Jim Parkman Anticipates Scaling Back of the Thompson Memo

2006-12-18 10:45:00.0 CDT

Jim Parkman, lead criminal attorney with The Cochran Firm, whose client Richard Scrushy was acquitted of over three-dozen fraud and money laundering charges in a massive $2.7 billion earnings overstatement, has had first hand experience with the war on corporate fraud.

In 2005, Parkman and his legal team were the first and only team to successfully represent a defendant under the Sarbanes-Oxley Act, which was an uphill battle against the strong-arm tactics recently employed by the government in handling high-profile corporate fraud cases.

These tactics used by the Justice Department were written by Larry Thompson while acting as a deputy attorney general, and have recently been referred to as the “Thompson Memo.”

“Some of these recent ëmemo developments’ may be a step in the right direction in the government’s fight on corporate crime,” says Parkman. Most recently, Senator Arlen Specter, a Republican from Pennsylvania, has indicated that when Congress reconvenes in 2007, he will reintroduce a bill calling for a revision of the methods the Justice Department will be allowed to use in their corporate fraud investigations.

Notably, the current tactics used by the Justice Department include encouraging companies under investigation to avoid indictment by denying the payment of attorney’s fees to employees that are also subjects of the investigation.

In many instances, this amounts to the government effectively forcing the corporation to breach its contract with the subject employee; as many corporate officers have contracts which provide the corporation will pay their legal fees. The government also entices companies to reveal information which is subject to attorney-client privilege and would otherwise be undiscoverable in exchange for leniency.

In HealthSouth’s case, though never confirmed, Parkman believes the company signed an agreement, which made prosecutors privy to privileged information and corporate finances during the accounting-fraud probe, and also agreeing to deny Scrushy legal fees.


“These methods are unconscionable use of government force to deny unindicted and presumptively innocent individuals their right to counsel under the 6th Amendment to the United States Constitution,” says Parkman.

He does not believe that the changes have been initiated by lawmakers seeking to protect constitutional rights.

“The driving force behind the changes are the investors that have complained about the expense of compliance by the companies, which hurts the stock price,” Parkman offers. “Also, when the companies breach their contract with their executives to pay for legal costs, it opens the company to civil liability,” he continues.

Parkman saw this first hand with HealthSouth, which originally denied paying Richard Scrushy his attorney’s fees as guaranteed under his contract, and was ordered by the court to pay nearly $20 million in reimbursement fees.

“I believe many of the changes are designed to prevent damage to the investors and you will see the government begin to concentrate on the individual wrong-doers,” says Parkman. “The bottom line is: when investors speak, politicians listen.”

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