Source: http://globalinvestigationsreview.com/insight/the-practitioner%E2%80%99s-guide-to-global-investigations/1079328/individuals-in-cross-border-investigations-or-proceedings-the-us-perspective
Timestamp: 2017-05-23 05:12:46
Document Index: 494912143

Matched Legal Cases: ['art. 8', 'art. 6', 'art. 2', 'art. 2', 'art. 2', '§ 78', '§ 9', '§ 9', '§ 9', 'art. 4', 'art. 4', 'art. 4', 'art. 3', 'art. 7', 'art. 3', 'art. 7', 'art. 3', 'art. 2', '§ 981', '§ 1963', '§ 853', '§ 982', '§ 853', '§ 982', '§ 982', '§ 853', '§ 982', '§ 983', '§ 1607', '§ 983', '§ 985', '§ 981', '§ 853', '§ 982', '§ 981', '§ 981', '§ 983', '§ 983', '§ 78', '§ 78', 'art. 19', 'art. 509', '§ 983', '§ 853', '§ 853', '§ 126', '§ 129', 'art, 763']

Individuals in Cross-Border Investigations or Proceedings: The US Perspective – Global Investigations Review – GIR
and Margot Laporte 04 January 2017
Representing individuals in parallel or cross-border investigations and proceedings requires the ability to interact with counsel in multiple jurisdictions and disciplines, and a dogged focus on the desired result, often in the face of complex and competing jurisdictional, procedural and legal obstacles. In some instances, issues of foreign law or regulatory climate, as well as the nature and order of interactions with regulators and third parties, can affect the outcome to a greater extent than the underlying facts or evidence. In this chapter, we discuss certain of the variables counsel should anticipate, including extradition, asset seizures and forfeiture, interaction with local counsel, pool counsel and privilege considerations, evidentiary issues involving cross-border document production and parallel proceedings, and issues involving settlement and client reputational risk.
17.2 Extradition
The United States has aggressively pursued the extradition of individuals located abroad who are charged with US criminal offences. While successful extradition requests have historically been in the context of violent crimes and narcotics trafficking, the United States has increasingly obtained extradition in connection with white-collar crimes, including corruption and money laundering.1 Attorneys representing individuals located outside the United States in white-collar criminal matters, therefore, should understand the extradition process and anticipate that their clients may be subject to a US extradition request.
17.2.1 Law and practice
Extradition law and practice is driven by obligations that arise from bilateral or multilateral treaties. Under a typical extradition treaty, the parties agree, under specified conditions, to extradite individuals who are within their jurisdictions and who have been charged with extraditable offences in the requesting country. The United States has entered into bilateral treaties with over 100 countries2 and is a party to two multilateral extradition agreements, including the 2010 Extradition Agreement between the United States and the European Union.3 In addition, the United States has entered into several multilateral international conventions that supplement bilateral extradition treaties by obligating the parties to prosecute or extradite individuals charged with certain crimes.4
Modern extradition treaties have expanded the definition of extraditable offences. Historically, the United States has entered into ‘list’ treaties that enumerate extraditable offences, often to the exclusion of modern white-collar offences.5 Under more recent ‘dual criminality’ extradition treaties, an offence is extraditable if it is a crime in both jurisdictions punishable by more than one year’s imprisonment.6
Many modern treaties have expanded the list of extraditable offences to include crimes committed outside the territory of the requesting state.7 This expansion is particularly significant in light of the United States’ assertion of broad ‘territorial’ jurisdiction in charging foreign individuals for conduct that occurred overseas on the basis of only minimal US contacts.8 In 2010 and 2011, for instance, the US Department of Justice (DOJ) successfully extradited two UK citizens, Jeffrey Tesler and Wojciech Chodan, for violations of the US Foreign Corrupt Practices Act (FCPA),9 asserting jurisdiction based, in part, on the use of correspondent bank accounts in the United States to make corrupt payments to Nigerian government officials.10
17.2.2 Enforcement of the extradition request
In practice, extradition decisions are part judicial and part foreign policy. Federal and state prosecutors in the United States must submit extradition requests for review and approval by the DOJ’s Office of International Affairs.11 Once approved, the US Department of State will formally request extradition to the appropriate agency within the requested state.12 While practices vary, in general, the judicial branch in the requested state will then make a determination as to whether the individual is extraditable under the relevant treaty and domestic law.13 During this process, the individual typically may challenge the extradition request within the requested state, based on the factual and procedural defences discussed immediately below.14 Once extradition is determined to be lawful, the executive branch of the requested state generally makes the final decision as to whether to approve the extradition request.15 If the request is approved, the requested state will transfer custody of the individual to US law enforcement authorities.16
17.2.3 Defences
When representing an individual who may become, or has become, subject to an extradition request from the United States, relevant considerations include (1) which treaty or treaties may be applicable, given the client’s nationality and current location; (2) whether it would be advisable for the client not to travel to certain jurisdictions; and (3) whether to waive or challenge extradition. In considering these factors, it may be necessary to consult counsel specialising in the extradition law of the relevant jurisdiction.
Factors to consider when advising a client as to whether to waive extradition and surrender to the requesting state include: (1) the likelihood of success in challenging extradition in the relevant jurisdiction; (2) the effect of waiving extradition on any future charges that may be brought, by both US and foreign regulators; and (3) the potential benefits of waiving extradition and co-operating with US regulators, including the possibility of obtaining more favourable conditions of release once in the United States.
In considering whether to challenge an extradition request, practitioners should bear in mind that authorities in the requested state must, in theory, grant extradition if the relevant treaty requirements are met. Nonetheless, extradition treaties enumerate specific grounds for denying extradition requests to accommodate the legal and policy interests of both state parties.
