ExecuCite Blogger Archive

On January 20, 2003, the U.S. Department of Justice issued a memorandum entitled the “Principles of Federal Prosecution of Business Organizations” (http://www.execucite.com/member-site/Executive_Ethics/Principles-of-Federal-Prosecution-of-Business-Organizations). The memo was authored by the then Deputy Attorney General Hon. Larry Thompson. This memo has received a great deal of attention in the last three years and for good reason. The memo represented the Department’s view about how it handles criminal investigations for corporate wrongdoing. At the time, the Department had to react with a swift and heavy hand, as investors lost their fortunes due to accounting fraud and corporate corruption.
The memo created nine factors or principles for federal prosecutors to apply, the most controversial and the most compelling of which was number four:

“the corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of corporate attorney-client and work product protection”

Apparently the government has been persuaded that the fraudulent times have past and corporations have learned their lessons. The 2003 Thompson Memo has been revised by the new Deputy Attorney General Paul McNulty. As reported in the NY Times today (December 13, 2006) “under the revisions, federal prosecutors will no longer have blanket authority to ask routinely that a company under investigation waive the confidentiality of its legal communications or risk being indicted. Instead they will need written approval for waivers from the deputy attorney general, and can make such requests only rarely.” These actions resonate a strong political force pressuring the Department to change a once “great” but short-lived rule. Big business has tired of the old rule and in keeping with the current trend of politics under the Bush Administration, big business wins. Even the Sarbanes-Oxley Act of 2002 is being scaled back as a result of increased lobbying by corporate interest groups.

Why does big business want to eliminate the aforementioned rule pertaining to the disclosure of confidential communications—there is more room to hide behind if you do not have to disclose your true intentions, i.e. a better defense.

Ever since the guidelines were issued in 2003, the Hon. Mr. Thompson has never spoken publicly about them. Until last week. In another NY Times article it was reported that:

“Speaking at a Washington conference at the Heritage Foundation, the conservative research group, Mr. Thompson, now general counsel of PepsiCo, said that requests by federal prosecutors that companies, executives and lawyers disclose legal communications among themselves and other parties should be ‘extremely limited.’”

Obviously, the Hon. Mr. Thompson has completely changed his opinion on the rule that has caused so much consternation and the one he created. But the nagging question remains- why did he change his opinion on this issue?

Mark P. Carey
CEO ExecuCite.com