Why Does Congress Put Witnesses Through This Charade?

Like most people, I read the news stories about Martin Shkreli’s testimony before Congress this week. I saw the quotes about his eye-rolling and general snarkiness. His post-hearing tweet was amusing.

Now, we’ve all had challenging clients. His lawyers certainly have their work cut out for them. He’s clearly not going to be “handled” and good PR is obviously not his focus.

But what bothers me the most about all of this hullabaloo is not that Mr. Shkreli wasn’t on his best behavior during the hearing.

It was that he had to be there at all.

His lawyers had already made it very clear to the congressional committee that Mr. Shrkeli planned to take the Fifth Amendment during the hearing and not testify.

Despite this, Representative Chaffetz wrote a letter to Mr. Shkreli’s lawyers that

We write to advise you that the subpoena issued to Mr. Shkreli on January 12, 2016,
remains in effect, and that failure to appear and comply with the subpoena may expose Mr. Shkreli to criminal liability pursuant to 2 U.S.C. §§ 192 and 194.

In case you were wondering, 2 U.S.C. § 192 concerns “Refusal of witness to testify or produce papers.”

Every person who having been summoned as a witness by the authority of either House of Congress to give testimony or to produce papers upon any matter under inquiry before either House, or any joint committee established by a joint or concurrent resolution of the two Houses of Congress, or any committee of either House of Congress, willfully makes default, or who, having appeared, refuses to answer any question pertinent to the question under inquiry, shall be deemed guilty of a misdemeanor, punishable by a fine of not more than $1,000 nor less than $100 and imprisonment in a common jail for not less than one month nor more than twelve months.

(Section 194 has to do with reporting the failure to testify to the local AUSA. Lucky Channing Phillips.)

Now, Mr. Shkreli was obviously grandstanding. And he was kind of being a jerk. But so was Congress. The committee members knew he wasn’t going to testify. They simply wanted to embarrass him or do some grandstanding themselves.

Pot, meet kettle.

Congress does this All. The. Time. And every time it is a colossal waste of time and taxpayer dollars. If Congress wants to investigate drug prices, then do that. But don’t haul someone before a committee to testify, knowing that he will take the Fifth. It’s a constitutional right, for goodness’ sake. There’s an ongoing criminal investigation, and any lawyer worth her salt would tell him to take it.

 

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When Criminal Defense and Civil Litigation Collide—Taking the Fifth in Civil Litigation

Thomas KlebestreifenMost criminal defense lawyers would have no idea how to draft an interrogatory. That’s ok; it doesn’t come up in their practices. And most lawyers who handle civil cases would have no idea how to advise a client whose testimony may implicate criminal liability. That’s a real problem.

It’s a real problem because once a witness testifies and does not assert the Fifth Amendment, then it is usually too late. You can’t unring that bell.

A high-profile trial involving General Motors in the Southern District of New York has raised some of these issues. The lead plaintiff was forced to hire criminal counsel to help.

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Can You Be Liable Because of Your Job Title? Control Person Liability and Jon Corzine

Chief executive officerOne of the primary differences between criminal and civil liability is that criminal liability requires the government to prove that the defendant acted wrongfully. In a civil case, an employer may be held liable under a theory of respondeat superior if an employee does something wrong. This can’t happen in a criminal case. (Conspiracy is a whole different ballgame.)

Federal agencies, however, have increasingly sought to take advantage of “control person liability” to impose civil liability against directors, officers, and other “control persons” for the wrongdoing of their subordinates.

Historically, the SEC and Commodity Futures Trading Commission (CFTC) only used control person liability statutes in enforcement actions against executives who were already facing charges as primary violators. More recently, though, both agencies have aggressively used this theory of liability against executives who do not face any liability except under this theory.

The case by the CFTC against former New Jersey Senator and Governor Jon Corzine illustrates this trend. Mr. Corzine was the head of MF Global Holdings, which collapsed amid allegations of financial mismanagement.

The CFTC and SEC cases using this theory may be “only” civil or administrative in nature, but the punishment resulting from them can have severe consequences. So, is control person liability fair? Is it just being used to pin the blame on those who run Wall Street?

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Keep Your Friends Close – The Second Circuit Strengthens Common Interest Privilege

The common interest (sometimes called “joint defense”) privilege serves an invaluable strategic role in complex white-collar cases.

It allows the targets of an investigation to work together, without fear that the government will discover their communications or shared work product.

In a complex case, it’s nearly impossible to defend an individual without knowing what other people did. White collar defense work is not for lone wolves.

