimate need exists, prosecutors should seek the least intrusive waiver necessary to conduct a complete and thorough investigation, and should follow a step-by-step approach to requesting information. Prosecutors should first request purely factual information, which may or may not be privileged, relating to the underlying misconduct (“Category I”). Examples of Category I information could include, without limitation, copies of key documents, witness statements, or purely factual interview memoranda regarding the underlying misconduct, organization charts created by company counsel, factual chronologies, factual summaries, or reports (or portions thereof) containing investigative facts documented by counsel.
Before requesting that a corporation waive the attorney-client or work product protections for Category I information, prosecutors most obtain written authorization from the United States Attorney who must provide a copy of the request to, and consult with, the Assistant Attorney General for the Criminal Division before granting or denying the request. A prosecutor’s request to the United States Attorney for authorization to seek a waiver must set forth law enforcement’s legitimate need for the information and identify the scope of the waiver sought. A copy of each waiver request and authorization for Category I information must be maintained in the files of the United. States Attorney. If the request is authorized, the United States Attorney must communicate the request in writing to the corporation.
A corporation’s response to the government’s request for waiver of privilege for Category information may be considered in determining whether a corporation has cooperated in the government’s investigation.
Only if the purely factual information provides an incomplete basis to conduct a thorough investigation should prosecutors then request that the corporation provide attorney-client communications or non-factual attorney work product (“Category II’). This information includes legal advice given to the corporation before, during, and after the underlying misconduct occurred.
This category of privileged information might include the production of attorney notes, memoranda or reports (or portions thereof) containing counsel’s mental impressions and conclusions, legal determinations reached as a result of an internal investigation, or legal advice given to the corporation.
Prosecutors are cautioned that Category if information should only be sought in rare circumstances.
Before requesting that a corporation waive the attorney-client or work product protections for Category II. information, the United States Attorney must obtain written authorization from the Deputy Attorney General. A United States Attorney’s request for authorization to seek a waiver must set forth law enforcement’s legitimate need for the information and identify the scope of the waiver sought. A copy of each waiver request and authorization for Category If information must be maintained in the files of the Deputy Attorney General If the request is authorized, the United States Attorney must communicate the request in writing to the corporation.
If a corporation declines to provide a waiver for Category II information after a written request from the United States Attorney, prosecutors must not consider this declination against the corporation, in making a charging decision. Prosecutors may always favorably consider a corporation’s acquiescence to the government’s waiver request in determining whether a corporation has cooperated in the government’s investigation.
Requests for Category II information requiring the approval of the Deputy Attorney General do not include:
legal advice contemporaneous to the underlying misconduct when the corporation or one of its employees is relying upon an advice-of-counsel defense; and
legal advice or communications in furtherance of a crime or fraud, coining within the crime-fraud exception to the attorney-client privilege,
In these two instances, prosecutors should follow the authorization process established for requesting waiver for Category I information.
For federal prosecutors in litigating Divisions within Main Justice, waiver requests for Category I information must be submitted for approval to the Assistant Attorney General of the Division and waiver requests for Category II information must be submitted by the Assistant Attorney General for approval to the Deputy Attorney General. If the request is authorized, the Assistant Attorney General must communicate the request in writing to the corporation.
Federal prosecutors are not required to obtain authorization if the corporation voluntarily offers privileged documents without a request by the government. However, voluntary waivers must be reported to the United States Attorney or the Assistant Attorney General in the Division where the case originated. A record of these reports must be maintained in the files of that office,
Shielding Culpable Employees and Agents
Another factor to be weighed by the prosecutor is whether the corporation appears to be protecting its culpable employees and agents. Thus, while cases will differ depending on the circumstances, a corporation’s promise of support to culpable employees and agents, e.g., through retaining the employees without sanction for their misconduct or through providing information to the employees about the government’s investigation pursuant to a joint defense agreement, may be considered by the prosecutor in weighing the extent and value of a corporation’s cooperation.
