Tactics eased in federal investigations

Janet Babin Aug 28, 2008
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Tactics eased in federal investigations

Janet Babin Aug 28, 2008
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TEXT OF STORY

Scott Jagow: Today, the Justice Department may announce new guidelines for companies that get into legal trouble. Marketplace’s Janet Babin reports from North Carolina Public Radio.


Janet Babin: Here’s what often happens when a corporation is suspected of wrongdoing: The firm tells the government it will carry out its own investigation. Then the company might come back and say, “We found no wrongdoing.” Then the government often says, “Well, OK. Show us what you found.” But hat happens next is where the trouble starts, says securities professor James Cox at Duke University.

James Cox: The response by the corporation is to say, “Oh no, I’m sorry. I’m protected by the attorney-client privilege. We can’t show that to you.” So you don’t know whether the report is one, legitimate, or two, just a highly paid for whitewash.

The government would often fight back by indicting these companies, a sure-fire way to create problems for shareholders. Now, that may change. The New York Times reports that under new Justice Department guidelines, companies won’t be penalized for protecting attorney-client privilege or for paying their employees’ legal fees. Cox thinks the Justice Department is going overboard. But Wall Street firms and their lawyers would likely be pleased with the changes.

I’m Janet Babin for Marketplace.

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