A recent Second Circuit decision, Schaeffler v. United States, reinforced the parameters of the common interest privilege. The court held that a waiver of attorney-client privilege did not occur when documents prepared for one client were shared with a consortium of banks involved in the client’s complex transaction. The parties shared a common economic interest in the outcome of litigation with the IRS, though only one party was directly involved in the IRS dispute.

The court also held that the work-product doctrine protected the material within the documents, because they were prepared in anticipation of litigation.

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Inside Baseball: The Basics of the Computer Fraud and Abuse Act

Baseball background

The Computer Fraud and Abuse Act (CFAA) has been an increasingly popular tool for DOJ over the last few years. A recent case against the St. Louis Cardinals’ Director of Baseball Development is an easy introduction to the statute.

Christopher Correa worked for the Cardinals from 2009 to July 2015. Two other staffers who worked for him at the Cardinals left the organization in 2011 to move to the Houston Astros. According to his plea agreement, Mr. Correa took one of the departing staffers’ computer and asked for his password. He then used that password to figure out the new password for the staffer at the Astros.

Mr. Correa was able to access the staffer’s email at the Astros and a private online database operated by the Astros called “Ground Control” (Aside: RIP David Bowie: “Ground control to Major Tom.”) He obtained the Astros’ scouting information and draft reports.

In 2013, the Cardinals went the World Series and the Astros had the worst record in baseball (51-111—ouch). So, it’s not at all clear why Mr. Correa took this risk. If you are going to steal information, steal it from the Royals or the Giants, right? It reminded me of the Yogi Berra quote, “if you see a fork in the road, take it.”

Mr. Correa ultimately pleaded guilty to five counts under the CFAA. So what is this statute anyway?

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What To Do With Notes from an Internal Investigation? Court Says Big Firm’s Methods Were “Gamesmanship”

shredded evidenceWhen I was a brand-new associate at a big firm, I volunteered to work on an internal investigation into accounting irregularities at a public company. I knew nothing about internal investigations.

Before we started interviewing employees, a partner explained the process: I would take notes and then draft interview memos from my notes. When the memo had been finalized by the partner, I could get rid of my notes. That way, the typed memo was the definitive record of the interview. At the time, there was no government investigation into the company; it was purely an internal inquiry. (This process changed when the government started investigating; at that point, we kept everything.)

In a recent opinion in a criminal case relating to the Bridgegate scandal, a federal judge chastised a big law firm for getting rid of its interview notes from its internal investigation. Ultimately, though, the court did not find that the firm had violated any law or requirement to keep notes of interviews.

What are best practices for handling interview notes in an internal investigation? Are they protected work product? Should you always keep them?

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Top 10 Posts in 2015 (and My Other Favorites)

In the tried-and-true tradition of blogs everywhere, here’s a list of the top 10 most-read posts on Grand Jury Target. Some were a surprise to me, others not so much. Hot topics: taint teams, search warrants and the Yates Memo. Plus, statutes of limitation. Who knew?

Without further ado:

  1. White Collar Crime Resource Guide: Statute of Limitations. This one is always at the top of the list in my analytics on WordPress. I doubt it’s read by many of my regular readers, given how basic the information is. It’s proof that even with zero knowledge of SEO, a post can still get a lot of hits.
  2. First-Ever Case Against Chief Compliance Officer For Failure To Implement Anti-Money Laundering Program at MoneyGram. This one is no surprise. It’s a big deal with the government goes after a new type of corporate executive. DOJ just hired its first compliance officer; that too should make compliance officers everywhere just a little bit nervous.
  3. When the Good Wife Faces Criminal Forfeiture: The Government’s Efforts to Seize a Spouse’s Assets after Conviction. Maybe it was the good click-bait title? Maybe it’s because criminal forfeiture is a topic every criminal lawyer needs to understand?
  4. Marge Would Not Be Happy: The Simpsons’ Former Executive Producer Indicted for Fraud. This is a post from mid-2014, so it surprised me to see it as #4. However, the subject of the post (David Pritchard) was sentenced in February 2015 to five years in prison. That may have led to renewed interest in the post.
  5. Corporate Kickback Charges That Involve Private Jets, A “Gentleman’s Club” and Marketing for Pharmaceutical Companies. Another old one–this time from October 2013, when NO ONE was reading my brand-new blog (except you, mom, thanks!). Michael Mitrow, Jr. was sentenced in October 2015 to 42 months in prison.
  6. Tax Fraud Case Against Investment Company Executives, Are the Clients the Next Targets? This post is from June 2013 when even my my mom wasn’t reading the blog. The two defendants pleaded guilty to one count in August 2015.
  7. When a 20-Month Prison Sentence Goes in the “Win” Column. This was always one of my favorite posts because it highlights what really counts as a “victory” when you practice white collar defense work. it was a pleasant surprise to see that my readers agree.
  8. These Defendants Are Asking For a Taint Team. Why? Taint teams are a hot topic and so are search warrants in white-collar cases. So it’s no surprise to me that a lot of folks were interested in reading this post. I’ve written a longer piece about this topic (with an update in the works–stay tuned).
  9. Yates Memo Watch – The First Casualty. This one surprised me. Not because it’s not a topic of interest (it is) but because every law firm wrote about it. Still, it’s a key white collar development this year.
  10. White-Collar Crime Resource Guide: What is a Grand Jury Target? Just slipping into the list at #10 is another Resource Guide, this time answering the question, what is a grand jury target?

