IN 1994 MARY JO WHITE’S southern district made the most significant advance in corporate prosecutions in the modern era, forming the first deferred prosecution agreement, or DPA, a special kind of settlement with a company. The office didn’t plan it. Beyond the one agreement, they put little thought into what they had done. No one understood that they were creating the model for twenty-first-century corporate law enforcement.
Before the first DPA, the Department of Justice’s prosecutorial approach to corporate enforcement evolved slowly. Jed Rakoff’s United Brands case in the 1970s was something of a one-off. Prosecutors continued to focus on individuals, rarely contemplating corporatewide enforcement measures until the late 1980s. During the 1980s and 1990s, fear of street crime brought policing and penal changes. Congress and the states passed punitive laws about street crime, increasing prison terms, establishing mandatory minimum sentences, and building the modern prison complex. The movement touched corporations, too. Corporations skated too easily for their wrongdoing. Potential fines were small, as the government realized with United Brands. The profits from illicit activities dwarfed the penalties, neutering any disincentive power they might have.
In the mid-1980s, Congress authorized the creation of the US Sentencing Commission to examine prison terms and codify norms to correct the arbitrary punishments meted out by unaccountable judges. First, in 1989 the commission’s guidelines for individuals went into effect, establishing a point system for how many years of prison a convicted criminal might get, based on the seriousness of the misconduct and a person’s criminal history. In 1991, amid public and congressional outrage that sentences for white-collar criminals were too light and fines and sanctions for corporations too lenient, the Sentencing Commission expanded the concept to cover organizations. It formalized the Sporkin-era regime of offering leniency in exchange for cooperation and reform. The new rules delineated factors that could earn a culprit mercy. In levying a fine, the court should consider, the sentencing guidelines said, “any collateral consequences of conviction.”1
“Collateral consequences” was, and remains, an ill-defined concept. How worried should the government be if a punishment causes a company to go out of business? Should regulators worry about the cashiering of innocent employees? What about customers, suppliers, or competitors? Should they fret about financial crises? From this rather innocuous mention, the little notion of collateral consequences would blossom into the great strangling vine that came to be known after the financial crisis of 2008 by its shorthand: “too big to jail.” Prosecutors and regulators were crippled by the idea that the government could not criminally sanction some companies—particularly giant banks—for fear that they would collapse, causing serious problems for financial markets or the economy.
As the Sentencing Commission wrote rules for punishing organizations, the Southern District of New York also fumbled for a solution to corporate investigations. In 1992 the office, under White’s predecessor, reached an agreement not to file charges against Salomon Brothers, in a case in which traders tried to corner the market for US Treasury bonds. The office deemed the investment bank’s cooperation earnest and complete, so it dismissed the charge upon settling. It did one more similar settlement.
Two years later, in 1994, prosecutors were trying to salvage a flailing case against Prudential Securities. For more than a decade, Prudential brokers steered clients, mainly small investors, into inappropriately risky investments. Brokers pitched them as safe, and they were—but not for the investors. The partnerships served as reliable vehicles for transferring fees to Prudential. Clients had collectively lost more than $2 billion.2 Yet Southern District prosecutors realized that any Prudential criminal case would face significant problems. Much of the malfeasance had taken place years earlier. Memories were fading, evidence yellowing. The SEC had already settled its civil case a year before, so the agency wasn’t generating new evidence. Prudential had a charming CEO who convinced prosecutors of his desire to turn around the company’s corporate culture. While no one at the office would admit it publicly, the Southern District was concerned it wouldn’t prevail at trial. Prosecutors wouldn’t tell Prudential that, obviously. What to do? In a meeting of White’s top advisors, her top lieutenant, Shirah Neiman, tossed out an idea: “What about trying a deferred prosecution agreement?”
