The change explicitly described the circumstances under which a corporation's failure to waive could have sentencing consequences. On May 15, 2006, the Federal Advisory Committee on Evidence reported a proposed evidentiary rule amendment crafted to resolve the splits in the circuits over the selective waiver of corporate attorney-client and work product protection. Constitutional Concerns

In the summer of 2006, a court in the Southern District of New York held in United States v. Stein that implementation of the Thompson Memorandum's policy with regard to a corporation's reimbursement of the attorneys' fees of its employees and pressure on them to make incriminating statements violated the Fifth Amendment substantive due process rights of the employees, their Fifth Amendment privilege against self-incrimination, as well as their Sixth Amendment right to the assistance of counsel. The case began with the criminal tax investigation of an accounting firm and its employees. The firm then entered into a deferred prosecution agreement with prosecutors for the eventual dismissal of charges under which it agreed to waive indictment; pay a $456 million fine; accept restrictions on its practice; waive all privileges including, but not limited to, attorney-client and attorney work product; and provide the government with extensive cooperation in its investigation and prosecution of the firm's former officers and employees. Legislative Activity in the 109th Congress

Both the House and Senate Judiciary Committees held hearings on the policy reflected in the Thompson Memorandum during the 109 th Congress, and in its final days, Senator Specter introduced S. 30 which, among other things, would have prohibited federal authorities from requesting a waiver of organizational attorney-client or work product protection or predicating the adverse exercise of prosecutorial discretion of the absence of such a waiver or the payment of attorneys' fees for their employees or officers. It dropped the specific reference to the waivers from the general statement of factors to be weighed when considering whether to charge a corporation. Moreover, the McNulty Memorandum divided attorney-client and work product material into two categories. A corporation's refusal to waive cannot be considered in the exercise of prosecutorial discretion. 3013 introduced in the House by Representative Scott and virtually identical to the version of that bill passed by the House. Attorneys Manual. The 110 th Congress adjourned without further action of the proposals. It is a replica of the bill which the House passed in the 110 th Congress ( H.R.
The Justice Department enjoys prosecutorial discretion to bring criminal charges against a corporation, its culpable officers or employees, or both. For a corporation, indictment alone can be catastrophic, if not fatal, in some instances. The Thompson Memorandum, since replaced with guidelines in the U. S. Attorneys Manual, described the policy factors to be considered in the exercise of prosecutorial discretion. Two of the factors explicitly mentioned were whether a corporation had waived its privileges and whether it had cut off the payment of attorneys' fees for its officers and employees.
Justice Department policies and practices under the Thompson Memorandum led to constitutional challenges based on the Fifth Amendment's self-incrimination clause, the Amendment's due process clause, and the Sixth Amendment's right to counsel clause. Due process and right to counsel concerns were enough for a federal district court in New York to throw out the indictments of thirteen former partners and employees of an accounting firm, charged with creating and marketing fraudulent tax shelters, United States v. Stein. The Second Circuit affirmed on right to counsel grounds and consequently found it necessary to address the merits of the due process argument.
The House addressed the conflict in attorney-client protective legislation which it passed in the 110th Congress. Soon thereafter, the Department of Justice announced a revised policy concerning the circumstances under which a corporation's failure to waive its attorney-client privilege might influence the decision to prosecute it. The 110th Congress, which had previously amended the Federal Rules of Evidence relating to the inadvertent waiver of the attorney-client privilege, adjourned without taking further action on the House-passed legislation. Similar proposals, however, have been introduced in 111th Congress, H.R. 4326 (Representative Scott); S. 445 (Senator Specter). This report provides a brief discussion of the legislation, the legal background, and a chronology of related issues and events; it is an abbreviated version of CRS Report RL33842, The McNulty Memorandum: Attorneys' Fees and Waiver of Corporate Attorney-Client and Work Product Protection, by [author name scrubbed], without the footnotes or citations to authority found in the longer report.