While each extradition treaty is negotiated separately and contains party-specific provisions, available defences against extradition generally fall into four categories: (1) the character of the offence charged, including defences against extradition for political offences17 (which, in most recent treaties, excludes violent acts of terrorism18) and military offences;19 (2) the characteristics of the individual, including whether the individual is a national of the requested state;20 (3) legal due process, including the legality of the offence charged, statute of limitations and prohibitions against double jeopardy;21 and (4) humanitarian considerations, including whether the individual may be subject to cruel and unusual punishment or the death penalty in the requesting state.22
Although the United States successfully extradited defendants in a number of recent white-collar matters, the United States continues to face certain challenges in securing the extradition of foreign nationals.23 First, while most modern bilateral treaties prohibit the refusal of extradition on the basis of nationality,24 a number of the United States’ key treaty partners, including France, Germany and Brazil, cannot extradite their nationals under their constitutions or domestic laws and are not obliged to do so under their extradition treaties with the United States.25 Second, under modern dual criminality treaties, an extradition request may not be granted where the alleged offence is not a crime in the jurisdiction of the requested party.26 This requirement raises particular defences in the context of FCPA matters, for example, where the country in which the individual currently is located may not prohibit certain types of payments that are prohibited under the FCPA.27
17.3 Asset seizures and forfeiture
In recent years, US authorities, including the DOJ and the US Securities and Exchange Commission (SEC), have pursued the seizure and forfeiture of assets, located in the United States and abroad, relating to white-collar criminal offences including insider trading, corruption and money laundering.28 To that end, the DOJ has established a dedicated Asset Forfeiture Program that coordinates with a number of other US regulatory and law enforcement authorities, including with respect to requests for international assistance in the seizure and forfeiture of assets.29 Attorneys representing individuals in cross-border investigations and proceedings, therefore, should anticipate that US authorities may seek to seize or forfeit their clients’ assets, even when those assets are located outside the United States.
17.3.1 Circumstances required for freezing or seizure of assets
US law provides mechanisms through which the DOJ and SEC may obtain court orders to freeze, seize and forfeit assets in connection with criminal and civil proceedings. In criminal enforcement matters, the DOJ may seize the property of a defendant through either criminal or civil forfeiture proceedings.30
To initiate a criminal forfeiture proceeding, the DOJ must include criminal forfeiture-related charges in the indictment.31 Owing to concerns that defendants may hide assets, prosecutors often will seek both pre-indictment and pretrial restraining orders to freeze the assets at issue until a criminal forfeiture order can be obtained.32 While the DOJ also may take possession of the property pursuant to a criminal seizure warrant,33 generally, the property will remain in the possession of the defendant, subject to a restraining order, until the court enters an order of forfeiture.34
The DOJ cannot obtain a criminal forfeiture order unless the defendant has been criminally convicted or has pleaded guilty to a forfeitable offence.35 In cases where the property subject to forfeiture is no longer available as the result of an act or omission of the defendant, the court may, under certain circumstances, order the forfeiture of ‘substitute assets’ belonging to the defendant.36
To initiate a judicial civil forfeiture proceeding,37 the DOJ must file an in rem action against property that was derived from or used to commit the crime.38 Unlike criminal forfeiture, in the case of civil forfeiture, the DOJ typically will seize the property at issue, with the exception of real property,39 before the court enters a civil forfeiture order.40 Depending on the circumstances, the DOJ may seize the property: (1) pursuant to a seizure warrant obtained in the same manner as a search warrant under the Federal Rules of Criminal Procedure,41 which requires the DOJ to establish that there is ‘probable cause’, or a reasonable basis, to believe that the defendant committed a forfeitable offence and that the property has the requisite connection to the crime;42 (2) pursuant to an arrest warrant in rem, which also requires a showing of probable cause;43 or (3) without a warrant.44 The DOJ may also obtain pre-indictment and pretrial restraining orders to freeze any assets that it has not seized.45
Unlike in criminal forfeiture actions, the defendant need not have been convicted or pleaded guilty for the DOJ to obtain a civil forfeiture order. In a civil forfeiture action, the DOJ must establish, by a ‘preponderance of the evidence’, that the property is subject to forfeiture.46
In civil enforcement matters, the SEC may seek temporary pretrial restraining orders to freeze a defendant’s assets, primarily to secure funds for any future disgorgement if the defendant is found liable.47 For instance, the SEC may seek a temporary restraining order to freeze a defendant’s assets when it appears to the Commission that the defendant ‘is engaged or is about to engage’ in securities law violations.48 To obtain an asset freeze, the SEC must make a ‘proper showing’,49 by showing either a likelihood of success on the merits or that ‘an inference can be drawn’ that the defendant violated federal securities laws.50
The decision to freeze assets, or to modify an asset freeze, is within the court’s discretion to order equitable relief.51 In practice, courts have not imposed a high burden of proof on the SEC, ordering asset freezes in cases where there was only circumstantial evidence that a violation had occurred52 or where the funds could not be traced directly to the alleged illegal activity.53
17.3.2 Freezing or seizure of assets located abroad
US authorities’ efforts to seize assets that are believed to be related to illicit conduct are not limited to assets located within the United States. The United States and other members of the international community have concluded a number of treaties and other formal and informal understandings that provide for the seizure or return of assets located in foreign jurisdictions.54 In addition, both US authorities and private civil litigants may seek to register with the courts of a foreign jurisdiction final decisions by US courts ordering the seizure or forfeiture of assets, or both, and to request the assistance of the authorities in that jurisdiction to enforce the judgment.55 US-based practitioners should also bear in mind that international co-operation mechanisms are mutual, and that foreign regulators may seek the co-operation of US authorities to seize or forfeit assets located in the United States.
17.3.3 Strategic considerations – legal fees and other expenses
When representing an individual faced with a court-ordered asset freeze, counsel should consider the tactical ramifications of litigating to challenge the freeze order, negotiating or litigating to obtain a carve-out for legal fees and other expenses, or of letting the order stand. While practitioners may, in the first instance, attempt to negotiate the terms of an asset freeze with the relevant authority, it may ultimately become necessary to seek judicial relief. In considering whether to litigate an asset freeze, counsel should balance factors such as the opportunity to gain insight into the government’s enforcement investigation against the risk that litigation may accelerate the enforcement process, the jurisdictional implications of challenging the order, the fact that the defendant may need to provide evidence during the course of litigation, and the likelihood of success given prior precedent.
