Recently in the Pre-trial Disclosure category:
In Mahaffy, the six defendants who went to trial in the case and were found guilty by the jury moved for a dismissal of the indictment, or, in the alternative, for a new trial, on the ground that the government failed to disclose the transcripts of 12 depositions taken by the Securities and Exchange Commission (“SEC”), which the defendants claim violated the government's disclosure obligations. Judge Gleeson denied the motion, finding that the depositions themselves did not contain sufficient favorable or exculpatory information as to have had a material effect on the verdict. He ends his decision, however, with this admonition to the government:
(emphasis added).Notwithstanding the foregoing, I remain mystified by the government's failure to disclose the testimony of these various witnesses. I see no legitimate interest served by an approach that has the parties and the Court sifting through the transcripts of testimony taken by the SEC after the trial has already occurred-especially when the testimony was taken as part of the investigation that resulted in this very case. Nor do I see a justification for the decision by the government's trial team (which did not include any members of the team that handled the original trial) not to reconsider the disclosure decisions made by their predecessors. The disclosure obligations imposed by the federal rules, federal statutes and the Constitution are too important, and too easily complied with, to justify such an approach. Even if the prosecutors are not sufficiently motivated, as they should be, by the defendants' interest in a fair trial, one would think the government's selfish interest in the integrity and durability of the convictions it obtains would induce it to consider its disclosure obligations on an ongoing basis, and to err on the side of over-disclosure unless well-grounded concerns about particular witnesses or other investigations counsel otherwise. My only concern in denying the pending motion is that it might have the effect of diminishing that selfish incentive. The government has assured me otherwise, and that changes have been made in the United States Attorney's office to ensure that similar failures do not occur in the future. Time will tell in that regard, but I note here that those procedures ought to include a requirement that the prosecutors in the case make contemporaneous records of their actions and decisions regarding disclosure in a manner that makes them accessible later on. . . .Whatever else the United States Attorney does in response to the disclosure guidance recently provided by then-Deputy Attorney General David W. Ogden, it should make sure that it can provide a complete accounting of its actions in future cases.
Of course, leaving this issue to the prosecutor’s sound judgment and good faith is like leaving the fox in charge of the henhouse, as the Second Circuit observed in Rodriguez. That’s why, to the extent possible, defense lawyers should try to identify and request specific Brady material in pretrial motion practice and request in camera review by the court if the government concedes the existence of the material but refuses to turn it over (as happened in Nogbou).
Rule 16 Discovery for Speedy Trial Motion
First, the court queried whether Rule 16 applied at all to an affirmative defense unrelated to the prosecution's case-in-chief, citing dictum in United States v. Armstrong, 517 U.S. 463 (1996). Neither party had addressed the issue, and the court proceeded on the assumption that Rule 16 permitted discovery in support of the speedy trial motion at issue here.
Work Product Excluded From Rule 16
One of the documents the defendant sought under Rule 16 was a bullet point memorandum sent from the USAO in the SDNY to the DOJ in Washington that was "something of an order of proof with respect to Ghailani." The court held that this was not discoverable "regardless of its materiality," because it was government work product, which is protected from disclosure under Rule 16(a)(2).
(I note that Rule 16(a)(2) exempts work product "[e]xcept as Rule 16(a)(1) provides otherwise," and since Rule 16(a)(1) requires disclosure of documents that are "material to preparing the defense," there is an argument - without any case law support that I know if, I hasten to add - that under the plain language of Rule 16, materiality trumps the work product privilege.)
What is the "government" for Rule 16 purposes?
The issue then turned to the defense request for the disclosure of all communications between various branches of government indicating that the decisions to move Ghailani between various places of detention were not related to national security. These communications were material to the speedy trial motion because the government had claimed in part that "national security justified delaying Ghailani's federal prosecution."
The trickier question was the meaning of the term "government" under Rule 16. Does it extend "beyond the USAO and the trial team up into Main Justice and the FBI and, if so, how far?" The government argued that "the government" is co-extensive in the Rule 16 and Brady contexts. In the latter context, "courts have held that prosecutors are under a duty to disclose not only exculpatory evidence known to the prosecutors, but also to 'others acting on the government's behalf in the case, including the police.'"
Finding it "unnecessary, in the unique circumstances of this case" to decide the issue (but noting that the government's position was "not quite as compelling as it first appears"), the court reached a "practical interpretation of Rule 16" in this case that would be fair to the defendant and would not unduly hamper the prosecution. He concludes "the term 'government' includes individuals at DoJ who participated in advising on or making the decisions regarding Ghailani's prosecution." He explains:
Even if those officials had no other involvement with Ghailani's investigation or prosecution, the decisions at issue were so important to the timing and progress of this case that participation in the decisionmaking renders those individuals members of the prosecution team, at least to the extent of that participation.