I’d be remiss if I didn’t add a few of my personal favorites here, even if they didn’t make the top 10 list. If you are in the office, looking for a few minutes to waste before diving back into your work, here are a few interesting posts, IMHO.

  1. An Appeals Court Finally Takes a Practical Approach to Sentencing in Government Contracting Case (and an Interesting 4th Amendment Issue). This may be a very important case for sentencing in government fraud cases. It’s also a decision that makes sense.
  2. SDNY Limits a Corporate Executive’s Ability to Use the Advice-of-Counsel Defense. This is a crucial defense in some white collar cases, particularly for individual defendants. The SDNY made it much harder to use. It’s not a surprising decision, but it offers a serious roadblock to those of us who defend individuals rather than companies. Combined with the Yates memo, this decision makes it tough to be in cooperative joint defense groups.
  3. Will the New DOJ Policy End Joint Defense Agreements? Speaking of the Yates memo, my post on its effect on joint defense groups is here, too.
  4. First, We’ll Blame the Lawyers: Second Circuit Grants New Trial in Remarkable Jury Taint Case. The facts of this one are just so fascinating, hit very close to home given the judgment calls we all make during a fast-moving trial. Plus, it was a close call for the lawyers with a happy ending.
  5. A Brady Win for a Defendant–Finally (and Some Tips to Get Brady Material). Brady is always an important issue. It’s nice to read about a win for a change. End 2015 on a positive note.

Happy New Year, everyone!

 

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There’s a New Sheriff in Town: Eleventh Circuit Wrestles with Public Bribery Statute—Again

sheriffI previously posted about an interesting case involving the Eleventh Circuit’s interpretation of one of the public bribery statutes, 18 U.S.C. § 666.

Well, the Eleventh Circuit is at it again. This time, it didn’t turn out as well for the defendant.

In United States v. Chafin, the Eleventh Circuit interpreted a different section of the statute—the exemption for bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business.” This was an issue of first impression.

In short, the court held unless the federal government’s funds were provided specifically for a salary (and not just for general personnel or operating expenses), then the exemption did not apply. This decision narrows the exemption, giving the government greater latitude to charge individuals under the statute.

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Criminal Prosecutions Under HIPAA

Fleet

Health care fraud has long been a focus of the Department of Justice. In 2014, DOJ recovered nearly $6 billion (that’s billion with a “b”) from civil health care fraud cases.

DOJ has had its share of setbacks too. Just last week, a Northern Virginia dermatologist was acquitted of heath care fraud charges.

One area where DOJ has not been very active (yet) is prosecuting criminal violations of the Heath Insurance Portability and Accounting Act (HIPAA). The law protects the privacy of health care information and includes penalties for knowingly divulging confidential information. Given all the news about security breaches at large companies, is this the next frontier for DOJ in the health care realm?

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Well, At Least We Know Allen Charges Work – Blankenship Jury Verdict

The trial of Donald Blankenship has been all over the media. I’ve written about it here and here and here and here. Today, the jury reached its verdict.

It found Mr. Blankenship guilty on one charge of conspiracy to avoid certain mine-safety laws. This is a misdemeanor only. It acquitted him on two felony counts of false SEC filings. Although the outcome is a conviction, it was on the lesser of the charges and the possible sentence is low. All in all, a victory for the defense, I’d say.

But the timeline of the verdict is telling.

The jury started its deliberations on November 17. On November 19, the jury reported that it could not reach a verdict. The judge told the jury to keep deliberating. The jury kept going for about 5 more days (presumably , the jury did not meet on Thanksgiving and the day after) and told the judge it was “deadlocked.”

That means the jurors deliberated for about 56 hours and couldn’t reach a decision. That’s not enough to show that a mistrial should be granted?

Nope.

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