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Report of the Association of Corporate Counsel Attorney-Client Privilege: Erosion and Yet, Progress
January, 2007

The attorney-client privilege is often called the bedrock upon which the lawyer-client relationship is built. Nowhere is the privilege more essential to the efficient and effective performance of a lawyer’s duties than in the in-house context; nowhere is the privilege under greater attack than when asserted by a company under scrutiny (be it audit, investigations into possible wrongdoing, or counseling on major litigation or risk assessment). Recent erosions in the privilege, largely stemming from overly-aggressive prosecutorial and enforcement tactics and policies, call into question the future viability of corporate clients’ reliance on and assertion of their rights to confidential counsel. ACC is fighting to reclaim your clients’ rights and to assure that your relationship with your client continues to enjoy the confidentiality that makes it possible for you to do your work as in-house counsel and gatekeeper of the corporation’s ethical culture. Because privilege erosion must be reversed, and because it is not feasible for companies acting on their own once in the crosshairs to meaningfully protest privilege waiver demands, ACC is stepping up its efforts to bring home solutions to this problem, addressing the root causes: prosecutorial and enforcement demands for privilege waiver. Below is a summary of some of the work that ACC accomplished in the past year or so on behalf of the corporate bar and their clients. We are focusing our work in 2007 on the passage of the Attorney-Client Privilege Protection Act, recognition of certain kinds of selective waivers, and an effort to reverse practices that erode and undermine the relationship between companies and their auditors, including addressing problems with PCAOB regulatory standards that de facto force auditors to demand privilege waivers.

Visit ACC’s privilege protection homepage, which details work done and resources developed both before and after the coverage of this chronology: http://www.acc.com/php/cms/index.php?id=84 ACC’s Attorney-Client Privilege Resource Bibliography http://acc.com/public/article/attyclient/acc-ac-biblio.pdf

ACC Privilege Chronology for Fall 2005 – Present1 Oct. 2005 Associate Attorney General Robert McCallum issues the “McCallum Memo” to US Attorneys, asking each field office of the Justice Department to develop and report on its privilege waiver policies and practices in an effort to respond to ACC and its Coalition partners’ assertions that DOJ tactics are abusive; ACC publishes a statement that recognizes that Mr. McCallum no doubt had the best of intentions to increase DOJ’s accountability for waiver practices, but protests both the inference that each USAO should be allowed to set its own policies (thus creating confusion and inconsistency across jurisdictions), and the lack of interest in requiring metrics and detailed reporting. (Note: as January 2007, the DOJ has still not released any results of the McCallum Memo’s info-collection exercise.) ACC’s testifies before and submits written statements to the United States Sentencing Commission regarding USSC commentary in the corporate sentencing guidelines that provides the Justice Department with unilateral discretion in requiring waiver of the attorney-client privilege and the work product doctrine in order for a corporation to be considered cooperative. http://www.acca.com/public/attyclntprvlg/accnamussctestimony.pdf ACC files amicus in the Texas Supreme Court in a case involving attorney-client and auditor-client privilege issues raised by document disclosures required by auditors. http://www.acca.com/public/amicus/txamicus.pdf ACC participates in the regular meeting of the ABA’s Task Force on Attorney Client Privilege ACC organizes a CLO ThinkTank in New York City (hosted by Bill Lytton, the new CLO to Tyco), on coercive prosecutorial practices and abuses. It is sold out. Read an executive summary of this meeting on the ACC CLO homepage at http://www.acca.com/protected/clo/liability.pdf

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January /Feb. 2006: ACC conducts a second survey on privilege (following up on themes developed in our first privilege survey, published in 2005), entitled the “Decline of the AttorneyClient Privilege in the Corporate Context.” The survey is presented to The Sentencing Commission in March, is highly covered in the media, and is also offered to Congress for hearings held in March and September. Over 700 inside and outside counsel provide detailed answers to questions on privilege and document waiver problems: http://www.acca.com/resource/v6877 Feb. 2006: Feb. 2006: ACC participates in the regular meeting of the ABA’s Task Force on Attorney Client Privilege ACC’s letter demanding changes to The Thompson Memorandum is hand-delivered to Attorney General Alberto Gonzales. The letter discusses the deleterious impact of the erosion of attorney-client privilege and work-product protections on corporate compliance and accountability. The letter is delivered during an in-person meeting

1 Last updated January 2007. (This summary does not detail the release of ACC resources on privilege, speeches made on the subject to a variety of audiences, or media “hits” or articles published on this issue. We estimate that during this period a minimum of 250 articles on privilege-related topics were either published by ACC or other legal and business media outlets mentioning ACC’s efforts.)