Nonetheless, even if a court determines that a freeze order is appropriate with respect to certain assets, it may be possible to argue that the order is overly broad. Potential arguments include that the freeze order restricts untainted assets or assets belonging to individuals who have not been charged in the proceeding,56 or that the asset freeze leaves the defendant without the means to pay for reasonable living expenses.57
Practitioners should also consider whether the asset freeze will preclude their clients from paying legal fees. In general, whether a court will agree to a carve-out for the payment of legal fees will be influenced largely by whether the client is facing a civil or criminal proceeding. In particular, civil proceedings do not implicate the US constitutional right to counsel,58 and courts have held that civil defendants do not have a right to pay legal fees with the proceeds of illegal activity.59 Therefore, courts in civil proceedings may (or may not), in their discretion, agree to release frozen funds for the payment of legal fees if it is shown that the particular assets at issue were not tainted by the alleged conduct and that the client has sufficient funds to satisfy any future penalties and disgorgement.60
With respect to criminal proceedings and parallel civil and criminal proceedings, the US Supreme Court has held that neither pretrial restraint nor forfeiture of tainted assets needed to retain counsel of choice violates a criminal defendant’s Sixth Amendment right to counsel.61 In particular, in United States v. Monsanto, the Supreme Court held that the pretrial restraint of assets that prevented a defendant from hiring counsel was constitutional because, among other reasons, there was probable cause to believe that the defendant had committed a forfeitable offence and that the assets had the requisite connection to the crime.62 Since Monsanto, many US District Courts will, under certain circumstances, provide criminal defendants seeking to use restrained funds to hire counsel a right to a pretrial adversarial hearing, commonly called a ‘Monsanto hearing’, at which the court evaluates whether there is probable cause to believe that the property at issue has the requisite connection to the crime.63
By contrast, on 30 March 2016, the Supreme Court held that, unlike tainted assets, the pretrial restraint of a criminal defendant’s untainted assets violated the individual’s constitutional right to counsel.64 Therefore, in criminal proceedings, and in parallel civil and criminal proceedings, counsel should consider asserting their clients’ constitutional rights to obtain a carve-out from untainted assets for reasonable legal fees. At the same time, counsel may argue that the court, in its discretion, should grant a carve-out from untainted assets for living and other expenses as well.
17.4 Interviewing individuals in cross-border investigations65
17.4.1 Dual representation
During the course of a cross-border investigation, individuals may receive requests for interviews from authorities across multiple jurisdictions, as well as from their current or former employers as part of internal investigations. Because such interviews often raise highly fact-specific, complex questions, lead counsel should consider at the outset of the representation whether the client would benefit from the addition of relevant subject matter and foreign law experts to assist in identifying and navigating issues in each jurisdiction. Relevant considerations include (1) the jurisdiction in which the individual is located; (2) the jurisdiction in which the relevant events occurred or documents are located; and (3) any actual or likely interest from foreign authorities. For example, lead counsel may wish to initiate communications with foreign authorities through local counsel in the relevant jurisdiction and may wish local counsel to be present at any interviews with the client, both to assist with legal and cultural considerations and to preserve attorney–client privilege in that jurisdiction. Labour counsel may be necessary in the jurisdiction in which an individual is located to advise whether the individual must submit to an interview as part of an internal investigation and to provide context as to the tactical and legal implications of doing so under local labour laws.
Lead counsel should consider any potential civil, regulatory or criminal implications before submitting to an interview. Considerations include (1) any limitations on how information shared during an interview may be used; (2) any bases on which an individual may choose to decline to answer certain questions, such as the Fifth Amendment of the US Constitution66 or attorney–client privilege; and (3) if the individual declines to participate in the interview or to respond to certain questions, any potential legal implications in the relevant jurisdictions.
Before submitting to an interview, counsel also must be mindful of issues inherent in parallel criminal proceedings. For example, testimony compelled by US criminal authorities over a witness’s assertion of the privilege against self-incrimination under the Fifth Amendment of the US Constitution may be viewed in certain circumstances by US criminal authorities as tainted.67 Counsel should consider the implications of this issue in coordinating (or fending off) testimony in multiple jurisdictions.
Finally, if the individual is registered with any regulators (such as the US Financial Industry Regulatory Authority (FINRA) or the UK Financial Conduct Authority) that may conduct their own investigations or implement their own disciplinary measures as a result of the facts uncovered in the investigation, it may be necessary to consult with counsel experienced with the relevant authorities. Counsel should consider, among other factors, the interplay between co-operating with an investigation and the potential loss of registration with a regulator. If the individual has potential criminal exposure or more significant regulatory risk, it may be in an individual’s best interest to decline to co-operate with an internal investigation, even if the individual faces termination or potential de-registration with a regulator as a result.
When consulting with multiple counsel across jurisdictions, lead counsel should take steps to preserve any applicable privileges, including by formally retaining any additional counsel to preserve the attorney–client privilege.
17.4.2 Pool counsel considerations
‘Pool’ counsel, or independent counsel that represents more than one individual in connection with an internal investigation, can provide an effective and efficient way of providing legal representation when multiple current or former employees are identified as witnesses. From the initiation of representation through the resolution of the matter, pool counsel must remain vigilant to issues such as conflict of interest among the pool of clients, and protection of applicable legal privileges. Experienced pool counsel should understand how to evaluate these risks as new clients are added to the pool or new facts are developed. In addition, counsel must be able to communicate effectively with all clients to ensure that each understands the nature of his or her own attorney–client relationship and that counsel owes a duty to other clients in the matter.
17.4.2.1 Considering conflicts
Pool counsel should evaluate potential conflicts at the outset of each client relationship to determine that there is no conflict of interest that would prohibit concurrent representation of the proposed clients. This evaluation process has become more difficult since the promulgation of the ‘Yates Memorandum’68 in the United States because the heightened focus on prosecution of individuals has caused many companies to involve pool counsel earlier in an investigation. As a result, counsel may already have begun representations only to learn facts later in the investigation that reveal a potential conflict of interest. Counsel should monitor for potential conflicts of interest among pool clients on an ongoing basis. Use of pool counsel, while efficient, should be limited to circumstances where the individuals in the pool are generally considered witnesses and have little personal criminal or regulatory exposure.
There are practical steps that pool counsel and the company can take to set expectations among counsel and clients, and to allow counsel to zealously represent each client without prejudicing another. For example, pool counsel can work with company counsel to evaluate whether representing a particular category of potential clients (e.g., only former employees, or only employees from the legal department) will reduce the risk of conflicts of interest.
