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Editors note: This is the second and final part of this article, which continues from yesterday’s edition of The Legal. The court’s decision in holding that counsel’s failure to permit their client to proffer was evidence of a conflict fails to consider the reality of the role of competent defense counsel in representing a witness, either subject or target. Counsel may believe that the government has limited knowledge about his or her client. Counsel may believe the best possible strategy is not to give the prosecutor a single fact about his client, nor will he verify any facts that the government perceives. There is nothing unethical about such a stance and it is one frequently adopted by some of the best criminal lawyers in the country. Equally important, the attorney may not be confident his client is telling him the truth or, at least, not telling him all the facts. This often occurs. Those engaged in criminal practice are well aware of this. Corporate employees and corporate executives as clients are no exception. The attorney in this position does not want the client making statements to anyone. A lawyer’s refusal to permit a proffer under these circumstances is perfectly legitimate. An attorney permitting a proffer under such circumstances would place the client in jeopardy. As one prominent defense attorney said, “The decision whether to engage in a proffer is often as difficult as deciding whether a defendant should take the stand at trial.” It depends in part on the attorney’s evaluation of the truthfulness of the defendant’s version of the offense. If the attorney has doubts of the truthfulness of the defendant’s version or simply feels that his version, even if true, would appear illogical and may not be believed, the attorney should not put that person on the stand or even permit the prosecutors to hear it. This is the lawyer’s professional evaluation and is entirely ethical. In this matter, the U.S. attorney stated that he would immunize only one of the two target witnesses, but would not do so without being able to negotiate with one or the other to determine their proposed testimony. This is an often-used tactic. Assuming this is a good faith assertion, the U.S. attorney, after hearing one or both of the witnesses in a proffer session, may decline to offer immunity to either one, for any number of reasons. Prosecution decisions are not that simple. The court should not be put in a position of making a judicial determination on some theoretical, nonbinding, proposed strategy of the prosecutor. The prosecutor could make the same argument in disqualifying two lawyers who each represent a single target. The argument is easy to predict: “Your honor, we will offer immunity to one of these two witnesses. Each of their attorneys has declined to proffer. Obviously, they have made a decision to stonewall the government, to the detriment of the clients. We move that both be replaced by other counsel.” This is not too far fetched under the decision in question. Joe Tate of Dechert, who has an extensive practice dealing with grand jury matters, commented, “We have increasingly run into instances where the government contends it has information incriminating several witnesses and insists that individual clients be spun off to separate counsel so that a proffer can be made. Quite often, it turns out the government has no evidence at all incriminating the witnesses.” The prosecutor’s contention that he cannot offer immunity without knowing the possible testimony is a hollow argument. The court should not aid the prosecutor in making a purely executive decision. Congress provided the prosecutor with a remedy for such a situation by enacting the use immunity statute, 18 U.S.C. 6001-6005. Immunizing the witness does not prevent a prosecution of the witness under the proper circumstances. The prosecutor is free to seal his evidence, and then immunize the witness. If the witness’ testimony is not helpful, the prosecutor is free to prosecute the witness using the sealed evidence, after demonstrating he obtained no leads from the immunized testimony. The court in In re Investigation Before April 1975 Grand Jury faced a similar situation where the prosecutor desired to offer immunity to some witnesses but complained that multiple representation required him to make “blind selections” as to whom to immunize. The court said, “It seems to us that the circumstances of this case present precisely the type of situation for which Congress intended to provide he government with an effective tool [18 U.S.C. 6001-6005] for discovering the truth without risking violations of the Constitution in the delicate areas of freedom of association and representation by counsel of one’s choice.” The second troublesome aspect of the decision in question is that the court found that the law firm was conflicted because its fees were being paid by a legislative committee, chaired by a certain state senator, who is the ostensible target of the grand jury investigation. The court said, “This financial arrangement therefore imparts a desire, however subconsciously embedded, to protect (from indictment) the public official who pays the client’s legal fees.” The court found that such payments created, “The possibility of a subtle allegiance to the public official that challenges the purity of the law firm’s current advice to the target clients . . . but also the independence of any future advice to the nontarget clients.” Curiously, these