Source: https://wp.nyu.edu/compliance_enforcement/2018/03/27/the-clash-of-legal-cultures-in-the-brave-new-world-of-international-law-enforcement/
Timestamp: 2019-06-19 13:59:43
Document Index: 667250638

Matched Legal Cases: ['§ 116', '§ 116', 'EWCA ', '§ 3282', '§ 3293', '§ 3295', '§ 1201', '§ 3293']

The Clash of Legal Cultures in the Brave New World of International Law Enforcement | Compliance and Enforcement
Defense lawyers all around the world have heard loud and clear that prosecutors and police agencies have announced a new age of international cooperation. Prosecutors from one country have been posted to the offices of another. Agents from nations around the world now sit at desks next to each other in central locations like London. Global resolutions of big cases are being announced by enforcers in multiple jurisdictions. One of the main subject-matter focuses of these joint cases has been anti-corruption – namely the Foreign Corrupt Practices Act in the United States and the Bribery Act in the United Kingdom.
With this cooperation, though, comes a clash of both the substantive and ethical rules of different countries. Some of these clashes will work to the advantage of clients, and others will pose increased risks. Either way, to form a sound defense strategy in this “brave new world of international criminal enforcement,” U.S. v. Allen, 864 F.3d 63, 90 (2d Cir. 2018), it is increasingly important to have a working understanding of important differences abroad.
To that end, in this article we discuss five major legal differences between U.S. and English law, each of which can profoundly affect the course of an investigation and prosecution. The five are:
Fifth Amendment. The Fifth Amendment protection of the right to remain silent does not exist to the same degree in England. As a consequence, compelled testimony in England can pollute a prosecution in the U.S. – and there is already one prosecution in which it has.
Attorney-client privilege. For over thirty years, lawyers’ interviews of a corporate client’s employees have been protected in the U.S. by the attorney-client privilege. Under recent decisions by the High Court of England, the same types of interview memoranda have been found not privileged in England – and prosecutors have obtained a court order that old interview memoranda by U.S. lawyers be turned over for use against the client.
Witness preparation. English rules prohibit typical U.S.-style witness preparation by both the prosecution and defense. Not only will this difference create strains among defense teams strategizing on both sides of the Atlantic, but it may also pose problems in how prosecutors handle cooperating witnesses. English defense lawyers may begin to contend that the way that witnesses or cooperators were handled by U.S. lawyers has tainted English trials.
Statute of limitations. There is no statute of limitations under English criminal law. Coupled with the lack of attorney-client privilege for internal investigations, this creates ongoing prosecutorial risk in England for events beyond the U.S. statute of limitations.
Corporate criminal liability. There is corporate criminal liability in only limited circumstances in England. Thus, historically, English prosecutors have lacked the leverage that U.S. prosecutors have used for well over a decade to “encourage” corporate clients to investigate and cooperate against their employees. The U.K. Bribery Act, of relatively recent vintage, has broadened corporate criminal liability in England, and time will tell the extent to which English prosecutors exploit that leverage.
Prosecutors and regulators in England can compel a witness’s testimony without granting that witness the protections that the U.S. Constitution views as co-extensive with the right to remain silent.
This can pose problems of a constitutional dimension for U.S. prosecutors when their overseas counterparts compel a target’s testimony. Indeed, in a case decided last July, the Second Circuit reversed two convictions after concluding that the defendants’ compelled testimony in England had been used against them. See U.S. v. Allen, 864 F.3d 63 (2d Cir. 2018).
The Department of Justice warned in its appellate brief that such a ruling could end up being a windfall for defendants – a prophecy that will rightly intrigue lawyers as they formulate an international defense strategy.
The Fifth Amendment of the U.S. Constitution directs that “No person shall . . . be compelled in any criminal case to be a witness against himself.” U.S. Const. amend. V.
