Solomon L. Wisenberg is a partner and co-chair of the white-collar criminal defense practice group of Nelson Mullins Riley & Scarborough, LLP.
Introduction: Witness-Subject-Target
At the heart of most white-collar crime investigations is an Assistant United States Attorney with a bevy of federal agents working under him. The prosecution team is aided by an investigatory grand jury, a group of 16 to 23 citizens empowered to subpoena individuals to appear before them in order to answer questions or turn over documents. The grand jury also issues indictments. All individuals coming into the orbit of the prosecutor and grand jury fall into one of three categories: witness, subject or target. A target is someone who stands a 50% or more chance of being criminally charged. As a practical matter, once an individual has been branded a target, the prosecutor has decided that the individual is guilty. The prosecutor is simply looking for strong enough evidence to indict. A witness is not under any suspicion, as yet, but simply has information of interest to a grand jury. A subject is somewhere in-between a target and a witness. He has engaged in conduct that may look suspicious or unethical, but the prosecutor is not certain that a provable crime has been committed and wants to do more investigating in order to be sure.
Even though your status as a witness, subject or target may be important in guiding your strategy during a particular phase of a federal white-collar crime investigation, the key thing to remember about these categories is that they are ultimately meaningless and offer you no protection. Why? Because even if you are currently a witness or subject, there is no guarantee that your status will remain unchanged. A prosecutor’s written statement to your attorney that you are a mere witness, and should thus have no qualms about talking to investigators or testifying before the grand jury, is not worth the paper it is written on. A witness appearing before the grand jury (or in front of a federal agent) appears utterly exposed, unless he or she is testifying under some additional form of protection such as use or transactional immunity. It is necessary therefore, from the outset of a white-collar crime investigation, to base any strategy on a realistic assessment of your potential criminal exposure, rather than on the crumbs and empty promises thrown at you by an Assistant United States Attorney.
There are many intangibles involved in federal white-collar crime prosecutions. There is much unfairness as well. A corporate insider who has knowledge of a white-collar crime may, in one federal district, turn and blow the whistle and be hailed as a hero, becoming in the process a star prosecution witness. A virtually identical insider, in another federal district, may be required to enter a felony guilty plea and serve time as part of his co-operation agreement with the government. These breathtaking disparities in treatment may be accounted for by many factors, such as: the character of individual prosecutors; the differing policies of various United States Attorney’s offices; or, the speed with which a defense attorney first approaches the government.
No one plan of action can protect you against all of these intangibles and injustices that occur every day in the criminal justice system. This white-collar crime primer doesn’t pretend to do so or to sugarcoat a thing. But it is a brief roadmap to the official and unofficial rules of white-collar crime inquiries, which may: 1) keep you from committing deadly mistakes during the critical stages of an investigation; 2) make you a more intelligent consumer of legal services and advice; and, 3) turn you into a strategist and tactician capable of significantly aiding your own case.
The white-collar crime crash course will focus on the real-world defense of individuals, as opposed to corporations, during the pre-indictment stage of a federal white-collar crime investigation. Most large companies can avoid indictment by cooperating with the federal government, waiving the attorney-client privilege and turning over the results of corporate internal investigations to the United States Department of Justice (“DOJ”). Today, more than ever, it is the individual businessperson, corporate employee or government official who is in need of personal representation from the very start of a white-collar crime inquiry.
1. WHERE DO WHITE-COLLAR CASES COME FROM?
A. The Traditional Model
White-collar crime is typically described as financial, economic or corporate crime, often carried out by sophisticated means. In the old days, most large-scale white-collar crime cases were referred to federal law enforcement authorities (primarily the FBI) by regulatory agencies. If the alleged white-collar fraud was committed by a few rogue employees, company management usually notified the appropriate regulatory body. If management itself participated in the alleged crime, an appropriate regulatory body (such as the Office of the Comptroller of the Currency in cases involving federally insured banks) would notify law enforcement authorities. This notification would sometimes happen after the affected company had failed. Individuals or small companies accused of white-collar crimes were also reported to the FBI by their alleged victims.
Most fraud cases were initially worked on by the FBI (or the Secret Service or Postal Inspectors) and an offense report was generated by the main case agent. That offense report would summarize the allegations against a white-collar suspect and the steps the agent had taken to verify the allegations. A copy of the offense report, with supporting documentation, would then be sent to the United States Attorney’s Office for the federal district in which the alleged offense was committed. The offense report would eventually wind up on the desk of an Assistant United States Attorney (“AUSA”), the line prosecutor assigned to decline or prosecute the case.
B. The New Model
Today, the old methods of generating white-collar crime referrals are still used, but many new avenues have opened up as well. Alleged financial fraud often comes to light through shareholder lawsuits and/or securities class actions against the officers and directors of publicly traded companies. Most publicly traded companies now have virtually automatic compliance mechanisms in place to report and investigate allegations of wrongdoing, even when the allegations involve top management. (There are several reasons for these virtually automatic reporting requirements and corporate internal investigations, including: the Sarbanes-Oxley Act; the United States Sentencing Guidelines for Organizations; and, the United States Department of Justice’s Thompson Memorandum.) Whistleblower and/or Qui Tam lawsuits, in which an individual can report an alleged fraud and reap some of the eventual monetary reward obtained by the government, also account for a number of federal white-collar crime referrals. State Attorney Generals are now more aggressive in investigating and exposing alleged fraud, but many of their cases are ultimately referred to federal authorities. Finally, investigative reporters, news media outlets and various watchdog groups have become quite sophisticated in uncovering and publicizing alleged political corruption and financial scams.
