Generally, the Supreme Court has approved the Government’s use in a criminal case of evidence gathered in a related civil proceeding, often by a civil agency of the Government. The leading authority in this area is United States v. Kordel, 397 U.S. 1 (1970). The Kordel Court, addressing the criminal use of evidence garnered by the FDA, required only that the Government show an absence of bad faith on the part of the civil agency. Id. at 12-13. A civil action brought solely to advance a criminal investigation is one brought in bad faith. Id.; United States v. Rand, 308 F. Supp. 1231 (N.D. Ohio 1970).
Of course, a prosecutor violates Fed. R. Crim. P. 6(e) if evidence collected by a grand jury is turned over to civil authorities, even within the same United States Attorney’s Office, absent the applicability of an exception to that Rule. E.g., 18 U.S.C. § 3322 (disclosure permitted in connection with civil forfeiture).
Recently, the Ninth Circuit reinstated indictments which had been dismissed by a district court based on the Kordel standard and in so doing breathed new life, and breadth, into the government's ability to manipulate civil proceedings to assist criminal prosecutions. In United States v. Stringer, 521 F. 3d 1189 (9th Cir. 2008), the SEC first began investigating Stringer, the former CEO of a defense contractor, and others for fraud, then began holding coordination meetings with the U.S. Attorney’s Office. A criminal investigation into the same activities was then initiated.
In due course, access to the SEC’s files was granted to the prosecutors. The SEC was advised that targets of the investigation included Stringer and his former CFO, although apparently a grand jury had not been formally convened at that point in time.
The prosecutors stayed hidden to the targets, but coordinated with the SEC on how the latter should conduct witness interviews, and even suggested the venue for SEC depositions to facilitate criminal prosecution of false statements made in depositions in that district. Prior to the SEC depositions of Stringer and other persons who subsequently became defendants, the witnesses were given an advice of rights and a warning text explaining only that the SEC often makes its files available to federal prosecutors. Asked directly by Stringer’s attorney whether any, and if so which, U.S. Attorney’s Office was working with the SEC, however, the SEC attorney was less than candid and made no disclosure.
Following their indictment, Stringer and the other defendants moved to dismiss the indictment alleging a due process violation in the misuse of two parallel proceedings and moved to suppress their statements to the SEC. Defendants argued that their Fifth Amendment rights were violated by the SEC’s trickery and deceit.
The Ninth Circuit rejected the argument that defendants’ Fifth Amendment rights were not undermined by the quality of the notice given to them by the SEC; even though the notice only generally warned of the possibility of criminal prosecution and did not identify the prosecutors with whom the SEC was shaping strategy, the notice was not deemed to be deceitful. The court also naively found no Kordel violation because the SEC investigation began first, which "tends to negate any likelihood that the government began the civil investigation in bad faith as, for example, in order to obtain evidence for a criminal prosecution. Id. at 1197-99.
It remains to be seen how Stringer is received by other circuit courts of appeals. Unless checked, the Stringer analysis leaves criminal prosecutors absolutely free to orchestrate SEC or other agency investigations, choreographing the content and even location of depositions, and allows the SEC or other agency to act with no meaningful disclosure to deponents of the furious behind-the-scenes activity designed solely to collect evidence against those witnesses.