A witness may invoke the Fifth Amendment “in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory, and it protects against any disclosures that the witness reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used.” Kastigar v. U.S., 406 U.S. 441, 444-45 (1972). The Fifth Amendment forbids any government comment at a criminal trial on a defendant’s refusal to testify because that would be “a penalty imposed by courts for exercising a constitutional privilege.” Griffin v. California, 380 U.S. 609, 614 (1965).
Under Fifth Amendment doctrine, a government entity (whether state or federal) may not compel testimony unless it provides protections co-extensive with the right to remain silent. This means that the witness can be compelled to speak only if fully protected in a criminal case against both the use of (a) compelled answers and (b) any evidence derived from those answers. Lefkowitz v. Cunningham, 431 U.S. 801, 805 (1977); Kastigar, 406 U.S. at 460-62. This protection is provided through an official immunity grant protecting against both types of damage, known as “use and derivative use” immunity. Having granted a witness immunity and compelled his or her testimony, the government assumes a heavy burden if it later nonetheless chooses to prosecute that witness: “This burden of proof . . . is not limited to a negation of taint; rather, it imposes on the prosecution the affirmative duty to prove that the evidence it proposes to use is derived from a legitimate source wholly independent of the compelled testimony.” Kastigar, 406 U.S. at 460.
Both the Serious Fraud Office (“SFO”) and the Financial Conduct Authority (“FCA”) can compel a witness to answer questions in interview. See Section 2 Criminal Justice Act 1987 and Section 171 Financial Services and Markets Act 2000. Under the statutes and human rights law, this testimony cannot be used directly against the witness in a criminal prosecution, but the witness receives no “derivative use” immunity.
In addition, with some important exceptions, English prosecutors can ask that juries draw an adverse inference if a defendant (a) is silent or fails to provide relevant details during police questioning and then (b) offers a defense at trial that relies on those details. See Section 34 to 37 Criminal Justice and Public Order Act 1994. Thus in England police “caution” a witness before questioning – much as U.S. police officers provide “Miranda” warnings. But the caution is very different, as the potential defendant is advised: “[I]t may harm your defence if you do not mention when questioned something which you later rely on in court. Anything you do say may be given in evidence.” The Police and Criminal Evidence Act 1984 (PACE), Code of Practice C.
Ramifications for Joint Investigations
When U.K. and U.S. investigations overlap, authorities may take steps to avoid tainting U.S. prosecutions with evidence derived from statements compelled by U.K. authorities. But, as demonstrated in Allen, those efforts do not always survive the twists and turns of dual-jurisdictional enforcements.
In Allen, the Second Circuit reversed the conviction of two U.K. bankers, Allen and Conti, on charges related to LIBOR manipulation. The Court held that the prosecution’s derivative use of compelled testimony violated the defendants’ Fifth Amendment rights. 864 F.3d at 101. During the LIBOR investigation, U.S. and U.K. authorities had worked to avoid tainting U.S. evidence with U.K. compelled testimony: the FCA and DOJ had maintained a “wall” between their investigations, and sequenced U.S. interviews ahead of U.K. interviews. Id. at 76.
These safeguards, however, did not prevent cross-pollination of evidence once enforcement actions were taken, first in the U.K, and then in the U.S. Allen and Conti’s testimony, compelled by U.K. authorities, was disclosed to a third banker, Robson, as part of the U.K.’s evidence against Robson in a regulatory proceeding. Id. at 76-77. After he had reviewed Allen and Conti’s compelled testimony, U.K. regulatory proceedings against Robson were stayed in favor of criminal charges against him in the U.S. Robson then cooperated with U.S. prosecutors, giving evidence that led to Allen and Conti’s indictments and convictions. Id. at 77-78. While Robson claimed the compelled testimony did not inform his testimony, the Court said the prosecution did not meet its burden to show that Robson’s evidence “was derived from a wholly independent source.” Id. at 97.
The holding in Allen will spur reactions on both the defense and prosecutorial sides. U.S. defense lawyers will be alert for ways to exploit testimony compelled in England, to capitalize on DOJ’s warning that foreign governments might “inadvertently scuttle prosecutions in the U.S. by compelling testimony and then making the testimony available to potential witnesses or the public.” Brief for the United States in U.S. v. Robson, 2016 WL 5869834 at *123. And, in turn, enforcement authorities are likely to respond with increasingly sophisticated strategies for cooperation.
