The indictment last week on criminal charges of Milberg Weiss, the leading class action securities law firm in the US, has fuelled a growing debate about whether the Justice Department has been too heavy-handed in its prosecution of white-collar crime.
Even the most ardent critics of class action securities lawyers say the decision by the US attorney’s office in Los Angeles to indict the entire firm – as opposed to individual attorneys – sets a dangerous precedent that could be used against other corporate enterprises and infringes companies’ rights.
Milberg has claimed it was indicted because, after six months of intense negotiations with prosecutors, it refused to waive attorney-client privilege, which traditionally protects communications between corporate lawyers and their clients.
A set of policies set out by the Justice Department in 2003, referred to as the Thompson memo, called on prosecutors to weigh the level of a company’s co-operation with the government – including the waiver of privilege – as a factor to consider when deciding to bring charges or negotiate plea agreements.
KPMG, the auditing firm, avoided a criminal indictment last year and accepted a plea agreement with the government by co-operating with prosecutors, and waiving its right to attorney-client privilege.