Until then, such agreements had been used only in street crime. They began in the 1930s as a method of dealing with first-time juvenile defendants. There might be some mitigating circumstances—the criminal had stolen medicine for his sick mother—that might require something less than a full conviction. It was a middle ground between dropping charges and a draconian sanction.3
White wasn’t enthusiastic, but she couldn’t see any other option. She approved the deferred prosecution agreement, the first with a large company. In late October 1994 the Department of Justice filed criminal charges against Prudential Securities but then held off on pressing them on the condition that the firm adhere to reforming itself. The Department of Justice made the company put $330 million into a fund for the investors, doubling the fund that the SEC had set up the previous year. White said that she and her office made the decision not to indict formally out of fear for what would happen to Prudential’s eighteen thousand employees and to its clients.4
The company accepted a monitor: a law partner who had left his position as a federal judge in the Southern District. He went on Prudential’s board of directors and reported to the Manhattan US Attorney’s Office over the next three years. Something about the deal rankled Neiman and White; justice had been served underdone. After Prudential, Mary Jo White’s office didn’t do any corporate deferred prosecutions for the rest of her tenure, which ended in early 2002.
Other US Attorney’s Offices around the country did, however. Defense attorneys complained that prosecutors demanded a DPA even before they opened cases. “Some offices really didn’t have the evidence to indict a company, but they would threaten them with prosecution and then offer a deferred prosecution if the company cooperated,” Neiman would say later. White “rued the day we came up with this idea.”5
The defense bar worked the new system. Lawyers complained to any official who would listen that they were being extorted into an agreement before the government had amassed evidence to support its suspicions. Defense attorneys, however, would also accept deals when offered early because they stopped an actual investigation. By the mid to late 1990s, defense bar complaints reached Deputy Attorney General Jamie Gorelick and other high-level officials in President Bill Clinton’s Justice Department. There seemed to be no rules. What were the policies? What were the factors they considered? The defense bar wanted written guidelines for prosecuting corporations. Gorelick ordered up a memo to codify the approach.
White and Neiman felt a memo was unnecessary. Of course the defense bar knew what the factors were; they were the same in every case. Any settlement came about if there was appropriate cooperation, and defense lawyers understood whether the cooperation was full and sincere. Neiman and White considered the defense bar’s complaints ridiculous. A memo was not only unwarranted but also dangerous. Anytime you write down something, clever lawyers can take advantage of it. Defense lawyers would just start arguing about what it did and didn’t say.
But the memo was going to happen with or without the Southern District. So Mary Jo White, facing a turf threat on her hands, directed Neiman to go to Washington to make sure the politicos didn’t screw up the policy.
White’s emissary prosecuted without discrimination, legally and in the hallways—against defendants, their counsel, judges, and Justice Department colleagues, subordinates and superiors alike. Neiman grew up in a modern Orthodox Jewish household in Brooklyn and Queens. Her mother was a concert pianist and piano teacher and her father an intellectual of Jewish history. She went to Ramaz, the Orthodox day school on the Upper East Side; Barnard for college, and then Columbia Law School, where there were only 23 women in her 1968 graduating class of 304. She served on law review.
After law school, Neiman clerked for two federal district court judges, where she began a romance with the courtroom. One of her judge’s cases was against a Weather Underground fellow traveler who had helped plant bombs across the city. The day of the trial came, and she sat among the spectators, impatient for it to begin. The prosecutors and the defense team rose to go into the judge’s chambers. To her horror, she realized they were going to settle. She was crushed.
By the late 1960s, Neiman had decided to go to the US Attorney’s Office in the Southern District. She spoke with the attorney in charge of hiring and told him she wanted to go to the criminal section. The man informed Neiman that the Southern District did not hire women in the criminal division. For years, women had served in the civil division of the Southern District but Robert Morgenthau (as had his predecessors) blocked them from being criminal prosecutors. She said she knew about the policy.
“Are you going to make an issue of it?” he asked.
“Yes, I do intend to and want to make an issue of it,” she replied.
It was 1969. While her application process wound through the system, Morgenthau left in 1970, and Whitney North “Mike” Seymour took over as US attorney. The judge she clerked for, Milton Pollack, one of the most respected federal district court judges of the day, called up Seymour and recommended that he hire one of his great clerks to the criminal division. Seymour told him, “Great! Send him over.” “It’s not a ‘him,’ ” Pollack replied.
The head of the office’s criminal division asked Neiman to lunch at a Chinese restaurant. She had recently stopped keeping kosher and had never been to one before. The food disgusted her. She ordered what he ordered but didn’t eat. She remembers him asking her three questions: Will you be able to get along with the FBI agents? Will you be able to handle the blue language in the Thursday criminal division meeting? Will juries believe you?
