Bar Task Force Fights Waivers Of Privilege

John Caher

03-28-2006


ALBANY — Addressing what it views as a serious assault on the attorney-client relationship, the New York State Bar Association yesterday called on the U.S. Sentencing Commission to abandon a policy that encourages corporate criminal defendants to waive the attorney-client and work product privileges to obtain more lenient sentences.

By adopting as official policy a report from the Task Force on Attorney-Client Privilege, the nation's largest voluntary bar association is now on record opposing the use of waivers as a plea bargaining tool. It not only urged the sentencing commission to eliminate a 2004 amendment encouraging waivers, but also demanded "an express statement that waiver of the attorney-client and work product protections is not to be considered in evaluating the level of cooperation of the defendant and its culpability score."

The task force report was signed by 14 attorneys, including two former U.S. attorneys, a former enforcement chief with the Securities and Exchange Commission, an attorney with the New York Stock Exchange, academics and practicing criminal and civil defense counsel.

Two of the task force members, former Eastern District U.S. Attorney Loretta E. Lynch and Jean T. Walsh of the New York Stock Exchange, agreed the amendment should be excised but would not go so far as to have the sentencing commission state affirmatively that waivers of privilege will not be considered in sentencing.

At issue is what defense attorneys say is an increasing tendency of federal and state prosecutors to require privilege waivers as part of a plea bargain. The issue is rooted largely in memos issued in 1999 and 2003 by Deputy Attorneys General Eric H. Holder Jr. and Larry D. Thompson, respectively.

Mr. Holder's memo first suggested that, in assessing whether a corporate defendant has cooperated, the government could consider among other factors whether the accused had waived the attorney-client and work product privileges. Mr. Thompson's memo endorsed and amplified the suggestions of Mr. Holder and made clear that it willingness to waive is a legitimate issue in plea bargaining.

The following year, the sentencing commission added language, consistent with the Thompson memo, to the commentary of §8C2.5 of the U.S. Sentencing Guidelines. Since then, some prosecutors and regulators have adopted a position that if a defendant will not waive its privileges, it should be subjected to tougher penalties.

Early this year, State Bar President A. Vincent Buzard of Harris Beach in Rochester appointed a task force headed by Stephen D. Hoffman of Siller Wilk in Manhattan to consider the issue. He also convened during this year's annual meeting in Manhattan a special presidential summit, which attracted several hundred lawyers.

'The Rule, Not the Exception'

In its report, the task force said waiver requests have become "the rule, not the exception" and expressed concern that the trend will eviscerate the privilege and have a chilling effect on attorney-client communications.

"Many attorneys have come to believe that it is necessary for their clients to offer to waive the privilege in the hope of obtaining credit for cooperation, even when waiver has not been requested, and there have been many situations where corporate clients have felt compelled to waive the privilege, before even being asked, lest they be viewed as less than fully cooperative and less than fully interested in having the truth revealed," the task force said.

The American Bar Association last summer opposed the "routine" practice of demanding waivers. Last fall, a coalition of groups that included the U.S Chamber of Commerce and the Association of Corporate Counsel asked the Justice Department and the SEC to abandon any policy that pressures a defendant corporation into waiving its rights.

In October, Acting Deputy Attorney General Robert D. McCallum Jr. directed each federal office to establish a "written waiver process." The SEC in January issued a policy statement suggesting that corporations should be rewarded for cooperating, punished for refusing to cooperate and that waiver of the privilege is a legitimate factor in ascertaining whether the corporation cooperated.

In February, Mr. Buzard presented New York's concerns to the ABA at its annual bar leaders conference in Chicago, where the New York State Bar Association was hailed as national leader on the issue.

Today is the last day to submit commentary to the sentencing commission, and the quick action yesterday by the state bar's executive committee ensured that the voice of the New York bar will be heard in Washington.

"While one could argue that the increased corporate fraud culture over the past 10 years has brought this about, that neither justifies it nor merits its continuation," the task force said. "The attorney-client privilege and work product doctrine are predicated upon jurisprudence which recognizes the critical importance of the confidentiality of communications between client and counsel."

'A Kind of Pressure'

The task force concluded that the goal of "having clients fully and truthfully communicate with counsel" so they can be wisely counseled is frustrated if the client knows that whatever he or she shares with the lawyer could be disclosed. Still, the task force would not categorically ban waiver requests.

"[T]here are times when it may be appropriate for the government, in the interests of justice and in the search for the truth, to request that the privilege be waived," the task force said. "Target corporations may also sometimes hide behind the privilege, either improperly or by an over-expansive interpretation of its parameters."

Mr. Hoffman, in an interview yesterday, said the task force agreed that so long as a waiver is an issue in plea bargain, it will inevitably infect the attorney-client relationship. He said that even accepting as true the government's assertions that waivers are requested in a limited number of carefully screened cases, the possibility that a waiver will result in a more favorable plea bargain — and the possibility that a refusal to waive will be viewed as lack of cooperation — impacts counsel and corporate clients.

"As long as it's on the table, it exerts a kind of pressure," Mr. Hoffman said. "The pressure is there in every case, not just the rare case when the government actually needs to have a waiver."

Neither Ms. Lynch nor Ms. Walsh, the task force members who partially dissented, was immediately available for comment yesterday.

The waiver issue has emerged as a signature issue of Mr. Buzard's presidency, and the rapid response of a task force he appointed just a few months ago fosters his goal of having the organization more attuned to pressing issues. Mr. Buzard yesterday said he fully supports the task force report, and applauded the executive committee for promptly endorsing it.

"Given the potential of significant increases in penalties in the absence of waiver, there is tremendous pressure on corporations to waive a privilege that, for centuries, has been recognized as serving the public interest," Mr. Buzard said in a cover letter that was sent, along with the task force report, to Washington.

At Mr. Buzard's presidential summit in January, a panel of experts generally agreed that privilege waivers may be appropriate in some rare, isolated instances. But they differed on how frequently waivers are requested, how often they are offered by defense counsel with no direct prodding by the government and how much of an impact they have on attorney-client communications.

In addition to Mr. Hoffman, Ms. Walsh and Ms. Lynch, the task force included: 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.; Gerald B. Lefcourt of Manhattan; Mark J. Mahoney of Harrington & Mahoney in Buffalo; Marc D. Powers of Baker & Hostetler in Manhattan; Seth Rosner of Saratoga Springs; Bryan Charles Skarlatos of Kostelanetz & Fink in Manhattan; and Lauren J. Wachtler of Montclare & Wachtler in Manhattan.

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