Results matching “"thompson memo"”

KPMG, corporate prosecutions and white-collar justice - PointOfLaw Forum

A flurry of activity concerning the standards for corporate prosecutions, summarized nicely in a Wall Street Journal editorial today, "White-Collar Justice":

Congratulations to Lewis D. Kaplan, the federal judge whose withering critique of prosecutorial abuse in the KPMG tax-shelter case was vindicated yesterday by the Second Circuit Court of Appeals.

In fact, you can double that applause, because yesterday the Justice Department went further and once again rewrote its white-collar prosecution guidelines to accommodate Judge Kaplan's demolition. Whether Justice anticipated its legal defeat before the surrender is less important than the fact that it has now restored a measure of due process fairness to corporate defendants and their employees.

The Journal regards the new standards as the repudiation of the "Thompson Memo," a government overreaction to the Enron scandals that gave prosecutors in white-collar cases far too much power, inviting abuses.

Earlier Point of Law posts here, here here, and especially here, "Want leniency for your business? Knife your workers."

McNulty memo under scrutiny - PointOfLaw Forum

The so-called McNulty Memo on white-collar prosecution, issued last month by the U.S. Department of Justice, was initially hailed by many as a welcome retreat from the overreaching principles embodied in the earlier, much-criticized Thompson Memo. However, per a report by Pamela MacLean in the NLJ, the new policy is not actually as big a concession as all that, and leaves many of the critics of the Thompson Memo far from satisfied. "We're thrilled the Department of Justice has taken this step forward after two years of begging. But this proposal is no solution. It not only doesn't go far enough, it still misses the point. They still think DOJ gets to decide whether corporate counsel they are prosecuting have a right to counsel or not," says Susan Hackett of the Association of Corporate Counsel.

The government relents on the Thompson memo - PointOfLaw Forum

As discussed here, the "McNulty memo" is a step in the right direction on prosecutorial practices that short-circuit criminal defenses, but possibly not far enough.

Thompson memo superseded - PointOfLaw Forum

Decades from now, everyone is going to wonder what this Thompson memo everyone in the early 21st century was talking about, but, Ashby Jones reports, a narrower McNulty memo is now in place.

Thompson memorandum of global warming - PointOfLaw Forum

The WSJ has the story on the implied threat underlying a letter by two senators to Exxon Mobil about its participation in the global warming debate. I discuss the implications for constitutional protection of corporate speech.

Justice Department backing off Thompson Memo? - PointOfLaw Forum

So says Carrie Johnson in today's Washington Post. Interesting quote from Larry Thompson himself, suggesting that the memo has been applied beyond its original intended scope.

Thompson Memo Event @ Heritage - PointOfLaw Forum

The Federalist Society and The Heritage Foundation are sponsoring an event tomorrow morning at eleven on the attorney-client privilege in white-collar criminal prosecutions, and Larry Thompson himself will speak on the issue, along with former attorney general Edwin Meese and George Terwilliger.

This paper assesses the federal government's regulation of white-collar criminal prosecution as articulated in the 2003 memorandum issued by then-Deputy Attorney General Larry Thompson. In particular, the paper is critical of the memorandum's open inducement to corporations under investigation to waive attorney-client privilege and refuse to advance attorneys' fees to individual defendants. The paper proposes specific reforms to reduce the tendency of government prosecutions to infringe on important individual liberties.

NYC panel next Mon.: Thompson memo & the right to counsel - PointOfLaw Forum

Next Monday evening in midtown Manhattan, the Federalist Society NYC Lawyers Chapter will be holding a panel discussion of whether the Thompson memo interferes with the right to counsel. (See, among many other links, this one.) Panelists will include Matthew Biben, Andrew Hruska, and Gary Naftalis, and the moderator will be Columbia lawprof John Coffee. Details here.