A straightforward discussion of the benefits and potential challenges inherent in concurrent representations can help each client provide informed consent to such an arrangement, and can protect pool counsel from concerns regarding professional responsibility and conflicts of interest. Benefits include pool counsel often being in a position to develop a broader and deeper understanding of the underlying facts and having more opportunities to interact with authorities and understand the issues of interest to them. The core challenge inherent in concurrent representation is pool counsel’s use, and ability to use, information obtained in the course of representing one client for the benefit of another client while minimising the risk of conflicts of interest and preserving legal privilege. Client engagement letters should address this challenge explicitly.
Typically, such engagement letters will identify clients represented by counsel (and be updated from time to time through an addendum to the engagement letter), and set forth the expectation that pool counsel may use information provided by one client to more efficiently and effectively represent the interests of all clients. They should note that information provided in confidence will not be provided to other clients without specific authorisation, but that counsel has a duty to represent all clients and may be forced to withdraw from one or more representations if restricted from using information necessary to fulfil that duty with respect to information provided in confidence. The engagement letter should also address the possibility that, during the course of the representation, pool counsel may learn of conflicts among one or more represented clients and as a result obtain each client’s consent to counsel’s continued representation of the remaining non-conflicted clients.
17.4.2.2 Maintaining privilege among clients
Educating one’s clients is the most effective step pool counsel can take to protect legal privilege. Pool counsel should discourage clients from discussing with one another either the matter at issue or their communications with counsel. Clients represented by pool counsel may mistake the nature of their relationship with one another in the context of the matter and assume that disclosures they make to others represented by the same lawyer are protected. While it is possible that a common interest or joint defence privilege may exist among individuals represented by pool counsel, it is not always the case.
Pool counsel should carefully consider communications with clients in the pool, and disclosures made to third parties, to ensure that privilege is not inadvertently breached with respect to one client in the course of representing another. It may be helpful for counsel to consider before each interaction with the government or other third parties (on behalf of any client in the pool) whether there is particular information that is sourced directly from a client interaction. This helps to streamline and clarify the analysis and resulting communication, particularly in the context of a co-operating witness.
17.5 Effect of varying privilege laws across jurisdictions
Individuals and their counsel may engage in a variety of communications during the course of the attorney–client relationship (including with employers’ internal and external counsel and compliance personnel, as well as with third parties such as auditors) that may be subject to discovery during the course of a cross-border regulatory investigation. When representing individuals in cross-border investigations, it is important to understand the differing rules of privilege across jurisdictions that may protect such communications from disclosure. It is equally important to establish procedures at the outset of the representation to ensure the client preserves the broadest applicable privileges. In navigating these privilege considerations, it may be necessary to consult counsel with expertise in the privilege laws of the relevant jurisdictions.
While the United States and other common law jurisdictions such as the United Kingdom typically afford broad protections based on privileges that include the attorney–client privilege, attorney work-product privilege, and joint defence and common interest privileges, many civil law and other jurisdictions provide far fewer protections. For example, while US attorney–client privilege attaches to communications of legal advice from a company’s internal and external counsel to its employees,69 the European Union does not recognise privilege protections for any communications from in-house counsel and from external counsel not licensed in the local jurisdiction.70 Other jurisdictions, most notably those in Asia, impose a duty to maintain client confidentiality but do not provide for an attorney–client privilege.71 (See also Chapter 32 on privilege.)
In general, US courts will apply foreign privilege laws if they conclude that the foreign jurisdiction has the predominant interest in whether the communications remain confidential (the ‘touch base’ test).72 Thus, foreign documents and communications may be subject to discovery in US proceedings that would otherwise be withheld as privileged under US law.
In communicating on behalf of clients, attorneys in cross-border investigations play an important role as gatekeepers in preserving their clients’ privilege protections. Regardless of the applicable privilege laws, counsel should take steps to preserve the privilege over all materials used or created as part of the representation, including by: (1) restricting access to attorney–client and work-product materials, particularly in jurisdictions with more limited privilege protections; (2) labelling all documents and communications as legally privileged and confidential; and (3) limiting written communications that may be subject to discovery. In addition, attorneys should consider whether communications with foreign in-house or external counsel, which may be protected under the US common interest privilege, will be considered privileged in the relevant jurisdiction and take steps to tailor their communications accordingly.
Individual counsel should also consider whether communications with in-house counsel are protected as privileged in the relevant jurisdictions. If the privilege is inapplicable or unclear, counsel should, initially, be aware that communications pertaining to their clients that were generated during the course of an internal investigation under the direction and supervision of in-house counsel, as opposed to locally licensed external counsel, may not be privileged and may be subject to discovery by authorities and third parties.73 Privilege protections may also not apply to documents and communications generated during internal investigations under the direction or supervision of an internal or external compliance or audit team. Moreover, consideration should be given to the potential involvement of in-house counsel in any interviews of the client, including the risk that the client’s statements and any notes, memoranda or other records prepared as a result of the interview may be subject to discovery.
Even if certain privilege protections are available in the relevant jurisdictions, individual counsel should consider who holds the privilege under the relevant laws. In the United States, for example, while interviews with employees conducted as part of an internal investigation are protected as privileged, the privilege belongs to the company, which may choose to waive the privilege at its discretion.74 Because employees may mistakenly believe that their communications with in-house and company counsel are privileged, individual counsel should ensure that their clients understand the relevant privilege laws before speaking with company counsel. In addition, US counsel conducting an internal investigation on behalf of the company or its board of directors or audit committee typically will commence each witness interview by providing an Upjohn warning, informing the employee that the lawyer does not represent him or her, that the privilege covering the discussion belongs to the company or its board or audit committee, and that the contents of the discussion may be disclosed to outside parties at the privilege holder’s discretion.75
Finally, attorneys representing individuals who serve as in-house legal, compliance, or audit staff should be particularly focused on their client’s role in any internal investigations (including whether their clients should participate at all) and any communications and other materials that their clients may create as a result. While, under US law, these materials may be privileged if created under the direction or supervision of counsel,76 such materials may not be protected from disclosure in a number of other jurisdictions.77
17.6 Evidentiary issues
17.6.1 Production of documents in an investigation/proceeding before another
Individuals in complex cross-border investigations may be subject to requests for information, not only from multiple federal and state authorities within the United States, but from foreign authorities or courts as well. In the United States, authorities such as the DOJ have been increasingly focused on obtaining co-operation from companies and individuals, which may involve the waiver of privilege under US law and the disclosure of potentially privileged materials. While co-operation with US authorities may have certain benefits, counsel should consider the potential implications of voluntarily producing documents in one investigation on any future regulatory proceedings or private civil litigation. In addition, counsel should consider privacy and data protection legislation in the country in which the client or the client’s documents reside, and factor that issue into discussions with US authorities as appropriate.