Prosecutors generally should not take into account whether a corporation is advancing attorneys’ fees to employees or agents under investigation and indictment. Many state indemnification statutes grant corporations the power to advance the legal fees of officers under investigation prior to a formal determination of guilt. As a consequence, many corporations enter into contractual obligations to advance attorneys’ fees through provisions contained in their corporate charters, bylaws or employment agreements. Therefore, a corporation’s compliance with governing state law and its contractual obligations cannot be considered a failure to cooperate3 This prohibition is not meant to prevent a prosecutor from asking questions about an attorney’s representation of a corporation or its employees.4
Obstructing the Investigation
Another factor to be weighed by the prosecutor is whether the corporation, while purporting to cooperate, has engaged in conduct intended to impede the investigation (whether or not rising to the level of criminal obstruction). Examples of such conduct include: overly broad assertions of corporate representation of employees or former employees; overly broad or frivolous assertions of privilege to withhold the disclosure of relevant non-privileged documents; inappropriate directions to employees or their counsel, such as directions not to cooperate openly and fully with the investigation including, for example, the direction to decline to be interviewed; making presentations or submissions, that contain misleading assertions or omissions; incomplete or delayed production of records; and failure to promptly disclose illegal conduct known to the corporation.
Offering Cooperation: No Entitlement to Immunity
Finally, a corporation’s offer of cooperation does not automatically entitle it to immunity from prosecution, A corporation should not be able to escape liability merely by offering up its directors, officers, employees, or agents as in lieu of its own prosecution, Thus, a corporation’s willingness to cooperate is merely one relevant factor, that needs to be considered in conjunction with the other factors, particularly those relating to the corporation’s past history and the role of management in the wrongdoing.
Charging a Corporation: Corporate Compliance Programs
General Principle: Compliance programs are established by corporate management to prevent and to detect misconduct and to ensure that corporate activities are conducted in accordance with all applicable criminal and civil laws, regulations, and rules. The Department encourages such corporate self-policing, including voluntary disclosures to the government of any problems that a corporation discovers on. its. own. However, the existence of a compliance program is not sufficient, in and of itself, to justify not charging a corporation for criminal conduct undertaken by its officers, directors, employees, or agents. Indeed, the commission of such crimes in the face of a compliance program may suggest that the corporate management is not adequately enforcing its program. In addition, the nature of some crimes, e.g., antitrust violations, may be such that national law enforcement policies mandate prosecutions of corporations notwithstanding the existence of a compliance program.
Comment: A corporate compliance program, even one specifically prohibiting the very conduct in question, does not absolve the corporation from criminal liability under the doctrine of respondeat superior. See United States v. Basic Construction Co., 711 F,2d 570 (4th Cir. 1983) (“[A] corporation may be held criminally responsible for antitrust violations committed by its employees if they were acting within the scope of their authority, or apparent authority, and for the benefit of the corporation, even if… such acts were against corporate policy or express instructions.”). In United States v. Potter, 463 F.3d 9. 25-26 (lst Cir, According to the court, a corporation cannot “avoid liability by adopting abstract rules” that forbid its agents from engaging in illegal acts; “even a specific directive to an agent or employee or honest efforts to police such rules do not automatically free the company for the wrongful acts of agents.” Similarly, in United States v. Hilton Hotels Corp., 467 F.2d 1000 (9th Cir. 1972), cert. denied, 409 U.S.. 1125 (1973), the Ninth Circuit affirmed antitrust liability based upon a purchasing agent for a single hotel threatening a single supplier with a boycott unless it paid dues to a local marketing association, even though the agent’s actions were contrary to corporate policy and directly against express instructions from his superiors. The court reasoned that Congress, in enacting the Sherman Antitrust Act, “intended to impose liability upon business entities for the acts of those to whom they choose to delegate the conduct of their affairs, thus stimulating a maximum effort by owners and managers to assure adherence by such agents to the requirements of the Act.5 It concluded that “genera policy statements” and even direct instructions from the agent’s superiors were not sufficient; “Appellant could not gain exculpation by issuing general instructions without undertaking to enforce those instructions by means commensurate with the obvious risks.” See also Untied States v. Beusch, 596 F,2d 871, 878 (9th Cir. 1979) (“[A] corporation may be liable for the acts of its employees done contrary to express instructions and policies, but… the existence of such instructions and policies may be considered in determining whether the employee in fact acted to benefit the corporation.”);. United Slates v. American Radiator & Standard Sanitary Corp., 433 F,2d 174 (3rd Cir. 1970) (affirming conviction of corporation based upon its officer’s participation in price-fixing scheme, despite corporation’s defense that officer’s conduct violated its “rigid anti-fraternization policy” against any socialization (and exchange of price information) with its competitors; “When the act of the agent is within the scope of his employment or his apparent authority, the corporation is held legally responsible for it, although what he did may be contrary to his actual instructions and maybe unlawful.”).