She was furious. Such sexist, ridiculous questions. Years later, Neiman barely remembers her answers. Of course she could get along with agents and handle any bad words! And why wouldn’t juries believe a woman? She went back to her office, and, assuming she wasn’t going to get the job, called her contact at a law firm that had recently offered her a position and accepted. Ten minutes later, US Attorney Seymour called and said, “How would you like to be the first woman in the criminal division of the Southern District of New York?” She told him she’d have to think about it over the weekend.
Neiman took the job. Of course she did. When she was sworn in, the Daily News, the Times, and the New York Post all covered it. According to one account, some of her new colleagues sat in the back and said, “All right, let’s go to McSorley’s.” The bar was in the news because it didn’t allow women. A collection of pioneering women criminal prosecutors would soon follow her.
• • •
Three decades later, Neiman was still at the Southern District. She was an obsessive, telling the New York Sun once that she worked “twenty-two hours a day.” People believed it. She mastered arcane areas, particularly tax law, making her invaluable. She was curt, short-tempered, and unapproachable, but able. Young prosecutors would rather face down an Islamic terrorist or a Mafia boss than have to deal with Neiman.
Though more often right than wrong, she was missing a diplomacy gene. Neiman recognized that her colleagues held her to a different, double standard. Aggressiveness in a male prosecutor was praised and rewarded; she was criticized for it. She wasn’t a pushover but, as she saw it, no more so than many of her male colleagues. When Rudolph Giuliani was a US attorney in the 1980s, he’d banished her physically, moving Neiman to an office on the other side of the floor. In the 1990s, Mary Jo White retrieved her back from Siberia to serve as her chief advisor. Neiman did not fear delivering bad news or wielding a shiv in a turf battle. White could arrive on the scene and be the placating hero in the wake of Neiman’s “violence.”
Now, in 1999, Neiman had another job to do for White: to help shape the new corporate prosecution guidelines. Putting aside her disdain, she did her typical mountain of research, looking at White’s speeches, case law, and her own history and institutional knowledge. Neiman arrived in Washington with an outline of the factors that prosecutors should think about before bringing charges against a company. These made up the heart of what would become the Holder memo, named after Eric Holder, who was then deputy attorney general under Janet Reno. Holder himself had little to do with drafting it. Of the many people on the memo’s working committee, Neiman was the most forceful.
The Holder memo, signed on June 16, 1999, wasn’t policy; it provided only guidance for prosecutors. But it was the first effort by the Justice Department to enumerate principles for charging corporations. In corporate prosecutions, the Holder memo first laid out the usual factors: prosecutors needed to consider “the sufficiency of the evidence, the likelihood of success at trial, the probable deterrent, rehabilitative, and other consequences of conviction.” But it went further than that. It proposed eight other factors prosecutors could consider when deciding whether to indict a corporation:
1. the seriousness of the offense and risk of harm to the public;
2. the pervasiveness of wrongdoing at the company;
3. the corporation’s history of similar conduct;
4. the corporation’s timely and voluntary disclosure of the wrongdoing and its willingness to cooperate in the investigation, “including, if necessary, the waiver of the corporate attorney-client and work product privileges”;
5. the existence and adequacy of the corporation’s compliance program;
6. the corporation’s remedial actions;
7. the collateral consequences, “including disproportionate harm to shareholders and employees not proven personally culpable”; and
8. the adequacy of noncriminal remedies.
The new elements essentially changed how the law would be enforced. The Supreme Court had allowed corporations to be prosecuted as legal persons since the 1909 New York Central & Hudson decision. The Holder memo conceded something that had been influencing prosecutorial decisions about corporate indictments since Mary Jo White’s Prudential DPA: corporations are different from individuals. The memo was an admission that the government did not desire or seek a corporate indictment as a matter of routine.
How to get sufficient cooperation bedeviled the department. Companies evaded investigations and hid wrongdoing even as they made a show of cooperating. For years, big businesses hid behind attorney-client privilege to conceal facts and bad behavior. They shielded questionable conduct by invoking privilege, rendering details of suspect dealings by top executives inadmissible in court.6
When companies came under federal scrutiny, they typically paid the legal bills for its executives, hiring some of the nation’s best law firms, which were expert at slowing or even killing inquiries. When multiple executives fell under suspicion, their lawyers would often sign joint defense agreements allowing them to share with one another what they had learned about the Feds’ case.
