Opening Statement of Deputy Attorney General Paul J. McNulty Senate Judiciary Committee The Thompson Memorandum's Effect on the Right to Counsel in Corporate Investigations

Opening Statement of Deputy Attorney General Paul J. McNulty Senate Judiciary Committee "The Thompson Memorandum's Effect on the Right to Counsel in Corporate Investigations"
September 12, 2006

Washington, D.C.

Today's hearing is about duty, the duty of prosecutors and the duty of corporate officials. It's about how those duties are brought together to enforce the law and to protect the integrity of the marketplace.

People of good will and great distinction have criticized how we at the Department of Justice are fulfilling our duty. These are smart and experienced people and their concerns must be taken seriously.

But, Mr. Chairman, as a United States Attorney and Deputy Attorney General for the past five years, I have a little experience myself. And I would like, therefore, to suggest five realities I have observed in relation to the practice of waiving attorney-client privilege in corporate fraud prosecutions.

Reality No 1: Federal prosecutors have a duty to the taxpayers of this country to hold corporate officials and corporations accountable for criminal wrongdoing. Our job is to protect the integrity of public markets, to ensure that investors have a safe place to entrust their hard-earned dollars. And it is not in the interests of taxpayers, and investors in particular, for corporate fraud investigations to drag on for years.

Reality No. 2: Most corporations want out from under the dark clouds of criminal wrongdoing as quickly as possible. The moment it becomes known that a corporation could be facing a criminal investigation and potential prosecution, the value of that company's stock begins to plummet, it's shareholders lose money, and the Board of Directors quickly recognizes its fiduciary duty to those shareholders. It immediately sets out to locate the cancer of corporate corruption, excise the tumor, and get the company back on the road to good health. It is not in the interests of shareholders for corporate criminal investigations to drag on for years.

Reality No. 3: Most corporations, therefore, are anxious to cooperate with government investigations. Whether it's the Holder memo, the Thompson memo, a McNulty memo, or no memo, Corporations will continue to cooperate in order to bring criminal investigations to an end, to bring them out from under that dark cloud of potential prosecution.

Reality No. 4: There are many ways for government investigators to get the facts in a corporate fraud investigation, to find out who did what when. Some ways are faster and more productive than others.

One of the most productive ways to get the facts is for a cooperating corporation to tell the government what it knows. It's not the only way for the government to learn the truth, but generally speaking, disclosing the results of the company's internal investigation is one of the best ways. Let's face it, searching for hot documents in rooms full of paper or on servers filled with computer files is much slower than looking through a 3-ring binder or a CD ROM identifying the most relevant evidence.

As a general counsel of a Fortune 500 company recently told me, if I could bring a Justice Department investigation to a close by turning over an internal investigation, and I didn't do it, my Board would fire me.

Reality No. 5: Once a corporation has turned over the internal report, and the prosecutor is ready to decide B indict or not indict? -- the corporation will insist, will demand, that its cooperation be given full consideration along with other relevant factors in deciding NOT to indict the company. Thompson memo or no memo, the waiving of attorney client privilege will always be argued by a company in its defense. And why shouldn't it be? Would it be fair to treat a company that didn't cooperate, that circled the wagons and fought the government every step of the way, the same as one that said to the government, "We're on your side. We'll help you get to the truth." I'm sure if prosecutors took that approach, my phone would be ringing off the hook.

First, the attorney-client privilege is an extremely important component of our constitutional order and great legal tradition. The Justice Department may not, and will not, do harm to this principle of basic fairness. But just as drug trafficking defendants routinely waive their constitutional right to a trial by jury in exchange for reduced charges, so to a corporation can waive a basic right when it is in its interest to do so.

Second, the waiving of the attorney-client privilege is just one part of one factor out of nine factors cited in the Thompson memorandum for consideration in deciding whether to prosecute a company. But such a waiver can make a big difference for the hopes and dreams of shareholders who are anxiously waiting for their investments to bounce back.

And third, when it comes to waiving attorney-client privilege, we rarely have an interest in legal advice or counsel contemporaneous with the investigation. We take the Sergeant Joe Friday approach, "Just the facts, Ma'am."

The Justice Department stands ready to work with everyone who has a suggestion for improving this waiver process. We're currently holding discussions with several interested parties.

All we seek at the end of the day is the ability, under the right circumstances, to get the facts as quickly as possible and to fulfill our duty to the taxpayers and investors.