While the Department recognizes that no compliance program can ever prevent all criminal activity by a corporation’s employees, the critical factors in evaluating any program are whether the program is adequately designed for maximum effectiveness in preventing and detecting wrongdoing by employees and whether corporate management is enforcing the program or is tacitly encouraging or pressuring employees to engage in misconduct to achieve business objectives. The Department has no formal guidelines for corporate compliance programs. The fundamental questions any prosecutor should ask are: “Is the corporation’s compliance program well designed?” and “Does the corporation’s compliance program work?” In answering these questions, the prosecutor should consider the comprehensiveness of the compliance program; the extent and pervasiveness of the criminal conduct; the number and level of the corporate employees involved; the seriousness, duration, and frequency of the misconduct; and any remedial actions takes by the corporation, including restitution, disciplinary action, and revisions to corporate compliance programs.6 Prosecutors should also consider the promptness of any disclosure of wrongdoing to the government and the corporation’s cooperation in the government’s investigation. In evaluating compliance programs, prosecutors may consider whether the corporation has established corporate governance mechanisms that cars effectively detect and prevent misconduct. For example, do the corporation’s directors exercise independent review over proposed corporate actions rather than unquestioningly ratifying officers’ recommendations; are the directors provided with information sufficient to enable the exercise of independent judgment, are internal audit functions conducted at a level sufficient to ensure their independence and accuracy and have the directors established an information and reporting system in the organization reasonably designed to provide management and the board of directors with timely and accurate information sufficient to allow them to reach an informed decision regarding the organization’s compliance with the law. In re: Caremark, 698 A. 2d 959 (Del. Ct Chan. 1996).
Prosecutors should therefore attempt to determine whether a corporation’s compliance program is merely a “paper program” or whether it was designed and implemented in an effective manner. In addition, prosecutors should determine whether the corporation has provided for a staff sufficient to audit, document, analyze, and utilize the results of the corporation’s compliance efforts. In addition, prosecutors should determine whether the corporation’s employees are adequately informed about the compliance program and are convinced of the corporation’s commitment to it This will enable the prosecutor to make an informed decision as to whether the corporation has adopted and implemented a truly effective compliance program that, when consistent with other federal law enforcement policies, may result in a decision to charge only the corporation’s employees and agents.
Compliance programs should be designed to detect the particular types of misconduct most likely to occur in a particular corporation’s line of business. Many corporations operate in complex regulatory environments outside the normal experience of criminal prosecutors. Accordingly, prosecutors should consult with relevant federal and state agencies with the expertise to evaluate the adequacy of a program’s design and implementation. For instance, state arid federal banking, insurance, and medical boards, the Department of Defense, the Department of Health and Human Services, the Environmental Protection Agency, and the Securities and Exchange Commission have considerable experience with compliance programs and can be very helpful to a prosecutor in evaluating such programs. In addition, the Fraud Section of the Criminal Division, the Commercial Litigation Branch of the Civil Division, and the Environmental Crimes Section of the Environment and Natural. Resources Division can assist U.S. Attorneys’ Offices in finding the appropriate agency office and in providing copies of compliance programs that were developed in. previous cases.
Charging a Corporation: Restitution and Remediation.
General Principle: Although neither a corporation nor an. individual target may avoid prosecution merely by paying a sum of money, a prosecutor may consider the corporation’s willingness to make restitution and steps already taken to do so. A prosecutor may also consider other remedial actions, such as implementing an effective corporate compliance program, improving an existing compliance program, and disciplining wrongdoers, in determining whether to charge the corporation.
