There has been a lot of talk in the media recently about obstruction of justice.
Obstruction of justice is a fascinating topic, to be sure. But whether the President of the United States obstructed justice when he fired the Director of the FBI is not exactly the most common scenario for white-collar criminal defendants.
One of my favorite bloggers wrote a helpful piece about the obstruction of justice statutes and evaluated how difficult it is to win a conviction under them.
A recent case from the Ninth Circuit confirms that winning an obstruction of justice charge is not an easy task. In United States v. Liew, the court reversed the defendant’s convictions for conspiracy to obstruct justice and for witness tampering because the government had not proved sufficient facts showing the defendant committed these crimes.
The conduct in this case is far afield from President Trump’s alleged wrongdoing, but this opinion offers demonstrates how aggressive prosecutors can be in bringing these as well as how difficult it can be to win them.
Defendants Walter Liew and his company USA Performance Technology Inc. were convicted of eight counts under the Economic Espionage Act of 1996. The convictions were based on conspiracy to commit economic espionage, theft of trade secrets, possession of misappropriated trade secrets, and sharing trade secrets. All these trade secrets were related to DuPont’s technology for producing chemical called titanium dioxide.
The panel wrote “[i]f you wanted to learn about the secretive and lucrative world of titanium dioxide production, then this was the trial for you.” You get the sense that the court of appeals may not have been thrilled about the amount of information it had to digest to understand the technology involved in the case.
I won’t bore you too much. Titanium dioxide production technology has very little to do with the obstruction charges in the case. But….since I’m sure you are dying to know, titanium dioxide is a white pigment they can be extracted from ore in certain ways. It’s used in a wide variety of products “from paint to the filling in Oreo cookies.” (It kind of freaks me out that the same chemical is used in paint as in Oreos, but apparently that’s the world we live in.)
DuPont had developed a way to produce titanium dioxide using chloride. This was a more efficient method than the method used in Europe and Asia involving sulfate. Most of the facts of the case had to do with Mr. Liew’s efforts to recruit former DuPont employees and obtain their DuPont documents to sell information to China. This information would allow a Chinese manufacturing group to build a plant that could produce titanium dioxide using the chloride method.
Ultimately, USA Performance signed a $17.8 million contract with a Chinese group to build a titanium dioxide chloride facility in China. Mr. Liew worked with two former DuPont employees – unknown to DuPont of course – to provide information to help China build this plant.
Here’s where it gets interesting: In 2009, DuPont learned that Mr. Liew’s company might be improperly using DuPont’s information. In August 2010, Dupont received an anonymous letter about a USA Performance employee named John Liu. The letter explained that Mr. Liew and Mr. Liu had sold DuPont’s technology to China. Like any good company, Dupont started investigating. It contacted Chevron, where Mr. Liu worked. Chevron interviewed Mr. Liu and searched his work computer.
At one point, an investigator working for DuPont went to John Liu’s house to interview him. As the court explained:
Coincidentally, Liew and his wife Christina Liew (“Christina”) were having dinner at Liu’s house that same night. Liew hid in the basement, and during the interview Christina told Liu in Mandarin that he “shouldn’t let people come into his house.”
The Liews also cautioned Mr. Liu that he “should not really tell other people’s names “to the investigator, helped him draft a letter to Chevron complaining about the visit from the investigator, warned him not to allow “strange people” to enter his house and informed him that he shouldn’t speak with anyone about these matters without consulting a lawyer.
In April 2011, just a month after the investigator went to Mr. Liu’s house, DuPont sued Mr. Liew, USA Performance, and Mr. Liu for trade secret misappropriation. After the lawsuit was filed, Mr. Liew met with John Liu to discuss the case generally. Here’s how the court described the meeting:
During that meeting, Liew told Liu not to reveal the names of [the former DuPont employees helping USA Performance] (who were not named in a lawsuit), and that it would not be “good for anybody, not even good for Liu’s family” if Liu revealed their names.
Because it was a civil lawsuit, Mr. Liu and USA Performance had to file an answer to the complaint. The answer denied that they “wrongfully obtained or possessed” any DuPont trade secrets related to titanium dioxide and denied that they “misappropriated any information from DuPont or any of its locations.”
The Criminal Investigation and Trial
The FBI began investigating Mr. Liew and USA Performance about the DuPont trade secrets matter. They executed search warrants that found incriminating information at his home. Eventually Mr. Liew, his wife Christina, his company, and one of the former DuPont employees were charged with several economic espionage charges.
They were also charged with conspiracy to violate 18 U.S.C. §1512(c) by obstructing an official proceeding in violation of 18 U.S.C. §1512(k). The obstruction charge was based on the defendants’ agreement to file an answer to DuPont’s civil complaint that contained false statements denying liability. Specifically, the indictment alleged that the defendants falsely stated that they had never misappropriated any information from DuPont.
The indictment also alleged that Mr. Liew had engaged witness tampering in violation of 18 U.S.C. § 1512(b)(1) for telling Mr. Liu that he should not discuss the former DuPont employees who were working at USA Performance with anyone because “it would not be good” for Mr. Liu or his family.
At trial, Mr. Liew was convicted of all charges and sentenced to 180 months’ imprisonment.
Most of the Ninth Circuit’s opinion analyzes the jury instructions for the trade secret charges and the sufficiency of the evidence on those charges. The court concluded that the instructions were appropriate and that there was sufficient evidence to convict the defendants of the charges.