Since these maneuvers hindered the government’s investigations, Neiman and her memo-formulating colleagues sought to explain to the corporate world and the defense bar that this behavior would not be tolerated anymore. Their tactics had become a form of obstruction of justice. To reverse this slide, the Holder memo authors laid out what cooperation meant. If necessary, they wrote, companies would need to waive corporate attorney-client privilege. Such privilege is rule of evidence that protects clients from having their lawyers use the information they gave them against them in court. A bedrock principle of ethical conduct that predates the American legal system, lawyers treat attorney-client privilege as sacrosanct.
For the first few years of its existence, the Holder memo, including the attorney-client privilege waiver language, wasn’t controversial. Then came the Thompson memo.
After the Arthur Andersen prosecution in 2002, Deputy Attorney General Larry Thompson was preoccupied with how to rein in corporations and fend off critics of his aggressive Justice Department. Political advisors in the George W. Bush administration began to worry. Corporate executives told White House aides that the Justice Department was demonizing business. The Enron Task Force was too aggressive. Corporate executives weren’t used to being treated this way—and by a Republican administration! In early 2002 the president summoned Thompson to the White House. The deputy attorney general and FBI Director Robert Mueller met with the president in the Roosevelt Room of the White House. The two of them decided not to talk legal theory with him; instead, they showed him the evidence prosecutors had amassed in investigations such as the Enron case. Thompson, with short gray-flecked hair and rimless glasses, spoke in his stately manner, barely above a whisper, laying out the evidence.
George Bush seemed stunned. His trusted advisors explained how executives, some of whom he knew personally, like Ken Lay, made up numbers and lied to the public. The president could no longer condone what was happening at corporations. At the end of the presentation, he turned to Mueller and Thompson and dashed the hopes of his political and economic advisors. Bush said, “Bobby and L.T., continue what you are doing.” It was just what a law-and-order man like Larry Thompson wanted to hear.
Born in 1945, Larry Dean Thompson grew up in Hannibal, Missouri, Mark Twain’s hometown. His mother was a cook who worked in various private homes; his father worked as a railroad laborer. Neither had more than a high school education. Missouri was segregated, so Thompson attended an all–African American school through the eighth grade. For vacations, Thompson’s father would get free passes on the railroad, taking the family all over the Midwest. Even in ostensibly integrated places, they couldn’t count on being able to find a hotel that would put them up. The Thompson family relied on an informal network of African American families to board them when needed. Such experiences hadn’t left him embittered. He recalled the acts of kindness and equity. Thompson played basketball and football for his integrated high school. Once, when a restaurant in town refused to serve him, his coach and teammates declined to eat there without their black teammate.
In his preintegration schools, Thompson’s teachers employed a strict, rigid style. Sometimes they would tell him he had to be better than white students. One year, at a citywide spelling bee for students from all four schools in town—three white and one black—Thompson came in second. His teachers didn’t praise him, they assailed him. He was going to be a failure because he didn’t work hard enough, they said. Thompson loved them for it. He liked to say that he never knew he was “quote-unquote ‘disadvantaged’ ” until he was a college sophomore taking sociology classes, and his professors taught about class stratification in the United States.
Thompson had little notion of politics in his youth. But by 1964, he’d read The Conscience of a Conservative by Senator Barry Goldwater, the conservative insurgent and Republican candidate for president in 1964, and found an ideological home. He didn’t care for Goldwater’s stance against the Civil Rights Act of 1964, but otherwise, the views of the Arizona firebrand grabbed him. Thompson never thought that expecting the government to support people was right; he would point out to people that it was the government that had enforced segregation. The conservatives he came to know treated him more like an individual, he felt, while the liberals patronized him.7
He graduated from Culver-Stockton College in Canton, Missouri, in 1967, earned a master’s degree in sociology from Michigan State University, and then went on to the University of Michigan Law School, graduating in 1974. Thompson’s first intense involvement in politics came in 1980, when he became a soldier in the Reagan revolution. An associate at an Atlanta law firm, King & Spalding, Thompson campaigned for Mack Mattingly, the first Georgia Republican to be elected to the US Senate since the post–Civil War Reconstruction period. Two years later, thanks to Mattingly, Thompson was drafted to become the US attorney for the District Court for the Northern District of Georgia. He was thirty-six years old.
