The Honorable Ricardo H. Hinojosa
U.S. Sentencing Commission
One Columbus Circle, N.E.
Washington, D.C. 20002-8002
Re: Chapter 8 Organizational Guidelines, Section 8C2.5, Waiver of Attorney-Client Privilege
Dear Judge Hinojosa:
On behalf of the undersigned organizations, please accept this letter as a request for the U.S. Sentencing Commission to review and amend the Commentary for Section 8C2.5 contained in the Chapter 8 Organizational Guidelines to the extent the provision endorses government-coerced waivers of the attorney-client privilege and work product protections. This request is supported by the American Chemistry Council, the American Civil Liberties Union, the Association of Corporate Counsel, Business Civil Liberties, Inc., the Business Roundtable, Frontiers of Freedom, the National Association of Manufacturers, the U.S. Chamber of Commerce, and the Washington Legal Foundation.
On April 30, 2004, the U.S. Sentencing Commission submitted to Congress a number of amendments to Chapter 8 of the Guidelines relating to “”organizations””-a broad term that includes corporations, partnerships, unions, non-profit organizations, governments, and other entities. Included in these amendments-all of which became effective on November 1, 2004- was a change in the Commentary for Section 8C2.5 that authorizes and encourages the government to require entities to waive their attorney-client and work product protections in order to show “”thorough”” cooperation with the government and thereby qualify for a reduction in the culpability score-and a more lenient sentence-under the Guidelines.
Prior to the change, the Commentary was silent on privilege and contained no suggestion that such a waiver would ever be required, even though the Justice Department has requested waiver of privilege prior to the amendments as a condition of certifying a company’s cooperation as part of its evaluation. Privilege waiver was the subject of substantial consideration by the Commission’s Ad Hoc Advisory Group on the Organizational Guidelines, which proposed the changes after considering information from the Department of Justice, as well as members of the defense bar and regulated entities.
During the Advisory Group’s deliberations, numerous representatives of the business community and various legal groups expressed concerns about the Group’s proposal regarding the waiver issue, which was not dramatically different than the version ultimately adopted by the Commission. Since the adoption of the final version, a broader cross-section of organizations has evaluated the substantive and practical impact of the waiver provision on their operations and has identified profoundly negative unintended consequences. Though the Commission and the Advisory Group have done work in this area, we respectfully suggest that the Commission revisit this issue for the following reasons.
The attorney-client privilege is the bedrock of a defendant’s rights to effective counsel and confidentiality in seeking legal advice. It also serves a key practical role in the process of corporate self-investigation and reporting by allowing corporate officials and staff to talk with lawyers without concern that their admissions, questions or requests for legal guidance will be required to be shared with government investigators.
The privilege also encourages clients to place lawyers on mission-critical teams so that legal advice can be regularly integrated into the company’s day-to-day and strategic business decisions. Removing the protections of the privilege from the corporate or other organizational contexts will make it far more difficult for companies, associations, unions, and other entities to detect employee wrongdoing when it occurs and correct it early.
While the Commentary to Section 8C2.5 states that “waiver of attorney-client privilege and of work product protections is not a prerequisite to a reduction in culpability score [for cooperation with the government] …unless such waiver is necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization,” the exception is likely to swallow the rule. Now that the amendment has become effective, the Justice Department-which has followed a general policy of requiring companies to waive privilege as a sign of cooperation since the 1999 “Holder Memorandum” and 2003 “Thompson Memorandum”-is likely to pressure companies to waive privileges in almost all cases. Our concern is that the Justice Department, as well as other enforcement agencies, will contend that this change in the Commentary to the Guidelines provides Congressional ratification of the Department’s policy of routinely requiring privilege waivers. From a practical standpoint, organizations will have no choice but to waive these privileges whenever the government demands it, as the threat to label them as “uncooperative”” in combating corporate crime-even if the charge is unfounded-could have a profound effect on their public image, stock price and credit worthiness.
These changes to the Section 8C2.5 Commentary-resulting in the routine compelled waiver of attorney-client privilege and work product protections-will unfairly harm companies, associations, unions and other entities in the following ways:
The new amendment will weaken the attorney-client privilege between companies and their lawyers. Lawyers for companies and other organizations play a key role in helping these entities and their officials comply with the law and act in the entity’s best interests. To fulfill this role, lawyers must enjoy the trust and confidence of managers and boards and must be provided with all relevant information necessary to properly represent the entity. By requiring routine waiver of the attorney-client and work product privileges, the amendment will discourage companies and other organizations from consulting with their lawyers, thereby impeding the lawyers’ ability to effectively counsel compliance with the law.
The amendment will undermine internal compliance programs. Instead of aiding in the prosecution of corporate criminals, the privilege waiver amendment will make detection of corporate misconduct more difficult by undermining companies’ internal compliance programs and procedures. These mechanisms, which often include internal investigations conducted by the company’s in-house or outside lawyers, are one of the most effective tools for detecting and flushing out malfeasance. Indeed, Congress recognized the value of these compliance tools when it enacted the Sarbanes-Oxley Act. However, because the effectiveness of these internal investigations depends on the ability of the individuals with knowledge to speak candidly and confidentially with the lawyer conducting the investigation, any attempt to require routine waiver of the attorney-client and work product privileges would undermine a system that has worked well. The potential for routine privilege waivers undermines rather than promotes good compliance practices.
The amendment will unfairly harm employees. The privilege waiver amendment will place the employees of a company or other organization in a very difficult position when their employers ask them to cooperate in an investigation. They can cooperate and risk that statements made to the company’s or organization’s lawyers will be turned over to the government by the entity or they can decline to cooperate and risk their employment. It is fundamentally unfair to force employees to choose between keeping their jobs and preserving their legal rights.
Unfortunately, the Supreme Court’s recent decision in United States v. Booker/Fanfan did not alleviate the problems caused by the amendment. Although the Supreme Court struck down as unconstitutional those provisions of the Sentencing Guidelines that made them mandatory and binding on the courts, it preserved the overall Guidelines as non-binding standards that the courts must consider when crafting sentences. Therefore, the privilege waiver amendment will continue to cause adverse consequences as long as it remains in place.
For all these reasons, we believe that the new privilege waiver amendment is flawed and uniquely dangerous to our shared goal of protecting the policies that are advanced by the attorney-client relationship. Therefore, we urge the U.S. Sentencing Commission to revise Section 8C2.5 by deleting the language “”unless such waiver is necessary in order to provide timely and thorough disclosure of all pertinent information known to the organization,”” or to consider other revisions that do not endorse waivers of the attorney-client privilege and work product protections.
AMERICAN CHEMISTRY COUNCIL
AMERICAN CIVIL LIBERTIES UNION
ASSOCIATION OF CORPORATE COUNSEL (formerly the American Corporate Counsel Association)
BUSINESS CIVIL LIBERTIES, INC.
FRONTIERS OF FREEDOM
NATIONAL ASSOCIATION OF MANUFACTURERS
THE U.S. CHAMBER OF COMMERCE
WASHINGTON LEGAL FOUNDATION
cc: Timothy McGrath, Staff Director, U.S. Sentencing Commission
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