Last week, I teased the continuation of a series of posts about the Fifth Amendment. That’s still coming, but I had to return to another common theme first. My preview came at the end of a post about both the Fifth Amendment and parallel proceedings, which I’d also written about before. The Inception-ing of the blog continues with yet another brief comment on parallel proceedings, this time inspired by a news item that Justin flagged in last week’s roundup: Deputy Attorney General Rosenstein gave a speech before the New York City Bar Association’s annual white collar crime conference. The whole speech is worth watching or reading, but the highlight of the address was DAG Rosenstein’s announcement of “a new Department policy that encourages coordination among Department components and other enforcement agencies when imposing multiple penalties for the same conduct.”
Aaron Brecher is a litigator at Lane Powell in Seattle. He focuses his practice on investigations, compliance and white collar defense as well as privacy and data security. He’s passionate about helping individuals and companies through some of their most difficult and sensitive challenges: investigations that could lead to government enforcement actions and resulting litigation. In addition to his compliance and enforcement work, he represents clients in antitrust, intellectual property, and securities litigation as well as qui tam litigation under the False Claims Act.
News of the last few weeks has prompted me to return to two issues I’ve discussed here before: parallel proceedings and the Fifth Amendment. This time around, the Fifth Amendment issue is not double jeopardy, but instead the constitutional protection against compulsory self-incrimination.
Remember parallel proceedings? By that I mean the government conducting criminal and civil investigations of the same or similar conduct, and bringing related criminal, civil, or administrative enforcement proceedings around the same time. This creates all kinds of problems for defendants, including the difficulty and expense of fending off legal challenges on several fronts and the care needed to ensure that steps taken responding to one enforcement action don’t bite you in the other.
Among the most important dangers are those stemming from offering testimony in a civil or administrative proceeding. You see, “pleading the Fifth” and refusing to answer questions that might incriminate you doesn’t work the same way in civil and administrative settings that it does in the criminal context.
- Last Monday, the U.S. Treasury’s Office of Foreign Assets Control authorized certain transactions winding down or maintaining business with Russian aluminum giant RUSAL through October, after sanctions against the company announced earlier this month hurt industry
- Charges against two men alleged to have been conspiring to commit economic espionage on behalf of a Chinese company
- New stats this week from the Administrative Office of the U.S. Courts on the 2017 activities of the Foreign Intelligence Surveillance Court
- In Portland, a man is charged with conspiring to launder money in furtherance of his drug business
- Charges in Anchorage for killing Steller sea lions in violation of the Endangered Species Act and the Marine Mammal Protection Act, false statements, and obstructing the investigation
- In Tacoma, Washington, a woman is charged with wire fraud and identity theft—after being convicted in 2014 of stealing almost $100,000 in an earlier identity theft scheme
- In Chicago on Thursday, Deputy Attorney General Rod Rosenstein provided appropriate context for Shakespeare’s joke about “kill[ing] all the lawyers” in a speech to the International Association of Defense Counsel’s “Corporate Counsel College”
- Lance Armstrong settled a False Claims Act case for $5 million. His cycling team was sponsored at one point by the U.S. Postal Service. Apparently doping violates the terms of federal government sponsorship agreements. Who knew?
- In Texas, the GM of a Venezuelan energy company entered a guilty plea for his role in an international money laundering and bribery scheme
- Closer to home, former FBI Director James Comey will be in Portland tomorrow to plug his new book. He’ll be in Seattle on Sunday. I’ll be attending the Seattle talk.
- It’s not just famously fired government officials who are active in the Pacific Northwest. Current prosecutors are busy as well. In Portland, a CPA’s 4/20 plans went up in smoke when the U.S. Attorney’s Office accused him of hiding income and diverting investor money from his accounting business to his marijuana business.
- In Seattle, the former president and former vault-manager of a King County precious metals business were arraigned this week on charges that they fraudulently obtained millions of dollars from thousands of customers by misrepresenting shipping times for bullion and using bullion and money belonging to customers to fulfill other bullion orders. I can still think of at least one far more ambitious bullion-based criminal scheme:
I was thinking about double jeopardy yesterday. Not the Trebek kind, though that is my favorite tv show. Instead, I was thinking about the somewhat enigmatic statement in the Fifth Amendment to the U.S. Constitution that no person “be subject for the same offence to be twice put in jeopardy of life or limb.” My musings were prompted by yesterday’s news that New York Attorney General Eric Schneiderman has asked New York’s legislature to amend the state’s double jeopardy law to ensure that state prosecutors can go after persons whose conduct violates both federal and state law but who may be pardoned by the President after being prosecuted for federal crimes. I’ll provide some context below, but I don’t want to leave you in suspense about my view: I’m troubled by this.
Did you know that, as of 2008, there’s a good chance the federal government can prosecute you for fraud against the U.S. whenever it wants to, regardless of the statute of limitations? Does that seem alarming to you?
The government can do this because of a federal statute called the Wartime Suspension of Limitations Act. The Act says that when the U.S. is at war or “Congress has enacted a specific authorization for the use of the Armed Forces,” the statute of limitations for any offense involving fraud or attempted fraud against the U.S. or one of its agencies is suspended until five years after the termination of hostilities.
Following our recent post on disclosures to the EPA, this week we’re going to look at disclosures to outside auditors, often in the context of internal investigations, and steps to take to limit any waiver of attorney work-product protection. Here we go . . .
Work-product protections are not automatically waived by disclosure to third parties. Rather, they are waived when such disclosures are to an adversary or increase the likelihood of disclosure to an adversary. As usual in the world of law, there is a split of authority over whether the disclosure of work-product to an independent auditor, such as a Big Four accounting firm, waives work-product protection.