In particular, the voluntary production of documents in one jurisdiction may amount to a waiver of certain rights and privileges with respect to future proceedings.78 While US authorities may agree to maintain the confidentiality of privileged materials as a condition to waiver, many courts have rejected the notion of a ‘selective waiver’ to a particular authority and have instead found that the production of privileged materials amounted to a wholesale waiver of privilege.79 As a result, privileged materials voluntarily produced to one authority may be subject to discovery, both by other authorities and by third parties in related civil litigation.
Another potential issue concerns the production of documents in a foreign jurisdiction that would otherwise be protected by privilege in the United States. In some instances, US courts have concluded that privilege may be waived if documents are voluntarily disclosed to foreign authorities (as opposed to in response to a court order, subpoena or other demand of a governmental authority backed by sanctions for non-compliance).80 This means that when representing an individual whose documents have been requested by a foreign authority, attorneys should consider challenging that request to the fullest extent of the law to avoid a determination that the disclosure was voluntary and that privilege has been waived in any future proceedings in the United States.
Finally, whether or not the materials are potentially privileged, counsel should bear in mind that authorities have entered into bilateral, multilateral and other ad hoc agreements with one another to facilitate the sharing of information, both domestically and internationally.81 On the one hand, if counsel can convince an authority to formally request documents from its counterparty in a foreign jurisdiction, the client may be viewed as having co-operated with the requesting authority by producing documents to its counterparty through formal procedures, while potentially avoiding a waiver of privilege. On the other, unless counsel has obtained a representation from the authority that any materials produced will remain confidential, counsel should assume that the materials may be disclosed to other interested authorities, both domestic and foreign, without the individual’s knowledge or consent.
17.6.2 Interviews or testimony in civil proceeding prior to criminal proceeding
Attorneys considering a request to interview their individual client or a subpoena compelling their client to testify in a civil proceeding must consider a number of complex issues, particularly when their client faces or could face a parallel criminal proceeding. Many of these considerations are highly fact-specific and should form part of the overall strategy that will be discussed with the client.
Of particular concern is that any statements that an individual makes in a civil proceeding may be used against the individual in any related criminal proceedings or private civil actions in the future. For instance, an individual in a civil proceeding may make incriminating statements or statements that may otherwise assist prosecutors in developing a criminal case. Moreover, providing testimony in a civil case may commit the individual to certain testimony for purposes of the criminal case as well as any private civil litigation that may follow. This also raises the risk that prosecutors may charge the individual with perjury or obstruction of justice if they perceive that the individual’s testimony has materially and improperly changed.
In response to these risks, counsel should consider whether the Fifth Amendment right against self-incrimination under the US Constitution is available, and, if so, the tactical implications of asserting the Fifth Amendment privilege. An individual may not have recourse to the Fifth Amendment privilege, particularly in foreign civil proceedings. If the privilege is available, advantages of asserting the privilege include that the client may be prevented from making statements in a civil proceeding that could be used against him or her in future criminal or civil proceedings or private civil litigation.82 In addition, testifying in a civil or criminal proceeding may, under certain circumstances, amount to a waiver of the Fifth Amendment privilege for purposes of the same proceeding and any future proceedings.83 Conversely, risks of asserting the privilege include that adverse inferences may, under certain circumstances, be drawn in civil or administrative proceedings from an individual’s assertion of Fifth Amendment rights in a prior civil or administrative proceeding.84 Moreover, an individual’s assertion of the privilege in a civil proceeding could factor into law enforcement’s charging decisions.
Given these risks, counsel representing an individual in parallel proceedings should consider seeking to stay the civil proceeding pending the resolution of the criminal proceeding. The decision whether to grant a stay of civil litigation in light of parallel criminal proceedings is within the court’s discretion.85 In considering whether to grant a stay, courts balance a number of factors, including:
the interests of the civil plaintiff in proceeding expeditiously with the civil litigation;
the hardship to the defendant;
the convenience to both the civil and criminal courts;
the interests of any third parties;
the good faith of the litigants (or lack thereof); and
the status of the cases.86
In some instances, when faced with the prospect of US criminal prosecution, it may be in a client’s interest to default in the civil proceeding rather than to expose himself or herself to US jurisdiction. (See also Chapter 15 on representing individuals in interviews.)
17.7 Settlement considerations
In the context of an investigation involving an individual’s current or former employer, the company’s decision to enter into a settlement agreement may have important implications for the individual. Although the individual will not have a seat at the negotiating table, the settlement agreement negotiated by the company may reference the individual by title or by name, reference the individual’s conduct, or even include admissions by the company that implicate the individual. Often, these settlement papers are made public. Whether the settlement papers reference the individual, and if so, the specific language used, can have legal implications, including with respect to any ongoing civil or criminal investigations involving the individual, as well as professional implications, including disclosures in publicly accessible databases with bodies such as FINRA, and eligibility to practise before the SEC, to serve on the boards of directors of US-listed companies, or to be employed by government contractors.
Therefore, individual counsel’s role should not be limited to advocating on behalf of their clients before the relevant authority, but should also extend to interacting with counsel for other relevant parties, including company counsel. Individual counsel who can establish and maintain a good rapport with company counsel may gain insight into any implications the company’s settlement may have on their client, as well as, to the extent possible, engage in discussions with company counsel regarding the language used in the settlement papers to mitigate the risks to their client.
17.8 Reputational considerations87
Individual counsel’s role also extends beyond the confines of legal strategy to anticipating and addressing press exposure and other reputational considerations. While, in some circumstances, it may be helpful to hire outside public relations firms, counsel should consider whether communications between the client, counsel, and outside firms are considered privileged in the relevant jurisdictions.