NY Times on future reforms - PointOfLaw Forum

The New York Times article has some remarkable good news: the Bush administration is looking into sweeping moves to reform securities law, including paring Sarbanes-Oxley (Mar. 6); limiting the aggressiveness of the Thompson memo; federal limits on overzealous state attorneys general; and, notably, ending the judicially-created civil enforcement of 10b-5, which has led mostly to strike-suit mischief and left-pocket-to-right-pocket wealth transfers taxed by attorneys (e.g., Jun. 26). But the headline tells it all: "Businesses Seek New Protection on Legal Front." As even the left-leaning Slate notes, "The story has the usual he said-she said, with several experts pointing out that scaling back regulations would be a mistake. But what it lacks is a good analysis of Sarbanes-Oxley's effect on business and the economy. While it may be tempting to toss this all off as the Bush administration seeking to help out buddies in the business world, there's a lot more at stake here." That analysis is present in the Wall Street Journal, where Glenn Hubbard and Brookings Institute chair John Thornton discuss rationalizing securities regulation.

Update, Oct. 31: See also Larry Ribstein today.

Senate Judiciary Committee hearing on Thompson memo - PointOfLaw Forum

The hearing is going on right now; the Committee has a page of prepared testimony. Other Point of Law coverage on the Thompson memo.

Thompson memo - PointOfLaw Forum

It's being criticized by a bipartisan group of eleven former senior Justice Department officials. Legal Times has more.

Does the KPMG case help Milberg Weiss? - PointOfLaw Forum

That's what the law firm appears to claim about the KPMG case in a press release reported by Peter Lattman. But other than the words "Thompson Memo," there are no similarities.

  • The concern in Stein was that the DOJ actually forced KPMG to withhold attorneys' fees for its employees. But KPMG did cave; Milberg Weiss didn't. And its charged "employees" are multi-millionaire partners capable of affording competent counsel, removing any concern of inadequate representation.
  • KPMG was risking indictment for behavior of a small portion of the firm. But the indicted Milberg Weiss partners are name partners with 33% ownership of the firm—and if "Partner A", identified by many to be Mel Weiss, is also indicted, one is talking about a majority of the shares being implicated. This isn't a case of a corporation being forced to choose between throwing its low-level employees overboard and being irresponsible to its shareholders; here, the shareholders are the alleged wrongdoers, and the alleged wrongdoing is alleged to be part of the Milberg Weiss business model.
  • There's more than just Milberg Weiss's refusal to implicate its partners behind its being charged. The investigation started in 1999; subpoenas went out in 2003; Milberg Weiss was allegedly engaging kickbacks through 2005; and didn't hire its well-publicized compliance officer until shortly before the May 2006 indictment.

For more, see my recent Congressional testimony, which reviewed the Milberg Weiss indictment in the course of discussing the pending H.R. 5491 and the need for more measures to prevent kickbacks and improper relationships between lead plaintiffs and plaintiffs' counsel.

Judge: Thompson memo imperils right to counsel - PointOfLaw Forum

In the KPMG case, federal judge Lewis Kaplan has blown a great big hole in the Justice Department's policy (as outlined in the now-notorious Thompson memorandum, Sec. VI) of arm-twisting corporations under investigation into withholding legal support from their accused employees:

"Those who commit crimes - regardless of whether they wear white or blue collars - must be brought to justice. The government, however, has let its zeal get in the way of its judgment. It has violated the Constitution it is sworn to defend."

Tom Kirkendall has links to several leading commentators, while Prof. Oesterle (via Bainbridge) challenges the idea that the unfairness involved rises to the level of unconstitutionality. White Collar Crime Prof discusses the D&O insurance implications. More: Larry Ribstein weighs in, predicting that the opinion will stand as "a landmark".

Inside Milberg's Credenza - PointOfLaw Columns

By Walter Olson

(Reprinted from The Wall Street Journal, 6-22-06)

As the nation's premier filer of class action lawsuits, Milberg Weiss Bershad & Schulman LLP has long presented itself as a fearless watchdog of America's financial markets. Milberg lawyers are famed for their skill at seizing on missteps by the businesspeople they sue—a missed earnings projection, an omitted disclosure, a too-rosy accounting practice—and portraying them as evidence not of inadvertent or technical slip-ups, but of systematic and brazen crookedness.

