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The McNulty Memo and Penalty Guidelines

The Department of Justice has been revising its policies about corporate investigations, particularly as they pertain to cooperation and the waiver of attorney-client privilege. Below is some of the most recent Compliance Week coverage on this issue, including coverage of The Filip Memo, The McNulty Memo, penalty guidelines, and related topics on cooperation during investigations. See also the columns of former SEC Chairman Harvey Pitt, who has written extensively on the topic for Compliance Week.

Ninth Circuit Adopts Attorney-Client Privilege Test

August 24, 2010

Jumping on the bandwagon with other circuit courts, an influential federal appeals court has adopted for the first time a five-part test for determining the nature of the attorney-client relationship between corporate employees and corporate counsel.

How to Size Up, and Manage, FCPA Investigation Costs

August 17, 2010

Corporations worried about compliance with the Foreign Corrupt Practices Act—which would be, like, all of them—have a few more glimpses into the costs of investigating and settling FCPA probes that might prove to be useful benchmarks.

Study Raises Questions on Cooperation and Enforcement

August 10, 2010

Regulators and enforcement agencies continue as always to preach the mantra that corporations should voluntarily disclose instances of misconduct, but a new study is fueling the constant debate about what rewards corporations really get in exchange for confessing their sins.

Global Enforcement, Cooperation on the Rise

September 29, 2009

U.S. and international regulators and law enforcement agencies are upping their game with increased resources and greater cooperation in response to the global financial crisis. Corporate compliance departments and counsel may want to do the same.

Regulators Talk Cooperation, but Little Progress

September 09, 2009

Regulators from the Securities and Exchange Commission and the Commodity Futures Trading Commission got an earful last week on how they might reconcile some of the differences in their rules and approaches, and it appears they’ve got their work cut out for them.

Lowdown on Corporate Charging Decisions

June 16, 2009

Nobody ever wants to end up sitting across the table from federal prosecutors. But if the worst happens, here’s what compliance officers and corporate counselors need to know about how charging decisions are made when corporate wrongdoing occurs, straight from current and former law enforcement officials.

Keeping Compliance Effective in Difficult Times

June 09, 2009

By all accounts, the tough economic environment has created an even tougher enforcement environment for Corporate America. Companies shouldn’t expect that to improve any time soon.

Hopes for More Clarity in Deferred Prosecution Deals

January 27, 2009

Deferred prosecution agreements were the hip new accessory for companies under investigation during the Bush Administration. Now they may become fashionable on a permanent basis.

Filip’s Privilege Guidelines Draw Skeptics

September 09, 2008

Details of the Justice Department’s new “Filip Memo”—replacing the previous McNulty Memo, spelling out how companies’ cooperation in regulatory probes affects possible corporate indictments—are finally available.

Reform, Skepticism on DoJ Waiver Policy

July 22, 2008

The Justice Department is poised to revise its policies about corporate investigations yet again, its latest effort to quell chronic complaints that prosecutors strong-arm companies into waiving attorney-client privilege in exchange for avoiding indictment or other punishments.

McNulty Memo at One Year: Not Much Progress

January 23, 2008

One year after the Justice Department pledged to curb what many perceived as strong-arm tactics to push companies to cooperate with government investigations, the practices that spawned the policy change remain alive and well, legal observers say.

Lawyers Fume Over EU Attorney-Client Privilege Decision

Judd Elizabeth November 06, 2007

If in-house counsel advise their coworkers based anywhere in the European Union on a competition matter, the conversations, e-mails, and documents aren’t protected by attorney-client privilege, according to a controversial decision handed down on September 17, 2007. General counsel across Europe roundly condemned Akzo Nobel Chemicals Ltd. v. Commission, which found that attorney-client privilege in antitrust cases occurring within the 27 European Union member states can only be claimed by attorneys who’ve passed the bar in an EU country and are affiliated with a law firm.

