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. 

Facts

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. 

Holding

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.” 

Comment

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.

A trip to the United Kingdom to take depositions might be a welcome diversion for many lawyers, but not during the weeks leading up to a major, document-intensive, white collar criminal trial.  In United States v. Vilar, 05 CR 0621 (RJS), 2008 WL 2944654 (S.D.N.Y. July 31, 2008), previously blogged about here and here, the trial had been scheduled to begin on September 8, 2008.  On July 21, 2008, almost three years to the day after the indictment had been returned, the government moved to take the depositions of four witnesses in the U.K., claiming it had only just learned the witnesses were unwilling to testify at a U.S. trial.  The defendants opposed, pointing out that the government had inexplicably dragged its feet on this matter for too long, and conducting foreign depositions at this stage would unfairly prejudice their ability to prepare for trial.  Granting the motion as to two of the proposed witnesses as well as a two-week adjournment (in part to ensure the depositions could be completed without disrupting trial preparation), the court’s decision is an interesting spotlight on this rarely-used mechanism in criminal cases.

Requirements for Rule 15 Depositions

The court held that, as to two witnesses, all the requirements for depositions under Fed.R.Crim.P. 15 were met here: (1) they were unavailable (they were outside the subpoena power of the court, and refusing to testify, despite the government’s promise of an all expenses paid trip), (2) their testimony was material (it was “highly relevant” to one of the defendant’s alleged knowledge of and participation in the fraudulent schemes at issue, and to both defendants’ alleged misrepresentations), and (3) their testimony was necessary “to prevent a failure of justice” (a requirement usually satisfied when the first two are met, and here, the government’s delay did not represent such “as serious lack of due diligence” as to justify denying the motion). 

Showing Necessary to Succeed on Rule 15 Motion

Notably, in reaching its decision, the court rejected the defendants’ demand that in order to evaluate the availability prong, the government be directed to provide affidavits from the witnesses themselves confirming that they would not travel to the U.S, and in particular, that the government confirm that it had advised one of the witnesses that he himself may be a target in the case, which may impact his willingness to participate in any deposition.  In addition, the court rejected a similar demand that in order to satisfy the materiality prong, the government must produce affidavits from the witnesses as to their proposed testimony, or at a minimum, produce all of the notes and memoranda of the witness interviews.

Timing of Rule 15 Motion

Also noteworthy is the court’s rejection of the defendants’ argument that in considering whether the government had engaged in “unexcused delay,” the court should take into account the government’s failure to seek these depositions during the three-year period following the indictment.  “[T]hese prior periods of delay are simply unrelated to the issue of whether conducting the proposed depositions at this time would unfairly prejudice defendants . . . More importantly, defendants have failed to cite any order that the government violated by failing to bring a Rule 15 motion at an earlier date or any authority indicating that the government’s failure to file a Rule 15 motion prior to the two previously scheduled trial dates constituted a waiver of its ability to file such a motion at this time.”

Comment

This case is an interesting counterpoint to United States v. Mason, discussed here, where the court precluded evidence due to a late Rule 16 disclosure rather than adjourn a firm trial date in a multi-defendant case.  Of course, Rule 16 disclosures, unlike Rule 15 notices, have timing constraints: they are to be made upon request, and newly obtained Rule 16 materials are to be “promptly” disclosed before trial.  Moreover, in Vilar, unlike Mason, the only prejudice the defense could identify was disruption of trial preparation.  There was no suggestion that the depositions themselves might open a hornet’s nest requiring additional investigation or a severance.  Finally, the defendants’ laches claim might have had more traction if Mr. Vilar wasn’t simultaneously seeking his own adjournment of the trial until November. 

As noted by this blog previously, see here, the Adam Walsh Act of 2006 prohibits the reproduction of child pornography during legal proceedings, and in particular, permits the government to refuse to supply copies of child pornography to the defense in a child pornography prosecution as long as the material is made “reasonably available” to the defendant.  The “reasonably available” concept (the so-called “safety valve” of the Act) is defined in the statute as “ample opportunity for inspection . . . at a Government facility.”  The Second Circuit has not yet defined what constitutes “ample opportunity,” but several district courts have required it to be “due-process-level” access to the original material, or the defense team gets a copy of the hard-drive in question.

In United States v. Patt, 06-cr-6016, 2008 WL 2915433 (W.D.N.Y. July 24, 2008), the court further refined the meaning of “ample opportunity,” concluding that there was no due process violation where the defense expert may have found it time-consuming and inefficient to do his job at the government facility, but was nonetheless able to “conduct a complete and independent analysis of the hard-drives” at issue.  In the absence of any claim that the results were “incomplete or compromised . . Patt was provided ample opportunity to inspect and analyze the computer drives that were seized and are alleged to contain child pornography.” 