Comment: in determining whether or not a corporation should be prosecuted, a prosecutor may consider whether meaningful remedial measures have been taken, including employee discipline and full restitution. A corporation’s response to misconduct says much about its willingness to ensure that such misconduct does not recur. Thus, corporations that fully recognize the seriousness of their misconduct and. accept responsibility for it should be taking steps to implement the personnel, operational, and organizational changes necessary to establish an awareness among employees that criminal conduct will not be tolerated. Among the factors prosecutors should consider and weigh are whether the corporation appropriately disciplined the wrongdoers and disclosed information concerning their illegal conduct to the government.
Employee discipline is a difficult task for many corporations because of the human element involved and sometimes because of the seniority of the employees concerned. While corporations need to be fair to their employees, they must also be unequivocally committed, at all levels of the corporation, to the highest standards of legal and ethical behavior. Effective internal discipline can be a powerful deterrent against improper behavior by a corporation’s employees, in evaluating a corporation’s response to wrong doing, prosecutors may evaluate the willingness of the corporation to discipline culpable employees of all ranks and. the adequacy of the discipline imposed. The prosecutor should be satisfied that the corporation’s focus is on the integrity and credibility of its remedial and. disciplinary measures rather than on the protection of the wrongdoers.
In addition to employee discipline, two other factors used in evaluating a corporation’s remedial efforts are restitution and reform. As with natural persons, the decision whether or not to prosecute should not depend upon the target’s ability to pay restitution. A corporation’s efforts to. pay. restitution even in advance of any court order is, however, evidence of its “acceptance of responsibility” and. consistent with the practices and policies of the appropriate Division of the Department entrusted with enforcing specific criminal laws, may be considered in determining whether to bring criminal charges. Similarly, although the inadequacy of a corporate compliance program is a factor to consider when deciding whether to charge a corporation, that corporation’s quick recognition of the flaws in the program and its efforts to improve the program are also factors to consider.
Charging a Corporation: Collateral Consequences
General Principle: Prosecutors may consider the collateral consequences of a corporate criminal conviction in determining whether to charge the corporation with a criminal offense,
Comment: One of the factors in determining whether to charge a natural person or a corporation is whether the likely punishment is appropriate given the nature and seriousness of the crime. In the corporate context, prosecutors may take into account the possibly substantial consequences to a corporation’s officers, directors, employees, and shareholders, many of whom may. depending on the size and nature (e.g., publicly vs. closely held) of the corporation and their role in its operations, have played no role in the criminal conduct, have been completely unaware of it, or have been wholly unable to prevent, it. Prosecutors should also be aware of non-penal sanctions that may accompany a criminal charge, such as potential suspension or debarment from eligibility for government contracts or federal funded programs such as health care. Whether or not such non-penal sanctions are appropriate or required in a particular case is the responsibility of the relevant agency, a decision that will be made based on the applicable statutes, regulations, and policies.
Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties, and the mere existence of such an effect is not sufficient to preclude prosecution of the corporation. Therefore, in evaluating the severity of collateral consequences, various factors already discussed, such as the pervasiveness of the criminal conduct and the adequacy of the corporation’s compliance programs, should be considered in determining the. weight to be given to this factor. For instance, the balance may tip in favor of prosecuting corporations in situations where the scope of the misconduct in a case is widespread and sustained within a corporate division (or spread throughout pockets of the corporate organization). In such-cases, the possible unfairness of visiting punishment for the corporation’s crimes upon shareholders may be of much less concern where those shareholders have substantially profited, even unknowingly, from widespread or pervasive criminal activity. Similarly, where the top layers of the corporation’s management or the shareholders of a closely-held corporation were engaged in or aware of the wrongdoing and the conduct at issue was accepted as a way of doing business for an extended period, debarment may be deemed not collateral, but a direct and entirely appropriate consequence of the corporation’s wrongdoing.
The appropriateness of considering such collateral consequences and the weight to be given them may depend on. the special policy concerns discussed in section III. supra.