The law enforcement community investigates white-collar crime cases differently today as well. There is usually no offense report, and the AUSA is involved from the very beginning of the case, carefully planning an overall strategy. The prosecutors often work in tandem with regulatory agencies, encouraging the agencies to conduct parallel civil investigations. The advantage to this approach is that regulatory agencies have more leverage to force individuals to cooperate with investigations, because the failure to cooperate with a regulatory investigation can cause a person to lose his or her professional license. As previously mentioned, today’s federal prosecutors can also coerce corporations into waiving the attorney-client privilege and turning over the results of internal investigations. This allows the government to save prosecutorial resources by hijacking the prior work product of private company attorneys.
In summary, there are many more opportunities in today’s environment for alleged white-collar crimes to come to the attention of federal criminal authorities. And once the federal authorities start to focus their attention, they wield more prosecutorial power than at any time in our nation’s history.
2. WHAT DO THE CLIENT AND THE ATTORNEY HAVE A RIGHT TO EXPECT FROM EACH OTHER?
A. What Your Federal White-Collar Attorney Must Know
To competently handle a federal white-collar crime case, your attorney must, at a minimum, be thoroughly grounded in the law of federal criminal procedure as well as the substantive criminal law or laws that you are suspected of having violated. Over and above this, your white-collar crime lawyer needs to know the operational basics, that is, how the rules of criminal law and procedure really operate during the various stages of a federal white-collar crime investigation. The competent white-collar crime practitioner should also be acutely aware of the ever-increasing use by the government, against corporate and individual defendants, of civil enforcement tools, including regulatory investigations (by entities such as the Securities and Exchange Commission), asset forfeitures and actions under the False Claims Act.
B. Will Your Real Attorney Please Stand Up?
If your company’s attorney interviews you as part of an internal corporate investigation, does the attorney represent you as well? The answer is almost always no. The company attorney conducting the interview will probably tell you that: 1) he represents the company; 2) the interview is privileged; 3) the privilege belongs to the company; and, 4) the company has the option of waiving the privilege at some time in the future. (In fact, most authorities agree that the company attorney is ethically obligated to tell you this.) If this is all that the company attorney tells you, however, you might go into your interview with a false sense of security. Why? Because, what the attorney has not told you, in the above example, is that, in the current white-collar climate, the company will almost certainly waive its privilege and turn over the results of the internal investigation, including a summary of your interview, to federal prosecutors. You should obviously be aware of this before deciding whether to participate in an interview which is part of an internal corporate investigation. Knowing the stakes involved, you can then decide, in consultation with your own white-collar lawyer, whether to participate in the interview. Your failure to participate might result in the company firing you, but that may be preferable to increasing your criminal exposure through an interview with company counsel who has become, in effect, an agent for the government.
C. Attorney Honesty
A white-collar crime client, no matter how outwardly sophisticated, is usually scared when he first contacts a criminal defense attorney. In many cases he is already in serious trouble. He wants to be told that things aren’t that bad, or that he might not be charged with a federal white-collar crime at all. Seasoned counsel can often provide sincere reassurance as to some of these matters. But your attorney should never downplay your potential criminal exposure or minimize the legal and factual situation at hand. Credibility is one of the criminal defense attorney’s most potent weapons. If he cannot establish credibility with his own clients, how can he be expected to do so with government attorneys during plea negotiations or with juries during trial? If you cannot trust your own attorney-if he seems to have a different answer every time you ask a question, if his attitude toward you changes after he receives your up-front retainer funds, if he fails to return your phone calls without adequate explanation-it is time to consider a new lawyer.
D. Client Honesty
White-Collar crime lawyers should never say that they “don’t want to know what happened.” Whatever the merits of that approach in cases involving drugs or violence, it is definitely inappropriate in white-collar crime matters. Your attorney needs to know everything, because in white-collar cases, intent is almost always the issue. Only a small number of white-collar crime cases involve outright thievery–the rest constitute a gray area. Moreover, almost all white-collar crimes require the prosecutor, in effect, to prove willfulness, that is, intentional violation of a known legal duty, or at least to establish a specific intent to defraud. This can be a very difficult burden to meet. You must tell your attorney every little fact, and every bad thing that you think you did, so that he can determine as early as possible if there is a legitimate defense based on lack of intent. Also, you should never put your attorney in the position of negotiating with the government based on false assumptions about your culpability, because this destroys his credibility with the government. But that is just what will happen if you fail to reveal everything to counsel. Getting this information from you will often be difficult for your lawyer, because the denial factor (“I didn’t do anything wrong”) among white-collar crime clients is high. Why is the denial factor so high among white-collar crime clients? Many of them are prominent in their professional fields and have never before been involved with the criminal justice system. It is often very hard for such people to reveal uncomfortable facts to their lawyers, even in the context of privileged attorney-client conversations. You must get over this hang-up. Your freedom is in the balance.