Internal Investigations in the Global Enterprise

L. Mitchell Scott October 30, 2007

Back in the book of Genesis, the first-ever investigation was pretty straightforward: only two potential perpetrators, a single location (under a tree), and an omniscient investigator. Things have become much more complex since then—and in most cases, we don't have the benefit of an omniscient investigator. As such, most organizations should develop an approach to internal investigations that improves effectiveness while reducing costs and complexity.

FCPA Opinions on Hosting Foreign Officials

, Compliance Week by October 16, 2007

The Justice Department has released new guidance to help companies understand how they can host foreign officials without running afoul of the anti-bribery Foreign Corrupt Practices Act.

FCPA Opinions on Hosting Foreign Officials

October 16, 2007

The Justice Department has released new guidance to help companies understand how they can host foreign officials without running afoul of the anti-bribery Foreign Corrupt Practices Act.

Post Enron, Deferred Prosecution Deals Soar

October 10, 2007

Six years after its implosion, Enron continues to remind Corporate America of its legacy in a number of ways. Add the steady rise of pretrial diversion agreements to that list.

Who’s Coming and Going in Governance

August 07, 2007

Compliance Week regularly tracks various personnel moves, board appointments, product releases, customer wins, and industry gossip in the corporate governance realm. Submit announcements to Compliance Week’s Jaclyn Jaeger.

Parsing Stein Ruling on White-Collar Crime

August 07, 2007

Yes, Corporate America and its legal teams are cheering federal district court’s decision to dismiss charges against 13 ex-KPMG workers, amid allegations that government prosecutors had strong-armed KPMG into abandoning its employees.

What Frauds Are Prevalent, And Preventable

July 24, 2007

While government officials congratulate themselves for a job well done since establishing the Corporate Fraud Task Force five years ago, experts tell Compliance Week that institutional fraud is still a rampant problem.

Cooperation Important For GRC Business-Case Justification

June 07, 2007

Building the business case for governance, risk, and compliance programs is a bit harder than it was five years ago when Sarbanes-Oxley loomed and hulking fines were breaking news. These days, the fear factor alone won’t cut it, said compliance experts on a panel for building the GRC business case at Thursday’s Compliance Week 2007 conference.

SEC Tips On Comment Letters; Paulson Markets Plan

, May 30, 2007

In keeping with his promise to address issues viewed as hurting the competitiveness of American capital markets, Treasury Secretary Henry Paulson recently unveiled the first steps of a plan he says will strengthen competitiveness, including a study of the current auditing system and an analysis of the factors contributing to the growth in financial restatements.

Overseas, A Slow Pace To Follow FCPA Path

February 27, 2007

The United States blazed the trail against bribery of overseas officials when it enacted the Foreign Corrupt Practices Act 30 years ago. Other nations, however, are taking some very different routes to achieve the same goal.

Proposed Evidence Rule Leaves GCs Wary

Martinek Paul J. February 06, 2007

A proposed new rule of evidence for federal courts that was intended to limit disclosure of privileged corporate information may be more of a mixed bag than originally anticipated.

Perspectives On Risk Assessments And ERM

Mitchell Scott January 30, 2007

In the current environment, risk has a higher profile and increased responsibility for those who manage it. Business executives and board members face higher expectations for the oversight, management, and disclosure of key risks.

10 Cases To Shape The 2007 Legal Landscape

Martinek Paul J. January 03, 2007

Court rulings in Delaware and by federal judges across the country had an impact on a wide range of corporate-governance issues in 2006. Following are overviews of 10 of the most important court decisions over the past year and the possible implications for companies in 2007 and beyond.

Where The ‘McNulty Memo’ Goes From Here

Martinek Paul J. December 19, 2006

Mixed reviews greeted the Department of Justice’s publication of new marching orders for federal prosecutors probing allegations of corporate wrongdoing.

Paulson Committee Ideas Unveiled

December 05, 2006

With the clock ticking on regulatory efforts that are underway to improve implementation of the Sarbanes-Oxley requirements related to companies’ internal controls over financial reporting, a high-profile group of leaders from the investor, business, finance, law, accounting, and academic communities has offered its two cents on how to make compliance with Section 404 less burdensome for companies.

