by T. GormanPosted on Posted in SECActions

The Senate Committee on the Judiciary will hold a hearing on “The Thompson Memorandum’s Effect on the Right to Counsel in Corporate Investigations” tomorrow, September 12.  The tentative witness list includes Paul J. McNulty, Deputy Attorney General; Edwin Meese, Former Attorney General; Thomas J. Donohue, President and CEO U.S. Chamber of Commerce; Karen J. Mathis, President American Bar Association; Andrew Weissmann, Jenner & Block LLP; and Mark B. Sheppard, Sprague & Sprague.  Curiously, last week former Attorney Generals and Solicitor Generals sent a letter to Attorney General Alberto Gonzales petitioning his support to change the Justice Department’s policies regarding waiver of attorney-client privilege and work-product doctrine, which the letter characterizes as “seriously eroding these protections.”  (see also Blog entries of Aug. 14, “ABA Resolutions to Preserve Rights in Prosecutorial Process Are A Beginning, Not An End”; July 27, “Measuring Cooperation: Give the Government What it Needs, Not What it Wants”).  While supporting ongoing efforts to fight corporate crime, the bipartisan letter attacked the Thompson Memo and its policies as “seriously flawed and undermines, rather than enhances, compliance with the law.”  Tomorrow’s hearing, specifically Mr. McNulty’s testimony, should provide insight as to the Department’s response and, possibly, the fate of the Thompson Memo.

by T. GormanPosted on Posted in SECActions

Last week the Senate Finance Committee began hearings on executive compensation, part of which focused on the current government enforcement investigations underway focusing on backdated stock options. (for access to all statements see http://www.senate.gov/~finance/sitepages/hearing090606.htm)  SEC Chairman Cox noted in his testimony that the Commission currently has over 100 companies under investigation for backdated stock options.  That estimate is significantly higher than those reported just a view weeks ago, indicating that the government is continuing to increase its efforts in this area.  This fact was confirmed by the testimony of Deputy Attorney General Paul J. McNulty, Chairman of the financial fraud task force, who told the committee that backdated stock options is a priority for the task force. 
 
Mr. McNulty testified cases which are appropriate for criminal resolution are being prosecuted on the theory “that the defendants violated the federal securities statutes and other anti-fraud statutes by (1) falsifying corporate books and records . . . (2) causing the preparation of false and misleading financial statements . . . (3) lying to the corporation’s board of directors, and auditors and the SEC; and (4) misleading investors and the financial press . . .”   Mr. McNulty noted that the department was coordinating with the SEC and that additional legislation was not necessary.
 
IRS Commissioner Mark Everson also addressed the issue of inter-agency cooperation in his testimony before the Committee.  Mr. Everson noted that while the IRS obtains information from other agencies the IRS is precluded from providing any information from a tax return.  The Commissioner went on to note however that  the IRS is “working with the SEC to determine whether there might be limited areas in which broader information sharing would be helpful . . .”