As a prosecutor, Thompson came to believe that white-collar crime could be just as serious as blue-collar street crime. It sapped the economy and created an uneven playing field. A sense that no one was above the law fired him. As a US attorney, he heard all kinds of excuses. He liked a thought experiment: a drug dealer is caught, say, in Brooklyn. The dealer says, “I gave a lot of money to charities in the Eastern District of New York. I’m willing to resolve this problem, but I’m not going to plead guilty to a crime. I want a civil resolution. You can take my money and give it to the charities. You can do all kinds of things. You can do all kinds of things to me, but I cannot agree to a criminal resolution.”
It was preposterous. This country put kids in prison for carrying drugs. But the United States should accept corporate bigwigs going free because the company settled with the Justice Department? He was so mild-mannered that all he would say was that this state of affairs bothered him. Larry Thompson allowing that something “bothered” him was the equivalent of a normal person overturning a table.
Both Shirah Neiman and Larry Thompson were steely about white-collar crime. They believed that the priority of prosecutors should be going after individuals. Perhaps not coincidentally, both were outsiders: a pioneering woman and an African American Republican.
Thompson never once doubted the necessity of indicting Arthur Andersen. The accounting firm had been so truculent that the prosecutors had to indict. He believed in the decision. But the prosecution had stirred outrage, forcing him to respond.
Just as Neiman and the Southern District had to respond to pressure from the defense bar to help craft the Holder memo, Thompson had to turn his attention to the same questions over how the department approached corporate prosecutions. He and his team decided to revise the Holder memo.
The result, known as the Thompson memo, came out on January 20, 2003, six months after Arthur Andersen had been found guilty. The only substantive change was a new factor to consider, number eight of nine: “The adequacy of the prosecution of individuals responsible for the corporation’s malfeasance.” Thompson still wanted prosecutions of individuals to be the government’s priority. Additionally, the Thompson memo formalized the policy outlined by its predecessor, the Holder memo. That memo was only advisory, but US Attorney’s Offices around the country had to follow Thompson. In his preface, Thompson emphasized how necessary the guidelines were. Companies, he wrote, purport to cooperate while impeding exposure of the full account of a company’s wrongdoing.
The Thompson memo offered a deal. It was not intended to be a generous one. Companies could win Brownie points for being cooperative. Prosecutors could push companies to waive their attorney-client privilege and share detailed materials with the government. They needed to cooperate with the prosecutions of individuals. And they had to eschew tactics such as joint defense agreements, in which the various counsels for various targets of investigation share information about government tactics and prosecutorial knowledge. Sophisticated companies with their sophisticated lawyers had defenses when the government began to investigate. The government wanted to tear those down.
Thompson had a goal for prosecutors and a message for business. He wanted to make certain that the Justice Department wasn’t going to indict a corporation willy-nilly, even though it could by law. He wanted to make sure, however, that companies understood what they had to do. Pervasive bad behavior, a lack of contrition, a phony compliance program—his Department of Justice would treat these transgressions sternly. Members of the white-collar bar howled in outrage.
By the middle of 2003, Thompson was getting attacked from both sides. Corporate America was furious about how aggressive the Justice Department had been in its investigations and prosecutions following the Nasdaq crash. The public and the media, however, wanted immediate gratification. In an interview on CNBC in June 2003, a host asked Thompson what was taking so long. Just that month, Martha Stewart had been charged with obstructing justice in an insider trading probe. “The CEOs in the most notorious scandals still haven’t been charged. Why is it that we see Martha Stewart marching into court, but not Ken Lay, Jeff Skilling, Bernie Ebbers?” (Ebbers was the cofounder and CEO of WorldCom. He would be convicted of fraud and conspiracy in 2005 and is currently serving a twenty-five-year prison term.)
Thompson responded: “We’re looking at the facts of these investigations, and we’re going to let the facts take us to the people that are involved in these matters. We don’t want to be engaged in any kind of what I would call a lynch mob mentality. We’re going to proceed professionally, methodically, but most importantly, thoroughly.”8 He repeated the “lynch mob” line in a press conference the next month. It was an unfortunate metaphor for a man who had grown up in segregated Missouri. Like Stanley Sporkin, he preferred to play down his tough approach, while remaining serious about prosecuting individual wrongdoers.
