ࡱ> EGD` bjbj .0FFFFZ,~$h` ~~ zZYF 0} }L}b("6Nb      HYPERLINK "http://online.wsj.com/home"  INCLUDEPICTURE "http://online.wsj.com/img/printformat_logo.gif" \* MERGEFORMATINET  INCLUDEPICTURE "http://online.wsj.com/img/b.gif" \* MERGEFORMATINET April 6, 2006   INCLUDEPICTURE "http://online.wsj.com/img/b.gif" \* MERGEFORMATINET REVIEW & OUTLOOK DOW JONES REPRINTS  INCLUDEPICTURE "http://online.wsj.com/img/g.gif" \* MERGEFORMATINET   INCLUDEPICTURE "http://online.wsj.com/img/b.gif" \* MERGEFORMATINET  Corporate Injustice April 6, 2006;PageA14 Two big things happened last week in the federal prosecution of 16 former KPMG partners and two other alleged co-conspirators. The first, which got lots of media play, is that one of the defendants copped a plea. But the second received almost no attention, even though it may have much larger significance for future white-collar indictments. At a pre-trial hearing in the KPMG case in New York last week, federal Judge Lewis A. Kaplan suggested that a three-year-old Justice Department policy on corporate prosecutions might be unconstitutional. He was referring to the now famous Thompson memo, which in 2003 rewrote Justice guidelines on when to indict entire firms in criminal investigations. "Too often," the memo states, "business organizations, while purporting to cooperate with a Department investigation, in fact take steps to impede the quick and effective exposure of the complete scope of wrongdoing under investigation." With that as a premise, then-Deputy Attorney General Larry Thompson laid out what firms should do to avoid a corporate indictment, a la Arthur Andersen. Those steps were extraordinary in their attempt to pressure corporate executives: They include waiving attorney-client privilege to give investigators access to internal documents and cutting off accused employees from legal and other forms of support. In short, the Thompson memo said that companies under investigation are expected to surrender any right against self-incrimination and cut their accused employees adrift. In one sense, the memo's guidelines are just that -- internal guidelines for prosecutors. But as a practical matter, only a rare CEO will risk the death sentence that a corporate indictment represents. So "cooperation" as defined by Justice is hardly optional. It was on this point that Judge Kaplan took Assistant U.S. Attorney Justin Weddle to task last week. When Judge Kaplan questioned the fairness of pressuring companies to throw their employees overboard, Mr. Weddle replied that companies are "free to say, 'We're not going to cooperate.'" "That's lame," the judge retorted. He then asked Mr. Weddle "what legitimate purpose" was served by insisting that companies cut their former employees off from legal support. Companies under investigation, Judge Kaplan noted, ought to be free to decide whether to support their employees or former employees without Justice's "thumb on the scale." Mr. Weddle replied that paying the legal fees of former employees charged with crimes amounted to protecting "wrongdoers." This prompted the judge to remind the young prosecutor that the accused are still innocent until proven guilty. He also reminded Mr. Weddle that the Constitution's Sixth Amendment guarantees the right to counsel. And for good measure, if the government is confident in its case, it shouldn't be afraid to allow "wrongdoers" access to an adequate defense. On Tuesday of this week, Judge Kaplan dismissed a defense motion to throw out the entire case based on a charge of "prosecutorial misconduct," but he left the Sixth Amendment question open for possible further proceedings. That partial victory notwithstanding, Mr. Weddle's replies betrayed Justice's willingness to trample the due-process rights of companies and defendants in white-collar cases in the wake of the Enron uproar. It's certainly possible for law breakers to shield incriminating material using attorney-client privilege, but taking down that wall also has serious unintended consequences. For one thing, executives are now on notice that even asking a legal question of an attorney could later be used against them in court -- say, as proof that they were aware that what they were doing might not be proper. The likely result is a greater reluctance to seek legal advice in the first place. The Thompson memo also notes that firms are "legal persons" that shouldn't be treated more or less leniently by law enforcement because of their "artificial status." But a company and a person are in reality very different. A firm cannot be put in jail or take the stand in its own defense. And bankruptcy nearly always follows a corporate indictment, whether the firm is later convicted or not. That fact alone gives the lie to Mr. Weddle's insouciant reply that companies are free to refuse to cooperate. The Thompson memo was written at a time when corporate blood was in the political water, and Justice attorneys were angry in particular about Andersen's lack of cooperation. Well, they certainly nailed Andersen, only to have that conviction overturned later by the Supreme Court. The trouble is that in expanding the threat of corporate capital punishment, Justice has also damaged the attorney-client privilege for white-collar defendants and thus the right to a fair trial. And all of this was done with little or no public debate, much less a vote in Congress. Justice could alter or eliminate the Thompson memo by the stroke of a pen, but it is unlikely to do so until its legitimacy is challenged in court. If Judge Kaplan's reaction in the KPMG case is indicative, that day may not be far off. And a good thing too. URL for this article:  HYPERLINK "http://online.wsj.com/article/SB114429123411418521.html" http://online.wsj.com/article/SB114429123411418521.html  *+,- . / 0 C D F H I J K ] _ `   Ͽϱh#Ch#C5j2h#CUjh#CUh#C0J5OJQJ\^J h#CCJ j<h#CU h#C<h#C5CJ\aJh#CCJaJjKh#CUh#CB*phjh#CB*Uphjh#CUh#C4l$di$If[$\$a$qkd$$If4\8 !,"634a $$Ifa$$If 1 C MH@$IfK$gd#C8kd$$IfY!$634a$IfskdG$$If4\8 !~634aC D E F G H I TN$If`kd$IfK$L$xF! 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