Backlash?

Could it be that prosecutors have overreached? Judge Lewis A. Kaplan thinks so.

Kaplan recently declared unconstitutional the Department of Justice’s policy of pressuring companies to stop paying the legal fees of top executives and other employees as a condition of getting lenient treatment in criminal investigations.

The federal trial judge made his ruling in the KPMG tax fraud case. We cover his landmark ruling on page one.

Kaplan was equally critical of DOJ policymakers in Washington, D.C., as well as the prosecutors handling the KPMG case.

Of the policy, embodied in the well-known Thompson Memorandum, Kaplan said it deprived employees of their constitutional right to defend themselves by holding the proverbial gun to the head of the company.

And of the prosecutors in the case, Kaplan chided them for not being completely forthcoming in court.

The judge’s frustration with the DOJ mirrors what many in-house lawyers are feeling: The government’s zeal to uproot and punish financial wrongdoing in the corporate world has driven it to adopt heavy-handed techniques that are unfair and even unconstitutional.

This issue is far from settled, however.

Kaplan’s ruling is just one opinion, albeit an important one. Other judges may weigh in and could have a different take. The DOJ may or may not reconsider its approach in criminal investigations.

Companies may be emboldened by the ruling to pay attorneys’ fees of indicted executives despite a “deferred prosecution” agreement with the government, as did AOL recently in a financial fraud case in federal court in Virginia. But, then again, others may still not want to risk the wrath of the DOJ.

However, despite the uncertainties, there seems to be a growing sense in many quarters that the government needs to take a hard look at its current practices.

The July issue of In-House is chock-full of useful information on evolving trends. For instance, on page one we take a look at the pending e-discovery rules that promise to reshape civil litigation in federal court. There’s also plenty of news coverage in the inside pages, including the fallout from U.S. Supreme Court rulings on retaliation claims in employment cases, and on whether injunctions should be granted in patent infringement lawsuits.

As always, we hope you find our articles engaging and informative. We’re here to help you stay on top of your game.

One more thing: Be on the lookout for the 2006 Directory of New England In-House Counsel, which should be hitting your desks by the end of August. This comprehensive index will help you stay in touch with corporate counsel throughout the region.

Paul D. Boynton
Publisher