White Collar Defense and Compliance : New Jersey White Collar Defense Lawyer & Attorney : Fox Rothschild Law Firm : Criminal Defense, Insider Trading, RICO, Consumer Fraud : New Jersey, New York City

In an effort to turn the tables on a person believed to be cooperating with the government, an attorney may direct his client to record conversations with the informant, hoping to hoard those recordings for later trial use against the informant, secure in the belief that the attorney-directed recordings are protected from the prying eyes of the government by the work product doctrine. In the Second Circuit, at least, that attorney would be wrong.

In In re Grand Jury Subpoena Dated July 6, 2005, 510 F.3d 180 (2nd Cir. 2007), cert. denied, 2008 WL 2047559 (2008), an attorney opposed a grand jury subpoena seeking the tapes' production on the ground that the recordings constituted opinion attorney work product, entitled to the greatest level of protection, because the topics raised by his client with the other party and captured on tape reflected the attorney’s mental impressions and theories. The Second Circuit rejected the argument, largely because of a procedural flaw: the attorney did not produce the recordings for in camera review by the district court, so the only support for any finding of opinion work product was the attorney’s conclusory assertions about the recordings’ content.

Protected only as lesser fact work product prepared in anticipation of litigation, the court of appeals agreed with the district court that the government had shown substantial need for the information and an inability to obtain the equivalent elsewhere. The district court’s order directing compliance with a grand jury subpoena for the recordings was affirmed.

It is unclear from the opinion why the tape recordings were not reviewed by the district court, that is, whether the judge did not ask for them or the attorney simply did not volunteer them. Except in the unusual situation, it would seem that the better practice in arguing for opinion work product is to let the judge see, or hear, exactly what it is that purports to reflect the attorney’s mental impressions.

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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 (9^th 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.

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It is often exceedingly difficult for a defense attorney to obtain access to the legal instruction given by the prosecutor to a grand jury. Under Fed. R. Crim. P. 6(e)(3)(E)(ii), discovery of grand jury proceedings may be granted where "a ground may exist to dismiss the indictment because of a matter that occurred before the grand jury." But absent disclosure by the government of the transcript containing the colloquy between prosecutor and grand jury, the only argument that an erroneous instruction was provided must be made inferentially from the words of the indictment and the failure of the indictment to make out the essential elements of the charged offense (hence, the argument goes, the prosecutor must have misinstructed the body in order to have obtained the true bill).

Even more frustrating, when the high hurdle to discovering the legal instructions can be surmounted, there is commonly no remedy. Courts routinely have held that dismissal is not a proper remedy for faulty grand jury instructions, although there are scattered district courts which have dismissed indictments on that ground. See, e.g., United States v. Buchanan, 767 F.2d 477 (10th Cir. 1986) (no dismissal available), cert. denied, 494 U.S. 1988 (1990). But see United States v. Peralta, 763 F. Supp. 14 (S.D.N.Y. 1991) (distinguishing Buchanan and dismissing indictment); United States v. Vetere, 663 F. Supp. 381 (S.D.N.Y. 1987) (dismissing indictment).

However, a recent New Jersey Supreme Court case offers hope that there is relief available where the prosecution errs. In State v. Lisa, 194 N.J. 409 (2008), a defendant was indicted for reckless manslaughter when a teenaged victim died from a drug overdose while a guest in Lisa’s home. The prosecutor charged the grand jury that Lisa could be held criminally accountable for the girl’s death based on a civil liability standard found in the Restatement (Second) of Torts, which obligates one to exercise a duty of care where he has voluntarily assumed the care of another and secluded person and that aid from others was unavailable.

The Supreme Court, agreeing with the intermediate appellate court, held that reliance on a civil standard for criminal liability was improper because the use of civil standards which had not migrated into substantive criminal law provided insufficient notice to an accused and violated due process principles. 

The Supreme Court rejected the argument that the evidence before the grand jury was insufficient to support a reckless manslaughter charge on some other theory, and the Court discussed the indictment. The State was free to re-present the case on some other theory of liability.

Achieving an indictment’s dismissal, particularly in a case which was brought with some notoriety, is a notable accomplishment and a setback for prosecutors, even if not the last word in a defendant’s fate. The Lisa case supports the vital principle that words – especially where delivered by a prosecutor in ex parte fashion to a grand jury – matter.

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