September 28, 2006
By Brian W. Walsh
Sometimes what you don't know can hurt you -- and your
family -- a lot.
Imagine that after almost 10 years at your company, you've
been promoted to supervisor of the finance department. Lately
you've heard through the grapevine that the company is the subject
of a federal criminal investigation, but you know you've done
As you walk into your office one Monday morning, coffee in
hand, you get a call from your company's legal department. An
attorney you've never met tells you that the federal prosecutors
investigating the company would like to speak with you. You aren't
technically required to cooperate, he says, but it would
be best for everyone if you did.
Your pulse races. What answer do you give? If you say yes,
could you be waiving some important right? If you say no, do you
But, you remind yourself, you've done nothing wrong. Even
if you inadvertently violated some federal law you knew nothing
about during the course of your normal duties, your company will
defend you and give you your own lawyer if you end up needing one.
That used to be true. But you had better revisit such
assumptions before taking any unexpected calls from your legal
In fact, you would be well-advised to jump on the Internet
and grab a copy of two recent opinions by a federal court in
Manhattan that illuminate how the Department of Justice's current
policies and practices for investigating white-collar crime put you
at risk. The case is U.S. v. Stein, and it involves the
federal prosecution of 12 former employees of international
accounting powerhouse KPMG.
In the Stein case, Judge Lewis Kaplan concluded
that the Justice Department violated the employees' Fifth and Sixth
Amendment rights by heavily pressuring KPMG to "encourage" its
employees to cooperate with the federal investigation. When
employees who were pushed to give statements to the federal
prosecutors and show up without counsel refused to do so, the
government notified KPMG. The firm immediately sent the employees
letters threatening to stop paying their (extensive) legal bills
and strongly implying they'd be fired unless they promptly started
cooperating with the government.
KPMG did this not because it's a bad business or disloyal
to its employees, but because it had no choice.
Every big business knows that a federal indictment alone
can destroy it before it ever gets close to trial. That's what
happened to Arthur Andersen. The 89-year-old accounting firm
imploded and its 28,000 employees (at least 99 percent of whom were
never implicated or suspected of any wrongdoing) were scattered to
the four winds almost immediately after the Justice Department
indicted it. When the Supreme Court eventually reversed the firm's
conviction, it was far too late to help the firm or its employees
(or its creditors).
KPMG isn't alone. Scores of companies have found
themselves in the same vise created by the Justice Department's
policies. A department document called the Thompson Memorandum
requires every federal prosecutor considering whether to indict a
company to assess how well the company did on a set of nine
factors. One of them is whether the company fully cooperated with
"Cooperation" generally includes encouraging employees to
provide testimony to government investigators as well as (subtly)
encouraging them to testify without a lawyer. "Cooperation" also
typically includes refusing to pay employees' legal
KPMG told the federal prosecutors that it was willing to
do anything it could to avoid indictment, which was music to the
government's ears. Besides threatening to cut off the legal fees
and terminate any employee who didn't cooperate, the firm capped
its legal fee payments for all employees -- even those who
cooperated. This violated KPMG's previously unbroken tradition of
advancing all legal fees for all employees.
Never before have America's employees been so vulnerable
to federal indictment just for doing their job. Somebody needs to
sound an alarm.
Who should you count on to protect your rights when the
feds come knocking at your workplace? Congress has expressed
serious concerns about the Justice Department's policies on
white-collar crime, but nothing concrete has changed yet. So for
now, the only person you can really rely on to protect your rights
is yourself -- and the best lawyer you can afford.
Brian W. Walsh is a Senior Legal Research Fellow in
the Center for Judicial Studies at The Heritage Foundation
Distributed nationally on the McClatchy Tribune wire
Sometimes what you don’t know can hurt you -- and your family -- a lot. Imagine that after almost 10 years at your company, you’ve been promoted to supervisor of the finance department. Lately you’ve heard through the grapevine that the company is the subject of a federal criminal investigation, but you know you’ve done nothing wrong.
Brian W. Walsh
Senior Legal Research Fellow
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