Charging a Corporation: Non-Criminal Alternatives
General Principle: Non-criminal alternatives to prosecution often exist and prosecutors may consider whether such sanctions would adequately deter, punish, and rehabilitate a corporation that has engaged in wrongful conduct In evaluating the adequacy of non-criminal alternatives to prosecution, e.g., civil or regulatory enforcement actions, the prosecutor may consider all relevant factors, including:
the sanctions available under the alternative means of disposition;
the likelihood that an effective sanction will be imposed; and
the effect of non-criminal disposition on federal law enforcement interests,
Comment: The primary goals of criminal law are deterrence, punishment and rehabilitation. Non-criminal sanctions may not be an appropriate response to an egregious violation, a pattern of wrongdoing, or a history of non-criminal sanctions without proper remediation. In other cases, however, these goals may be satisfied without the necessity of instituting criminal proceedings. In determining whether federal criminal charges are appropriate, the prosecutor should consider the same factors (modified appropriately for the regulatory context) considered when determining whether to leave prosecution of a natural person to another jurisdiction or to seek non-criminal. alternatives to prosecution. These factors include: the strength of the regulatory authority’s interest; the regulatory authority’s ability and willingness to take effective enforcement action; the probable sanction if the regulatory authority’s enforcement action is upheld; and the effect of a non-criminal disposition on federal law enforcement interests. See USAM §§ 9-27.240, 9-27.250.
Charging a. Corporation: Selecting Charges
General Principle: Once a prosecutor has decided to. charge a corporation, the prosecutor should charge, or should recommend that the. grand jury charge, the most serious: offense that is consistent with the nature of the defendant’s conduct and that is likely to result in a sustainable conviction.
Comment: Once the decision to charge is made, the same rules as govern charging natural persons apply. These rules require “a faithful and honest application of the Sentencing Guidelines” and an “individualized assessment of the extent to which particular charges fit the specific circumstances of the case, are consistent with the purposes of the federal criminal code, and maximize the impact of federal resources on crime.” See USAM § 9-27.300. In making this determination, “it is appropriate that the attorney for the government consider, inter alia, such factors as the sentencing guideline range yielded by the charge, whether the penalty yielded by such sentencing range … is proportional to the seriousness of the defendant’s conduct, and whether the charge achieves such purposes of the criminal law as punishment, protection of the public, specific and general deterrence, and rehabilitation.”See Attorney General’s Memorandum, dated October 12, 1993.
Plea Agreements with Corporations
General Principle: In negotiating plea agreements with corporations, prosecutors should seek a plea to the most serious, readily provable offense charged. In addition, the terms of the plea agreement should contain appropriate provisions to ensure punishment, deterrence, rehabilitation, and compliance with the plea agreement in the corporate context. Although special circumstances may mandate a different conclusion, prosecutors generally should not agree to accept a corporate guilty plea in exchange for non-prosecution or dismissal of charges against individual officers and employees.
Comment: Prosecutors may enter into plea agreements with corporations for the same reasons and under the same constraints as apply to plea agreements with natural persons. See USAM §§ 9-27.400-500. This means, inter alia, that the corporation should be required to plead guilty to the most serious, readily provable offense charged. As is the. case with individuals, the attorney making this determination should do so “on the basis of an individualized assessment of the extent to which particular charges fit the specific circumstances of the case, are consistent with the purposes of the federal criminal code, and maximize the impact of federal resources on crime. In making this determination, the attorney for the government considers, inter alia, such factors as the sentencing guideline range yielded by the charge, whether the penalty yielded by such sentencing range … is proportional to the seriousness of the defendant’s conduct, and whether the charge achieves such purposes of the criminal law as punishment, protection of the public, specific and general deterrence, and rehabilitation.”See Attorney General’s Memorandum, dated October 12, 1993. In addition, any negotiated departures from the Sentencing Guidelines must be. justifiable under the Guidelines and must be disclosed to the sentencing court. A corporation should be made to realize that pleading guilty to criminal charges constitutes an admission” of guilt and. not morely a resolution of an inconvenient distraction from its business. As. with natural persons, pleas should be structured so that the corporation may not later “proclaim lack of culpability or even complete innocence.” See USAM §§- 9-27.420(b)(4), 9-27.440,9-27.500. Thus, for instance, there should be. placed upon the record a sufficient factual basis for the. plea to prevent later corporate assertions of innocence.
A corporate plea agreement should also contain provisions that recognize the nature of the corporate “person” and ensure that the principles of punishment, deterrence, and rehabilitation are met. In the corporate context, punishment and deterrence are generally accomplished by substantial fines, mandatory restitution, and institution of appropriate compliance measures, including, if necessary, continued judicial oversight or the use of special masters. See USSG §§ 8BI.1, seq. In addition, where the corporation is a government contractor, permanent or temporary debarment may be appropriate. Where the corporation was engaged in government contracting fraud, a prosecutor may not negotiate away an agency’s right to debar or to list the corporate defendant.