All the while, if one is to credit the 102-page indictment by a federal grand jury in Los Angeles last week, Milberg Weiss was passing at least $11 million in payoffs under the table to plaintiffs in its suits. Since such payoffs are baldly illegal, prosecutors claim the firm took elaborate steps to keep them concealed from judges and others. They say Milberg funneled much of the money through law-firm cut-outs and other channels, including casinos, and drew on a stash of money kept in a safe located in a credenza in partner David Bershad's New York office, "to which access was strictly limited." Again and again, prosecutors add, the firm submitted sworn statements on behalf of its clients denying any receipt of the sorts of payments they were in fact receiving. The payoffs helped Milberg reap some $216 million in attorneys' fees from the cases prosecutors say they know about; others remain under investigation.

Milberg and partners David Bershad and Steven Schulman (who have taken leaves of absence from the firm) flatly deny the charges and say they're victims of overzealous prosecution. There's irony in this—since the firm is known for zealous tactics akin to those it's now facing, such as the use of charges under the RICO (Racketeer Influenced and Corrupt Organizations) law. Even so, some of the firm's complaints will resonate with critics of today's trend toward criminalizing business practice. The firm's defense Web site,, goes so far as to link approvingly to editorials in this newspaper.

* * *

When is a cash payment to someone an improper "kickback" or "payola"? Sometimes it is hard to discern the line. If you're a record producer who pays radio execs to spin a Jennifer Lopez disc, Eliot Spitzer will land on you with full force. But if you're a publisher who pays book chains to give prime display to your new hardcover thriller, you're safe. Economists and legal analysts typically consult a range of factors, including whether the person taking the payment owes some third party a duty of loyalty or independent judgment, whether an agent discloses his acceptance of a payment to his principal, whether a type of payment is accepted as customary in a given trade, and so forth.

Milberg Weiss lawyers have been in the forefront of efforts to define kickbacks broadly and punish them with rigor. The firm's Web site boasts that it "has sued major providers of private mortgage insurance for kickback violations, resulting in substantial settlements." Melvyn Weiss and others at the firm have expressed indignation at, and filed lawsuits over, alleged kickbacks in the contexts of Wall Street initial public offerings, mutual fund sales, insurance brokerage commissions and doctors' prescribing of pharmaceuticals.

Although there are many debatable cases, concealed payoffs to named plaintiffs in class actions aren't one of them: They're clearly improper under virtually any analysis. As the indictment states, both plaintiffs and their lawyers are under obligation 1) not to place a named plaintiff's interests above those of absent class members; 2) not to behave deceitfully or unethically toward the court or absent class members; and 3) not to withhold from the court "any fact" that might call into question the representativeness of the plaintiff (a financial dependence on the lawyer would be one such fact). As a class action proceeds, plaintiffs repeatedly swear under oath to these matters. Bonus payments to compensate named plaintiffs for their time and trouble are permitted at settlement, but they must be disclosed to absent class members and approved by the judge.
These rules have a purpose. With other class members absent, named plaintiffs are one of the few watchdogs against self-dealing or misconduct by the lawyers—specifically, the pursuit of settlements that result in high legal fees, whether or not they serve the interest of the class. It's true that law firms do seek docile, loyal or merely clueless persons to serve as their named plaintiffs, which means it's rare (though not unheard of) for them to contribute an independent point of view in a case. But if the Justice Department's allegations are correct, Milberg was taking no chances on the watchdogs staying pacified: It threw regular chunks of raw liver into their cages. Significantly, Justice alleges that payoffs were computed not as a share of the class's eventual recovery, but as a share of Milberg's own fee haul—incentivizing the named plaintiff to side with Milberg's interests should the two clash.

Every so often someone will suggest that since the named plaintiff operates as the lawyers' tool 99% of the time, why not dispense with the rigmarole and let law firms seek class action status without having to qualify any particular client as representative? But imagine for a moment a defendant's trying to argue that, because certain legal rules are economically inefficient, it should be okay to break those rules. Imagine what a skilled plaintiff's lawyer, like those at Milberg, would say in response to such an argument. Lawyers, of all professionals, are the last ones who should claim a privilege of ignoring the law.

