tampabay.com

New rules limit inquiries

The Justice Department institutes tougher guidelines for corporate malfeasance investigations.

By ASSOCIATED PRESS
Published December 13, 2006


WASHINGTON - The Justice Department put new limits on prosecutors seeking confidential data from corporations Tuesday after critics leaned on the government to back off tough tactics authorized during the Enron-era scandals.

Deputy Attorney General Paul McNulty said the new guidelines won't hinder prosecutors from aggressively going after companies accused of fraud and other white-collar crimes. Whistle-blowers called the changes a setback for shareholders and employees who risk losing billions in pensions and savings if scandal-tainted corporations aren't fully investigated.

A coalition of allies who had demanded the changes offered only lukewarm support. The new rules bar the government from charging businesses solely on the basis of their refusal to hand over corporate attorney-client communications or their continuing to pay lawyer's fees for employees under investigation.

Announcing the changes in a New York speech that was closed to the media and public, McNulty said they aimed "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." The text of his speech was released in Washington.

The policy should help companies curb fraud internally by encouraging open talk between corporate attorneys and their clients, McNulty said in an interview with the Associated Press. "It, in no way, slows down the ability to prosecute these cases successfully," he said.

Under the new rules, U.S. attorneys and their trial prosecutors:

- Must obtain written approval from the deputy attorney general before demanding confidential information or communications between attorneys and their clients.

- Must consult with the assistant attorney general who oversees all Justice Department criminal cases before seeking results of corporations' internal investigations or other factual information.

- Cannot consider as uncooperative any firms that pay attorneys' fees for employees. However, the deputy attorney general could approve harsher charges in rare cases where the payments result in blocking the government's investigation.

- Cannot bring charges against corporations simply because they refuse to hand over confidential and so-called "privileged" attorney-client information. Firms that do, however, will receive credit for cooperating.

The new rules replace guidelines issued in 2003 to coordinate prosecution tactics among the 94 U.S. attorneys' offices nationwide following scandals at Enron Corp., WorldCom Corp. and other firms.

Critics charged that those tactics, devised by former Deputy Attorney General Larry Thompson, were too harsh on corporations trying to avoid being branded as uncooperative. They feared that could lead to indictments that would publicly scarred even innocent businesses.

Stan Anderson, senior counsel at the U.S. Chamber of Commerce, said the new guidelines show the Justice Department "clearly recognized that they had a problem." But he raised concerns over how firms who do not turn over information or refuse to pay attorneys' fees can escape harsher penalties if those that do are given credit for cooperating. "To me, that seems inconsistent," Anderson said.