2. Privilege in Investigations
As a general matter, memoranda and notes of interviews that lawyers conduct as a part of an internal investigation are privileged under U.S. law but apparently not under current U.K. law. See Pope, Hagedorn, Gibbons, and Lattimer, The Growing Danger to Privilege in Investigations, (August 2017).
Coupled with the lack of a statute of limitations in the U.K. (see section 4, below), this creates the unpleasant risk that U.K. prosecutors could compel the production of memoranda of investigations of matters that are past the U.S. statute of limitations and prosecute viable cases (if any) laid out in them.
The U.S. Supreme Court set out the leading U.S. rule in the well-known case Upjohn Co. v. United States, 499 U.S. 383 (1981). The Court held that lawyers’ interviews of a corporate client’s employees are covered by the attorney-client privilege and that the lawyers’ memoranda and notes of those interviews were protected work product. Id. The crux of the holding was that the employees of client corporations are the very people who have the facts that lawyers need to advise their clients competently, and thus the attorney-client privilege must protect not only the giving of advice but also the “giving of information to the lawyer.” 449 U.S. at 390.
In two cases in 2016 and 2017, the English High Court held that notes and memoranda of witness interviews conducted by outside counsel during internal investigations were not privileged. See Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (QB) (“ENRC”); The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) (“RBS”). They were not protected by English legal advice privilege, lawyers’ working papers privilege, nor litigation privilege.
The reasoning underpinning the two holdings was:
Legal advice privilege is strictly limited to communications between lawyers and the small group of employees authorized “to seek and receive legal advice.” It does not extend to the lower-level employees being interviewed. RBS ¶ 91.
Lawyers’ working papers are privileged only when they give a “clue” as to the “trend” of the legal advice. Right or wrong, U.K. courts have taken the position that mere interview memoranda (without more evidence to show the privileged nature of the document) give no such clue. RBS ¶¶ 102, 107, 126.
Litigation privilege applies only to documents created for the dominant purpose of conducting adversarial litigation that is reasonably in contemplation. ENRC ¶ 51. It consequently does not apply, said the court, when one is defending against a government investigation because “an investigation is not adversarial litigation.” ENRC ¶ 151. Similarly, the High Court held that avoiding a prosecution is not the same as defending against one that has been brought. ENRC ¶¶ 167-168, 170-171. Finally, one cannot, as a matter of law, “reasonably anticipate” adversarial litigation (that is, a prosecution) unless and until you have discovered facts strong enough that a prosecutor would think there was “a good chance of securing a conviction.” ENRC ¶ 160.
As far as these holdings go, they still do not undercut privilege for investigations that occur after a government agency has threatened litigation. Thus the English High Court, in a highly fact-specific decision, did find that particular interview memoranda were covered by litigation privilege. See Bilta (UK) Limited and Others v (1) Royal Bank of Scotland Plc (2) Mercuria Energy Europe Trading Limited [2017] EWHC 3535 (Ch). In that case, however, a government agency had written a letter to the client that, said the judge, constituted a clear threat of litigation. Because the investigation at issue took place after the threat, litigation privilege applied.
Once again, there are potential ramifications here for both prosecutors and defense counsel. For U.S. defense counsel, the risk is that documents that are clearly privileged under U.S. law are likely not privileged under the law of England and Wales. Thus there is a risk that English prosecutors can demand and will receive materials that, when created, were believed to be privileged and confidential.
