State Bar Task Force to Address Waiver of Privilege

John Caher

01-10-2006


ALBANY — A recent trend in which state and federal prosecutors require as part of a plea bargain that corporate defendants waive the attorney-client privilege is raising concern among leaders of the New York State Bar Association.

President A. Vincent Buzard of Harris Beach in Rochester said he is concerned not only with the inherent "threat to the attorney-client privilege," but also the fact that many lawyers are apparently unaware of the trend.

Last week, Mr. Buzard appointed a task force, headed by Stephen D. Hoffman of Siller Wilk in Manhattan, to consider the implications of the practice and to make recommendations. Mr. Buzard also announced a special presidential summit to address the issue at the state bar's annual meeting later this month.

"It is just bone chilling whenever you think that somebody may have access to our work . . . or privileged documents are produced in discovery, it is a nightmare," he said. "To think you would have to turn it over to save your client from indictment or a harsh sentence is frightening to all lawyers."

In recent years, the U.S. Department of Justice and some state attorneys general have been requiring corporate defendants looking for a cooperation deal to waive the attorney-client privilege and hand over documents prepared by in-house and outside counsel that would otherwise be confidential. Prosecutors argue that such disclosure is essential both in ensuring that the defendant really is cooperating and in reaping full benefit of the cooperation agreement.

But a number of groups, including the American Bar Association, the National Association of Criminal Defense Lawyers, and several former federal prosecutors, have asked the U.S. Sentencing Commission to adopt a policy that waiver of the privilege is not a required element of a cooperation agreement. Some critics of the trend would outright ban requests for waivers. But most would be satisfied if such arrangements were negotiated more on a case-by-case basis, rather than imposed automatically, and if a client's refusal to waive were not deemed an act contrary to cooperation.

That is the position of former Southern District U.S. Attorney Mary Jo White, now a partner at Debevoise & Plimpton. Ms. White said she has on occasion requested waivers, but stressed they are not appropriate in all cases of corporate wrongdoing.

She said the trend apparently began when financier Warren Buffett offered, without being asked by the government, to waive the privilege in connection with an investigation involving treasury auctions.

"Some prosecutors thought it was a good idea, from the point of view of showing the company to be a good corporate citizen in helping the investigation," Ms. White said. "It was not intended to be routinely asked for, nor was the absence of a waiver intended to hurt a company. Rather, a company might be given 'extra credit' if it agreed to do that."

Practice Becomes Policy

Then, what began as an informal government practice became more of an official policy with the issuance of two documents in recent years.

One, the so-called 1999 Holder Memo by then-Deputy Attorney General Eric Holder Jr., articulated a number of factors federal prosecutors should take into consideration when deciding whether to criminally charge a corporation.

It was revised in 2003 by Deputy Attorney General Larry D. Thompson. The Thompson Memo said that prosecutors should consider such factors as a corporation's timely disclosure of its misdeeds and its willingness to cooperate in the probe, "including, if necessary, the waiver of the corporate attorney-client privilege and work-product protection."

Since then, some prosecutors and regulators have taken the position that if a corporate client will not waive, it should be subjected to a higher penalty.

Last summer, the American Bar Association adopted a resolution opposing the "routine practice by government officials of seeking to obtain a waiver of the attorney-client privilege or work product doctrine through the grant or denial of any benefit or advantage."

In October, a coalition that includes the U.S. Chamber of Commerce, the Association of Corporate Counsel and various other organizations said it would ask the Justice Department and the Securities and Exchange Commission to abandon any policy that essentially forces a defendant corporation to waive the attorney-client privilege.

Now, the state bar group is weighing in, with both the task force and the presidential summit.

Need for Information

Mr. Buzard said he is troubled by an erosion of the attorney-client privilege and fears the ramifications of routinely demanding waivers as part of a plea bargain.

"One of our goals must be to discover how much of this is going on and inform lawyers," he said. "When I talk to lawyers, they are flabbergasted, and I believe it is far more widespread than people realize. We need to find out how much is going on and to inform lawyers about the practice. The attorney-client privilege ultimately must be considered sacred because of the importance of what we do."

Mr. Buzard also said that reliance on waivers could prove to be too easy a shortcut for prosecutors, and one that he is reluctant to encourage.

Other members of the task force include David M. Brodsky of Latham & Watkins in Manhattan; former Eastern District U.S. Attorney Zachary W. Carter of Dorsey & Whitney in Manhattan; Lawrence S. Goldman of Manhattan; Bruce A. Green of Fordham University School of Law; Michael J. Holliday of Westfield, N.J.; Mark J. Mahoney of Harrington & Mahoney in Buffalo; Marc D. Powers of Baker & Hostetler in Manhattan; Bridget Michael Rohde of Brooklyn; Lauren J. Wachtler of Montclare & Wachtler in Manhattan; and Jean T. Walsh of the New York Stock Exchange.

Ms. White, who is scheduled to appear on a panel moderated by Stephen Gillers of New York University School of Law during the bar group's Jan. 23-28 meeting, said willingness to waive is viewed by some prosecutor's offices as a "litmus test" for cooperation.

"That is troubling because the privilege is important from a public interest point of view," Ms. White said. "I think it is important that we encourage, as a matter of public policy, corporate officers to freely consult with counsel. To the extent that you know . . . that may be turned over, it will discourage those conversations."

— John Caher can be reached at jcaher@alm.com.