For instance, in connection with the U.S. Department of Justice’s charges against multiple international soccer officials for FIFA-related corruption allegations, Switzerland has approved the extradition of several officials detained in Zurich. Other FIFA officials have chosen to waive extradition from Switzerland and voluntarily appear to face charges in the United States. See, e.g., Rebecca R. Ruiz, FIFA Official’s Extradition Approved on Eve of Meeting in Zurich, N.Y. Times, 23 September 2015, available at www.nytimes.com/2015/09/24/sports/soccer/fifa-officials-extradition-approved-on-eve-of-meeting-in-zurich.html?_r=0. Separately, in connection with the extradition of an Algerian national from Thailand to face cybercrime charges in the United States, Deputy Attorney General Yates noted that ‘[n]o violence or coercion was used to accomplish this scheme,’ but that ‘[t]his arrest and extradition demonstrates our determination to bring [cybercriminals] to justice.’ Press Release, U.S. Dep’t of Justice, International Cybercriminal Extradited from Thailand to the United States (3 May 2013), available at https://www.justice.gov/usao-ndga/pr/algerian-national-extradited-thailand-face-federal-cybercrime-charges-atlanta-spyeye.
See U.S. Dep’t of State, Treaties in Force: A List of Treaties and Other International Agreements of the United States in Force on 1 January 2013, available at www.state.gov/documents/organization/218912.pdf; U.S. Dep’t of State, Treaties in Force 2014/2015 – Supplement, available at www.state.gov/documents/organization/235185.pdf.
See Inter-American Convention on Extradition, 26 December 1933, 49 Stat. 3111; Agreement on Extradition Between the United States of America and the European Union, entered into force 1 February 2010, S. Treaty Doc. No. 109-14.
See, e.g., United Nations Convention for the Suppression of Unlawful Seizure of Aircraft art. 8, 16 December 1970, 860 U.N.T.S. 105 (‘The offence shall be deemed to be included as an extraditable offence in any extradition treaty existing between the Contracting States.’); United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances art. 6, 20 December 1988, 1582 U.N.T.S. 95 (‘Each of the offences to which this article applies shall be deemed to be included as an extraditable offence in any extradition treaty existing between Parties.’).
See, e.g., Extradition Treaty, U.S.-N.Z., art. 2, 12 January 1970, 22 U.S.T. 1.
See, e.g., Extradition Treaty, U.S.-Lux., art. 2, 1 October1996, T.I.A.S. No. 12,804.
See, e.g., Extradition Treaty, U.S.-U.K. (United Kingdom Extradition Treaty), art. 2, 31 March 2003, S. Treaty Doc. No. 108-23 (‘If the offense has been committed outside the territory of the Requesting State, extradition shall be granted . . . if the laws in the Requested State provide for the punishment of such conduct committed outside its territory in similar circumstances.’ If the laws of the Requested State do not provide for such punishment, the Requested State may grant extradition in its discretion.)
See Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 78dd-3(a) (providing that foreign entities (other than U.S. issuers) and individuals are subject to U.S. jurisdiction if they ‘corruptly . . . make use of the mails or any means or instrumentality of interstate commerce,’ or if they ‘commit any other act in furtherance of’ a proscribed bribery offence, ‘while in the territory of the United States’).
See Chodan v. Government of the United States and Another, [2010] EWHC 2207 (Admin.); Tesler v. Government of the United States, [2011] EWHC 52 (Admin.).
See Indictment ¶ 21, United States v. Tesler & Chodan, No. 09-CR-098 (S.D. Tex. 17 February 2009).
U.S. Dep’t of Justice, Office of the U.S. Attorneys, U.S. Attorneys’ Manual § 9-15.210, available at https://www.justice.gov/usam/united-states-attorneys-manual.
Id. § 9-15.300.
Id. § 9-15.400.
See, e.g., United Kingdom Extradition Treaty, supra note 8, art. 4(1).
See, e.g., id. art. 4(2).
See, e.g., id. art. 4.
See, e.g., id. art. 3.
See, e.g., id. arts. 2, 5, 6.
See, e.g., id. art. 7.
Since 2011, for instance, the DOJ has unsuccessfully sought the extradition of certain former executives and agents of Siemens AG, including German nationals residing in Germany, for their alleged participation in a scheme to bribe Argentine government officials in violation of the FCPA. See Letter from Preet Bharara, U.S. Att’y, Dep’t of Justice, to Denise Cote, U.S. District J., Southern District of New York, U.S. v. Sharef et al., No. 11-CR-1056 (S.D.N.Y. 15 December 2011) (‘The defendants in this case all reside overseas and none of the defendants is currently in custody. As such, none of the defendants will be arraigned in the immediate future.’).
See, e.g., United Kingdom Extradition Treaty, supra note 8, art. 3 (‘Extradition shall not be refused based on the nationality of the person sought.’).
See, e.g., Extradition Treaty, U.S.-Braz., art. VII, 18 June 1962, 15 U.S.T. 2093 (‘There is no obligation upon the requested State to grant the extradition of a person who is a national of the requested State, but the executive authority of the requested State shall, subject to the appropriate laws of that State, have the power to surrender a national of that State if, in its discretion, it be deemed proper to do so.’); Extradition Treaty, U.S.-Ger., art. 7(1), 20 June 1978, 32 U.S.T. 1485 (‘Neither of the Contracting Parties shall be bound to extradite its own nationals. The competent executive authority of the Requested State, however, shall have the power to grant the extradition of its own nationals if, in its discretion, this is deemed proper to do and provided the law of the Requested State does not so preclude.’); Extradition Treaty, U.S.-Fr., art. 3(1), 23 April 1996, S. Treaty Doc. No. 105-13 (‘There is no obligation upon the Requested State to grant the extradition of a person who is a national of the Requested State, but the executive authority of the United States shall have the power to surrender a national of the United States if, in its discretion, it deems it proper to do so.’).
See, e.g., United Kingdom Extradition Treaty, supra note 8, art. 2(1).
For example, in 2005, the DOJ indicted Viktor Kozeny, a Czech national residing in The Bahamas, who was accused of participating in a scheme to bribe Azeri government officials. Although the United States and The Bahamas have entered into an extradition treaty, see Extradition Treaty, U.S.-Bah., 9 March 1990, S. Treaty Doc. 102-17, in 2012, the highest appellate court for The Bahamas ruled that Kozeny could not be extradited, among other things, for acts that would not constitute offences against the law of The Bahamas if they had taken place within The Bahamas, see Superintendent of Her Majesty’s Foxhill Prison & United States v. Kozeny, Privy Council Appeal No. 0073, ¶ 53 (Judicial Comm. of the Privy Council 28 March 2012) (Bah.).