with the AG and three other Privilege Coalition2 leaders from the business community (NAM, US Chamber, Business Roundtable). http://www.acca.com/public/attyclientpriv/gonzales021306.pdf Feb. 2006: ACC joins coalition members in helping to secure and draft a letter by prominent former DOJ officials decrying DOJ privilege waiver tactics as unnecessary and harmful to compliance. Its publication is picked up by the US Sentencing Commission, the Wall Street Journal editorial board, numerous legal publications, and garners prominent attention at DOJ main. ACC’s “redline” of the Thompson Memo (suggesting specific ideas for its amendment), passed by the ACC Board in January of 2006, is hand-delivered to the Attorney General and Associate AG Robert McCallum at an in-person meeting at DOJ with leaders from the US Chamber which expresses support for our redline. http://www.acca.com/resource/v7255 ACC files comments written by ACC on behalf of the Coalition on Chapter Eight-Privilege Waiver with the United States Sentencing Commission. http://www.acca.com/resource/v7146 ACC coalition members and ACC General Counsel Susan Hackett testify before the United States Sentencing Commission regarding the request for changes to the commentary language of Section 8C2.5 regarding waiver of the attorney-client privilege. ACC organizes another CLO ThinkTank in Washington DC on privilege erosion in the corporate context. Stasia Kelly, then the clean-up CLO at MCI Worldcom, Hosts (Ms. Kelly is now the new CLO of AIG in New York). Read an executive summary of this meeting on the ACC CLO homepage at http://www.acca.com/protected/clo/thinktank05.pdf ACC sends a requested follow-up letter with additional information to the US Sentencing Commission on the request for changes to the commentary language of Section 8C2.5 regarding waiver of the attorney-client privilege. http://www.acca.com/resource/v7147 ACC and its Coalition partners submit comments written by ACC to the U.S. House of Representatives Judiciary Subcommittee on Crime, Terrorism and Homeland Security regarding the erosion of the privilege in the corporate context. http://www.acca.com/public/accapolicy/coalitionstatement030706.pdf After extensive meetings with Hill staff, ACC and its Coalition partners testify before the U.S. House of Representatives Judiciary Subcommittee on Crime, Terrorism and Homeland Security regarding the erosion of the privilege in the corporate context;

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2 ACC participates in and helped to organize a coalition of legal, civil rights, and business groups interested in reversing attorney-client privilege erosions in the corporate context. The Coalition is a broad-based and diverse group of organizations, including the US Chamber of Commerce, the ACLU, the National Association of Criminal Defense Lawyers (NACDL)), the National Association of Manufacturers, the Business Roundtable, Business Civil Liberties, Inc., the Securities Industry Association, the Financial Services Roundtable, the American Chemistry Council, and others. The American Bar Association does not participate in coalitions, but our staffs endeavor to closely coordinate our efforts. Members of the coalition sometimes work in a pack, and other times act independently on the issues. It is the broad, bi-partisan and powerful nature of this assemblage that allows us the serious attention of regulators, law-makers, the courts, and the executive. Through this group, we are able to deliver the important message that privilege erosion is not a lawyer issue, but a client and legal system issue.

there is enthusiastic bi-partisan support for our position, criticism of DOJ and SEC practices, and wide media coverage of the event. http://www.acca.com/public/accapolicy/coalitionstatement030706.pdf Mar. 2006: ACC files an amicus in the Qwest Communications case arguing for protections for a company that was forced to waive its privileges to the SEC in return for what became an unenforceable confidentiality agreement. ACC argues against limited waiver, but in favor of the equities of the court. http://www.acca.com/public/amicus/qwest.pdf ACC participates in the regular meeting of the ABA’s Task Force on Attorney Client Privilege US Sentencing Commission announces that it will remove the language ACC and its Coalition partners protested in its submission of revised Guidelines to Congress in May. http://www.ussc.gov/FEDREG/2007finalpriorities.pdf ACC files a comment letter voicing its perspectives regarding the differences in requirements promulgated by regulatory agencies such as the SEC in the United States and lawmakers in other countries. (European/SOX whistleblower issue.) http://www.acca.com/resource/v7127 ACC meets with the DOJ and Associate AG Robert McCallum to further discuss issues and remedies regarding the erosion of the privilege and the Thompson Memorandum; our request for an update on information gathered pursuant to the McCallum Memo is not addressed – results are not yet available. ACC sends a follow-up letter to Associate Attorney General McCallum. http://www.acca.com/public/attyclientpriv/mccallum042106.pdf ACC participates in the regular meeting of the ABA’s Task Force on Attorney Client Privilege ACC joins with a number of Privilege Coalition leaders to file the first of two amicus briefs in the KPMG (US v. Stein) matter regarding the DOJ’s interference with corporate officer fee advancement policies and corporate employee defense rights. http://www.acca.com/public/amicus/acckpmgamicusbrief.pdf ACC files a second brief in the KPMG matter addressing Judge Kaplan’s specific request for further briefing on the effect of the DOJ’s Thompson Memorandum. http://www.acca.com/public/attyclientpriv/suppl-us-stein.pdf ACC’s Advocacy team joins ACC’s Corporate and Securities Law Committee to meet with the SEC discuss attorney-client privilege waiver requests in the enforcement context in light of recent SEC pronouncements and the Seaboard Report policies favoring waiver. ACC participates in the regular meeting of the ABA’s Task Force on Attorney Client Privilege. New policies for the consideration of the ABA House (addressing privilege in the audit context and privilege in the individual employee rights context) are finalized with our support. ACC Submits a comment letter to the Judicial Conference of the United States regarding Proposed Rule 502 on Waiver of Attorney-Client Privilege and Work Product. http://www.acca.com/public/attyclientpriv/502acc.pdf ACC participates in the regular meeting of the ABA’s Task Force on Attorney-Client