Paulson On SOX; ISS Releases 2007 Policies

November 28, 2006

Treasury Secretary Henry Paulson says regulators should find a better way to implement the Sarbanes-Oxley Act rather than make wholesale changes to it, even as a high-powered committee of business executives acting with his blessing put the final touches on a report that may well call for those major revisions.

A Staff Of One: A CGO’s Challenges Revealed

Adamson Grant November 14, 2006

As the chief governance officer at $4.9 billion Temple-Inland, I’ve had some pretty unique challenges. Of course, most governance officers feel that their company is a little different from the rest. But in the case of Temple-Inland, I’m pretty sure it is true.

State Bar Group Takes Aim At Thompson Memo

Martinek Paul J. October 17, 2006

Lawyers in Michigan have opened a new front in the battle against Department of Justice demands that companies waive their attorney-client and work-product privileges to get credit for being cooperative, with a first-of-its-kind ethical rule to prohibit government attorneys in that state from demanding such waivers.

DoJ Defends Thompson Memo Amid Clamor

October 11, 2006

Critics of a Justice Department memorandum that some say is forcing companies to routinely waive attorney-client and work-product protections—and cut off financial support for employees under investigation in order to curry favor with federal prosecutors—took their calls for reform to Capitol Hill recently, while a top Department of Justice official defended the memo’s principles and the tactics used by prosecutors.

Parsing Counsel’s Duties At Closely Held Cos.

Martinek Paul J. September 12, 2006

Although the principle that a corporation’s lawyer represents the company rather than the individuals who own or run the company is well-established, lawyers for small, closely held companies sometimes face challenges in determining whether they also have any fiduciary obligations to shareholders.

Thompson Memo Under Fresh Fire For Reform

August 08, 2006

Following what some praise as a landmark ruling where a federal judge blasted the tactics of government prosecutors and struck down crucial portions of the so-called Thompson Memo, the white-collar crime is abuzz over the implications of the case, and some are pushing the Justice Department to modify its guidance to prosecutors.

Investigations: Start Strong, Or Finish Weak

Martinek Paul J. July 18, 2006

No executive wants an investigation into wrongdoing at his company to end poorly. The key to avoiding that fate, legal specialists say, is to be sure the company’s own internal investigation starts strongly.

Key Victory For Execs On Legal Bills; Thompson Memo Hit

Martinek Paul J. July 05, 2006

In a first-of-its-kind decision sure to please executives under investigation everywhere, a federal judge has slapped down prosecutors for pressuring KPMG to cut off legal support to 16 employees indicted for selling illegal tax shelters.

Feds’ Tactics On Legal Bills Draw Scrutiny

May 31, 2006

Some recent court cases may be indicators that the tide is turning back in favor of the once-common practice of advancing legal fees to employees entangled in government investigations, which had appeared to be under fire by federal prosecutors in recent years.

Court Eases Sentence Rules For Cooperation

May 09, 2006

A federal appeals court loosened the sentencing standards last month for criminal defendants who cooperate with government authorities—even if prosecutors don’t ask for leniency when judges dole out a sentence.

SEC Goes Easy On Tyco; New Gov. Checklist

April 25, 2006

Tyco International settled a four-year investigation by the Securities and Exchange Commission last week and paid a $50 million fine for allegations that the company’s former management schemed to inflate results by at least $1 billion over a six-year period. More telling: the fine, a relatively small sum for a $40 billion conglomerate like Tyco, is a signal that the SEC is serious about the policy it announced in January of kinder, gentler enforcement actions.

Sentencing Panel Waives Cooperation Clause

April 18, 2006

In a move expected to ease the pressure on corporations under federal investigation to waive attorney-client privilege, the U.S. Sentencing Commission has voted to eliminate language from the Federal Sentencing Guidelines that requires corporations to waive the privilege if they want to earn credit for cooperation with investigators.