On the prosecutorial side, U.S. prosecutors must fear litigation both about taint and ethical violations if their English counterparts receive U.S. privileged materials and share information from them. It is not hard to anticipate a fact pattern analogous to that in US v. Allen, 864 F.3d 63 (2d Cir. 2017) – but with the shared evidence being privileged communications rather than compelled testimony. And there is no shortage of cases where defendants have attacked prosecutions (or prosecutors) on Sixth Amendment or ethical grounds, contending that prosecutors have infringed on the attorney-client relationship. See, e.g., U.S. v. Morrison, 449 U.S. 361, 365 (1981) (court must “identify and neutralize the taint by tailoring relief appropriate in the circumstances”); In re Robert Neary, 84 N.E.3d 1194 (S.Ct. In. 2017) (prosecutor suspended for eavesdropping on attorney-client communications); State ex rel. Winkler v. Goldman, 485 S.W.3d 783 (Mo. Ct. App. 2016) (disqualifying prosecutor’s office and appointing a special prosecutor after incursion into defendant’s attorney-client relationship).
3. Witness Prep
A U.S. lawyer is expected to prepare a client for testimony by: discussing the client’s anticipated testimony; challenging the client’s recollection with inconsistent evidence or testimony; and discussing predicted lines of cross examination and possible responses. A lawyer may “rehearse” direct and cross examination, and may even (according to leading authorities) suggest particular wording for the client – as long, of course, as that wording is truthful and not misleading. Precisely the same conduct would be an ethical violation for an English lawyer.
In the U.S., diligently preparing a witness is part of a lawyer’s duty: “[I]ndeed, a lawyer who did not prepare his or her witness for testimony, having had an opportunity to do so, would not be doing his or her professional job properly.” DC Ethics Opinion No. 79 (Dec. 18, 1979) (“Opinion No. 79”).
Proper, diligent preparation can include:
discussing the witness’s testimony;
revealing other testimony or evidence and asking the witness to “reconsider” recollection in that light;
reviewing documents; discussing probable lines of hostile cross examination; and
“rehearsal” of testimony.
Restatement (third) Law Governing Lawyers § 116, comment (b).
In addition, a U.S. lawyer “may suggest choice of words that might be employed to make the witness’s meaning clear.” Restatement (third) Law Governing Lawyers § 116, comment (b). Indeed, a lawyer’s suggestion of “particular language” may be an aid to “clarity and accuracy.” Opinion No. 79.
Official pattern jury charges script the judge to charge the jury that it is “normal” for lawyers to meet with witnesses and review documents. For example, New York State’s pattern jury instruction is “Speaking to a witness about his or her testimony and permitting the witness to review materials pertaining to the case before the witness testifies is a normal part of preparing for trial, and is not improper.” N.Y. Pattern Jury Instruction, (“Witness Pre-trial preparation”).
The ethical lodestone is whether the witness’s testimony is true and not misleading. Thus the same pattern jury instruction concludes: “Of course, in the process of trial preparation, a [lawyer] may not suggest that the witness depart from the truth.” Id. In one sense, it is the witness’s oath that is regarded as the ultimate safeguard: “[T]he governing consideration for ethical purposes is whether the substance of the testimony is something the witness can truthfully and properly testify to.” Opinion No. 79.
Some U.S. legal ethicists thought one law firm crossed the line when it gave class action witnesses a lengthy deposition preparation document, including direct instructions and frequent reminders of how their testimony would impact their financial settlement in the class action. Yet state disciplinary authorities dismissed ethical charges against the attorneys in that case. See W. William Hodes, The Professional Duty to Horseshed Witnesses Zealously, within the Bounds of the Law, 30 Tex. Tech L. Rev. 1343, n30, n47 (1999).
The rule in England is the opposite, and was set forth by the Court of Appeal in the leading case R v Momodou: “Training or coaching for witnesses in criminal proceedings (whether for prosecution or defence) is not permitted.” [2005] EWCA Crim 177. The court held that “coaching” inevitably poses an undue risk that memories would be “contaminated” – either inadvertently or deliberately. Id.
Reflecting this holding, the Bar Standards Board Handbook (the document that governs the conduct of barristers) directs: “[Y]ou must not rehearse, practice with or coach a witness in respect of their evidence . . . .” Rule C9.4. Thus there are clear potential ethical consequences for lawyers who engage in witness “training.”
