With all the talk in the media about grand jury subpoenas, it’s important to understand that subpoenas aren’t the only way that the government can demand documents and testimony.
One of the little-known but often-used methods is a Civil Investigative Demand or CID. This is a written demand by the government either for documents, for written responses to questions or for in-person testimony.
Just like in the grand jury context, it’s critical to protect the attorney-client privilege when responding to a CID. If you produce information that is privileged when responding to a CID, you will waive the privilege forever.
The government, however, cannot use a CID to demand production of privileged information. So why does the statute (and government investigators) make it nearly impossible for a company to protect its attorney-client privilege when it comes to CIDs?
By Dan Portnov
Last week I had the pleasure of attending a reception featuring SEC Commissioner Robert Jackson, who spoke about FinTech, ICOs and crypto-assets. Jackson’s prepared comments and subsequent Q&A session were a rare look into one Commissioner’s concerns and hopes for cryptocurrencies as ICO quantity and investment set records each quarter. (Disclaimer: Jackson’s views did not reflect those of the Commission).
To the surprise of no one, Jackson echoed SEC Chair Jay Clayton’s views that most ICOs are securities that should be registered unless exempt and that not all ICOs are fraudulent. Among the other key takeaways:
By Sara Kropf
I recently listened to Preet Bharara’s podcast on a long car ride. He’s the former United States Attorney for the Southern District of New York. After months of conducting interviews of government-side subjects—prosecutors, FBI agents and the like—he interviewed a person who had pleaded guilty to a crime.
What struck me was that although the interview seemed like a prime opportunity for Bharara to hear from someone on the other side of the table, Bharara clearly had no interest in really hearing what Jason Goldfarb said, at least when it came to criticizing Bharara’s practices.
In particular, Bharara declined this opportunity re-evaluate the fairness one of his former office’s pointless and cruel practices: the media-leaked perp walk.
By Dan Portnov
Yesterday, the Supreme Court decided Lucia v. SEC, holding that the Securities and Exchange Commission’s five-member commission must appoint the agency’s Administrative Law Judges (“ALJs”), as these in-house judges are “inferior officers” under the Constitution’s appointments clause. Justice Kagan wrote for a divided court that agency staff may not appoint ALJs, reserving that power to department heads, courts or to the president. (For those keeping score, Justices Ginsburg and Sotomayor dissented, while Justice Breyer concurred in part and dissented in part.)
As recently as 2016, the Commission had been waging a winning battle against financial advisor Raymond Lucia in the D.C. Circuit Court of Appeals, with the legal community watching closely. The Commission, represented by its trial attorneys and the Department of Justice’s appellate attorneys, had fought on behalf of itself and other federal agencies that similarly appointed and utilized ALJs. Many feared an administrative domino effect would result if the Commission’s ALJs were found unconstitutional. So what happened?
By Dan Portnov
Late last week the other shoe finally dropped for Theranos founder and ex-CEO Elizabeth Holmes, as she and fellow executive Ramesh “Sunny” Balwani were indicted on charges of wire fraud and conspiracy to commit wire fraud. Following allegations made in the Theranos investor lawsuit, the SEC charges against Balwani and settlement with Holmes, this latest and most serious development came as no surprise.
Theranos, with Holmes at the helm, had been the darling of Silicon Valley: once valued at $9 billion, touting a product that would have revolutionized blood testing technology and with investors that included well known private equity firms, media moguls, the family of the Secretary of Education. The deception and fall were also epic.
The Department of Justice has been humiliated in its misguided prosecution of over two hundred Inauguration Day protestors.
It has lost every single case to go to trial. It has engaged in intentional violations of the rules. And it has cost taxpayers hundreds of thousands of dollars along the way.
The DOJ should cut its losses now and dismiss the rest of the cases.
On January 20, 2017, hundreds of protestors gathered at Logan Circle to protest the new administration. Along the route, a handful of the protestors engaged in property destruction ranging from exceedingly minor (dragging newspaper dispenser boxes into the street) to serious (breaking large plate-glass windows). The police eventually surrounded the protestors and arrested the remaining 234 people.
Arresting people is one thing. That’s on the police. Charging them with multiple felonies is another. That’s on the prosecutors.
By Dan Portnov
The SEC’s Office of Investor Education and Advocacy (“OIEA”) came in hot last week with its HoweyCoin initial coin offering pre-sale – a mock ICO designed to teach cryptocurrency-hungry investors the lesson that some ICOs may be scams. It’s quite clever, actually. Complete with countdown clock, tiers of discounts and a white paper (chock full of white paper confidence), the site also features Easter Eggs for securities lawyers, like the coin’s name and that its celebrity promoters feature a generic boxing champ.
(The SEC’s first foray into contemporary public service advertising was to warn March Madness fans about investment adviser fraud. It was catchy, though not as clever.)
By Sara Kropf
The search of attorney Michael Cohen’s office by federal agents led to a phalanx of “former federal prosecutors” quoted by the media.
That’s not surprising. To be fair, I know a lot of great former federal prosecutors who provide informative quotes to reporters and likely share a lot of substantive information off the record that helps the media.
But what two former prosecutors recently said about the attorney-client privilege was disturbing because they show incredible disdain for it.
Liam Brennan, who used to be a federal prosecutor, wrote an op-ed in The Washington Post saying that the attorney-client privilege allows wealthy defendants “a free pass to engage in corrupt conduct.”
What, what? He couldn’t possibly have said that.
I’m not in the OIG, but I play one on TV.
By Dan Portnov
We have written on several occasions about OIG investigations on this blog, chiefly because a) their opacity creates a certain mystique, and b) we hope to minimize the chances that their targets underestimate the seriousness of what could later become a criminal investigation. The focus of this post is on OIG investigations involving a federal employee and a few key principles to keep in mind when suddenly confronted with an investigation.
In our (humblest) opinion, there are five things every federal employee should know about the OIG before its investigators show up to his or her office door:
By Dan Portnov
In certain legal (nerd) circles, coining a phrase or term of art is one of the surest ways to achieve immortality – think Tim Wu’s first use of “network neutrality” in a 2003
journal article or Justice Felix Frankfurter’s opinion in Rochin v. California holding that the certain police methods “shock[ed] the conscience.” And soon we may have Seth Levine to thank for the term “Brady Laundering.”
Here, Levine leveled his accusation on behalf of his client, Anthony Blumberg, in the midst of an evidentiary hearing into the relationship between the government and counsel for Blumberg’s former employer, ConvergEx Group, suggesting the former took pains to avoid uncovering Brady material by outsourcing the bulk of the investigative work to the latter. He further argued that ConvergEx achieved “extraordinary cooperation” status as a result of the company working so closely with the government that it effectively became a member of the prosecution team. Thus, ConvergEx also had the obligation to turn over Brady materials within its possession related Blumberg.
The four-day evidentiary hearing, which began on March 12, 2018 and will (hopefully) culminate on May 15, spotlights several important principles that counsel should consider during DOJ or SEC investigations where cooperation credit is sought.