In Part 1 of this series, we outlined the standard that the Department of Justice follows to seek forfeiture of a criminal defense attorney’s fees. If DOJ seeks forfeiture of your fees, you could find out in the forfeiture count of an indictment against your client. More commonly, though, DOJ will send you a notification letter.
Even DOJ’s guidelines say that this happens “only in extraordinary cases.” (Justice Manual § 9-120.111).
But if you do receive this kind of letter, what happens next?
DOJ may seek discovery of information about your fees. You’ll need to be careful to protect client confidentiality along the way.
Like Part 1, this post will focus on what DOJ’s own guidance says. You should be aware that there is considerable case law about this issue too, including the Supreme Court’s decision in Caplin & Drysdale Chartered v. United States, 491 U.S. 617 (1989). In Caplin, the Court held that a forfeiture statute which allows the government to restrain and eventually forfeit money that is currently in the hand of a criminal defendant does not impermissibly burden a defendant’s Sixth Amendment right to retain the attorney of his choice, even if those funds are the only source for defendant to hire private counsel.
The Justice Manual does concede that DOJ cannot prove an attorney’s “actual knowledge” of the forfeitability of an asset through “compelled disclosure of confidential communications made during the course of the representation.” (Section 9-120.113)
However, even this concession does not end the process, because DOJ has two other potential sources available.
First, a voluntary disclosure is permissible. So, if a defendant testifies at trial or makes statements during a proffer session, then those now-non-privileged statements could be used to seek forfeiture of a fee—if they prove actual knowledge.
Second, DOJ can seek discovery of non-privileged information to prove its case through a subpoena to the attorney. The Justice Manual says this information includes “non-privileged fee information, such as the amount, source and method of payment.”
What Is “Non-Privileged Fee Information”?
As a general matter, fee information is not privileged. So, the government can compel the attorney to turn over information about the amount of the fee and so forth.
Producing the amount of your fee is likely less of a concern than the source of the fee. DOJ’s guidance says that this discovery
may show that the fee for one or more alleged conspirators was paid by another co-conspirator, which is relevant to show ‘association in fact’ or may lead to the discovery of other co-conspirators.
This type of discovery is highly problematic in the white collar defense context. Fees for employees are often paid by their employer, and director and officer policies (D&O policies) exist for a reason. DOJ, however, may use payment information to prove a conspiracy case against someone other than the defendant. It’s a ripple effect.
Your engagement letter should always disclose the identity of who is paying a client’s fees. The identity of the person paying the fee should never be a secret from your client, and if a third party wants it to be a secret, then that is a huge red flag to both you and to your client. You can also include in your engagement letter a brief statement explaining why you understand the third party is paying those fees. It can be simple, “The firm understands that Widget Company is paying the fees of Ms. Smith because Ms. Smith is an employee of Widget Company and for no other reason.”
Of course, a prosecutor driven to indict may simply dismiss this language as self-serving, if she believes that Widget Company is paying fees as part of the conspiracy with Ms. Smith. A judge overseeing the § 853 forfeiture hearing may not be so quick to jump to conclusions.
Is Attorney Fee Information Work Product?
A quick aside: attorney fee information (in particular retainer letters) is generally not considered work product. As one court in the District of Columbia has explained:
It seems rather straightforward that information pertaining to fees and billing is usually prepared quite distinctly from the substance of the underlying litigation. In other words, the nature and form of an attorney’s fee arrangement really have nothing whatsoever to do with the substance of the litigation that the attorney is retained to advise the client about.
In re Grand Jury Proceedings, 201 F. Supp. 2d 5, 13 (D.D.C. 1999).
Post Judgment Discovery Is Allowed, Too
DOJ can also seek discovery about an asset after a forfeiture judgment has been entered against a defendant. The forfeiture statute permits a court to order a deposition or production of records. This would be discovery outside of a grand jury’s purview.
DOJ takes the position that “since these statutory proceedings will occur after trial, the likelihood for any adverse impact upon the attorney-client relationship will be diminished substantially.” Therefore, the guidelines suggest that when fee information is needed only for forfeiture, then the prosecutor should wait until after the trial. (Section 9-120.115)
This view, however, doesn’t take into account how a representation works in reality. A representation doesn’t usually end the day a trial ends. There are post-trial motions and a sentencing. There may be an appeal. There may be follow-on civil proceedings such as a False Claims Act case. Forfeiture proceedings could begin during this time (though not before sentencing). As the lawyer subject to these discovery requests, you need to be careful to understand your obligations to your client.
A Deal with the Devil? Agreements to Exempt Forfeiture
DOJ does offer one possibility to keep your fees—an agreement between defense counsel and DOJ to exempt fees from forfeiture. (Section 9-120.116)
This requires the approval of the Assistant AG for the Criminal Division. There are two requirements
(1) there are reasonable grounds to believe that the particular asset is not subject to forfeiture; and (2) the asset is transferred in payment of legitimate fees for legal services actually rendered or to be rendered.
The Justice Manual provides that the attorney can provide information as to assets “belonging to a defendant which are not subject to forfeiture.” In other words, you can provide information to DOJ about assets that were used to pay the fee that are not from criminal activity. If there is not “full and accurate disclosure” or “if the proffer is false or misleading,” then all bets are off.
DOJ will look to the amount of the fee since it can limit this type of agreement to the amount that can be shown to be from legitimate sources and thus not forfeitable.
It should go without saying that you should discuss any possible agreement like this one with your client. It creates considerable concerns as to client confidences. Presumably, you learned about your client’s assets from your client. Selective waiver of privilege generally doesn’t work (it will result in a full waiver), so you need to tread extremely carefully here.
Now, it may be that all of this happens after conviction and sentencing and your client fully consents to your efforts to keep your fee. Obtaining that knowing consent in writing would be best and consulting with a lawyer who handles disciplinary matters can keep you out of hot water. This is a dangerous path, but it can be navigated the right way.
Responding to–or resisting–government requests for fee information can take up a lot of time. Your firm may even decide to hire outside counsel to handle the dispute. This is another reason why it is important to include a provision in your engagement letter that requires your client to pay fees and expenses for matters arising out of your representation. That way, you are not on the financial hook to resist this type of discovery.