WASHINGTON - A fundamental principle of jurisprudence is that what criminal suspects tell their lawyers is private.

At least it used to be. Now the Justice Department is under fire for a policy that allows federal prosecutors to demand waivers of the attorney-client privilege as part of plea agreements with corporate criminals.

The policy has groups ranging from the American Civil Liberties Union to the Business Roundtable and the Chamber of Commerce up in arms. Even stalwart anti-crime Republicans like Rep. Dan Lungren, California's former attorney general, are beginning to think legislationmay be the only way to get the Justice Department to stop the intrusions.

The government's view about the once-sacrosanct attorney- client privilege began to shift after its investigation into the collapse of Enron, and it accelerated in 2003 with the release of what's become known as the Thompson memo, written by then-Deputy Attorney General Larry Thompson.

In essence, the memo expounded on ways that corporations under investigation could avoid being indicted. One way is to agree to waive the attorney- client privilege and turn over all confidential information given to or collected by their lawyer, and to stop paying the legal bills for their employees.

In response to an onslaught of criticism at a Senate hearing last year, the Justice Department issued a new memorandum in December, this one by Deputy Attorney General Paul J. McNulty. Among the changes intended to dampen the criticism, the McNulty memo said that prosecutors needed permission from Justice Department headquarters in Washington, D.C., to seek granted only in the rarest of situations. But the McNulty memo has done nothing to quell the outrage.

At a House Judiciary Committee hearing this week, Deputy Assistant Attorney General Barry M. Sabin insisted that the "tone" of the department's policy had changed. "It is a tone of respect for the importance and longstanding nature of the attorneyclient privilege," he said.

But witnesses for the American Bar Association, the Association of Corporate Counsel and several former federal prosecutors now defending corporations in criminal investigations said that while the McNulty memo might look less harmful, it has changed nothing. They said the McNulty memo hasmade the process of demanding waivers less formal, but it remains a routine part of federal criminal investigations, however inexplicit.

"We think it's gone underground, and it's now an implicit requirement," said Karen J. Mathis, American Bar Association president.

William Sullivan, a former federal prosecutor who now does high-profile white-collar criminal defense, told that panel that federal prosecutors want waivers of the attorney-client privilege before defense attorneys have had a chance to investigate the charges.

The consequences are farreaching, the witnesses said.

Internal investigations of wrongdoing done by a corporate attorney are handed over to federal prosecutors, who learn not just the facts but the company's strategy for dealing with it. The witnesses said the policy is discouraging corporate officials from talking to their lawyers and, more damaging to the public, jeopardizing corporate efforts to identify and correct internal problems on their own.

"So long as the possibility of waiver demands exists, the Justice Department's policy will continue to hamper and chill corporate compliance programs and investigations," the Coalition to Preserve theAttorney-Client Privilege said in a statement to the committee.

It's not just that the Justice Department wants the lawyers' notes and paperwork. If a company refuses to turn them over to the government, that refusal will be taken as a sign that it's not cooperating. If the company is then indicted and convicted, refusal to cooperate is used as a reason for a tougher sentence.

Rep. Robert Scott, D-Va., chairman of the panel conducting the hearing, said it sounded to him like the Justice Department was penalizing corporations for exercising their constitutional rights.

Sabin insisted that no penalization was involved.

It was clear from the hearing that committee members are ready to pursue legislation to stop the government from asking for waivers, and might even seek sanctions against prosecutors if they try. Such legislation was introduced in the Senate last year.

"You can see when bipartisanship comes together, things can get pretty rough for you," Rep. John Conyers, D-Mich., the Judiciary Committee chair, said to Sabin. "I can see where this train is headed."

Lungren, R-Gold River, noted that none of the witnesses he asked thought the McNulty memo had made the problem any better. Lungren then turned to Sabin with a blunt warning: "I think you understand that there's a bipartisan consensus that as we go after corporate crimes, we don't create a culture of coerced waivers."

As he left the hearing, Lungren said he had hoped that the McNulty memo might signal a change in the Justice Department's policy.

"I wanted to give the Justice Department time to see if it would work," he said. Now, he said, he may have no choice but to join Democrats in voting to ban the government's intrusion.