E. Learn the Crime And The Guideline Range
In federal criminal practice, since the establishment of the United States Sentencing Guidelines (“Guidelines”) on November 1, 1987, almost all strategic decisions of the competent white-collar crime defense attorney have initially flowed from Guidelines analysis. The United States Supreme Court, however, ruled on January 12, 2005, in U.S. v. Booker, that the Guidelines are no longer binding on United States District Courts. The Guidelines are now advisory. Federal judges must continue to calculate Guideline sentencing ranges and must “consult” and “consider” the Guidelines, but they do not have to follow the recommended Guidelines range. It is too early to tell what the full effect of Booker will be. Moreover, Congress may enact a legislative fix that renders the Guidelines mandatory again. For now, however, the Guidelines remain very important, and should be consulted at the outset of representation by the diligent white-collar crime attorney. You can obtain a copy of the Guidelines, which are usually updated yearly, from West Publishing Company or the United States Sentencing Guidelines Commission. In a Guidelines analysis, counsel must determine the most likely federal crime with which the client may be charged and the Guidelines section matching that crime. Once the proper Guidelines section is determined, the white-collar crime lawyer must learn the maximum possible harm and the maximum possible benefit, under the Guidelines, for every activity in which the client engaged. For example, did the client defraud a vulnerable victim? If so, he potentially faces more jail time. By the time a client leaves the office after the first visit, the attorney and the client should have a very solid idea of what the likely Guidelines range will be if the client is found guilty. This is a vital first step that will affect everything from the client’s decision whether to cooperate during the early stages of an investigation to the question of whether and how to plea bargain with the prosecutor.
Keep in mind that, while the Guidelines are now advisory, they still must be consulted and considered by the trial judge, and that a Guidelines sentencing range will be calculated by that judge. Also keep in mind that federal judges have been sentencing under the Guidelines for the past 17 years. Old habits die hard. In the vast majority of white-collar crime cases, these judges can be expected roughly to follow the Guidelines. And the trend in recent years has been towards draconian increases in recommended Guideline ranges for white-collar crime offenders. While fairly steep Section 5K1.1 downward departures are theoretically possible in white-collar crime cases, in actual practice the Guidelines have severely constrained judicial discretion in sentencing in the past several years. Moreover, in fraud cases, the more monetary loss you are found to have caused the higher your Guidelines range will be. It is relatively easy for a sophisticated prosecutor to allege and prove a large “amount of loss” under Section 2B1.1 of the Guidelines or to jack up your Guidelines range by throwing a money laundering count into your indictment. Your attorney must be able to spot such dangers and to give you best and worse case scenarios of what to expect from the Guidelines.
3. AVOIDING INDICTMENT
A. Getting Indicted Is Bad
For most white-collar crime clients, avoiding indictment is the name of the game. Getting indicted is financially and psychologically devastating and typically means a ruined reputation, debarment from doing business with the government, revocation of a professional license and/or the end of the corporate career. The costs of trial preparation and trial will dwarf the costs of trying to convince the prosecutor not to indict. Once you have been indicted, it is almost impossible to convince the government to change its mind and drop the charges. This will leave you with two alternatives-pleading guilty to at least one felony white-collar count or fighting it out in a trial.
B. Learning How to Shut Your Mouth
The gravest errors of white-collar crime suspects are often made in the period just after they learn of an official investigation. The most common mistake that white-collar crime clients make is to try and cover up their activities by altering or destroying documents, ordering their employees to do so, or asking their friends and colleagues, directly and indirectly, to hide the truth. This often convinces a prosecutor to charge the client and is also devastating in court. An innocent person, it will be argued and believed, has no need to engage in a cover-up.
A closely related and equally dangerous pitfall occurs when the client starts falsely denying culpability about the specifics of his alleged offense to everyone in sight, particularly law enforcement authorities. In some jurisdictions this can open the door, during the criminal trial, to a burden-shifting jury instruction known as the False Exculpatory Statements Instruction. This instruction essentially tells the jury that innocent people have no reason to lie, and that the jury can consider the accused’s false explanations in determining guilt or innocence. It is an invitation to convict and, in the hands of a skilled prosecutor, a stake in the heart of the white-collar crime defendant. (Even if the jury instruction is not given, a competent prosecutor can argue the point to the jury.)
You must not to discuss anything about your case with anybody except your attorney and the members of his staff. All inquiries of you by outsiders, whether friends, acquaintances or government agents, should be met with the same reply: “I have an attorney and I am not going to discuss this matter.” Federal agents can also be told that your attorney will get in touch with them. You should ask these agents for their business cards.
If you do not have an attorney yet, you can say that: “I am not going to discuss this matter. I am in the process of seeking [or “I am about to seek”] the advice of an attorney.” The key is to avoid any discussion of substantive matters and to never tell a lie, even when discussing non-substantive matters. Never make up a phony reason for declining to discuss a criminal investigation with a federal agent or an acquaintance. It will come back to haunt you.
If your friends, associates or employees are about to be questioned by law enforcement agents, or summoned to the grand jury, and they inform you of this, you should remind them that you are represented and will not talk about the case, but you can also urge them to tell the truth. (This must be done in general terms, without any specific discussion of what that truth is.) You can also ask them if they mind talking to your lawyer. Although your white-collar crime lawyer cannot offer them legal advice, he can explain some general principles and recommend counsel for them if they are not represented. You must not personally tell friends or associates anything that can be interpreted as a request on your part for them not to talk to federal agents.