A more powerful backlash against the Justice Department’s aggression began to take shape. The corporate lobby and the defense bar began to attack the Justice Department’s new policies for corporation prosecutions. They could not attack prosecutors for going after corrupt and unsympathetic Enron, WorldCom, or Adelphia executives. The soft underbelly of the Thompson memo was the demand for companies to waive their attorney-client privilege. When a company waived its privilege over an investigation, it delivered all of the law firm’s materials to the government, including details of employees’ meetings with lawyers—such as transcripts of interviews the lawyers conducted. Understanding how much exposure the materials might contain, law firms and companies sought to protect them.
The corporate lobby waited. Memories of Arthur Andersen’s crimes receded, supplanted by the company’s PR narrative. In September 2004, a little more than two years after Andersen’s indictment, the American Bar Association began its push against the Justice Department. The ABA created a task force on the attorney-client privilege problem, focused on rolling back the government’s policies. (The SEC had a similar directive.)
The ABA helped form a coalition with business lobbyists and trade organizations, including the Business Roundtable and the US Chamber of Commerce, as well as the Association of Corporate Counsel and the National Association of Criminal Defense Lawyers. Even the American Civil Liberties Union (ACLU) jumped into the coalition protecting the rights of corporations. The coalition lobbied and railed against aggressive prosecutors, but there was no serious effort to quantify the extent of the problem. The research was junk science. The studies had classic indicia of push-polling, with leading questions. And the respondents were more likely to have been investigated, skewing the results. The Justice Department’s antagonists conducted online surveys, without random samples, making the results scientifically invalid. In one survey from 2005, the coalition found that 50 percent of respondents under investigation had waived privilege. Of course, this meant that even with a self-selected group, the other half did not. In a subsequent study, the coalition conceded, “[S]ince we are not an independent surveying company or statisticians, we can make no proffer that the sampling is statistically significant or representative of the entire profession.” As a legal scholar would write later, the surveys “were not conducted with even minimal rigor, at least tested by the standards required in academic circles.” She concluded there was no evidence of the claimed abuses.9 Nevertheless, Congress cited them in criticizing the Justice Department.
The Wall Street Journal editorial page joined the campaign with enthusiasm. In one editorial, it denounced the Thompson memo as an institutionalized method to threaten a corporate “death sentence.” One 2006 op-ed labeled it “the odious Thompson memo.”10 Thompson often shared the page’s politics but fell out with the paper over its attacks.
Even Mary Jo White, who had traded in her post as US attorney for a partnership at the powerful New York law firm Debevoise & Plimpton, became a zealous Justice Department critic. In 2005 White gave a speech titled “Corporate Criminal Liability: What Has Gone Wrong?,” opining, “On the federal level especially, the sweep of corporate criminal liability could hardly be broader.” She conceded:
I must bear my share of responsibility for how government prosecutors are today using the easy prospect of corporate criminal liability and the Thompson memorandum to inject themselves too deeply into the business of corporate America and to dictate how companies must respond to government investigation. But, having now been on the receiving end of these measures in my representations of companies in criminal investigations, I have seen the light and urge that some prosecutors should change or at least moderate how they are treating companies in criminal investigations.11
Thompson left the administration in August 2003, becoming general counsel for PepsiCo the following year. He attended meetings of the American Bar Association, despite its task force devoted to rolling back his memo. People brazenly said to him, “Larry, we know you really didn’t mean to write it this way. You’re a pretty good guy.” Then they would continue, denouncing the memo. The same happened at the US Chamber of Commerce and the National Association of Criminal Defense Lawyers meetings. Thompson felt uncomfortable and patronized. “Such an outcry over the mistreatment of these poor corporate executives!” he thought. Even assuming that prosecutors were a little too aggressive with them, well, law enforcement gets tough with targets sometimes, he figured. Big companies and big lawyers could handle it.