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Privilege July 2006: Aug. 2006: ACC files a brief in the Teleglobe v. BCE matter (addressing parent-sub co-counseling privilege questions). http://www.acca.com/public/amicus/teleglobe.pdf ABA House passes the Audit and Employee Rights Resolutions endorsed by ACC and proposed by the ABA Task Force. http://www.abanet.org/buslaw/attorneyclient/home.shtml The Conference of Chief Justices passes a resolution in favor of privilege protection and the supremacy of the courts in determining privilege rights. http://www.acca.com/php/cms/index.php?id=84&fid=1015 ACC authors for its coalition partners the comments and written testimony to the U.S. Senate Judiciary Committee regarding the committee’s hearings (scheduled for Sept.) on the “Coerced Waiver of the Attorney-Client Privilege.” http://www.acca.com/public/attyclientpriv/coalitionsenjudtestimony.pdf ACC participates in the regular meeting of the ABA’s Task Force on Attorney Client Privilege Pressure on the DOJ is increased when the prominent former DOJ officials who previously sent a letter in spring to General Gonzalez are joined by more former DOJ leaders in a second letter regarding the continued erosion of the attorney-client privilege and its deleterious effect on corporate compliance. The former DOJ officials letters are coordinate with Coalition support. The Wall Street Journal, New York Times, NPR, and the legal media all cover the letter extensively. http://www.acca.com/public/attyclientpriv/agsept52006.pdf ACC and its Coalition partners testify before the U.S. Senate’s Judiciary Committee regarding the committee’s scheduled hearings on the “Coerced Waiver of the Attorney-Client Privilege.” http://www.acca.com/public/attyclientpriv/coalitionsenjudtestimony.pdf Testimony and Statements made at the Senate Hearings (Sept. 12, 2006): http://www.acca.com/public/attyclientpriv/writtentestimonyussenate.pdf Letter from former senior DOJ officials criticizing the Thompson Memo (2006): http://www.acca.com/public/attyclientpriv/agsept52006.pdf Senator Specter promises to introduce legislation to outlaw DOJ waiver policies in the Thompson Memo. ACC counsel, working with Coalition leaders, draft the Coalition’s proposed legislation submitted to Senator Specter’s staff for introduction in the lame duck session. (legislation is scheduled to drop in December of 2006, cosponsored by both Senators Specter and Leahy.) (and January 2007) Senator Arlen Specter (R-PA) introduces The Attorney-Client Privilege Protection Act of 2006/2007 during the last days of the 2006 “lame duck” session; he then re-introduces it in 2007 at the start of the new legislative session. http://www.acca.com/php/cms/index.php?id=84&fid=1081 U.S. Deputy Attorney General Paul J. McNulty revises the Thompson Memo charging guidelines for prosecuting corporate fraud. ACC reacts to his proposed revision as a “day late and a dollar short.” ACC resources related to the McNulty

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Memorandum can be found at the following URL: http://www.acca.com/php/cms/index.php?id=84&fid=1086 Jan. 2007: ACC Comments on Proposed FRE 502: Waiver of Attorney-Client Privilege/Work Product Protections. ACC's 2007 502 Comment can be found at the following URL: http://www.acc.com/public/policy/attyclient/accfre502comments.pdf