Silence is not the same thing as an affirmative statement that you are represented by counsel (or soon will be) and will not discuss the case. Why is it important to affirmatively state that you are (or are about to be) represented by counsel and that you will not discuss the case? In many situations, your silence can be construed as an admission. If you are in the custody of a state cop or federal agent, you have a right to remain silent and your silence cannot be used against you. But if you are talking to a state cop or federal agent and you are not in custody, or if you are talking with a private citizen, your complete silence can be interpreted as an admission and can be used against you in court. For example, suppose that a co-worker informs you of a pending criminal investigation and accuses you of committing a particular criminal act. If you just sit there and don’t say anything, that co-worker can later testify that you stood silent when he accused you. The jury is free to construe your silence as an admission or confession to the crime. The same thing can happen when a federal agent accuses you of something, as long as his accusation does not take place in a custodial setting. And if you testify at trial that you are innocent, your pre-custodial silence in the face of an accusation will be used to show that you are lying on the stand. The prosecutor will argue to the jury that the explanation you gave on the stand was false, because you did not give that explanation when you were initially confronted and accused.
You should not even talk about the case with your spouse. If you and your spouse want to do so, however, this is difficult for your lawyer to prevent. Such communications should be permitted reluctantly, if at all, and only after your spouse is instructed not to speak to anyone else. Even if you and your spouse later divorce, the marital communications privilege will prevent disclosure of these discussions, unless you were talking in front of a third-party (in which case the privilege is waived) or instructing your spouse to engage in criminal acts (in which case the crime-fraud exception applies). Remember that not all marriages survive a lengthy white-collar crime investigation. Male defendants often have a particularly hard time explaining to their wives how a portion of their ill-gotten loot went to refurbish a mistress’ apartment. Remember also that a disgruntled spouse can waive the marital testimonial privilege and testify against her spouse with respect to matters falling outside of the marital communications privilege. Finally, if you and your white-collar crime attorney have signed on to a joint defense agreement, communication is allowed, though not required, with other signatories to the agreement, although it is best for counsel to be present when this occurs. Without a joint defense agreement in place it is especially dangerous for the white-collar client to discuss the case with an alleged partner in crime. Today’s associate may be tomorrow’s star government witness.
You must also not throw away any arguably pertinent papers. There could very well be a “trash cover” on your house, resulting in the discovery of these papers and the issuance of a search warrant. In fact, some lawyers want all relevant records delivered to them so that nothing “disappears” prior to turning the documents over to the authorities.
C. Know Your Prosecutor
The character and experience of the prosecutor and the white-collar counsel’s attitude toward him are critical. Your attorney can usually find out which prosecutor is heading up an investigation by looking at the bottom of any grand jury subpoena you, your company, and/or another witness receives. Failing that, your lawyer can always call the United States Attorney’s Office to get this information. If your attorney does not already know the character and reputation of the Assistant United States Attorney (“AUSA”) investigating your case, a few calls to local defense attorneys will suffice. Remember that in a white-collar crime case the AUSA is heading up the entire investigative effort, not just passively sitting back and receiving an offense report from a law enforcement agent.
D. Be Nice To Your Prosecutor
As a general rule, you catch more flies with honey. Jerks have a tendency to get their clients indicted. While being nice will not prevent the indictment of a plainly culpable client, it can actually make a difference in a close case. Prosecutors enjoy tremendous discretion in deciding who and what to charge. Needlessly hacking them off might make your attorney look or feel like a hot shot, or may make you feel good because your attorney is a “fighter” who won’t back down from the government, but it is seldom beneficial to you. (There is a world of difference between being tough and being rude. Many federal white-collar crime defendants and their attorneys fail to grasp this critical reality.) Behaving courteously and professionally with the AUSA can also positively affect many important non-charging decisions, such as whether you will be allowed to turn yourself in for an arrest, as opposed to being handcuffed in your boxer shorts in front of your spouse, your children and all of the neighbors at six in the morning. There is an exception to the catch more flies with honey rule. Occasionally you may run across a prosecutor with an attitude problem of his or her own, who is also stupid or incompetent. Such individuals do exist and they often make big mistakes during an investigation. By aggressively pouncing on the mistake early enough, your attorney can potentially delay, hamper or derail a planned prosecution. For example, if you are able to discover, through friendly witnesses, that the prosecutor is abusing the grand jury process, complaining to the Department of Justice (“DOJ”) and filing a motion with the court can alert higher authorities to the abusive conduct, forcing a review of the entire investigation. Such reviews are rare, but they do happen. Even with an abusive prosecutor however, your attorney can take an extremely aggressive litigation posture without being personally insulting to the other side.
E. Get All The Information You Can As Early As You Can
After interviewing you, your attorney should obtain as much information as possible as early as possible from the prosecutor, friendly witnesses and the shadow grand jury. The prosecutor does not have to discuss his investigation with your attorney, but she often will do so. This is particularly true if you are not the primary target of the investigation. The prosecutor may want to use you in order to nail the main target. She can facilitate this process, at little cost to herself, by outlining the main themes of her case to your attorney and letting your attorney know where you fit into her game plan. If FBI agents are interviewing witnesses who are friendly to you, these witnesses will probably allow your attorney to debrief them about the interviews. By focusing on what the agents are asking these friendly witnesses, your lawyer can often get a good sense of where the investigation is heading. Your white-collar crime counsel can escalate this process by conducting what is known as a shadow grand jury. This entails debriefing friendly witnesses about their experiences in front of the grand jury. This is perfectly proper. Not only does it help you monitor the course and scope of the investigation, but it is also a means of discovering any grand jury abuse that may be going on. The downside of conducting a shadow grand jury is that it is costly, tends to anger ignorant prosecutors (who equate shadow grand juries with improper interference) and serves as a wake-up call to intelligent prosecutors, alerting them that potential subjects and targets are armed with competent counsel.
