Second, cooperation often means a company may turn against its executives, says E. Lawrence Barcella, who is representing Homestore.com co-founder and former CEO Stuart Wolff. So far Wolff has not been indicted, but he is under investigation by the DoJ. But that has been enough to deny Wolff access to records he might have used to build any future defense, says Barcella, “even though the company’s internal investigation did not show any wrongdoing on his part.”
Most seriously, by waiving its right to keep confidential information confidential, a company may end up seeing that information “fall into the hands of civil plaintiffs or other federal agencies,” says Handzlik. Columbia/HCA (now HCA Inc.), for example, made internal coding audits available to investigators looking at its billing practices. The firm claimed that it was not waiving its attorney-client privilege or work-product privilege when it set up a confidentiality agreement with the DoJ that ostensibly protected the information from leaking. Shortly after settling in 2000 for an $840 million fine, though, “innumerable” plaintiffs — private insurers and individuals — tried to acquire the documents to build their own cases. The U.S. Sixth Circuit Court of Appeals ruled in favor of those plaintiffs, upholding the prevailing view that “once a client waives the privilege to one party, the privilege is waived in toto,” according to its June 2002 decision.
The DOJ vs. the CFO
For executives caught in the DoJ’s crackdown, prosecutors have a slightly different yet equally powerful incentive to induce cooperation — lesser charges and less jail time. And given new federal sentencing guidelines, it often behooves executives to work with the DoJ up front.
Those guidelines — introduced in 1987 — give minimum sentences that make it difficult for federal judges to shorten. In addition, recent revisions suggest even longer minimum sentences for crimes committed after January 25, 2003. For example, the minimum sentence for an obstruction-of-justice charge was boosted from 18 months to 24 months.
Prosecutors are eager to wield the new standards. “Our emphasis is to make sure we follow through not just on prosecuting but [also on] arguing for a particularly tough sentence,” says Fitzgerald. And that sentence will be made even tougher, thanks to a recent Task Force-inspired DoJ directive to assign white-collar convicts to standard prisons, rather than low-security facilities. “They clearly want to eliminate any perception that white-collar criminals get favorable treatment,” says James M. Becker, an attorney with Saul Ewing in Philadelphia.
But could the DoJ be going too far in eliminating that perception? Some experts say it is possible. “When the playing field is tilted so heavily in favor of enforcement officials and the members of juries are viewing executives as criminals, it’s much harder to get fair treatment,” says Handzlik. He says that in many cases he knows of, executives will “take the pragmatic way out and plead guilty,” even when their cases are considered defensible. “That means, in my view, the system is not working properly.”