In negotiating a plea agreement, prosecutors should also consider the deterrent value of prosecutions of individuals within the corporation, Therefore, one factor that a prosecutor may consider in determining whether to enter into a plea agreement is whether the corporation is seeking immunity for its employees and officers or whether the corporation is willing to cooperate in. the investigation of culpable individuals. Prosecutors should rarely negotiate away individual criminal liability in a corporate- plea.
Rehabilitation, of course, requires that the corporation undertake to be law-abiding in the future. It is, therefore, appropriate to require the corporation, as a condition of probation, to implement a compliance program or to reform an existing one. As discussed above, prosecutors may consult with the appropriate state and federal agencies and components of the Justice Department to ensure that a proposed compliance program is adequate and meets industry standards and best practices. See section VIII, supra,
In plea agreements in which the corporation agrees to cooperate, the prosecutor should ensure that the cooperation is complete- and truthful. To do so, the prosecutor may request that the corporation waive attorney-client and work product protection, make employees and agents available for debriefing, disclose the results of its internal investigation, file appropriate certified financial statements, agree to governmental or third-party audits, and take whatever other steps are necessary to ensure that the full scope of the corporate wrongdoing is disclosed and that the responsible culprits are identified and, if appropriate, prosecuted. See generally section VII, supra.
This memorandum provides only internal Department of Justice guidance. It is not intended to, does not, and. may not be relied upon to create- any rights, substantive or procedural, enforceable at law by any party in any matter civil or criminal. Nor are any limitations hereby placed on otherwise lawful litigative prerogatives of the Department of justice.
To provide appropriate protection to attorney-client privileged communications and attorney work product.
IN THE SENATE OF THE UNITED STATES
Mr. Specter introduced the following bill; which was read twice and referred to the Committee on _____________________
To provide appropriate protection to attorney-client privileged communications and attorney work product.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the “Attorney-Client Privilege Protection Act of 2006”.
SEC. 2. FINDINGS AND PURPOSE.
(a) Findings.—Congress finds the following:
(1) Justice is served when all parties to litigation are represented by experienced diligent counsel.
(2). Protecting attorney-client privileged communications from compelled disclosure fosters voluntary compliance with the law.
(3). To serve the purpose of the attorney-client privilege, attorneys and clients must have a degree of confidence that they will not be required to disclose privileged communications.
(4). The ability of an organization to have effective compliance programs and to conduct comprehensive internal investigations is enhanced when there is clarity and consistency regarding the attorney-client privilege.
(5). Prosecutors, investigators, enforcement officials, and other officers or employees of Government agencies have been able to, and can continue to, conduct their work while respecting attorney-client and work product protections and the rights of individuals, including seeking and discovering facts crucial to the investigation and prosecution of organizations.
(6). Despite the existence of these legitimate tools, the Department of Justice and other agencies have increasingly employed tactics that undermine the adversarial system of justice, such as encouraging organizations to waive attorney-client privilege and work product protections to avoid indictment or other sanctions.
(7). An indictment can have devastating- consequences on an organization, potentially eliminating the ability of the organization to survive post-indictment or to dispute the charges against it at trial.
(8). Waiver demands and other tactics of Government agencies are encroaching on the constitutional rights and other legal protections of employees.
(9). The attorney-client privilege, work product doctrine, and payment of counsel fees shall not he used as devices to conceal wrongdoing or to cloak advice on evading the law.
(b) Purpose.—It is the purpose of this Act to place on each agency clear and practical limits designed to preserve the attorney-client privilege and work product protections available to an organization and preserve the constitutional rights and other legal protections available to employees of such an organization.
SEC. 3. DISCLOSURE OP ATTORNEY-CLIENT PRIVILEGE OR ADVANCEMENT OF COUNSEL FEES AS ELEMENTS OF COOPERATION.