A more likely source of sympathy for Milberg is its complaint—in common with that of many business defendants—of rough handling by prosecutors. To begin with, the Justice Department, following the line laid down by the now-infamous Thompson memorandum, insisted that Milberg waive attorney-client confidentiality if it wanted a favorable plea deal. The business community is in an uproar over the Thompson rules, with the U.S. Chamber of Commerce joining with groups like the ACLU and National Association of Criminal Defense Lawyers to challenge the waiver provisions as unfairly arm-twisting defendants into yielding up their employees' rights.

As a talking point for Milberg's defense, however, this one is likely to fade—precisely because the firm did hold out rather than cave. Nor is there an issue of favoritism, since the Justice Department subjects conventional businesses to the same unseemly pressure daily.

* * *

Should the feds have indicted the firm as distinct from individual partners? Memories are fresh of the indictment of Arthur Andersen, the accounting giant whose conviction was overturned by the Supreme Court three years later—far too late to save the firm, given the reluctance to let an indicted accountant do a company's books. Defending her Milberg decision, U.S. Attorney Debra Wong Yang cited the firm's lack of repentance: Not only had the "pattern of deception" gone on for decades, but "the conduct occurred all the way up to last year, when they knew we were looking at them."

The probe, in fact, had dragged on for six years, having met with implacable resistance from the Milberg side; prosecutors finally got their break this spring, in the person of businessman Howard Vogel, who, with his family members, had acted as plaintiff in about 40 suits. Mr. Vogel sang, admitting to more than $2.4 million in Milberg payments in a guilty plea, and others have reportedly begun to sing, too, which means further indictments are possible.

In short, the prolonged lack of interest in cooperating with law enforcement may cost the firm as dearly in the long run as the underlying offense. (Yes, now that you mention it, Milberg was the lead counsel in the suits against Martha Stewart.) The two celebrity lawyers who made Milberg famous, Melvyn Weiss and the now-departed William Lerach, have thus far escaped indictment: Of course, if they were prosecuting such a case, they would miss no opportunity to insinuate that misconduct by part of a team of top executives must have been at least tolerated by the others, that the rot goes straight to the top, that senior partners turned a convenient blind eye to signs of misconduct because they profited handsomely from that misconduct, and so forth. Messrs. Weiss and Lerach must count themselves lucky that such reasoning did not lead to their inclusion as defendants.

If they are consistent, those who cherish due process for white-collar defendants should spare some pangs for the many talented lawyers at the Milberg firm who, like Arthur Andersen accountants, may face professional shipwreck even though no one has charged them with the least bit of complicity in legal wrongdoing. And if they are consistent, those who applaud the crackdown on business misconduct of recent years should acknowledge that the Milberg prosecution embodies, for better or worse, many of the premises of that crackdown. Those are big "ifs."

Paying indicted employees' legal fees - PointOfLaw Forum

Under the policy outlined in the Justice Department's intensely controversial Thompson Memorandum, it's considered a mark of appropriate contrition in a business enterprise to refuse to advance legal fees to indicted employees, and the advancement of such funds may in fact be construed as a sign that the enterprise is unrepentant, uncooperative with prosecutors, and deserving of more severe punishment. So how does the federal government react when its own employees are indicted for alleged misconduct in carrying out official duties? Well, if they're FBI agents indicted over the Ruby Ridge incident, the answer pays their legal fees. Washington attorney John T. Boese of Fried Frank explains that companies struggling with Thompson-memo issues may be able to throw the government's own prior position back at it (PDF).

The Sentencing Commission has reportedly deleted commentary to the Guidelines urging the government to require corporations to demonstrate cooperation by waiving attorney-client and work-product privileges in order to get more lenient treatment. This comment was significant backing for the infamous Thompson memorandum. The NLJ has the article, tip by Law Blog. Here and here are posts on the underlying issues.