Lawyers: Peter Quijano, Gregory Cooper, Michael Bachrach (Defendant); AUSAs Michael Farbiarz, Nicholas Lewin
What defense lawyers in corporate fraud prosecutions wouldn’t want to get their hands on the treasure trove of materials prepared in an internal investigation by the company’s outside counsel – especially memoranda memorializing in-depth interviews with un-counseled employees before they’ve had a chance to groom their stories? But not having the government’s bargaining power, the defense must resort to the woefully inadequate discovery devices available in criminal cases – Fed.R.Crim.P. 16 and 17, Jencks Act, Brady, Giglio, etc. The potential and limitations of these devices in seeking corporate counsel’s interview memoranda are explored in United States v. Treacy, 2009 WL 812033 (S.D.N.Y. March 24, 2009). The case is notable both for the reason why SDNY Judge Rakoff granted the motion to quash the defendant’s subpoena, and, more importantly, for the disclosures he required or encouraged as the issue was being litigated.
Treacy had subpoenaed certain interview memoranda from Akin, Gump, a law-firm that had conducted an investigation on behalf of Monster’s board of directors into the company’s stock option grants. Akin moved to quash, citing attorney-client and work product privileges. Treacy countered that these privileges had been waived by Akin’s (1) furnishing certain other interview memoranda to the government that related to the same subject matter, or (2) making oral presentations to the government of certain statements made by some of these witnesses, as well as, more generally, its overall findings. The government had turned over to the defense any interview memoranda that were in its possession.
No Waiver: The court rejected the claim that the disclosure of a handful of interview memoranda to the Government automatically results in a general waiver of attorney client and work product privileges over different memoranda that were not provided to the Government. This was not a situation where “the privilege was being used as both a ‘sword and a shield’ by [Akin’s] choosing which memoranda it disclosed to the Government,” since Akin was “not a party to the action and seeks no advantage against its adversary” (applying both common law precedent and the recently-enacted Fed.R.Evid. 502(a)).
In Camera Review: The court also rejected the claim that Akin’s broad, thematic presentations to the government of its conclusions “amounted to a summary of the totality of the statements made by each witness,” but not before the court had reached that conclusion by reviewing the government’s notes of the presentations in camera.
Memoranda/Notes Disclosed: The court did, however, order Akin to turn over the memorandum relating to another witness’s interview, where Akin had given the government a detailed oral recitation of the interview. It also exerted some gentle pressure on the government to turn over snippets of its notes of notes meetings with Akin in which certain statements of other interviewees were briefly quoted or paraphrased because they “arguably could qualify as “Brady,” “Giglio,” or Jencks Act material.”
The holding in this case is far less useful than what is buried in the analysis: the government’s concession that interview memoranda in its possession should be turned over immediately (although, arguably, they might have been withheld until trial as Jencks Act material); the fact that the district court reviewed the government’s notes and the memoranda themselves in camera in order to determine if any should be turned over to the defense; the court order to Akin to turn over a memo it had orally disclosed to the government, and the court’s observation that encouraged the government to turn over notes of information provided about other interviews. Essentially, at least with regard to interview memoranda prepared by company counsel, the defense should get its hands on whatever was physically or orally provided to the government.
The court’s reason for not finding a general waiver here is also interesting. Judge Rakoff found that Akin was not a party to the proceeding who was using the privilege to gain an unfair advantage. While, this may be true here, many of us have witnessed a level of cooperation between the government and company counsel in some cases that it is hard to distinguish between the two. Moreover, companies often have an interest in seeing the perpetrators of the fraud convicted, so they can chalk the alleged misconduct down to bad apples, not systemic abuses.
Notably, the case doesn’t address whether, quite apart from the waiver issue, the interview memoranda are independently discoverable under Rule 17 as material to the defense and not discoverable elsewhere. This argument was rejected in United States v. Ferguson, 2007 WL 2815068 (D.Conn. September 26, 2007), which held (applying the Nixon standard) that interview memos with potential impeachment material were not discoverable under Rule 17. But in light of the less stringent standard proposed by Judge Scheindlin for Rule 17 subpoenas to third parties in United States v. Tucker, this issue is ripe for revisiting.
White collar defendants often face parallel civil investigations, a situation full of traps for the unwary, as noted here and here. In United States v. Stein, 05 CR 888 (LAK), 2008 WL 4212516 (S.D.N.Y. September 10, 2008), the four remaining defendants in the tax fraud prosecution arising out of certain KPMG tax shelter products (previously discussed here and here), moved to dismiss the indictment against them on the grounds that the government’s alleged deceitful procurement of KPMG’s confidential tax returns through a parallel civil tax fraud investigation by the DOJ was a violation of due process. The defendants relied on three cases where district courts dismissed indictments or suppressed evidence “where the Government has brought a civil action solely to obtain evidence for its criminal prosecution, or has failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution.” (Two of these cases were later reversed on appeal.)
Judge Kaplan rejected the motion, finding that neither circumstance applied here: “Defendants do not deny that there was a bona fide civil investigation, they complain merely that there was a criminal investigation as well. And defendants, who were not the targets of the civil investigation, do not claim to have been deceived by the government.” Interestingly, in a footnote, the court notes that the defendants relied in part on the fact that four of the now dismissed defendants had given deposition testimony while unaware of the criminal investigation. Judge Kaplan adds that they “do not suggest that the government deceived these individuals,” suggesting perhaps that if the government had engaged in some deceptive conduct, the defendants’ motion might have had more traction.