In a clever touch, defense attorneys couched their arguments against Thompson as a way to help the Department of Justice in its investigations. They argued that the language suggesting that companies waive attorney-client privilege intimidated employees, forcing them to clam up during internal probes. In a September 2006 letter to then US attorney general Alberto Gonzales, various Republican and Democratic luminaries wrote in support of proposed revisions. Among them were former attorneys general, including Dick Thornburgh; deputy attorneys general, such as Jamie Gorelick; and onetime solicitor generals Theodore Olson and Kenneth Starr. “By making waiver of privilege and work-product protections nearly assured, the department’s policies discourage personnel within companies and other organizations from consulting with their lawyers, thereby impeding the lawyers’ ability effectively to counsel compliance with the law,” the letter claimed.12
Gorelick, who had ordered up the precursor memo to Thompson, which also had the attorney-client privilege language, was now working in the private sector as a partner defending corporations at WilmerHale. Larry Thompson thought the effort silly and cynical. Critics summoned no evidence to back up their wild claims. He thought that Washington groups were trying to show corporations how much they were in their corner to whip up outrage and generate donations. Thompson had become a fund-raising tool.
Around that time, he read about a small scandal out of Los Angeles County. Cops were arresting Latino men, taking them into custody, and giving them their Miranda rights on a giant screen that had been mounted in a holding pen. Then the police asked the arrestees to sign papers saying they understood what had just been displayed before them. Could they have grasped their rights? Who knew if they even spoke English? Few, if anyone, objected to the police practice. At the same time, people on the Beltway conference and cocktail circuit and up and down the Amtrak Acela Express corridor raised their collective voices over corporate executives getting their rights trampled. Drug dealers, mobsters, terrorists—there was no outcry about any other class of potential criminal except corporate executives.
Thompson was in his office at Pepsi when an old acquaintance, Chris Christie, the US attorney in New Jersey, called him. “I want to give you a heads-up of what’s going on here. Can we have lunch?” They met in the Trump International Hotel and Tower on Columbus Circle.
Christie told him some bad news: the furor over the Thompson memo had the White House scared. In its early years, when Thompson was there, the Bush administration refrained from meddling in Justice Department decisions. Now Alberto Gonzales was attorney general. He had never adjusted to the transition from having been White House counsel, acting like a political operative rather than the head law enforcement officer in the land. Christie told Thompson that some Justice Department politicos were preparing to renounce the Thompson memo.
US attorneys around the country were angry. They thought the memo brought corporations to the negotiating table. Christie led a group of US attorneys, never the most easily mobilized group, to prevent the withdrawal of the memo. (Christie had a spotty history with corporate prosecutions. Critics charged he doled out lucrative corporate monitorships to friends. In one case, he had Bristol-Myers Squibb donate to his alma mater in exchange for a settlement with the drugmaker. At Main Justice, top officials were deeply concerned about the deal, which made it appear as if a US attorney was using his office to benefit an institution close to him. The Justice Department changed the rules to prevent such arrangements. In another deal, Christie gave John Ashcroft, the former attorney general, a monitorship that ended up being worth as much as $52 million for his firm, far more than initially anticipated.)13
Congress mobilized to make waiver requests illegal. The Justice Department could not tolerate this legislative branch incursion on executive power. Caving, the Bush appointees set to work revising the Thompson memo. On December 12, 2006, Paul McNulty, who was now in Thompson’s role as deputy attorney general, announced a change. The new policy called for carefully weighing the benefits and costs to an investigation of a waiver before requesting one. Now, before any such request, prosecutors had to obtain permission from their US attorney, who in turn needed sign-off by the head of the criminal division of Main Justice.14
In his letter introducing the new policy, McNulty wrote that the Justice Department had “experienced unprecedented success in prosecuting corporate fraud during the last four years.” But corporate officials had been complaining, he wrote. “Many of those associated with the corporate legal community have expressed concern that our practices may be discouraging full and candid communications between corporate employees and legal counsel.”
McNulty and the late-era Bush Justice Department had now embraced the criticisms from the defense bar and the corporate lobby.
The McNulty memo had new language, extolling attorney-client privilege, calling it “one of the oldest and most sacrosanct privileges under US law.” But the memo also explained that such waivers could be crucial in helping investigations, helping the government evaluate “the accuracy and completeness of the company’s voluntary disclosure.” The critics were not placated. They wanted a complete rollback.