Friday, June 16, 2006
The release of transcripts of depositions of former New York Stock Exchange CEO Richard Grasso show that during his examination by the SEC in 2005 he asserted the Fifth Amendment over 150 times. The deposition concerned whether he pressured the floor broker for American International Group's stock to keep the share price up to assist the company in a pending transaction. The deposition is part of an investigation by the SEC of former AIG CEO Maurice Greenberg for possible securities law violations related to the company's accounting and manipulation of its stock. A second Grasso deposition, this one given in connection with the lawsuit filed by New York Attorney General Eliot Spitzer related to compensation while he was CEO of the NYSE, does not show him asserting the Fifth Amendment in response to questions. The deposition in the New York state case against him came more recently, in April 2006, at a point in time when it does not appear that the federal government will be pursuing criminal charges against Greenberg, and the SEC has not yet filed a civil enforcement action against him. Spitzer has filed a securities fraud action against Greenberg, who has vowed to fight any charges related to his time as CEO of AIG.
Why did Grasso have to assert the Fifth Amendment repeatedly in the SEC deposition? While it certainly looks striking, and suspicious, to assert the privilege against self-incrimination so many times, the number of responses is more a function of the requirement that the SEC ask every possible question on which Grasso will assert the Fifth Amendment if it wants to ask the court (or jury) to draw an adverse inference from the assertion. Unlike a criminal case, in which a defendant cannot be forced to testify nor can the prosecutor comment on the defendant's decision not to testify, in civil litigation an assertion of the Fifth Amendment can be evidence considered by the trier of fact in deciding whether the person engaged in the alleged misconduct. By asking all relevant questions, and forcing Grasso to assert the Fifth Amendment, the SEC is creating a building block should it decide to sue Grasso. In criminal investigations, the assertion of the privilege cannot be used at all, so if a witness indicates that he or she will refuse to answer questions on that ground prosecutors will not call the person before the grand jury, unless there is a plan to grant the witness immunity and require the testimony.
There is no great harm to Grasso in asserting the privilege, aside from the embarrassment of having done so, because if he were to be sued by the SEC he could testify during discovery or at the trial and his earlier assertion of the Fifth Amendment most likely would not be admissible against him. At the time of the SEC deposition in 2005, it was certainly the prudent thing to do. Until it is clear where the government is headed in its investigation, an assertion of the Fifth Amendment keeps a person from incriminating himself or creating a record that could be the basis for a perjury or obstruction charge. Now that things have settled down regarding AIG and Greenberg, Grasso can answer questions like he did in the New York case without the same fear of negative consequences. In that sense, then, the story about Grasso asserting the Fifth Amendment over 150 times turns out not to be much of a story at all. An AP article (here) discusses the two depositions. (ph)