(a) In General.—Chapter 201 of title 18, United States Code, is amended by inserting after section 3013 the following:
“§3014. Preservation of fundamental legal protections and rights in the context of investigations and enforcement matters regarding organizations
“(a) Definitions.—In this section:
“(1) Attorney-client privilege.—The term ‘attorney-client privilege’ means the attorney-client privilege as governed by the principles of the common law, as they may be interpreted by the courts of the United States in the light of reason and experience, and the principles of article V of the Federal Rules of Evidence.
“(2) Attorney work product.—The term ‘attorney work product’ means materials prepared by or at the direction of an attorney in anticipation of litigation, particularly any such materials that contain a mental impression., conclusion, opinion, or legal theory of that attorney.
“(b) In General.—In any Federal investigation or criminal or civil enforcement matter, an agent or attorney of the United States shall not—
“(1) demand, request, or condition treatment on the disclosure by an organization, or person affiliated with that organization, of any communication protected by the attorney-client privilege or any attorney work product;
“(2) condition a civil or criminal charging decision relating to a organization, or person affiliated with that organization, on, or use as a factor in determining whether an organization, or person affiliated with that organization, is cooperating with the Government—
“(A) any valid assertion of the attorney-client privilege or privilege for attorney work product;
“(B) the provision of counsel to, or contribution to the legal defense fees or expenses of, an employee of that organization;
“(C) the entry into a, joint defense, information sharing, or common interest agreement with an employee of that organization if the organization determines it has a common interest in defending against the investigation or enforcement matter;
“(D) the sharing of information relevant to the investigation or enforcement matter with an employee of that organization; or
“(E) a. failure to terminate the employment of or otherwise sanction any employee of that organization because of the decision by that employee to exercise the constitutional rights or other legal protections of that employee in response to a Government request; or “(3) demand or request that an organization, or person affiliated with that organization, not take any action described in paragraph (2).
“(c) Inapplicability.—Nothing in this Act shall prohibit an agent or attorney of the United States from requesting or seeking any communication or material that such agent or attorney reasonably believes is not entitled to protection under the attorney-client privilege or attorney work product doctrine.
“(d) Voluntary Disclosures.—Nothing in this Act is intended to prohibit an organization from making, or an agent or attorney of the United States from accepting, a voluntary and unsolicited offer to share the internal investigation materials of such organization.”.
(b). Conforming Amendment,—The table of sections for chapter 201 of title 18, United States Code, is amended by adding at the end the following:
“3014.Preservation of fundamental legal protections and rights in the Context of investigations and enforcement matters regarding Organizations”.
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1. This letter reflects the views and opinions of the Committee on the Federal Courts only. It has not been approved by the Board of Directors of NYCLA and does not necessarily reflect the views of the Association or the Board.
2. See Comment on subsection (d) (“Under the rule, a confidentiality order is enforceable whether or not it memorializes an agreement among the parties to the litigation. Party agreement should not be a condition of enforceability of a federal court’s order.”).
3. The language of the proposed Rule leaves unclear whether a court can retroactively reattach privilege to materials disclosed to the adversary – and, therefore, subject to waiver- before the court issues its order. The Committee believes that allowing a court to “re-privilege” material already disclosed, possibly at a late stage of proceedings such as settlement, encourages sloppy practices. Therefore, the language should be amended to clarify that only disclosures made pursuant to and after the issuance of a court order are protected against waiver.
4. Although the language of the proposed Rule seems to cover deliberate, strategic disclosures of privileged material, as well as anticipated but unintended disclosures incident to mass discovery, we do not believe the Rule is intended to cover such situations and ought not to be so interpreted.
5. A related concern is the deliberate production of a document in the reasonable, good faith belief that it is not privileged, resulting in a waiver of other, unquestionably privileged communications when a comt later takes a broader view of privilege. Sinclair Oil Corp. v. Texaco. Inc., 208 F.R.D. 329 (D. Okla. 2002).
6. On the ethical obligations of a lawyer receiving an inadvertently produced privileged communication, see Association of the Bar of the City of New York Committee on Professional and Judicial Ethics, Formal Opinion. 2003-4 (2003). Briefly, upon becoming aware that the communication inadvertently reveals privileged matter, the receiving lawyer must cease further review of the communication, promptly notify the sender and follow the sender’s instructions concerning destruction or return. If the receiving lawyer has a good faith belief that the communication may be properly kept and used, it may be submitted to the court for a ruling. To the extent that the receiving lawyer has gained useful knowledge from reviewing the communication before its privileged character became apparent, the lawyer is free to use that knowledge to the extent otherwise permitted by law, but must promptly inform the sending lawyer of receipt of the communication to allow the sending lawyer to take steps to prevent further inadvertent disclosures or to seek whatever remedies may exist concerning the use of knowledge gained.