F. Talking To The Prosecutor
As a general rule, it is almost always advisable in a white-collar crime case to have your attorney talk to the prosecutor unless you have criminal exposure and the prosecutor knows nothing about you or your role in the matter under scrutiny. (Note again that I am not equating exposure with guilt.) Even in this situation, however, if discovery of your role is inevitable consider the advantages of having your attorney voluntarily disclose your activities or existence. It may well keep you from being indicted or at least reap benefits under the Guidelines. Keep in mind also that we are discussing your attorney, not you, talking to the government. (What the attorney says to the prosecutor and case agent will not be used against you at any later trial, although the prosecutor and case agent can use such information to pursue leads in the case and use any of the fruits of those leads. Your attorney should always confirm that the above rules apply to his discussions with the prosecutor and case agent. In the overwhelming majority of cases these rules will apply, but every once in a while an unscrupulous prosecutor or case agent will attempt to use the attorney’s actual words against the client at trial. This typically happens in criminal tax investigations.) You should never personally talk to government representatives unless your attorney is present and you should almost never talk to them, absent an immunity or plea bargain agreement, even if your attorney is present.
If you have some exposure and are already within the prosecutor’s worldview, your attorney’s approach will depend on whether you are one of many targets or the primary target of the investigation. If the prosecutor is trying to make a case against the primary target, and you want to cooperate in order to get immunity or a sweet plea bargain agreement, your attorney’s job is to make that prosecutor salivate. There are magic phrases that all prosecutors love to hear, such as “My guy can help you,” and “We want to cooperate.” Your attorney should use them liberally. (The mechanics of the approach will partially depend on the respective personalities of the defense attorney and the prosecutor and whether these actors are known to one another.) Your attorney should never promise information that you cannot truthfully deliver. Note as well that this brand of brown-nosing will usually not work if you are the Big Enchilada and have nobody bigger to rat on. In that case your attorney’s job is to convince the AUSA, and/or the AUSA’s superiors, not to indict you because: 1) you intended no wrongdoing; 2) the case is too complex to prove; 3) everybody was doing it this way [or, the alleged fraud was a “term of art” rather than a “lie”] in the construction, securities or fill-in-the-blank industry; 4) your experts will prove that your particular behavior was perfectly appropriate; 5) you are about to die (here is where a note from a prominent heart surgeon comes in handy); 6) you honorably served your country in World War II (this one is getting harder to use as the years go by); 7) the government’s star witness is a child-molester (this will not work if you aided and abetted the molestation); 8) there was no crime at all–just a complex series of transactions (resulting in a $5 billion loss) that the government doesn’t understand; or, 9) some combination of the above.
G. To Proffer Or Not To Proffer?
A proffer agreement (also known as a queen for a day agreement) is a written agreement between the prosecutor and an individual allowing the individual to provide information about a crime or possible crime to the government, with the assurance that his words will not be used against him in the government’s case-in-chief in the event of a subsequent trial. Think of it as a sneak preview you are giving to the prosecutor of what your likely testimony will be if you become a government witness. Unlike an immunity agreement or a plea bargain agreement, a proffer agreement will not protect you from the government’s later derivative, or indirect, use of your statements. In other words, the prosecution is free to use your statements to follow investigative leads and to advance the case. The proffer itself, which is given in a proffer session attended by you, your attorney, the prosecutor and the case agent, is almost always informally seen as a prelude to a written immunity or plea bargain agreement, provided that the government, in its sole discretion, finds your proffer truthful. (In fact, there is no reason for you ever to make a proffer absent this informal understanding.) But the informal understanding will not be contained in the written proffer agreement. The written proffer agreement will instead recite that the proffer is being given without any assurances whatsoever. Traditionally, written proffer agreements allowed the government to use your statements against you for impeachment purposes in a subsequent proceeding, but only if you took the stand and gave testimony materially inconsistent with your proffer. In recent years, government drafted proffer agreements also allow use of your entire proffer statement against you at trial, even in the government’s case-in-chief, if any portion of your trial defense (including your attorney’s opening statement or cross-examination questions) is in any way materially inconsistent with anything you said in your proffer session. This means that if your proffer session does not result in a plea bargain or immunity agreement, and you are indicted and go to trial, your ability to present a defense may be severely hampered. Thus, proposed government proffer agreements submitted to you and your white-collar crime attorney should be examined by both of you with the utmost of care.
H. Who Likes Proffers?
The prosecutor likes proffers. Since she is contemplating a plea bargain or immunity agreement, she does not want to buy a pig in a poke. (In case you were wondering, you are the pig.) She has to know what you will say at later trials of those who will be charged and she has to look you in the eye in order to determine whether you are credible. (She will protect herself by ensuring that any future plea bargain or immunity agreement will contain language nullifying the plea bargain or immunity deal in the event that you recant any part of your proffer.) Even if the proffer does not result in a plea bargain or immunity agreement, the prosecution has gained. As mentioned earlier, the prosecutor and agent will usually have some new leads. Further, having seen and interviewed you, the prosecutor is in a better position to cross-examine you some day. If you admitted some wrongdoing, the prosecutor will also feel more self-confident about indicting you, even if she cannot use your words against you, because she will “know” that you are guilty.
