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October 1, 2009
NACDL's 5th Annual Defending the White Collar Case Seminar - "Choppy Waters - The Ethics of Privilege and Disclosure," Thursday, October 1, 2009
Guest Blogger: Peter D. Hardy, Post & Schell, P.C. (Philadelphia, PA)
Moderator: Gerald B. Lefcourt
Gerald Lefcourt noted that it has been over 46 years since the Brady decision was issued, yet we still have no firm definition of Brady that most federal prosecutors can follow. There are varying and conflicting practices amongst prosecutors in regards to definitions and the proper time frame for disclosures. Moreover, incidents of Brady violations or potential violations are not uncommon.
Robert Cary represented Senator Ted Stevens. The heart of the defense was a note that Senator Stevens had sent to Bill Allen, the key government witness and the builder making improvements on the Senator’s chalet, which stated in part that the Senator wanted to make sure that Allen got fully paid, and that “friendship is one thing, but compliance with these ethics rules is another[.]” The government responded to this note by eliciting testimony from Allen that the note was just the Senator trying to concoct a cover story. After the guilty verdict, the second FBI agent on the case filed a self-described whistleblower complaint regarding conduct by the prosecution team. The Court ordered the government to provide discovery regarding the complaint, and a new prosecution team was put in place. New discovery contradicted directly the government’s theory and evidence at trial that Allen regarded the note as a mere cover story. Carey described the Attorney General as a hero for moving to dismiss the case. All of this happened only after a long trial and post-trial process (as well as Senator Stevens losing his re-election bid). Judge Sullivan, who oversaw the case, is to be commended for being careful and not simply taking the government’s word.
So, what should be done? Judge Gertner explained that the solution needs to involve the rules (ethical, court, and criminal procedure). The case law has slid into an outcome-determinative approach, which makes it very hard for the prosecutor to predict. The materiality standard is colliding with the harmless error doctrine. Brady had more to do with a failure to turn over evidence impugning the system, rather than predictions regarding potential outcomes. The definition of Brady should be re-assessed, and there also should be deadlines set for when information should be turned over: for example, 28 days before.
Professor Green described how the ABA code of ethics set forth in the 1970s a discovery rule for prosecutors: you must turn over information that would tend to negate the guilt of the accused. Everyone had assumed that this rule overlapped with Brady. But, the rule is not co-extensive with Brady – for example, it does not have a materiality standard. Rather, it categorically requires the disclosure of favorable information, or information which might lead to favorable evidence. A materiality test is really directed at post-conviction review, and is not well suited to govern the conduct of prosecutors at the time they are making their discovery decisions. Defense attorneys also need to know about exculpatory information in order to assess a case and decide whether or not to proceed to trial.
Paul Shechtman described federal plea agreements in New York which require waivers by the defendant of either impeachment and/or all exculpatory information. These plea waivers apparently run afoul of the rules just described by Professor Green. Current cases strongly suggest that prosecutors need more education regarding their obligations under Brady, in order to be better able to appreciate the exculpatory value of evidence. We need to reassess Brady, which has been hijacked by the materiality doctrine. The burden now is on the defendant to show materiality. In Brady, Justice Marshall wrote in dissent that the test instead should be harmless error, in which the government has the burden to show that the conviction should not be reversed. The materiality requirement invites courts to preserve convictions, despite poor decisions and poor decision-making processes by prosecutors.
Larry Thompson described a case in Detroit in which the prosecutor made false statements to the Court, and actually was prosecuted himself. Judge Gertner noted that part of the problem here is lack of meaningful remedies. There is professional discipline, but discipline is unlikely.
The panel then turned to attorney client privilege. Gerald Lefcourt noted that internal investigations, performed not by agents but corporation lawyers, can be disastrous for employees. No company wants to go to trial and become the next Arthur Anderson, so companies will go out of their way to avoid prosecution. The DOJ in effect has “outsourced” its investigations to corporation lawyers. Indeed, at least one employee has been prosecuted for obstruction of justice for allegedly lying to corporate counsel performing an internal investigation.
Larry Thompson stated that the strict application of the doctrine of respondeat superior is a problem for both employees and companies. If just one person acts as rogue employee, then all of the training and compliance efforts by the company may be for naught. Corporations really cannot go to trial, because the collateral consequences can be terrible. In an investigation, as corporate counsel, you need to find out what happened and you need your employees to talk to you. In the wake of the dismissals in the US v. Stein case (the KPMG criminal tax case), DOJ will be reluctant now to get involved in how a corporation deals with its own employees during its internal investigations.
The DOJ has changed what it has said about what constitutes cooperation by a corporation. Knowing or feeling that it has all the power, DOJ has imposed great demands upon corporations and its employees, and threatened the corporation with its own destruction. Gerald Lefcourt asked, is the government thereby coercing employees to speak, sometimes against their own interest? Are the protections provided by the warnings under Upjohn sufficient?
Paul Shectman represents many high-level employees of corporations. When he is asked to represent an employee, he sometimes finds that his client already has incriminated himself. The question is, does the employee know at the time that he is making statements that anything he says can be turned over by the corporation, and therefore nothing is confidential?
Judge Gertner asked about waiving the privilege for one purpose, but not for another. The panel responded that the doctrine of selective waiver is dead. So, if no privilege attaches, what is the purpose of hiring outside counsel?
Gerald Lefcourt asked, shouldn’t the employee be told by the corporation that he should obtain his own lawyer, now, because anything he says can be turned over later and used (by prosecutors, regulators, and civil litigants). Sometimes employees hire their own “shadow counsel,” because they want their own lawyer, but are reluctant to say “no” to the lawyer recommended by the corporation.
Robert Cary stated that the hardest decision for an individual is whether to cooperate or not during the first interview with corporate counsel. There is also a question regarding how many documents an employee can or should obtain from the corporation, particularly before any interview.
A question was posed: now that internal investigation lawyers in effect have been “deputized,” are there conflict of interest issues because the lawyers should advise the employees that they can turn over the information to the government. Paul Schectman suggested that statements/warnings by the corporation’s attorneys to interviewed employees that the information is covered by privilege (held by the corporation), and that the information might be disclosed by the company, likely gives employees a false sense of comfort, because the company may have decided long ago that any notable information will be turned over.
Professor Green argued that you cannot look to the court or ethics rules to solve this problem, because enforcement is rare. Echoing the comment above, the problem with the warnings is the “delusion” by an employee that, at the end of the day, the corporation or its lawyers will care about the employee’s interests.
The Filip Memo of the DOJ now provides that, in lieu of an impermissible request by the government for a company to waive privilege, the company can cooperate by providing the facts obtained during an internal investigation. This is a thin line. Is it purely semantics? Is it “incoherent?” Larry Thompson, however, noted that shareholders of a corporation expect cooperation with the government.
Gerald Lefcourt wrapped up by asking how a fair trial for an individual can take place when a cooperating company retains all of the potentially exculpatory documents? In KPMG, the defense theory was that the company was an instrument of the government, and therefore the government’s own disclosure obligations required KPMG to disgorge its documents to the individuals.
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