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The following is not meant to be legal advice.

Indemnification and advancement in the McNulty Memorandum is discussed under the heading "Shielding Culpable Employees and Agents." A company's "promise of support to culpable employees" by retaining them without sanction for their misconduct or providing them with information about the government's investigation pursuant to a joint defense agreement "may be considered by the prosecutor in weighing the value of a company's cooperation."

On legal costs, the McNulty Memorandum states that "[p]rosecutors generally should not take into account whether a corporation is advancing attorneys' fees to employees or agents under investigation and indictment."

Many states have indemnification statutes.  A corporation's compliance with governing state law and its contractual obligations cannot be considered a failure to cooperate. The McNulty Memorandum observes that "[i]n extremely rare cases, the advancement of attorney's fees may be taken into account when the totality of the circumstances show that it was intended to impede a government investigation."

The McNulty Memorandum provides that a prosecutor may ask questions about an attorney's representation, including how and by whom attorneys' fees are paid.

Indemnification and advancement of fees will not be seen as a lack of cooperation where the payments are made pursuant to either a statutory or contractual obligation.  Companies might review their articles, bylaws and indemnity agreements to determine whether advancement of fees is permissive or mandatory. Mandatory advancement of fees will prevent the government from taking the position that such payments amount to obstruction.

Where there is no statutory or contractual obligation, a company's decision to indemnify and advance fees should be supported by established policies, or by legitimate business needs, such as to promote corporate goodwill, and attract and retain high-quality employees, officers and directors.

Companies might consider when it is appropriate to condition indemnification and advancement of fees on an employee's cooperation with government investigators and willingness to waive Fifth Amendment protections.

Companies might consider when it is appropriate to enter into a joint defense agreement with employees.

Attorneys working in-house or external to companies might keep in mind when creating privileged and work product documents and materials, that materials relating to items under government investigation, may be produced to the government, in the absence of legislative relief, even though they are privileged.