Corporate-Wrongdoing Rules Eased, Yay!

Remember how Sen. Specter wanted those corporate-wrongdoing rules eased last week? Yesterday, his wish came true. In the wake of the 2003 Worldcom scandals, federal prosecutors received new powers in the form of guidelines written by then deputy attorney general, Larry D. Thompson.

However, under the new rules enacted Tuesday, federal prosecutors…


1:

    “…[W]ill no longer have blanket authority to ask routinely that a company under investigation waive the confidentiality of its legal communications or risk being indicted. Instead, they will need written approval for waivers from the deputy attorney general, and can make such requests only rarely.”

Fine and good. Attorney-Client privilege is sacrosanct and its protection should not be penalized.

2:

    Are prohibited, “…from considering, when weighing whether to seek the indictment of a company, whether it is paying the legal fees of an employee caught up in the inquiry.”

Ambivalent. On the one hand, it’s noble for an innocent company to stand behind its employees. On the other, it’s clear that a guilty company could be leverage its resources to unduly protect its interests. Perhaps too the company-paid lawyers would defend in a way that favored the company over the employee. Not to mention a strong parallel with a little thing called “hush money.”

In the wake of recent and rampant corporate improprieties, do corporations really need protection?

In limited instances, like particular overreaches by the Thompson memorandum, yes, if we want to preserve what we’re prosecuting in the first place: Justice. — BEN POPKEN

U.S. Moves to Restrain Prosecutors [NYT]

Previously: Senator Wants Corporate-Wrongdoing Rules Eased

Comments

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  1. AtomikB says:

    Corporations aren’t people, and they don’t deserve attorney-client privilege. Since the executives of a corporation can’t be held accountable for that corporation’s actions, waiving attorney-client privilege for a corporate entity endangers the right of no one. At worst, it endangers the profitability of a corporation that is breaking the law, and that doesn’t sound half bad to me.

  2. You must have missed two words in your comment AtomikB. I’ll fill them in for you.

    At worst, it endangers the profitability of a corporation that is ACCUSED OF breaking the law.

  3. kcskater says:

    Atomik, keep in mind that profitability is what causes the US economy to be as strong as it is. Without profitability, there can be no investment into new business, market, or growth. That would stall the economy and damage us all. These oversights that were cut back increased the amount of paperwork even for foreign based companies wishing to do business in the US. The amount of foreign investment in the US economy has dropped measurably since these oversights were put in place, with little to no added benefit for consumers.

    Let’s focus our attention on enforcing laws that are already in place and fully capable punishing those who need it.

  4. “Since the executives of a corporation can’t be held accountable for that corporation’s actions”

    Often they can. I kinda dozed through the “piercing the corporate veil” week in law school, but executives can be held accountable in some situations.

  5. Agreed Eyebrows, the corporate veil can be peirced, and I believe it was in Enron and Tyco…though CEO’s and other corporate royalty is adept at hiding money, offshore accounts, and other shelters…Why do you think all the Enron execs had big houses in Florida?

    All in all, I think the best solution would be to enforce the laws we already have, like kcskater mentioned, and to have some vigilante justice served up for people like Dennis Kozlowski, and the late Kenneth Lay.

  6. dickius says:

    Many (most?) corporations have provisions in their governing documents (certificate of incorporation, bylaws, etc) requiring the corporation to advance the legal fees of officers and directors who are being sued or investigated for matters relating to their service to the company. They also have contractual obligations to officers and directors to do likewise. The government’s prior policy of penalizing companies that fulfilled these obligations put the companies between a rock and a hard place–the sued officers would sue the company to enforce their right to legal fee advancement, even if the company didn’t “want” to pay (or was being strong-armed by the government into not paying). This was an untenable situation that may be cured by these reforms.

    AtomikB’s comment that corporations don’t or shouldn’t have A/C privilege is just silly, and contrary to established law.

  7. humphrmi says:

    AtomikB – meet SOX: http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act. Good, now that you know each other, you can stop with the outdated-by-four-year belief that executives of corporations can’t be held accountable.