Most courts have concluded that disclosures to outside auditors do not have the requisite adversarial relationship for waiver. See, e.g., SEC. v. Schroeder; In re JDS Uniphase Corp. Sec. Litig.; SEC v. Roberts; Merrill Lynch & Co. v. Allegheny Energy, Inc.
However, other courts have concluded that disclosures to outside auditors do amount to a waiver. See, e.g., Middlesex Ret. Sys. v. Quest Software, Inc.; Medinol, Ltd. v. Boston Scientific Corp.; Samuels v. Mitchell.
The only federal appellate court to have ruled on the question is the D.C. Circuit in United States v. Deloitte LLP, which concluded that work product protections are not waived by disclosure to independent auditors.
But relying on the “majority view” or one appellate court’s opinion is not a risk most people want to take. So to protect against the risk of waiving work-product protection, or if you’re in a minority jurisdiction, here are certain concrete steps that attorneys can take to help protect against waiver of the work-product doctrine:
- Ensure that disclosures made to the auditors are oral rather than written.
- Be aware that auditors’ notes concerning oral communications with counsel may be discoverable if there is a later determination that there has been a waiver.
- Request that the audit team confine their notes only to those facts that are essential to performing their audit function.
- Answer only those specific questions asked by the auditors.
- Do not volunteer to disclose work-product such as interview memoranda or any written report of the privileged investigation.
- Answer auditors’ questions by providing facts that have been gathered during the investigation, which are not privileged regardless of their form and thus would not constitute a waiver.
- Focus on the process underlying the investigation—the number of witnesses interviewed, length of those interviews, and the general thoroughness of the investigation—to assure auditors of the robust nature of the investigation or a client’s internal controls while minimizing the risk of waiving privilege.
- Discuss the auditors’ confidentiality obligations in advance of any oral report.
- If there is not already a confidentiality agreement in place, then one should be put in place.
- The confidentiality agreement should ensure that any information sent to the auditors is confidential and that the auditors will not further disclose that information.
- Specify that the confidential information is subject to work-product protection.
- Document the legal basis for the work-product protection when the work-product is transferred to the auditors.
- The agreement with the auditors should include a provision that if litigation arises and the auditor is subpoenaed,your in-house or outside counsel will review any auditor work papers that may contain privileged material before they are produced.
- Finally, ensure that other indicia of anticipated litigation, such as a litigation hold, are in place to strengthen the case that you both reasonably anticipate such a dispute and are taking steps to safeguard your information.
Finally, remember, even after all precautions have been taken, there is a limit to one’s control over events . . .
Henry Friendly still has my vote for the title of greatest American judge who ever served at any level. It’s the country’s misfortune that he never served on the U.S. Supreme Court. He did, however, spend nearly thirty years on the United States Court of Appeals for the Second Circuit, writing more than 1,000 opinions and carving out a reputation as one of the country’s most influential jurists. On March 10, 1986, thirty-two years ago today, Friendly died.
I’ve written at some length elsewhere about my definitely-not-unhealthy devotion to a long-deceased judge on an intermediate appellate court who, with a few exceptions, did not weigh in on the most hotly contested constitutional questions of the day. But Friendly’s reputation was built on his alarming analytical acuity, the lucidity of his writing, and his record of pragmatic decisions. He also had a great eye for talent: his law clerks included Chief Justice John Roberts, federal appellate judges Merrick Garland, A. Raymond Randolph, William Bryson, Pierre Leval, and Michael Boudin, and a slew of influential lawyers and academics including Bruce Ackerman, Larry Kramer, and Ruth Wedgewood.
For purposes of this blog, Friendly wrote several decisions addressing the scope of the attorney–client privilege and reviewing convictions for white collar crimes in an era when prosecutions for such crimes were relatively rare. Two of those decisions are discussed below and recounted in detail in David Dorsen’s excellent biography of Friendly.
I imagine that word—or else a prolonged stunned silence—was the response of many attorneys and non-attorneys alike when former Trump campaign aide Sam Nunberg announced in a series of bizarre interviews today that he planned to ignore a grand jury subpoena from the Special Counsel’s office. Nunberg then dared the government to arrest him for his refusal to cooperate.
As far as strategies go, Nunberg’s is all kinds of terrible. As others have described, you can be jailed for contempt for defying a grand jury subpoena, and subpoenaed witnesses in past investigations of presidents have faced such consequences.
Mr. Nunberg did raise an interesting point in an interview with CNN’s Jake Tapper, asking whether he should have to spend “80 hours” looking for every email he had sent to other campaign advisers since November 2015, complaining that he had exchanged many emails per day with some of those people. Grand jury subpoenas to produce documents can be a pain. Below are some tips to try to reduce costs.
- This month’s issue of the Federal Lawyer focuses on white collar crime, and includes this helpful article on subpoenas.
- Deputy Attorney General Rod Rosenstein visited Seattle this week for a press conference stressing DOJ’s continued commitment to catching the killer of a federal prosecutor tragically murdered here in 2001. One month to the day after 9/11, Assistant U.S. Attorney Tom Wales was working at his computer at about 10:40 p.m. Someone familiar with his home and work habits evaded the motion-sensor-based floodlights in his yard and shot him through the window. Over almost 17 years of active investigation, the government has pursued a variety of theories. If the murder was related to his work, Mr. Wales would be the first federal prosecutor killed in the line of duty in American history.
- A new podcast investigating the murder, Somebody Somewhere, launched on January 30th.
- If you’re thinking about the Supreme Court’s decision to leave in place a D.C. Circuit decision about standing in data breach cases, there’s a nice discussion of it on this week’s episode of the National Security Podcast.
- Just a week after Valentine’s Day, the U.S. Attorney’s Office in Portland indicted a dating site fraudster for stealing, and then laundering, money from would-be dates with the help of some catfish co-conspirators.