Why would you ever want to proffer? Because, and only because: 1) you have exposure; 2) indictment is a foregone conclusion if you don’t work out a plea deal or immunity agreement; 3) you want a plea deal or immunity agreement; and, 4) the prosecutor will not give you either without first hearing your proffer. Even in this scenario, as noted above, proffering is a high-risk venture.
I. Is It Worth The Risk To Proffer?
It is usually not worth the risk to proffer, even in the above scenario, unless: 1) the prosecutor is absolutely trustworthy; 2) a plea agreement (or immunity deal) is contemplated by both sides if you tell the truth at the proffer session; 3) your attorney, the prosecutor and the case agent are all on the same page regarding the general contours of the contemplated plea agreement and the general outline of what you are likely to reveal at the proffer session; and, 4) you are prepared to tell the full truth at your proffer session. There are two potential dangers associated with declining to proffer and/or plea bargain at the pre-indictment stage. If the Big Enchilada or another major player comes in and makes a deal while you are holding out, it will significantly reduce your chances of receiving a large Section 5K1.1 Guidelines reduction. Additionally, the prosecutor may very well react to your refusal to proffer by ginning up a specious money laundering count or artificially increasing the “amount of loss” caused by your alleged offense, greatly enhancing your potential Guidelines exposure. (On the other hand, since the Guidelines have now been rendered advisory by the Supreme Court, it is easier for federal judges to hand down sentences below the recommended Guidelines range even without a 5K1.1 Guidelines motion for reduction of sentence by the government.)
J. Grand Jury Issues
In general, you should do anything possible to avoid a grand jury appearance unless you have absolutely no exposure. The risks are high and the benefits few of a grand jury appearance. (The attorney is not allowed into the grand jury during the appearance, but the client is allowed to come out and consult with him after every question.) Though there are only two official categories of people appearing before the grand jury to give testimony, targets (those more likely than not to be indicted) and subjects (anyone with evidence within the grand jury’s purview), a three category system of target-subject-witness has informally evolved. Under this system, targets are more likely than not to be indicted, subjects are under some suspicion but have not yet reached target status, and witnesses are people not under current suspicion who simply have relevant evidence to give. These distinctions are still relatively meaningless, because a non-target’s status can change to target at any time. No prosecutor worth his salt will ever promise you that your status as a witness is permanent. Since the grand jury has a right to every man’s evidence, how do you keep out of its clutches? The privilege against self-incrimination is quite broad. Any question the truthful answer to which may tend to incriminate you can be met by invocation of the privilege. Of course the privilege must be invoked in good faith, but as a practical matter it is very difficult for the government to successfully resist its invocation. If a white-collar client has any non-frivolous claim of exposure due to his criminal activities, he should be legitimately able to invoke the privilege against self-incrimination.
K. Representing The Main Target
As noted earlier, if you are the primary target of the prosecution, you will want your attorney to conduct, if resources permit, a shadow grand jury. In addition to allowing you to monitor the government’s investigation, this affords you the opportunity to lock in the witnesses’ stories, through affidavits, just like the government seeks to do in front of the real grand jury. In this way, if the witness later changes his story, your attorney’s private investigator can take the stand and impeach him. You should also seriously consider entering into a joint defense agreement with other witnesses, subjects, or targets, in order to be able to trade information, if you so desire, without having it fall into the hands of the prosecution. A word of caution is in order here, though. Prosecutors usually hate joint defense agreements, viewing them as obstructionist in nature. Such agreements often act as great motivators for the prosecution team, which assumes that the alleged crime is even greater than originally anticipated because of all the players involved in the joint defense agreement. Also, many corporations will no longer enter into joint defense agreements with employees and former employees because it is now the policy of the Department of Justice that corporations entering into such joint defense agreements may not be fully capable of cooperating with the government.
A competent white-collar crime attorney should always be keenly aware of the chief law enforcement agent, or case agent, assigned to your case. Being friendly to the case agent is usually highly beneficial, resulting in good will and the obtaining of information. Occasionally you will draw a lazy, inexperienced, or poor agent. Monitor his indiscretions closely. These can be used to good effect at trial, though this is a very dangerous game, as juries typically fall in love with law enforcement agents. You should also consider the use of the media if it will help advance the goals of the case or if the United States Attorney’s Office is leaking to the press. In political corruption cases, for instance, portraying the client as the subject of a political vendetta is, depending on the locale and jurisdiction, sometimes an effective tool. Just make sure that it is the client’s interests being advanced by use of the media, and not the white-collar attorney’s career goals. Also be aware that your white-collar defense attorney’s statements to the media may be used against you, as an admission by an authorized agent, if the federal prosecutor assigned to your case is very aggressive. This is rare, but it does happen.
If the white-collar crime client works in a highly regulated field (such as the securities industry) or controls a company that makes its livelihood through government contracts, the government is in a position to whipsaw the client. The government’s burden of proof is much lighter than beyond a reasonable doubt in the civil and regulatory arena. If the government decides to shut your business down as part of an effort to put pressure on you or to bring about a global settlement, your options can be greatly limited. Moreover, by engaging in parallel civil and criminal proceedings, the government can try and force you in the civil suit or regulatory action to choose between asserting the privilege against self-incrimination, which often has very negative consequences, or testifying and having that testimony available for use against you in the criminal case.
