Financial Times Editorial - White-collar blues
Financial Times Editorial - White-collar blues
Copyright The Financial Times Limited 2006
Published: September 12 2006 03:00 | Last updated: September 12 2006 03:00
Corporate America has had a rough ride since Enron: between Eliot Spitzer, New York attorney-general, and the Sarbanes-Oxley act, US companies have paid a high price for their pre-Enron bad habits (not to mention the bad behaviour of others).
But corporate America's problems have come not only from the scourge of Albany, and the new regulatory burden imposed by Congress. The US Department of Justice has made white-collar crime (rightly) one of its top priorities. But in its zeal to catch corporate criminals, the DoJ has used some dubious tactics that arguably violate the US constitution and may even defeat the whole purpose of its corporate crime crusade - to create a new culture of compliance that encourages companies to do the right thing without having to be prosecuted.
Later today, the powerful Senate judiciary committee will open its own inquiry into the department's hardball tactics, particularly the practice of forcing companies to waive the privilege that normally protects communications with lawyers - including those between whistle-blowers and in-house lawyers. Businessmen have been complaining about this practice for years: they say they cannot risk talking to their lawyers - even to find out how to obey the law - if the DoJ has the power to use that information against them. Last week, a group of top former justice department officials wrote to Alberto Gonzales, the attorney-general, to say the same thing. The group included former attorneys-general with impeccable tough-on-crime credentials, and its criticisms will be hard to ignore.
The crux of the problem is a 2003 policy (known as the "Thompson memorandum") that says prosecutors should decide whether to indict a company partly based on the company's co-operation with the government; and the best way to prove co-operation is to waive attorney-client privilege, and give the government all the information it needs to make its case. Companies have little choice but to turn over the information: an indictment is tantamount to a death sentence.
This is the wrong way to fight corporate crime. Companies need legal advice to be able to obey complex laws; if they cannot get it - without the risk that what they say will be revealed to the government - they may not try to obey the law at all.
Even worse, the tactic defeats a larger purpose: it discourages insiders from reporting wrongdoing, for fear their information may land them in jail - and without that information companies cannot police themselves and catch wrongdoing before it goes too far. The bar, the courts, the business community and now the lawmakers are telling the prosecutors that they are abusing the remarkable power of their office.
The DoJ should rewrite its policy on waiver of attorney-client privilege - before Congress does so for it
Copyright The Financial Times Limited 2006
Published: September 12 2006 03:00 | Last updated: September 12 2006 03:00
Corporate America has had a rough ride since Enron: between Eliot Spitzer, New York attorney-general, and the Sarbanes-Oxley act, US companies have paid a high price for their pre-Enron bad habits (not to mention the bad behaviour of others).
But corporate America's problems have come not only from the scourge of Albany, and the new regulatory burden imposed by Congress. The US Department of Justice has made white-collar crime (rightly) one of its top priorities. But in its zeal to catch corporate criminals, the DoJ has used some dubious tactics that arguably violate the US constitution and may even defeat the whole purpose of its corporate crime crusade - to create a new culture of compliance that encourages companies to do the right thing without having to be prosecuted.
Later today, the powerful Senate judiciary committee will open its own inquiry into the department's hardball tactics, particularly the practice of forcing companies to waive the privilege that normally protects communications with lawyers - including those between whistle-blowers and in-house lawyers. Businessmen have been complaining about this practice for years: they say they cannot risk talking to their lawyers - even to find out how to obey the law - if the DoJ has the power to use that information against them. Last week, a group of top former justice department officials wrote to Alberto Gonzales, the attorney-general, to say the same thing. The group included former attorneys-general with impeccable tough-on-crime credentials, and its criticisms will be hard to ignore.
The crux of the problem is a 2003 policy (known as the "Thompson memorandum") that says prosecutors should decide whether to indict a company partly based on the company's co-operation with the government; and the best way to prove co-operation is to waive attorney-client privilege, and give the government all the information it needs to make its case. Companies have little choice but to turn over the information: an indictment is tantamount to a death sentence.
This is the wrong way to fight corporate crime. Companies need legal advice to be able to obey complex laws; if they cannot get it - without the risk that what they say will be revealed to the government - they may not try to obey the law at all.
Even worse, the tactic defeats a larger purpose: it discourages insiders from reporting wrongdoing, for fear their information may land them in jail - and without that information companies cannot police themselves and catch wrongdoing before it goes too far. The bar, the courts, the business community and now the lawmakers are telling the prosecutors that they are abusing the remarkable power of their office.
The DoJ should rewrite its policy on waiver of attorney-client privilege - before Congress does so for it
posted by Carlos T Mock @ 7:52 AM
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