In addition to consequences for the lawyer, there can also be consequences to the criminal case. For example, witness training of prosecutorial witnesses can lead to corrective jury charges and even the outright dismissal of the criminal case. As happened in Momodou itself: “In the case of one defendant [tried with Momodou] against whom the evidence largely consisted of witnesses who had been so trained, [the trial judge] withdrew the case from the jury.” Momodou ¶ 45.
In a world of joint investigations, it is inevitable that both U.S. and English prosecutors and regulators will often focus on the same witnesses, subjects, and targets. This will raise questions for English and U.S. lawyers and practitioners – both defense lawyers and prosecutors.
On the defense side, in discharging one’s basic duty to a client, U.S. lawyers will engage in conduct that might be viewed as “contaminating” a witness in England. What obligations will solicitors and barristers have to inform the court or their opponents? May they refer English clients to U.S. practitioners knowing what the U.S. lawyers will do? How should lawyers properly prepare witnesses in investigations where the place of the eventual tribunal(s) is not yet known? Must U.S. lawyers forbear from discharging their duty to prepare witnesses? Must English practitioners be walled off from what their U.S. counterparts are doing? And what happens if partners in a single, international firm represent the same defendant – one partner in the U.S. and one in England?
On the prosecutorial side, the issue sharpens in the area of prosecution witnesses, especially those who are cooperating with the prosecution. How will English courts deal with witnesses who have been extensively prepped by their own U.S. lawyers – or by U.S. prosecutors in the case of cooperating witnesses? How and when will English defense lawyers raise this issue when prosecution witnesses have been prepared abroad for related testimony?
There is no statute of limitations in England in criminal cases, allowing English prosecutors to investigate and prosecute financial misconduct that would be time-barred in the U.S.
By and large, prosecutors in the U.S. must bring criminal cases within a fixed period of time after a crime has been committed. The period, known as the “statute of limitations” is set by statute. The default statute of limitations under federal law is five years, see 18 U.S.C. § 3282, but the period is longer for others, see, e.g., 18 U.S.C. § 3293 (mail or wire fraud affecting a financial institution: 10 years); 18 U.S.C. § 3295 (arson: 10 years); 18 U.S.C. § 1201 (kidnapping where death results: no limitation). The statute of limitations is five years for mail and wire fraud that does not affect a financial institution. 18 U.S.C. § 3293. The default five-year statute of limitations applies to the FCPA.
The U.S. Supreme Court has explained that the purpose of a statute of limitations is “to protect individuals from having to defend themselves against charges when the basic facts may have become obscured by the passage of time, and to minimize the danger of official punishment because of acts in the far-distant past.” Toussie v. United States, 397 U.S. 112, 114-115(1970).
In addition, said the Supreme Court, “Such a time limit may also have the salutary effect of encouraging law enforcement officials promptly to investigate suspected criminal activity.” Id.
There is no statute of limitations for criminal conduct in England. Indeed, a recent deferred prosecution agreement entered into between the SFO and Rolls-Royce concerned conduct dating back to 1989, and according to press reports the current ongoing investigation into the allegations of corruption against GPT Special Project Management may involve conduct going back a similar period.
First, prosecutors in England will be able to bring cases based on conduct that is simply too old for their U.S. counterparts.
Second, as the U.S. Supreme Court observed, the presence of a statute of limitations does, indeed, have an effect on U.S. prosecutors – all of whom learned their craft with a keen eye on the statute-of-limitations clock. The statute of limitations is one of the factors that imparts a sense of investigative urgency in the U.S.
The great engine for corporate cooperation in the U.S. is that corporations can be criminally charged for the acts of their employees – even low-level employees. This creates an enormous incentive for corporations to “cooperate” – to provide evidence against others to mitigate or eliminate consequences at sentencing. As a practical matter, in the corporate context, the people against whom a corporation can most easily cooperate are the corporation’s own employees.