L. Derivative Use Testimonial v. Transactional Immunity
If your attorney is skilled or lucky enough to obtain immunity for you, you should not lose too much sleep worrying over whether the immunity is transactional (that is, covering an entire category of behavior) or derivative use testimonial in nature (that is, covering direct or indirect use of your testimony or statements). Though transactional immunity is preferred, as a practical matter, derivative use immunity is quite broad in scope, and it is extremely difficult to successfully prosecute someone who has been given such immunity as long as the agreement has not been nullified due to the subject’s breach of the agreement. Derivative use immunity can be ordered by the court, pursuant to Title 18, United States Code, Section 6002, or can be negotiated through the vehicle of a letter immunity agreement between your attorney and the AUSA. A prosecutor can also immunize you through the use of pocket or informal immunity. This is an oral offer of immunity, typically given to low level witnesses who have committed some minor wrongdoing and are reluctant to talk. Pocket immunity is every bit as enforceable as the more formal kind if it is given by a federal prosecutor. It is simply more difficult to prove in the event of a dispute. Occasionally, an inexperienced agent will offer pocket immunity to a subject or target, either not realizing what he is doing or not realizing that a particular individual is in fact a key wrongdoer. Most federal courts have held that federal law enforcement agents who offer immunity without the knowledge of federal prosecutors cannot bind these prosecutors.
4. BETWEEN INDICTMENT AND TRIAL
A. Whether And When To Plead Guilty
There can be certain advantages to pleading guilty before, rather than after, indictment. In many federal districts you will never get as good of a plea offer from the government as the offer you get pre-indictment. Also, by pleading guilty at the earliest possible time, that is, at the pre-indictment stage, you may increase your chances of obtaining a 5K1.1 downward departure recommendation from the government under the Guidelines.
On the other hand, if you have the resources to mount a defense, you will often find the most weaknesses in the government’s case after indictment. This is because you will learn more about the government’s case once you start filing motions and obtaining discovery. The government is under no obligation to provide you with discovery materials until after you have been indicted. More importantly, the government is under no obligation to provide you with exculpatory information under the Brady doctrine until the post-indictment phase. The weaker the government’s case is, the more likely you are to prevail at trial or to force the government to offer a better deal. In addition, with respect to the issue of downward departures, now that the Guidelines are advisory, the trial judge has the ability to hand down a sentence significantly lower than the recommended Guidelines range. In effect, the judge can give you his or her own downward departure even without a government recommendation. So, if you decide to wait until after indictment and the obtaining of discovery to enter a plea agreement you can still cooperate with the government and have a shot at a downward departure from either the prosecution or the judge.
B. The Risk Of Going To Trial
Even in our era of advisory Guidelines, there is a tremendous risk for the federal white-collar defendant in going to trial. As noted earlier, most federal judges can be expected to follow the recommended Guidelines range most of the time. Federal prosecutors, through the selective handing out of 5K1.1 downward departures and the manipulation of Guidelines “amount of loss” figures, can dramatically reduce the potential sentence of a cooperating witness. A white-collar crime defendant who opts for trial and loses can easily wind up with a real-time sentence of 10 to 20 years more than that of a cooperating defendant in the same case.
5. GOING TO TRIAL
A. Counsel's Credibility Is A Key Factor
Your attorney’s credibility, particularly in a white-collar crime case, cannot be emphasized enough. The jury must see your lawyer as a straight shooter. The minute the jury perceives that a white-collar lawyer is engaged in any kind of trickery, the consequences for you will be devastating.
B. State Of Mind Is All Important
Most successful white-collar crime defenses are won on the issue of intent. Your lawyer’s focus must be on convincing the jury that you did not intend to violate the law or to defraud anyone.
C. Taking The Stand
Unless you have a serious criminal record, you should almost always take the stand if you are the defendant in a white-collar crime case. Irrespective of any instruction it receives, the jury will usually not believe that you lacked the requisite criminal intent if you are not willing to look them in the eye and tell them so. We have all heard horror stories about white-collar crime defendants who took the stand and made the government’s case stronger through unbelievable testimony. Nevertheless, I am firmly convinced that in most of these cases the result would have been equally disastrous if the defendant had stood silent. There are exceptions to every rule. The decision whether to take the stand will differ with each individual defendant and case, and will sometimes depend on intangible factors. But all things considered, it is best for the white-collar criminal defendant to testify.
D. Businessman Trying to Run A Real Company
In a white-collar prosecution, your lawyer should seek to convince the jury that you are a responsible citizen– putting people to work, getting things done, and contending with government red tape. The unspoken message should be that your accusers are not doers, but are those who sit back and carp at people who achieve.
E. Don't Personally Attack The Prosecutor Or Case Agent In Front Of The Jury
It almost never works. It usually helps to sink your case. Most juries bond with the prosecutor and the case agent. Only in the most unusual circumstances, or in cases of clear agent misconduct, should your attorney employ this tactic. The jury must not believe that by acquitting you they are accusing the prosecutor or case agent of anything. Your attorney must convey to the jury through spoken and body language that you both respect the prosecution, but that, in this particular case, the prosecution made a mistake.