SEC Fine Guidelines: Shift From Cooperation To Shareholder Benefit Analysis

Dewey Ballantine February 16, 2006

According to the law firm of Dewey Ballantine, the SEC statement on the application of fines suggests a shift in the Commission's approach to corporate fines. Though cooperation was previously a focus, "the SEC has shifted its focus primarily to the question of whether the corporation’s shareholders were the victims or the beneficiaries of corporate misconduct and, if the shareholders were innocent victims, whether a fine could be used to compensate them for their losses."

SEC Publishes Guidelines For Companies On Fines

January 10, 2006

The Securities and Exchange Commission kicked off 2006 with a public declaration of its standards for levying fines on public companies that violate securities laws. But while the SEC said the move aims to set out objective standards that it will use in levying penalties, some experts say the guidelines may not actually offer companies much help in that regard.

DoJ Wants Review Process For Privilege Waiver Requests

Martinek Paul J. November 08, 2005

The Department of Justice last month issued a directive requiring federal prosecutors to create a review process for supervisory approval of requests for companies to waive the attorney-client privilege and work product protection. But this should not be interpreted as a weakening of the DoJ’s interest in obtaining privileged materials, according to experts.

Case Highlights Use Of Deferred Prosecution Agreements

Martinek Paul J. June 28, 2005

This month’s indictment of two former executives of Bristol-Myers Squibb highlights the government’s increasing use of “deferred prosecution agreements,” under which companies insulate themselves from criminal liability by agreeing to assist in the prosecution of employees.

What D&Os Should Know About SEC Fraud Investigations

Lee Jason June 07, 2005

As an officer or director of a public company, there are few things that will impact your professional life more profoundly than an investigation by the U.S. Securities & Exchange Commission’s Division of Enforcement.

True Stories: Why Setting The Right Tone Really Matters

March 22, 2005

Whatever your role in your company—be it director, CEO, or senior executive—you’ve undoubtedly heard a great deal about the need for your company to set the right “tone at the top.” But what is the “right” tone? Well, that’s usually easier to identify than articulate; the answer to the question is similar to the oft-paraphrased 1964 indecency opinion provided by U.S. Supreme Court Justice Potter Stewart, who said that we can’t define pornography, but we know it when we see it.

It’s Not Easy Being GC; Privileges, Positions Under Siege

Sammer Joanne February 08, 2005

Attorney-client privilege is under siege. That’s partially because regulators and the Department of Justice have stated that a company’s willingness to waive the privilege would be a factor in determining whether that company is cooperating with an investigation. But that's only one challenge that generals counsel are dealing with these days...

Carrot And Stick: Understanding The SEC’s Agenda

Lawrence Byrne and Joseph Armao November 30, 2004

Corporate boards and management have had to scramble to understand and implement the new rules under the Sarbanes-Oxley Act. Yet, as far-reaching as the changes Congress has made are, an even bolder agenda may be taking shape at the Securities and Exchange Commission. Recent developments indicate that the Commission is conducting investigations of corporate fraud not simply to punish wrong-doers, but also as a way of completely re-engineering the ethical code by which public companies, their managers and the directors abide.

Ahold Is Further Proof Cooperation With SEC Pays

October 19, 2004

Dutch grocery giant Royal Ahold settled SEC charges that it overstated sales by a whopping $30 billion between 2000 and 2002, but the company will not pay any fines in part because of it's "extensive cooperation with the Commission's investigation."

The Thompson Memo

U.S. Dept. of Justice September 09, 2004

January 2003 memo from Deputy Attorney General Larry D. Thompson outlined a revised set of principles that guide the Justice Department's prosecutors "as they make the decision whether to seek charges against a business organization."

Halliburton Is The Latest To Pay For Non-Cooperation

Taub Stephen August 10, 2004

When Halliburton settled charges by the Securities and Exchange Commission that it changed its accounting method without notice, most observers failed to notice that the company was fined because it failed to cooperate with the Commission's investigation.
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