payments become an issue only when there is a refusal to cooperate. The government counsel never complains when one lawyer represents multiple cooperators. The court based its decision on Rule 1.8(f) of the Pennsylvania Rules of Professional Conduct. The rule provides: A lawyer shall not accept compensation for representing a client from one other than the client unless: The client gives informed consent; There is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and information relating to a representation of a client is protected as required by Rule 1.6. Obviously, the rule permits third-party cooperation, if its conditions are met. The court’s ruling is equally applicable to disqualifying attorneys representing employees and officers of a corporation under investigation, where the corporation is advancing their legal fees. Courts have long approved of employers advancing fees for employees. In United States v. Stein, the court said: “[A]n employer often must reimburse an employee for legal expenses when the employee is sued, or even charged with a crime, as a result of doing his or her job. Indeed, the employer often must advance legal expenses to an employee up front, although the employee sometimes must pay the employer back if the employee has been guilty of wrongdoing. “This . . . is not the stuff of television and movie drama. It does not remotely approach Miranda warnings in popular culture. But it is very much a part of American life. Persons in jobs big and small, private and public, rely on it every day. Bus drivers sued for accidents, cops sued for allegedly wrongful arrests, nurses named in malpractice cases, news reporters sued in libel cases, and corporate chieftains embroiled in securities litigation generally have similar rights to have their employers pay their legal expenses if they are sued as a result of their doing their jobs. This right is as much a part of the bargain between employer and employee as salary or wages.” The court cited no evidence in the record that the committee or the targeted senator was controlling the law firm’s direction, or made payment of the fees contingent on the firm’s actions. It should be noted that the government did not object to the law firm receiving fees from the committee for the five individuals whom the law firm had offered for proffers. The only grand jury case cited by the court for this aspect of the decision was Pirillo v. Takiff. Pirillo involved an attorney, retained by the Fraternal Order of Police (FOP) to represent 12 officers subpoenaed in a grand jury investigating police corruption. All of the officers’ fees were paid by the FOP. Pirillo was also the FOP’s attorney for other matters. Pirillo took his orders from his client, the FOP. The FOP had a stated policy of non-cooperation with any investigation into police corruption. If any of the officers wanted to cooperate, the attorney would “immediately remove himself as counsel and advise the witness to hire another attorney.” The FOP would not pay for such separate representation. It was clear that the attorney was simply furthering the interests of the employer and not the interests of the client. The 3rd U.S. Circuit Court of Appeals distinguished the unusual facts of Pirillo in the matter of In re Grand Jury Investigation. The district court’s position that payment of fees by an employer raises an inference of conflict of interest is a troublesome statement. This is a substantial indictment of the criminal defense bar. Payment of legal fees by a corporation for its employees is specifically authorized by the statutory Pennsylvania Business Code, as well as the business codes of Delaware and New York. The holding that payment of counsel fees by an employer raises an inference of conflict that may be used to disqualify counsel representing employees in almost any grand jury investigation involving a corporate, non-profit entity, labor union, or other business entity. Under certain circumstances, the payment by an employer of counsel fees can be used to raise a conflict disqualifying two attorneys who represent single targets, or a single attorney who represents a single target. Payment by an employer of the employee’s fees in a grand jury investigation is a generally accepted practice. In a recent case in the Eastern District, my own law firm represented a target of a federal grand jury. The target paid the legal fees of several of his employees who were subpoenaed to testify before the grand jury. My firm suggested the names of attorneys to the employees who would represent them. The employees engaged those attorneys. One employee cooperated immediately, another refused to do so. The government immunized the noncooperating employee who then testified against the employer. The employer continued to pay their legal fees throughout. The U.S. attorney raised no objection to these fee arrangements, even though the U.S. Attorney’s Office was aware that the employer was paying the fees. I submit that the two criteria discussed in this article should not be used in any future cases regarding conflicts of interest. They are broad-brush criteria and give a misleading impression of an attorney’s lawful defense tactics. PETER F. VAIRA is a principal shareholder in the Philadelphia law firm of Vaira & Riley. He is the author of Eastern District Federal Practice Rules, Annotated (Gann Law Books). He may be contacted concerning issues of eastern district practice at [email protected].

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