Which leads me to the obvious point that in a civil enforcement action, where there is potential for criminal liability, it may be worth directly asking the government representative if he/she knows of any parallel criminal proceeding – the answer to which may lead to a prudent exercise of the right to remain silent, or might set up a due process claim based on affirmative misrepresentation.
The government’s obligation to disclose Brady material encompasses not only oral, unrecorded statements of a cooperating witness that are favorable to the accused, as held in Rodriguez, previously discussed here, but also exculpatory statements communicated to the government by the witness’s lawyer, the Second Circuit held in United States v. Triumph Capital Group, Inc., 2008 WL 4349318 (2d Cir. September 25, 2008).
Brady Material Includes Notes of Witness’s Attorney’s Proffer
In Triumph, the defendant had been convicted after trial of racketeering, bribery, fraud and obstruction of justice, arising out a scheme to bribe the Deputy Treasurer of the State of Connecticut. The bribee was the key cooperating witness at trial, but after the trial, he cooperated with the defense, and, no doubt to the dismay of the prosecutors, provided copies of notes he had made that had been communicated to the government in an attorney proffer as part of his initial plea negotiations. These notes differed from his trial testimony in key respects. While the government never had custody of the witness’s actual notes, it did have in its possession the notes an agent took of the attorney proffer. It withheld these from the defense, however, until the defense made its motion for a new trial arguing suppression of exculpatory evidence. The district court denied the motion, finding that the notes were not materially different from the witness’s trial testimony.
The Second Circuit disagreed. In a decision authored by EDNY Judge Gleeson sitting by designation, the Court carefully analyzed the differences between the notes and the trial testimony, demonstrating that the notes “provided scant if any support for the inference that [the defendant] possessed the requisite intent to bribe or defraud.” Finding the withholding of the agent’s notes of the attorney proffer “inexplicable,” the Court concluded that “the government deprived [the defendant] of exculpatory evidence going to the core of its bribery case against him,” as well as impeachment material that had a “real enough possibility to undermine confidence in the verdict.” Accordingly, the Court reversed the racketeering, bribery and fraud convictions.
Destruction of Documents Likely to Be Subpoenaed by Grand Jury is Obstruction
Also of note in this decision is the Court’s analysis of the evidence supporting the obstruction of justice conviction. The defendant had deleted certain documents from his laptop when he became aware that a grand jury investigation had commenced, albeit documents that were, at the time, not the subject of an outstanding subpoena. On appeal, the defendant argued that there was insufficient evidence to prove that he knew the documents would later be, or were likely later to be, requested by the grand jury, analogizing himself to the defendant in United States v. Aguilar, 515 U.S. 593 (1995), whose obstruction conviction was reversed because he could not be expected to have known that the false statements he made to an F.B.I. agent would be communicated to a grand jury.
This time, the Second Circuit disagreed with the defendant. There was a “crucial distinction” between Aguilar and this case: statements made to investigating agents may not necessarily be communicated to a grand jury, but grand jury subpoenas for documents are necessarily broad and sweeping. Here, the Court concluded that “the inference that the grand jury would issue a subpoena for [the deleted documents] was quite strong, perhaps inescapable.” Moreover, there was evidence of the defendant’s “awareness of the comprehensive nature” of subpoenas typically issued in grand jury investigations, that his company’s lawyers anticipated future subpoenas, and that the defendant had received advice from a former prosecutor that the grand jury would be likely to inspect the data on his laptop. The obstruction conviction was therefore affirmed, although the Court remanded for resentencing, in the event the convictions on the reversed counts had influenced the length of time imposed on that count of conviction.
In addressing the defendant's motion to quash, EDNY Judge Dearie rejected the defense claim that the appropriate standard is the more stringent one for pretrial subpeonas in criminal cases, set forth in United States v. Nixon, 418 U.S. 683 (1974) (which requires a showing of relevancy). Instead, the court adopted the more expansive deferential standard applicable generally to grand jury subpeonas, which are "presumed to be reasonable" and are only quashed where "there is there is no reasonable possibility that the category of materials the Government seeks will produce information relevant to the general subject of the grand jury's investigation." Since the subpeonas in this case were issued by a grand jury engaged in "an apparently legitimate grand jury inquiry," EDNY Judge Dearie held: "This investigation, which has already spawned a series of indictments, focuses on allegations of material support to an international terrorist organization, including the use of money laundering and other complex financial transactions. In light of this comprehensive inquiry, there is certainly, at the very least, a reasonable possibility that the details surrounding the payment of defendant's fees could prove highly relevant. Accordingly, defendant's motion to quash is denied."
Here, there was no suggestion in the decision that the government was using the on-going grand jury investigation as its beard to issue pretrial subpeonas that would not pass muster under Nixon. But that would be a troubling scenario for which we should be vigilant. See United States v. Ferguson, 2007 WL 2815068 (D. Conn. September 26, 2007) (the government may not use the grand jury to conduct discovery in a pending criminal case), (quoting United States v. Salameh, 152 F.3d 88, 109 (2d Cir.1998) (“It is improper for the government to use a grand jury subpoena for the sole or dominant purpose of preparing for trial.”)).
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