Under the law of England and Wales, however, corporations can be held criminally liable only under extremely limited circumstances. As a practical matter, this dramatically reduces a corporate client’s reason for cooperating. To the contrary, when there is little risk of criminal liability for the corporation, the corporate client’s incentive can be to resist government investigations forcefully.
The general rule in the U.S. is that a corporation can be criminally charged when an employee commits a crime for the corporation’s benefit. Specifically, under federal law, a corporation can be prosecuted under the doctrine of respondeat superior. The employer will be liable as long as the government can prove (1) the employee committed the crime while acting within the scope of employment, and (2) the employee’s actions were motivated at least in part by a desire to benefit the corporation. See U.S. v. Twentieth Century Fox Film Corp., 882 F.2d 656, 660 (2d Cir. 1989); see also Consolidated Edison Co. of New York, Inc. v. United States, 221 F.3d 364, 370 (2d Cir. 2000); U.S. v. Ionia Mgmt., S.A., 526 F. Supp. 2d 319, 324 (D. Conn. 2007). Both of these elements have been broadly defined.
For most offenses, the crimes of mere employees are not enough to establish criminal liability of the corporation. Instead, a company is typically criminally liable for only the acts of its “directing mind.” The “directing mind” is confined to a narrow band of high-level personnel: “The ambit of those who fall into this category is both limited and uncertain, save to say that the officers of the company and the main board are likely to be included.” Blackstone’s Criminal Practice § A6.2 (2016) (Corporate Liability, Rules of Attribution: Principle of Identification). Under this general rule, it is difficult as a practical matter to charge – or threaten to charge – most corporations with crimes.
There are, however, two recent exceptions to the rule. In the first criminal offense of its kind in English law, Section 7 of the Bribery Act makes a commercial organization criminally liable if it fails to prevent bribery by its “associated persons.” This means that should a person acting on behalf of a commercial organization (be that an employee, and agent, a subsidiary company, or another) bribe someone to obtain or retain business for the commercial organization, the organization is criminally responsible. This offense extends to any commercial organization that carries on a part of a business in the U.K., and the offense carries an unlimited fine. The only defense is to show that the organization had adequate procedures in place to prevent such bribery from occurring.
The second and third offenses of this kind are contained in Sections 45 and 46 of the Criminal Finances Act 2017, which make organizations criminally liable if they fail to prevent their associated persons facilitating the evasion of tax due in the U.K. or elsewhere in the world.
Whether or not a prosecutor can charge a corporation with a crime profoundly affects the defense culture in that jurisdiction. It is almost a cliché in the United States that defense lawyers for corporations have little choice but to cooperate, and that defense lawyers for individuals will often fight. The difference is clear: few corporations can bear the consequences of being criminally charged, and, thus, cooperation is often their only realistic strategic avenue.
U.S. prosecutors have strongly leveraged this corporate fear of being charged, including through formal policies. Thus DOJ’s policy – enunciated in the Yates memo and now codified in DOJ’s FCPA Corporate Enforcement Policy – is that corporations are ineligible for cooperation credit unless they provide all relevant facts about individual misconduct. DOJ Memo, Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015); U.S. Attorneys’ Manual 9-47.120.
In England, on the other hand, the failure-to-prevent corporate offenses are only of recent vintage, so experienced English defense lawyers have grown up in a system where no sword was dangling over their corporate client’s head. Thus, they are more often strategically inclined than their U.S. counterparts to be confrontational and non-cooperative with prosecutors. Perhaps as a by-product of this defense culture, English prosecutors are far more skeptical of internal investigations than their U.S. counterparts – who often view internal investigations conducted by big firms as almost an extension of their own resources.
Peter B. Pope, Nancy C. Jacobson, and Kelly Hagedorn are partners at Jenner & Block LLP
This entry was posted in Corporate Criminal Liability and Enforcement, Corporate Investigations, Individual Liability, UK Liability and Enforcement and tagged Kelly Hagedorn, Nancy C. Jacobson, Peter B. Pope on March 27, 2018 by Michelle Louise Austin.
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