Part III: Self-Reporting And Cooperation — Key Issues
The Department of Justice, like the SEC, offers the prospect of credit in the charging process in exchange of self-reporting and cooperation. Like the Commission, DOJ defines the question of cooperation in terms of furnishing all the facts. Unlike the SEC, its policy statements are less clear as to what is required. In practice however, that lack of clarity quickly disappears.
The McNulty memo, in statements which are not dissimilar from those used by its predecessors, discusses cooperation in general terms, noting for example that “[i]n gauging the extent of the corporation’s cooperation, the prosecutor may consider, among other things, whether the corporation made a voluntary and timely disclosure, and the corporations’ willingness to provide relevant evidence and to identify the culprits within the corporation, including senior executives.”
The prospects for credit offered in this portion of the McNulty memo are, however, limited by another portion of the memo which states that “whereas natural persons may be given incremental degrees of credit … for turning themselves in, making statements against their penal interest, and cooperating in the government’s investigation of their own and others’ wrongdoing, the same approach may not be appropriate in all circumstances with respect to corporations.” While the memo goes on to detail procedural and substantive limitations on the circumstances under which prosecutors can seek a waiver of privilege, this passage seems to suggest that cooperation may not yield credit. These statements seem to be tempered, if not contradicted, by recent remarks by the head of DOJ’s criminal division. In those remarks, she stated flatly that cooperation will yield benefits for a corporation.
Whichever statement is correct in practice, the necessity for privilege waivers to maximize cooperation credit is clear. Two surveys, one by a number of business and bar organizations taken before the McNulty memo, and a second and less formal one conducted by the Former Chief Justice of the Delaware Supreme Court after its issuance, confirm the fact that in practice waivers are a necessity.
While the necessity for waivers to gain cooperation credit may be clear, any organization considering the question must carefully assess the impact on the company and its employees. Both the SEC and DOJ focus on privilege waivers as a means to obtain all the facts and, in some instances, those which the government might not otherwise obtain. At the same time, waiver can impede the ability of the organization to secure all the facts, remedy the situation and thus ultimately to obtain cooperation credit. Stated differently, the demands of the SEC and DOJ may in fact impede the ability of the company to fully determine the facts and remedy the situation to ensure compliance with the law in the future – the very goals the SEC and DOJ are to implement.