In SEC v. One or More Unknown Traders in the Securities of Onyx Pharmaceuticals, Inc., for instance, the court agreed to maintain a previously imposed asset freeze on accounts that held allegedly illicit trading profits, even while dismissing the SEC’s complaint for failure to present sufficient evidence to support an inference of insider trading. 296 F.R.D. 241, 257 (S.D.N.Y. 2013).
See U.S. Dep’t of Justice, Asset Forfeiture Program, Participants and Roles, https://www.justice.gov/afp/participants-and-roles.
See, e.g., 18 U.S.C. §§ 981, 982.
Fed. R. Crim. P. 32.2(a).
See 18 U.S.C. § 1963(d); 21 U.S.C. § 853(e) (incorporated by reference in 18 U.S.C. § 982(b)(1) and numerous other federal criminal forfeiture statutes).
21 U.S.C. § 853(f) (incorporated by reference in 18 U.S.C. § 982(b)(1) and numerous other federal criminal forfeiture statutes).
U.S. Dep’t of Justice, Asset Forfeiture & Money Laundering Section, Asset Forfeiture Policy Manual at 35, available at https://www.justice.gov/criminal-afmls/file/839521/download (‘It is not necessary for the Government to have the property subject to criminal forfeiture in its possession during the pendency of a criminal forfeiture proceeding. . . . Cases where the Government takes physical possession of property subject to criminal forfeiture with a criminal seizure warrant prior to the entry of a preliminary order of forfeiture are relatively rare.’).
See 18 U.S.C. §§ 982(a), 1963(e); Fed. R. Crim. P. 32.2(b)(1)(A).
21 U.S.C. § 853(p) (incorporated by reference in 18 U.S.C. § 982(b)(1) and numerous other federal criminal forfeiture statutes).
Certain civil forfeiture statutes also contemplate non-judicial or administrative civil forfeiture, in which federal agencies may forfeit property without a court order. See 18 U.S.C. § 983(a)(1); 19 U.S.C. § 1607.
See 18 U.S.C. §§ 983(a)(4), 984(a)(1), 985(c).
Id. § 985(b)(1).
Id. § 981(f) (‘All right, title, and interest in property [subject to forfeiture] shall vest in the United States upon commission of the act giving rise to forfeiture under this section.’); 21 U.S.C. § 853(c) (incorporated by reference in 18 U.S.C. § 982(b)(1) and numerous other federal criminal forfeiture statutes) (same).
Id. § 981(b)(2).
Fed. R. Crim. P. 41(d)(1).
Fed. R. Civ. P., Supp. R. G(3).
18 U.S.C. § 981(b)(2).
Id. § 983(j).
Id. § 983(c).
Onyx, 296 F.R.D. at 254 (citing Sec. Exch. Comm’n v. Unifund SAL, 910 F.2d 1028, 1041 (2d Cir. 1990)).
15 U.S.C. § 78u(d)(1).
Onyx, 296 F.R.D. at 254–55 (citing Smith v. Sec. Exch. Comm’n, 653 F.3d 121, 128 (2d Cir. 2011)).
Id. (citing 15 U.S.C. § 78aa).
See id. at 255–57.
See Sec. Exch. Comm’n v. Grossman, 887 F. Supp. 649, 661 (S.D.N.Y. 1995).
See, e.g., Mutual Legal Assistance Treaty, U.S.-U.K., arts. 1 and 16, 6 January 1994, T.I.A.S. No. 96-1202 (providing for ‘mutual assistance’ in connection with ‘executing requests for searches and seizures’ and ‘identifying, tracing, freezing, seizing, and forfeiting the proceeds and instrumentalities of crime and assistance in related proceedings’).
See, e.g., id. art. 19(2) (providing that the parties may, at their discretion, and as agreed in writing, provide mutual assistance with respect to ‘hearings or any investigations before any court, administrative agency or administrative tribunal with respect to the imposition of civil or administrative sanctions’). While the United States has not entered into any treaties for the recognition of foreign court judgments in civil actions, private civil litigants may seek to register final U.S. court decisions with foreign courts through exequatur proceedings under the law of the foreign jurisdiction. See, e.g., French Code Civ. P. art. 509 (‘Judgments rendered by foreign courts and deeds received by foreign officers shall be enforceable on the territory of the French Republic in the manner and under the circumstances specified by law.’).
See, e.g., 18 U.S.C. § 983(d) (providing for an ‘innocent owner defence’ with respect to property subject to civil forfeiture).
See Sec. Exch. Comm’n v. Petters, No. 09-1750, 2009 WL 3379954, at *3 (D. Minn. 20 October 2009) (‘A district court may exercise its discretion to release frozen funds to pay living expenses or attorney fees, even in instances where the profit from the alleged wrongdoing exceeds the amount of the frozen funds.’).
See U.S. Const. amend. VI (‘In all criminal prosecutions, the accused shall enjoy the right . . . to have the assistance of counsel for his defense.’).
See Sec. Exch. Comm’n v. Coates, No. 94 Civ. 5361, 1994 WL 455558, at *3 (S.D.N.Y. 23 August 1994) (‘A party is not entitled to foot his legal bill [in a civil matter] with funds that are tainted by his fraud.’).
See id.; Onyx, 296 F.R.D. at 254 (stating that the primary purpose of an asset freeze is to secure funds for any future court-ordered payments).
Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 626–27, 631 (1989) (holding that post-conviction forfeiture of tainted assets that a convicted defendant would have used to pay counsel was constitutional because ‘[a] defendant has no Sixth Amendment right to spend another person’s money for services rendered by an attorney,’ and because title in assets subject to criminal forfeiture under 21 U.S.C. § 853(c) vests in the United States at the time of the criminal act giving rise to forfeiture); United States v. Monsanto, 491 U.S. 600, 614, 615 (1989) (holding that pretrial restraint of tainted assets was constitutional).
Monsanto, 491 U.S. at 615 (citing 21 U.S.C. § 853(a)).