F. Do Attack The Cooperator
One of the ways to convince the jurors that the prosecutor made a mistake is to convince them that the main cooperator is a pathological liar who will tell any falsehood he can think up about you in order to get a significant reduction in his own sentence. This is usually pretty easy to do, since most big cooperators are huge liars and do have the potential to get major sentence reductions for their cooperation. Extensive use of the Guidelines and the plea bargain agreement in cross-examining a cooperating witness is advisable. Comparing the possible Guidelines sentence if the cooperator had been tried, convicted and punished for all of his crimes with the possible Guidelines sentence he will receive under the plea bargain agreement is a very effective tool.
G. Don't Be Arrogant
Your attorney should be competent but friendly. Juries respect a self-confident trial lawyer. They are not amused by a bumbling idiot. They usually hate an arrogant show-off.
H. Show That Money Gained Was The Normal Fee
No matter what the alleged overarching white-collar crime is, if you did not receive any ill-gotten gains or if the money you received was your normal fee, such as an attorney’s fee, for the action you engaged in, the jury will be reluctant to convict. Juries are particularly unwilling to convict professionals who did not collect over and above their standard professional fee.
I. State In Opening What You Will Prove
Your attorney should lay his case out in the opening statement in a confident yet friendly tone. His language should be forceful and positive. He must not be on the defensive. He must state what he will prove, both generally and specifically. He must not rely on the prosecution’s need to establish proof beyond a reasonable doubt. He must tell the jury that he will prove your innocence to them. If your white-collar crime lawyer believes in you and in what he is saying, the jury will tend to believe it to. It will shape their perception of the evidence. It is impossible to overestimate the importance of the opening statement to the success of your case. You should insist on listening to your attorney’s proposed opening statement well before trial, and you should listen to several run-throughs.
J. Pay Attention To Brady Issues
The defendant is entitled to obtain all exculpatory evidence in the government’s possession, under the authority of Brady v. Maryland and progeny, in time for its effective use at trial. This includes impeachment evidence, such as prior inconsistent statements. The defendant is also entitled, under the Jencks Act and the Federal Rules of Criminal Procedure, to obtain prior statements of a government witness, if the statement relates to the subject matter of the witness’ testimony. The defendant is entitled to these statements no later than the conclusion of the witness’ testimony, but as a practical matter the statements are usually turned over in time for the defense counsel to examine them without delaying the trial. Your lawyer must be keenly aware of all Brady and Jencks Act issues during a white-collar crime case. You should constantly seek access to all handwritten or hand printed notes of any testifying agents (which you are entitled to under the Jencks Act) and to all 302s (typed agent interview reports) of any testifying witnesses (which you are generally not entitled to under the Jencks Act, unless the witness is the agent who wrote the 302 or the witness has read and adopted the 302, but which you may be entitled to under Brady). A white-collar case generates countless reports of interviews, both formal and informal. Inevitably, witnesses will testify to things which are inconsistent with their prior statements as reflected in 302s and agent notes. These 302s and agent notes are a fertile and vital source of cross-examination material. It is extremely difficult for the prosecutors to participate in the trial and simultaneously determine, witness by witness, which 302s and agent notes should be turned over under Brady, in time for effective use, based on prior inconsistencies. You must constantly press this issue, outside of the jury’s presence. (You must also insist that the prosecutors compare the agent notes of a witness interview with the final 302, in order to discover any material inconsistencies.) You must let the prosecutors know that you will never give up on this point and that you will file a Freedom of Information Act request for the 302s and agent notes after the case is over if you do not receive them at trial. The prosecutors must be made to fear what will happen to them if they do not liberally disclose this kind of information to you. Prosecutors also have a special duty under recent case law to affirmatively examine the personnel records of testifying government agents. You should insist that this be done and inquire on the record into precisely how the prosecutor performed his or her duty. With respect to Brady and Jencks motions and other standard pre-trial motions, it is also important to eschew boilerplate and to tailor the motions to the specific facts of your case.
K. I Saw What You Did And I Know Who You Are
It is safe to assume that someone on the jury is always watching you, your lawyer and the entire defense team. Be conscious of your body language, individually and as a team member. You want the jury not only to like you, but to like the way your group operates as a unit. Your attorney should treat his colleagues and subordinates with respect. Remember that the prosecution has an advantage in this regard, since it will usually be closer to the jury box. At least occasionally, the jury should see your lawyer interacting with the prosecutor in a friendly and professional manner. This is usually the right thing to do, and it can also have the advantage of subtly causing the jury bond with you and your attorney in the same way that they automatically bond with the prosecutor. You must believe in, summon and exemplify the persona of an innocent person, wrongfully accused and determined to get his version of events in front of the jury. This persona should infuse every aspect of your being while on trial and should permeate your entire defense team. Like your attorney, your credibility in front of the jury is all-important. You must never take off this persona–not even for one moment.
Conclusion: A High Stakes Game Played For Keeps
White lies, puffery and deception of competitors are everyday occurrences in the business world. During periods when the government is cracking down on white-collar crime, these common peccadilloes, usually overlooked, can bring you to the attention of the federal authorities and land you in the middle of a criminal inquiry. Upon learning that you are under the federal criminal microscope, your first course of action is to seek out a competent white-collar crime defense lawyer, shut your mouth and listen to his or her advice. Every step that you take is crucial and every misstep carries the potential of sending you to jail. You must learn not to panic–to be careful and calm but not arrogant. You must also be patient. Remember that white-collar crime inquiries are complex and time-consuming by nature. Prepare to be in it for the long haul. Above all, have courage. Your future literally depends upon it.