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?

Same here.

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.

Continue Reading Frightening Facts about Fraud and the Forever War

  • Lots of pernicious activity in the PNW, beginning with sending a false distress message to the Coast Guard, a big no-no
  • An interesting conspiracy to get around sanctions against Iran involving Chinese, Turkish, and Portuguese companies — the indictment was handed down in Washington, DC, but the plea will be in Seattle where the defendant was arrested and has remained in custody
  • This case was transferred to Seattle from Florida — ransomware used to extort people into paying “fines” to phony law enforcement organizations
  • I’m seeing a spinoff of WAGSWWCCs
  • Even listenin’ to Slippin’ couldn’t convince the judge not to give DMX some prison time
  • Most disturbing of all this week: massive wine fraud in the Rhone Valley — life really does imitate The Simpsons…

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. SchroederIn re JDS Uniphase Corp. Sec. Litig.SEC v. RobertsMerrill 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 . . .

 

To disclose or not to disclose, that is the question.  Although self-disclosure will bring the matter to the Environmental Protection Agency’s attention, it is a great mechanism for reducing penalties for any enforcement action the EPA might bring.

The EPA’s audit policy was issued in 2000.  It offers penalty mitigation and other incentives for companies that discover, promptly disclose, and expeditiously correct environmental violations, as well as take steps to prevent future violations.

The EPA now uses an automated system, eDisclosure, for self-reporting violations.  In general, companies must report violations within 21 days of discovery and resolve them within 60 days, although extensions are readily given for returning to compliance to avoid penalties.

The EPA categorizes disclosures as Tier 1 or Tier 2.  Only Emergency Planning and Community Right-to-Know Act (EPCRA) violations are covered by Tier 1.  Under Tier 1, eligible disclosures will automatically receive an electronic Notice of Determination (eNOD) confirming that the violations are resolved with no assessment of civil penalties, conditioned on the accuracy and completeness of the submitter’s certified eDisclosure.

Continue Reading How to Get Out of EPA Hot Water Penalty Free

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.

Continue Reading This Day in White Collar History: Remembering Henry Friendly

  • A couple of local “co-schemers” were charged with credit card fraud — one allegedly favored QFC and Fred Meyer, the other was all about Bartell
  • A Florida man was indicted in federal court in Boston for pretending to be an SEC employee and then demanding money from victim
  • One of the two former aides to former Virgin Islands Delegate to Congress Stacey Plaskett who pleaded guilty to distributing explicit images and a video of Ms. Plaskett and her husband to stop her reelection was sentenced to a year in prison
  • The mayor of Allentown, Pennsylvania resigned a week after being convicted on corruption charges
  • The prime minister of Macedonia pleaded not guilty to taking a bribe when he was a local mayor in the southeast of the country five years ago
  • And two former attorneys for Suge Knight were indicted for attempting to bribe potential witnesses in their former client’s upcoming murder trial

 

“Don’t.”

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.

Continue Reading “I’ve Made a Huge Mistake,” or: Don’t Ignore Grand Jury Subpoenas and Other (Less Obvious) Tips