3:07 p.m.
The Justice Department today limited the ability of its prosecutors to crack down on corporations that withhold confidential information during investigations as it scaled back tough legal tactics authorized after the Enron-era scandals.
Under the new guidelines, federal prosecutors still are expected to go aggressively after companies accused of fraud and other white-collar crimes.
However, the guidelines bar the government from seeking harsher penalties for businesses that won’t cooperate with prosecutors — either by denying them corporate attorney-client communications or paying lawyers’ fees for employees under investigation.
The policy shift aims to temper a diverse coalition of critics — from conservative former Attorney General Ed Meese to the leftist American Civil Liberties Union — who call prosecution tactics developed in 2003 unfair and, in some cases, unconstitutional.
“The whole strategy here is to strike a balance between the central concerns of those who have raised questions about the policy … and continue our aggressive efforts against corporate criminals,” said Deputy Attorney General Paul McNulty after he announced the changes in a speech in New York that was closed to reporters and the public.
“We still have a job to do to get the facts so we can prosecute corporate criminals,” Mr. McNulty said. “And there can be no letup in that effort. That’s what the taxpayers want us to do. And that’s what good corporations want us to do, too.”
Under the new guidelines, U.S. attorneys:
Must obtain written approval from the deputy attorney general before allowing prosecutors to demand confidential information or communications between attorneys and their clients.
Must consult with the assistant attorney general who oversees all Justice Department criminal cases before allowing prosecutors to seek results of corporations’ internal investigations or what Mr. McNulty described as other factual information.
Cannot penalize or otherwise consider as uncooperative any companies that pay attorneys’ fees for employees. However, Mr. McNulty said he and future deputy attorneys general could approve harsher penalties in rare cases where the payments result in blocking the government’s investigation.
Cannot penalize corporations that refuse to hand over the confidential and so-called “privileged” attorney-client information. Companies that do, however, will receive credit for cooperating, he said.
The new rules replace guidelines intended to coordinate prosecution tactics among the country’s 94 U.S. attorneys in the wake of corporate scandals at Enron Corp., WorldCom Corp. and other companies. These scandals cost investors and employees billions of dollars.
But critics charged that the prosecutorial tactics, developed by former Deputy Attorney General Larry Thompson, were too harsh on corporations trying to avoid being branded as uncooperative. They also said those tactics often led to indictments that publicly scarred innocent businesses.
Last week, outgoing Senate Judiciary Chairman Arlen Specter, Pennsylvania Republican, filed legislation to bar prosecutors from demanding attorney-client information from corporations in any case.
Responding to Mr. McNulty’s announcement, some critics said it was not clear whether the new guidelines would make much of a difference.
Stan Anderson, senior counsel at the U.S. Chamber of Commerce, said he remains bothered that companies that do turn over information or refuse to pay attorneys’ fees are given credit for cooperating — even if those that do not aren’t penalized.
“To me, that seems inconsistent,” said Mr. Anderson, one of the lead critics in the coalition that pushed for change. However, he said, the Justice Department “clearly recognized that they had a problem, and they recognized that we had legitimate concerns, and they’re trying to do something about it.”
Mr. McNulty said the “changes deserve to be given a try” before Congress moves forward with Mr. Specter’s plan.
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