Kevin McGrath Quoted in FinancialWeek

The December 19, 2006 article in FinancialWeek ("Prosecutors handcuffed: Justice Department calls off the dogs") notes "Companies caught in the government’s crosshairs can breathe a little easier. Maybe. In the last couple of weeks, two related efforts have been launched that could dramatically shift power to defenders from prosecutors in white-collar crime investigations. First, in a major retreat, the Department of Justice revised its controversial Thompson Memo—a set of prosecutorial guidelines that critics say forced companies in white-collar cases to waive their legal protections. Second, just days before the Justice Department’s surprise move, Senator Arlen Specter (R-Penn.), the outgoing Senate Judiciary Committee chairman, pressured the department to act by introducing legislation that goes much further in protecting companies’ legal rights than a revised Thompson Memo. Both of these moves follow a proposed rule, drafted earlier this year by the Advisory Committee on Evidence Rules. The committee would allow a “subject matter” waiver: Companies under investigation could hand over information to a government agency without fear of it also landing in the hands of shareholders (read civil lawsuits). All this action—backed by heavyweights including the American Bar Association, the American Civil Liberties Union and the U.S. Chamber of Commerce—has forced the Justice Department to rethink its tactics. The problem with the so-called Thompson Memorandum, which was drafted in 2003 by then Deputy Attorney General Larry Thompson in the wake of the Enron and WorldCom scandals, was that companies that didn’t waive their attorney-client privileges faced being criminally indicted. Ditto for companies that paid the legal fees of their executives under investigation. (A federal judge in New York harshly criticized the Justice Department recently for pushing KPMG to stop paying the legal bills of former employees, another dig that many believe forced the Justice Department to change.) The new rules, dubbed the McNulty Memo for acting Deputy Attorney General Paul McNulty, go some way toward evening the score. For example, they put some restraint on prosecutors’ ability to demand that companies waive attorney-client privilege; prosecutors must now get Mr. McNulty’s approval for this information. Mr. McNulty also warned that these communications between companies and their attorneys should only be sought in “rare” circumstances.Likewise, prosecutors can no longer use companies’ paying their employees’ legal bills as grounds for criminal indictment, unless the company is trying to influence an investigation. “This should send a message to prosecutors that they shouldn’t be conducting business as usual,” said Kevin McGrath, a lawyer at Seyfarth Shaw."