The WSJ ($) reports today that prosecutors are informing (warning?) firms that they might be less likely to be deemed "cooperative," and thus more likely to be indicted, if they pay the defense fees of indicted officials. White Collar Crime Profs Blog has a related post. The Thompson memo also states that in deciding whether an entity has cooperated, prosecutors should take into account such things as whether the entity disclosed the results of any internal investigation and whether it waived its privilege.
I think the fee issue is different from the waiver and disclosure issues. The case for the privilege itself is not terribly strong, and that is all the more true in an entity context, where properly-advised officials know that they cannot control any privilege that might apply to their communications. Producing evidence, even otherwise privileged communications, will tend to increase the accuracy of fact-finding, and producing internal investigations (if properly done) will tend to decrease the cost of accurate fact-finding.
(The same considerations counsel against allowing selective waiver--waiver only to enforcement officials but not plaintiffs' counsel. Competent private counsel would demand the information in discovery anyway, and should get what is responsive. There is no point increasing the costs of litigation by forcing parties to re-trace investigative work already done. The probability that private litigation will uncover the facts should also reduce any incremental effect the government's policy might have in deterring investigations that might otherwise have been done. These are and will remain business decisions, and I doubt many firms will forgo investigations that might help on the criminal side in order to make life harder for Lerach, Coughlin et al.)
In contrast, leveraging firms not to pay the fees of defense counsel (which many firms may be obligated to do by bylaws or state law) will tend to make cases more one-sided, and might well impede accurate fact-finding by reducing the probability that the government will be put to its proof. I therefore am inclined to think the government should continue to press for privilege waivers and disclosure of internal investigations, but to back off on payment of fees.