Securities Law Blog

It’s about time, don’t you think? On August 28th, the Justice Department released new corporate prosecution guidelines that, among other things, instruct prosecutors not to consider a corporation's advancement of attorneys' fees to employees when evaluating cooperativeness. The guidelines also make clear that the mere participation in a joint defense agreement will not render a corporation ineligible for cooperation credit. In addition, the new guidance provides that prosecutors may not consider whether a corporation has sanctioned or retained culpable employees in evaluating whether to assign cooperation credit to the corporation. The revised guidelines further state that credit for cooperation will not depend on the corporation's waiver of attorney-client privilege or work product protection, but rather on the disclosure of relevant facts. Corporations that disclose relevant facts may receive due credit for cooperation, regardless of whether they waive attorney-client privilege or work product protection in the process.I have been railing about this unfair practice and even did it in print in the ABA’s Securities Litigation Journal, Volume 17, No. 1-Fall 2006. For more on this welcome and long overdue change in the government’s stance, see Department of Justice Press Release and Remarks of Deputy Attorney General. In a related development, the Second Circuit affirmed the dismissal of the government's indictment against 13 former partners and employees of KPMG, LLP. The Court found that the government deprived the defendants of their Sixth Amendment right to counsel by causing KPMG to place conditions on the advancement of legal fees to defendants and to cap the fees and ultimately end them. Sanity has returned. Okay, at least a little leveling of the playing field...

For more information on this subject contact securities attorneys, Michaels, Ward & Rabinovitz, LLP.