Internet Content Changes White-Collar Criminal Litigation Tactics

Jonathan Bick, New Jersey Law Journal  August 8, 2016   

The federal government engages in certain tactics to reduce the effort associated with white-collar criminal litigation. Among the most criticized are the government's efforts to pressure corporations to waive the attorney-client privilege or work-product protection.

Internet content and related metadata (i.e., data about data) has ameliorated or eliminated the necessity for corporations to waive the corporate attorney-client privilege in white-collar criminal litigation. Such disclosures provide a verifiable source of information detailing what the corporation knew when, and the timing and nature of related response and behavior, as an alternative to privileged information.

White-collar criminal litigation generally includes a variety of nonviolent crimes, usually committed in commercial situations for financial gain. Because white-collar crimes are difficult to prosecute due to the ability of wrongdoers to hide within legitimate economic activity, prosecutors have extensive discretion in deciding whom to charge and for what.

Consequently, prosecutors may use this discretion to leverage corporations themselves to assist in investigations of corporate white-collar crimes. Because the adverse publicity associated with indictment often amounts to devastating business losses, one of the government's strongest tactics is to leverage possible criminal charges against business organizations to force cooperation with the government. Additionally, prosecutors often condition leniency for corporations on completion of a thorough internal investigation for fraud and the disclosure of investigatory materials, including information privileged by the attorney-client and work-product doctrines.

It is well documented that in a series of memoranda from 1999 to 2008 the Department of Justice (DOJ) memorialized procedures that forced the disclosure of corporate attorney-client privilege content. Procedurally, this was accomplished by forcing a corporation to consent to waive attorney-client privilege or work-product protections.

First, the Holder Memorandum (1999) outlined factors that prosecutors should consider in deciding whether to charge a company, and identified the disclosure of attorney-client communications and attorney work product as an important element. As a direct result, the Security and Exchange Commission (SEC), in "U.S. Sec. & Exch. Comm'n, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions, Release No. 44969" (Oct. 23, 2001), required the SEC to consider the same factors, including the disclosure of attorney-client and work-product doctrines, for determining when to take administrative action and initiate litigation.

The Thompson Memorandum (2003) mandated the disclosure of corporate attorney-client privilege as a factor for reducing charges. This change placed pressure on companies to waive attorney-client and work-product protection and to cooperate in the investigation of its agents. Corporations perceived as having not fully cooperated with a government investigation would be more likely to face criminal indictment, prosecution and criminal sanctions.

In 2006, the Senate Judiciary Committee held hearings as to the effects of the Thompson Memorandum. It expressed concern about government-coerced waivers. Consequently, the McNulty Memorandum (2006) was issued, which mandated that prosecutors implement the least intrusive waiver necessary to conduct a complete and thorough investigation. Under this approach, prosecutors were directed first to seek purely factual information, which may or may not be privileged, relating to the underlying misconduct and, in the rare circumstance that such information was insufficient, prosecutors were permitted to seek attorney-client communications or nonfactual work-product materials.

The Filip Memorandum (2008) confirmed the McNulty Memorandum, but urges prosecutors to refrain from requiring the waiver of core corporate attorney-client work product. However, the memorandum is not in fact binding on the DOJ, but provides only suggested guidelines.

The Filip Memorandum does not apply to prosecutions originated by federal agencies other than the DOJ, such as the SEC and other regulatory bodies. It in fact, it explicitly condones the use of coercive techniques outside of the DOJ.

In sum, these DOJ memoranda tied prosecution to a determination of whether, and how much, to credit self-policing, self-reporting, remediation and cooperation as a basis for ameliorated action. However, they do not require waiver of attorney-client communications or nonfactual work product materials if alternative documentation of self-policing, self-reporting, remediation and cooperation can be documented.

Evidence of self-policing, self-reporting, remediation and cooperation can be documented through Internet communications. Communication protocols are used to ensure that Internet communications can function in diverse and complex settings. And the protocols are structured using a layering scheme. Instead of using a single universal protocol to handle all transmission tasks, a set of cooperating protocols fitting the layering scheme is called the Transmission Control Protocol/Internet Protocol (TCP/IP).

TCP/IP uses the client/server model of communication, which is achieved by communication sent from one point (or host computer) in the network to another point (or host computer). Each communication is saved at each computer it passes through—thus allowing verification of the content of each communication—and each communication is tagged with data indicating what computer was used, when it was used, and with what computer it communicated.

This information can be used to confirm or refute claims of a thorough internal investigation for fraud and the disclosure of investigatory materials. This data can be used in lieu of privileged attorney-client communications and work product to refuse inculcation claims.

In particular, the disclosure of Internet content (which is not protected by the attorney-client privilege) is a basis to combat the DOJ privilege waiver policy and is a tool to lessen the routine compelled waiver of attorney-client privilege and work product protections. Such compelled waivers can be reduced by the disclosure of relevant Internet content (email, smartphone content, website content, etc.), combined with citing the McNulty Memorandum, which requires prosecutors to refrain from seeking privileged content when non-privileged content is available.

In order to expand a firm's coverage of information covered by the McNulty Memorandum, and consequently the expansion of coverage of content associated with its disinclination to waive attorney-client privilege and work-product protections after offering Internet content, a firm should consider showing a reasonable basis for the assertion of the privilege and citing the finding in Upjohn Co. v. United States, 449 U.S. 383 (1981). The Supreme Court, in this case, found that a company could invoke the attorney-client privilege to protect communications made between company lawyers and non-management employees. In doing so, the court rejected the narrower control group test that had previously governed many organizational attorney-client privilege issues.

It found that an uncertain privilege is little better than no privilege at all. The court reasoned that the attorney-client privilege was necessary to defend against litigation.

The appropriate use of Internet content will impact the practice of federal prosecutors. It is likely that both the DOJ and the judiciary (in the event of litigation), will recognize the probative value of Internet content as a reasonable substitute for attorney-client privilege and work-product protection. In light of the real-time documentation of "who said what to whom" provided by Internet content, it is likely that the DOJ policies, particularly those enumerated in the McNulty Memorandum, will force prosecutors to increasingly resist requiring the production of materials protected by attorney-client privilege and the work-product doctrine.•