7. For a particularly stark intra-district conflict, see, Ciba-Geigy Corp. v. Sandoz, Ltd., 916 F. Supp. 404, 410-11 (D.N.J 1995)(inadvertent disclosure of privileged matter not a waiver because waiver has to be knowing and voluntary) and Koch Materials Co. v. Shore Slurry Seal Inc., 208 F.R.D. 109, 121 (D.N.J. 2002)(inadvertent production was a waiver despite reasonable efforts at prevention).
8. New rnaterial is underlined; rnatter to be omitted is lined through.
9. The bracketing indicates that white the Committee is seeking public comment, it has not yet taken a position on the merits of this provision. Public comment on this “selective waiver” provision will be especially important to the Committee’s determination. The Committee is especially interested in any statistical or anecdotal evidence tending to show that limiting the scope of waiver will I) promote cooperation with government regulators and/or 2) decrease the cost of government investigations and prosecutions.
As the Committee has taken no position on the bracketed provision, it is obvious that there is nothing in the proposed rule that is intended either to promote or deter any attempt by government agencies to seek waiver of privilege or work product. The Committee takes no position on the ongoing debate arising from the Department of justice’s revised principles governing the prosecution of a corporation and the effect of cooperation and voluntary disclosure (Memorandum from Larry D. Thompson, Deputy Attorney General, section VI (January 20, 2003)).
10. While these guidelines refer to corporations, they apply to the consideration of the prosecution of all types of business organizations, including partnerships, sole proprietorships, government entities, and unincorporated associations.
11. The Sentencing. Guidelines reward voluntary disclosure and cooperation with a reduction in the corporation’s offense level See USSG §8C2,5.(g). The reference to consideration of a corporation’s waiver of attorney-client and work product protections in reducing a corporation’s culpability score in Application Note 12, was deleted effective November 1, 2006. See USSG §8C2.5(g)> comment. (n. 12).
12. In extremely rare cases, the advancement of attorneys’ fees may be taken into account when the totality of the circumstances show that it was intended to impede a criminal investigation. In these cases, fee advancement is considered with many other telling facts to make a determination that the corporation is acting improperly to shield itself and its culpable employees from government scrutiny, See discussion in Brief of Appellant-United States, United Slates v. Smith and Watson, No. 06-3999-cr (2d Cir. Nov. 6, 2006). Where these circumstances exist, approval must, be obtained from. the Deputy Attorney General before prosecutors may consider this factor in their charging decisions. Prosecutors should follow the authorization process established for waiver requests of Category II information (see section VIl-2, infra).
13. Routine questions regarding the representation states of a corporation and its employees, including how and by whom attorneys’ fees are paid, frequently arise the course of an investigation. They may be necessary to assess other issues, such as conflict-of-interest. Such questions are appropriate and this guidance is not intended to prohibit such inquiry.
14. Although this case and Basic Construction are both antitrust cases, their reasoning applies to other criminal violations. In the Hilton case, for instance, the Ninth Circuit noted that Sherman Act violations are commercial offenses, “usually motivated by a desire to enhance profits,” thus, bringing the case within the normal rule that a “purpose to benefit the corporation is accessary to bring the agent’s acts within. the scope of Ms employment.” 467 F.2d at 1006 & n4. In. addition, in United Slates v. Automated Medical laboratories, 770 F,2d 399,406 n,5 (4th Cir, 1985), the Fourth Circuit stated “that Basic Construction states a generally applicable rule on corporate criminal liability despite the fact that it addresses violations of the antitrust laws.”
15. For a detailed review of these and other factors concerning corporate compliance programs, see USSG § 8B2.1
Letter from the Committee on the Federal Courts Expressing Support for S. 2450 Part 1
Letter from the Committee on the Federal Courts Expressing Support for S. 2450 Part 2