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6 janvier, 2007 10:52

Andrew Longstreth

The American Lawyer

January 5, 2007

For many months, sound and fury had been building about the Thompson memo. Organizations ranging from the American Civil Liberties Union to the U.S. Chamber of Commerce had called for reform of the document, which laid out the factors that prosecutors must consider when deciding whether to charge a corporation with a crime. To its detractors, the memo was a symbol of prosecutorial overstepping. They charged that it eroded the attorney-client privilege and trampled the rights of individuals. In December, deputy attorney general Paul McNulty gave the critics what they wanted: a major shift in U.S. Department of Justice policy.

Lost in the discussion about what to do next was the story of the origin of the memo. It starts with a veteran New York prosecutor who participated in the creation of the memo eight years ago and today is running the hard-nosed prosecution of KPMG, where the memo has taken center stage.

That prosecutor is Shirah Neiman, and just about everybody who practices white-collar criminal law in New York knows her. At 63, she's the definition of a career prosecutor, having worked in the Southern District since 1970. She was one of the first women hired in the criminal division and held positions in the office as a deputy chief of the criminal division and chief of major crimes. She earned her reputation as an expert in complex tax and money laundering cases because of her mastery of white-collar crimes and tax statutes.

During the 1990s, Neiman was deputy to Mary Jo White, then the U.S. Attorney for the Southern District of New York. Corporate counsel had been complaining to the government about the lack of written guidelines for prosecuting companies, so the Department of Justice organized a working group of lawyers to formulate a policy. White dispatched Neiman to represent the views of the Southern District, which had the reputation as the most aggressive and sophisticated office in prosecuting white-collar crimes. According to one lawyer who participated in drafting the memo, the Southern District of New York didn't want claims of privilege stopping it from obtaining information.

The working group's final product, issued in 1999, was called the Holder memorandum, after then-deputy attorney general Eric Holder Jr. It laid out factors that prosecutors should consider when making a charging decision, such as whether a company waived the attorney-client privilege or appeared to be protecting "culpable" employees by paying their attorney fees.

The Holder memo was merely advisory until 2003. That year, after the implosion of Enron Corp. and WorldCom Inc., and the formation of the Corporate Fraud Task Force, the Justice Department updated the Holder memo and renamed it after the new deputy attorney general, Larry Thompson. (Neiman didn't play a visible role in the revision.) The changes were slight, but the policy became mandatory.

By then, James Comey had replaced White, and David Kelley had taken Neiman's position as the office's number two. Although Neiman's visibility in the office diminished, she kept her job as the office's expert tax prosecutor. So in February 2004, when the Southern District began investigating KPMG for creating phony tax shelters, Neiman naturally took a leading role. In October 2005, 16 former KPMG partners and a former Sidley Austin partner were indicted; KPMG was not.

Neiman and her tactics in the case have been a hot topic of conversation within the white-collar defense bar ever since. Opinions about her vary widely. Many defense lawyers concede that Neiman's institutional knowledge is an asset to an office that experiences constant turnover. Unlike countless assistants who have left to cash in their experience for a job on Wall Street, Neiman has opted for the halls of government and the relatively modest salary that goes with it. Nearly all are impressed with her dedication to the job. Neiman once told the New York Sun that she spent "22 hours a day" at work.

But some say she can be unyielding and deaf to defense arguments. "She's the exact opposite of what you want in a career prosecutor," says Stanley Arkin, name partner of Arkin Kaplan Rice, who represents one of the individual defendants in the KPMG case. Robert Morvillo of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer says that Neiman embodies a federal criminal system that has grown too severe. "From the perspective of a defense attorney, she has become more and more rigid over the years in her approach to making judgments about criminal cases," says Morvillo, who was Neiman's boss when he headed the fraud unit in the early 1970s. "And I say that not necessarily as a negative, but simply as a position that the [white-collar criminal] system has grown harsh. ... She's conducted herself consistent with what she views as the correct direction that the criminal system should take."

Neiman declined to comment for this story, but her boss, U.S. Attorney Michael Garcia, issued a statement defending Neiman, saying that her long record in leadership positions demonstrates that she is "not only an extraordinary dedicated public servant, but she has the temperament, intellect, experience, and judgment to have made invaluable contributions to the office and the public good."

The KPMG case has been a chance for Neiman to put into practice the policies she had helped write. In February 2004, at the first meeting between prosecutors and lawyers from Skadden, Arps, Slate, Meagher & Flom, who were representing KPMG, the government asked whether the accounting firm intended to pay the legal fees of those who were under investigation. Neiman said that "misconduct" should not "be rewarded," according to notes taken by an agent of the Internal Revenue Service produced at a hearing before New York federal court judge Lewis Kaplan. Although Neiman has said that she was talking about sentencing guidelines, not legal fees, that's not the way Kaplan saw it in a ruling last summer. "It is no stretch to conclude that this remark was taken by those who heard it as a reference to the Thompson Memorandum," he wrote.

The next month, KPMG announced that it wouldn't pay the legal fees for its former employees who were indicted. Kaplan slapped that move down, writing that the government "let its zeal get in the way of its judgment." He went on to find that KPMG had violated its employees' constitutional right to counsel.

Neiman's actions didn't go unnoticed in Washington, D.C. In September the KPMG case figured heavily in hearings held by the Senate Judiciary Committee about the Thompson memo. In December, Sen. Arlen Specter, R-Pa., introduced legislation that would essentially reverse some of the policies it contained. The bill would prohibit prosecutors from demanding that a company waive the attorney-client privilege, or basing a charging decision on whether a company had paid attorney fees for an employee. Days later, the Justice Department responded with the newly minted McNulty memo, which largely echoed Specter's bill.

It's not clear what effect, if any, the changes will have on the KPMG case. The trial has been postponed indefinitely, and the case is currently under consideration by the 2nd U.S. Circuit Court of Appeals. Neiman remains the supervising attorney on the KPMG case.