As this blog has previously lamented (see here), the discovery rights of defendants in criminal cases, unlike in civil cases, are oddly in inverse proportion to the high stakes at issue.  Three new decisions address discrete issues relating to pre-trial disclosure in criminal cases.  Two provide little comfort to defendants, but one – dealing with the disclosure of classified information – sets out some important procedures to balance the defendant’s right to a fair trial against the need to protect national security. 

Aref – Standard for Disclosure of Classified Material

In United States v. Aref, 2008 WL 2598018 (2d Cir. July 2, 2008) (a money-laundering prosecution that arose out of a terrorist sting operation), the Second Circuit addressed an issue of first impression: the standard for determining what relevant classified information a criminal defendant is entitled to receive during discovery. 

In Aref, the government had moved under Fed.R.Crim.P. 16(d)(1) (which authorizes a district court to issue protective orders denying or restricting discovery for good cause) and Section 4 of the Classified Information Procedures Act (“CIPA”) (which sets out procedures for “[d]iscovery of classified information by defendants”) for a protective order permitting it to withhold certain classified information that would otherwise be discoverable. 

On the defendants' appeal, the Second Circuit held that while the government may invoke the common-law state-secrets privilege underlying Section 4 of CIPA, that “privilege can be overcome when the evidence at issue is material to the defense.”  In Aref, the Court adopted the following three-step analysis – reviewable under an abuse of discretion standard – for a district court to follow in determining when the government’s privilege must give way in a case where classified information is at issue:

First, is the classified information discoverable?

Second, if it is, does the state-secret privilege apply because (1) there is “a reasonable danger that compulsion of the evidence will expose ... matters which, in the interest of national security, should not be divulged,” and (2) the privilege is “lodged by the head of the department which has control over the matter, after actual personal consideration by that officer”?

Third, if the information is both discoverable and privileged, then is it also “helpful or material to the defense,” i.e., not necessarily Brady material, but useful “to counter the government’s case or to bolster a defense”?

In Aref, conducting its own review of the classified information at issue and the government’s sealed submissions, the Court found no abuse of discretion and affirmed the district court’s findings.  Notably, in reaching its conclusions, the district court had held a series of ex parte conferences, not just with the government (as authorized under CIPA and approved by the Aref Court), but also with defense counsel “to assist the court in deciding what information would be helpful to the defense.”

Vilar – Early Production of 3500 Material Denied

United States v. Vilar, 05 Crim. 621, currently pending before Judge Sullivan in the Southern District, has already produced a very interesting search and seizure decision discussed here.  Now, in a new decision in this case, 2008 WL 2531195 (S.D.N.Y. June 22, 2008), the court has considered but rejected a creative motion from the defense requesting early disclosure of 18 U.S.C. § 3500 material (prior statements of government witnesses), so that the defense could determine whether evidence to be presented at trial is tainted by illegal seizure. 

First, the court reiterated, as it had pointed out in its earlier decision, that the defense had no right to litigate taint issues prior to trial.  Second, and more significantly, the court pointed out that it had no authority to compel early disclosure of Section 3500 material bearing on alleged violations of Fourth Amendment rights.  The language of Section 3500 itself only requires disclosure after the witness’s direct testimony, and the only carve-out of these mandates in Second Circuit case-law is for exculpatory or impeaching evidence under Brady, which concededly was not at issue here. 

The court concludes: “The Court expects the government to abide by its disclosure obligations under Brady as well as its pledge to produce Section 3500 material no later than two weeks prior to the trial in this action.”

Siraj – Early Disclosure of Statements Made to UC Officer Denied

Finally, in United States v. Siraj, 2008 WL 2669321 (2d Cir. July 9, 2008) (also a case involving a foiled terrorist plot), the Court addressed another issue of first impression: whether written police reports that memorialize non-interrogation oral statements made by a defendant to an undercover officer must be produced upon demand under Federal Rule of Criminal Procedure 16(a)(1)(B)(i) (which provides that upon a defendant’s request, the government must disclose to the defendant “any relevant written or recorded statement by the defendant”).  Answering in the negative, the Court reasoned that to hold otherwise would render other provisions of Rule 16 superfluous.  As the Second Circuit Blog points out, however, the defendant would at least have received these reports as last minute disclosures under 18 U.S.C. § 3500, and so could not claim unfair surprise.  Having them earlier, however, would certainly have helped the defense strategize for trial, and more importantly, may have encouraged more meaningful plea negotiations.