US Justice Dept. Drops Controversial Tactics for Prosecuting Corporate Fraud

The Department of Justice has revised its guidelines for prosecuting corporate fraud by halting two controversial tactics that were aimed at ensuring greater cooperation from employers during investigations.

The new guidance revises the department's Principles of Federal Prosecution of Business Organizations, which govern how all federal prosecutors investigate, charge, and prosecute corporate crimes. The changes address the credit corporations get for cooperating with investigators.

The revised guidelines state that credit for cooperation will not depend on the corporation's waiver of attorney-client privilege or work product protection, but rather on the disclosure of relevant facts. Under the new guidelines, corporations that disclose relevant facts may receive due credit for cooperation, regardless of whether they waive attorney-client privilege or work product protection in the process.

While prior guidance had allowed federal prosecutors to request the disclosure of non-factual attorney-client privileged communications and work product, the new guidance forbids it, with two limited exceptions.

The new guidelines also instruct prosecutors to avoid considering a corporation's advancement of attorneys' fees to employees when evaluating cooperativeness.

They also make clear that the mere participation in a joint defense agreement will not render a corporation ineligible for cooperation credit. In addition, the new guidance provides that prosecutors may not consider whether a corporation has sanctioned or retained culpable employees in evaluating whether to assign cooperation credit to the corporation. The revised guidelines are effective immediately.