See United States v. Monsanto, 924 F.2d 1186, 1191 (2d Cir. 1991) (en banc) (on remand from the Supreme Court, holding that the Fifth and Sixth Amendments entitle a criminal defendant seeking to use restrained funds to hire counsel of choice to an adversarial, pretrial hearing at which the court evaluates whether there is probable cause to believe that the defendant committed forfeitable crimes and that the property at issue has the requisite connection to the crime), abrogated, in part, by Kaley v. United States, 134 S. Ct. 1090, 1105 (2014) (holding that a defendant does not have a constitutional right to contest in a Monsanto hearing a grand jury’s determination that there was probable cause to believe that the defendant committed a forfeitable offence); United States v. Bonventre, 720 F.3d 126, 131 (2d Cir. 2013) (clarifying the Second Circuit’s en banc holding in U.S. v. Monsanto and holding that, to trigger a Monsanto hearing, defendants must make a threshold showing that they have insufficient alternative assets to fund counsel of choice).
Luis v. United States, No. 14-419, slip op. at 16 (2016) (plurality op.).
See Chapter 14 on representing individuals in interviews.
U.S. Const. amend. v. (‘No person shall be . . . compelled in any criminal case to be a witness against himself.’).
See Kastigar v. United States, 406 U.S. 441, 460–62 (1972) (holding that U.S. criminal authorities may confer immunity and compel testimony from a witness who invokes the Fifth Amendment privilege against self-incrimination, but that the prosecution then has an affirmative duty to prove that any evidence it intends to use in subsequent criminal proceedings against that individual is derived from a legitimate source wholly independent of the compelled testimony).
Memorandum from Sally Quillian Yates, Deputy Attorney Gen., U.S. Dep’t of Justice, Individual Accountability for Corporate Wrongdoing (9 September 2015), available at https://www.justice.gov/dag/file/769036/download. The ‘Yates Memorandum’ articulated the DOJ’s policies with respect to the prosecution of individuals in corporate fraud cases, including that, to be eligible for any co-operation credit, corporations under investigation must provide the DOJ with ‘all relevant facts about the individuals involved in corporate misconduct.’
See Upjohn v. United States, 449 U.S. 383, 397 (1981).
Case 155/79, Austl. Mining & Smelting Europe Ltd. v. Comm’n of the European Communities, 1982 E.C.R. 1575 (1982); Case C-550/07, Azko Nobel Chems. & Akcros Chems. Ltd. v. European Comm’n, 2010 E.C.R. I-08301 (2010).
See, e.g., Indian Evidence Act of 1872 § 126; Malaysia Evidence Act § 129.
See, e.g., Gucci Am., Inc. v. Guess? Inc., 271 F.R.D. 58, 65 (S.D.N.Y. 2010) (finding that U.S. privilege protections applied to communications made in Italy involving Italian in-house counsel because the communications related to U.S. legal proceedings and reflected advice on U.S. law, but providing that foreign privilege protections generally would apply to communications relating to foreign law or legal proceedings).
See Case 155/79, Austl. Mining & Smelting Europe Ltd., 1982 E.C.R. 1575; Case C-550/07, Azko Nobel Chems., 2010 E.C.R. I-08301.
See Upjohn, 449 U.S. at 390.
Model Rules of Prof’l Conduct r. 1.13(f), 4.3.
Upjohn, 449 U.S. at 397.
See, e.g., Case C-550/07, Azko Nobel Chems., 2010 E.C.R. I-08301.
See, e.g., In re Vitamins Antitrust Litig., No. 99-197, 2002 U.S. Dist. LEXIS 26490, at *105 (D.D.C. 23 January 2002) (concluding that disclosures to foreign regulators would be considered voluntary disclosures amounting to a privilege waiver unless they were made ‘in response to a court order or subpoena or the demand of a governmental authority backed by sanctions for noncompliance,’ and ‘any available privilege or protection’ was asserted at that time).
See, e.g., In re Pacific Pictures Corp. 679 F.3d 1121, 1128–29 (9th Cir. 2012) (holding that attorney–client privilege had been waived as to documents produced to the U.S. Attorney’s Office, despite the existence of a confidentiality agreement); In re Steinhardt Partners, L.P., 9 F.3d 230, 234–35 (2d Cir. 1993) (rejecting the doctrine of ‘selective waiver’ for documents voluntarily disclosed to the SEC).
See, e.g., In re Vitamins Antitrust Litig., 2002 U.S. Dist. LEXIS at *105.
See, e.g., Sec. Exch. Comm’n, Cooperative Agreements with Foreign Regulators, https://www.sec.gov/about/offices/oia/oia_cooparrangements.shtml (providing a list of the SEC’s enforcement-related cooperation arrangements with foreign regulators).
See Kastigar, 406 U.S. at 444 (holding that the Fifth Amendment privilege may be asserted ‘in any proceeding, civil or criminal, administrative or judicial, investigatory, or adjudicatory’).
While many courts have held that giving testimony in an earlier proceeding or before a grand jury only amounts to a waiver of the Fifth Amendment privilege with respect to the same proceeding, see, e.g., United States v. Gary, 74 F.3d 304, 312 (1st Cir. 1996), a minority of courts have held that giving testimony may amount to a waiver at subsequent proceedings, see, e.g., Walker v. Lockhart, 763 F.2d 942, 951–52 (8th Cir. 1985).
See Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) (holding that respondent’s Fifth Amendment rights were not violated where he was advised that he was not required to testify but that his silence could be held against him); Lefkowitz v. Cunningham, 431 U.S. 801, 808 n.5 (1977) (clarifying that Baxter permitted an adverse inference to be drawn in a civil case from a party’s refusal to testify, but that the Baxter respondent’s silence ‘was only one of a number of factors to be considered’).
Microfinancial, Inc. v. Premier Holidays Int’l, 385 F.3d 72, 77 (1st Cir. 2004).
Id. at 78 (citing Fed. Savs. & Loan Ins. Corp. v. Molinaro, 889 F.2d 889, 903 (9th Cir. 1989); Arden Way Assocs. v. Boesky, 660 F. Supp. 1494, 1496–97 (S.D.N.Y. 1987); Digital Equip. Corp. v. Currie Enters., 142 F.R.D. 8, 12 (D. Mass. 1991).
See Chapter 35 on protecting corporate reputation.
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