Obstruction of Justice
As the obstruction charge, however, the court reversed the conviction. It explained that this “issue turns on whether the aim of the conspiracy was to file a factual falsehood or simply to make a general, legal denial of guilt.” If it was the former, then it was a crime; the latter is not a crime.
The court of appeals disagreed with the defendants that it was impossible for an answer in a civil case to constitute obstruction of justice. As the court explained, an answer that misstated material facts could be considered obstruction of justice.
The court ultimately concluded that the statements at issue in the answer were “tantamount to general denial of legal liability.” The court went on to explain:
While drawing a line between a factual false statement in an answer and such a general denial can be difficult at times, we believe that the statements at issue here tacked too close to a general denial to constitute obstruction of justice.
In other words, the court of appeals held that simply denying allegations generally in an answer to a civil complaint cannot constitute obstruction.
This holding makes sense from a practical standpoint. The denial in the answer was the sole basis for the government’s obstruction charge, and that’s a very weak factual basis. Parties in civil disputes should be permitted to deny the allegations in a complaint if they have any colorable good faith reason for doing so. Answering a civil complaint is a technical process, and broad denials are commonplace; otherwise, you risk admitting something in a civil complaint that has wide-ranging ramifications down the road.
Had the court ruled otherwise, anyone facing parallel civil and criminal proceedings wouldn’t be able to deny the allegations in the civil case without risking an obstruction of justice charge in the criminal case.
The Ninth Circuit likewise reversed Mr. Liew’s conviction for witness tampering. Section 1512(b)(1) penalizes anyone who
knowingly uses intimidation, threatens, or corruptly persuades another person, or attempts to do so, or engages in misleading conduct toward another person, with intent to—(1) influence, delay, or prevent the testimony of any person in an official proceeding.
At trial, the government’s argument was that Mr. Liew threatened or intimidated Mr. Liu when Mr. Liew told him not to say anything about former DuPont employees because it would not be “good” for his family.
The Ninth Circuit saw right through this absurd theory. It held that this statement, standing alone, was insufficient to prove witness tampering. In fact, the court of appeals explained that Mr. Liew “provided the same advice that many criminal attorneys would in that situation – to not discuss the matter with anyone, and to risk otherwise could have bad effects on one’s family.”
This is a reassuring holding for those of us on the defense side of the table. First, to bring a witness tampering charge based on one ambiguous statement is questionable. Second, and more important, the holding protects the defense’s ability to contact witnesses without fear of reprisal from prosecutors.
I have had prosecutors suggest that my contacting a grand jury witness is somehow improper or intimidating. This strikes me as an effort to dissuade us from contracting witnesses and preparing a forceful defense to charges. (It doesn’t work with me.) Of course a prosecutor would prefer that I’m not in touch with witnesses, since it’s a rare witness that doesn’t have something helpful to say for the defense in a white-collar case.
I wouldn’t ever tell a witness what to say—or what not to say—but simply having a conversation with a witness is not witness tampering.
Now, there is a difference between defense counsel talking to a witness and the defendant himself. It’s a more dangerous proposition for a defendant to have that conversation himself. As a practical matter, the defendant should stay away from potential witnesses. (This can be a challenge when the defendant is personal friends with witnesses and impossible if they regularly interact personally or professionally.) It’s always much better to have your lawyer reach out to potential witnesses to have substantive discussions.
But prosecutors shouldn’t threaten or bring weak obstruction and witness tampering charges like these. They chill the defense.
The Brady Issue
There was also a Brady issue in the appeal. I’m only raising it because it so cleanly relates back to my previous post about FBI 302 interview memos.
One of the former DuPont employees, Tim Spitler, had agreed to enter a guilty plea. Tragically, before he could do so, he committed suicide.
During the investigation, Mr. Spitler had met several times with the prosecution team, and FD-302 reports were produced to the defense during discovery. Following standard procedure, the handwritten notes for the interviews were not given to the defense, only the final memos.
The defense requested that the government produce the rough notes from the interview that formed the basis of the 302 for Mr. Spitler’s interview. In support of that motion, the defense submitted a declaration from Mr. Spitler’s former attorney. The attorney stated that Mr. Spitler made statements during his interview that were not contained in the final 302. In particular, the lawyer
claimed that Spitler consistently denied “knowing involvement in a criminal conspiracy” and told the agents that when he retired, DuPont shipped in the boxes of documents that he later sold to Lou, so Spitler consider them to be valueless.
Based on this affidavit, the defendants argued that the rough notes could have contained potentially-exculpatory Brady material and should have been turned over. The district court denied the motion without a hearing.
The Ninth Circuit addressed this issue on appeal. It first explained that “mere speculation” about materials held by the government was not enough to force disclosure of them to the defense. But, as the court of appeals noted, “Liew had more than mere speculation – he had the declaration of Spitler’s attorney.”
This declaration met the defendants’ burden of production for their Brady challenge. The court went on to note that if the handwritten notes confirmed what was stated in Spitler’s attorney’s declaration, then those statements could undermine confidence in the verdict.
This wasn’t an outright win for the defense. The court of appeals vacated the order denying the request for production of the notes and remanded to the district court for an in camera review of the material. The court stated “we express no view on whether the notes, in fact, contain any exculpatory, impeaching, or even admissible or relevant material – we leave that to the district court to decide in the first instance.”
It’s always my preference that other witnesses meeting with the government have their own lawyers. This case shows exactly why. If the defense didn’t have Mr. Spitler’s attorney’s declaration to explain what was actually said during the interview (and what was excluded from the 302), then there’s no doubt in my mind that this challenge would have been denied summarily.