The Department of Justice is reportedly considering significant changes to the Thompson Memorandum. While it is unclear what the scope of any such changes might be, the Senate hearings held in September 2006 may provide some clue. During those hearings Senators Specter and Leahy reportedly made it clear to Deputy Attorney General Paul McNulty that either the Justice Department could initiate changes or there would be a legislative fix. These comments followed the ruling by Judge Kaplan in U.S. v. Stein, which held portions of the Thompson Memorandum unconstitutional for violating KPMG employees’ Fifth and Sixth Amendment rights and the passage of resolutions by the ABA decrying government actions that undermined the attorney-client privilege and the right to counsel.

Senator Spector has also proposed legislation in the Senate that would significantly impact the Thompson Memorandum. The bill, titled the “Attorney-Client Privilege Protection Act of 2006,” would preclude government investigators from requesting a waiver of the attorney-client privilege or the work product doctrine. It also would prevent government investigators, when evaluating cooperation, from considering whether the organization asserted privilege, entered into joint defense agreements, shared information with employees or paid legal fees for employees. The concluding section of the bill would permit organizations to make voluntary disclosures of privileged material to the government without a waiver as to third parties. In essence, the bill appears to be a combination of the ABA resolutions, the holding in U.S. v. Stein, and the proposed limited waiver rule, Federal Rules of Evidence Rule 502(c).

It would certainly be a welcome relief if the Justice Department reconsidered the Thompson Memorandum and its application. At the same time, it is clear that the SEC should reconsider the impact of its Seaboard Release, which suffers many of the same problems of the Thompson Memorandum. In this regard, the comments of SEC Commissioner Atkins in September noting that the Commission should not consider whether there was a waiver in evaluating cooperation serves as a welcome beginning, but the SEC needs to move further and reform Seaboard.

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On November 20, 2006, the Commission settled insider trading charges against David M. Willey, former CFO of Capital One Financial Corporation. The SEC alleged that Willey traded Capital One stock in advance of a negative announcement concerning supervisory action by the Federal Reserve Board of Governors. Without admitting or denying the charges, Willey agreed to a permanent injunction ordering him to pay over $1.8 million in disgorgement, prejudgment interest and penalties and consented to a five year officer and director bar. In connection with the settlement, the SEC also dropped similar charges against Willey’s wife. http://sec.gov/litigation/litreleases/2006/lr19918.htm

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