In the post-Enron era of criminalizing business, a business executive’s attorney-client privilege with the company counsel of the executive has already become largely illusory (posts here, here here and here). Now, according to this Nathan Koppel/WSJ ($) article, the government is now threatening to go Arthur Andersen on a New Hampshire company unless the company breaches its contractual obligation to provide counsel to a company executive that is accused of a crime.
The fee-payment issue has become an issue over the past several years after the 2003 “Thompson Memo,” former Deputy Attorney General Larry Thompson’s dubious directive that advised prosecutors how to induce companies to cooperate with the government in order to avoid an indictment and an Arthur Andersen-type meltdown. The memo advises that a company’s willingness to advance legal fees to “culpable employees” may signal a lack of cooperation. The nonpayment of legal fees has been a huge issue in the ongoing tax-shelter prosecution against former executives of KPMG LLP, where the accounting firm has not reimbursed its former executives since 2004.
In the New Hampshire case, five former executives of technology company Enterasys Networks Inc. are charged with accounting fraud. The case was scheduled to go to trial in Concord this month, but the defense received a three-month reprieve after federal prosecutors were accused of misconduct in pressuring the company to cut off legal fees to the defendants. At a March 7 hearing, U.S. District Judge Paul Barbadoro voiced concern over the prosecutors conduct, but he did not sanction the prosecutors and Enterasys reluctantly agreed to pay past-due fees and costs of defense counsel and to cover future costs.
The article notes that, over the past three years, federal prosecutors in New York, Alabama and now New Hampshire have placed companies at risk of being indicted out of business if they fail to cut off payments to an executive’s defense counsel. Clear Thinkers favorite Ellen Podgor of the White Collar Criminal Prof blog comments in the article:

“If companies don’t cooperate with the government, they can face a death penalty by being indicted,” says Ellen Podgor, a professor at Stetson University College of Law. She adds that companies fear becoming the next Arthur Andersen LLP, which imploded shortly after its indictment in 2002 for allegedly obstructing the government’s investigation of fraud at Enron Corp. (The accounting firm was later convicted of obstruction, but the Supreme Court overturned the verdict last year.) “Prosecutors can now force individuals to pay their own attorneys’ fees,” Prof. Podgor says, “and corporations have to go along.”

Justice Department spokesman Brian Roehrkasse disingenuosly responded by suggesting that “the government does not force corporations to do anything.” If a company declines to advance fees, “that is a business decision made after weighing all of the costs and benefits of cooperation.”
Yeah, right. Let’s see, here. Is the company better off with the cost attributable to breaching its obligation to pay the defense costs of an executive accused of a crime? Or of fulfilling that obligation, but being indicted out of business? Faced with that “choice,” what company wouldn’t elect the former?
So it goes with regard to the prosecutorial abuses (partial lists here, here, here and here) that are making a mockery of our criminal justice system in the post-Enron era of criminalizing business. As Larry Ribstein wryly notes:

Apparently the presumption of innocence isn’t what it used to be. But then, as a law professor was recently was quoted as saying, letting defendants pay lots of money to defend themselves could “undermine the deterrence idea of white-collar crime prosecution.”
Come to think of it, wouldn’t we get more deterrence if we dispensed with those pesky trials?