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Deutsche Bank AG headquarters on Wall Street. Photo: Victor J. Blue/Bloomberg Deutsche Bank AG headquarters on Wall Street. Photo: Victor J. Blue/Bloomberg

In a sharp rebuke of the government that could result in meaningful changes to the way that prosecutors and defense attorneys approach internal investigations, the Chief Judge of the Southern District of New York held last Thursday that the DOJ had improperly outsourced its investigation of LIBOR manipulation at Deutsche Bank (the Bank) to the Bank and its outside law firm. See United States v. Connolly, Memorandum Decision and Order Denying Defendant Gavin Black’s Motion for Kastigar Relief, 16 Cr. 0370 (CM) (S.D.N.Y.) (Mem.). The level of the government’s involvement in the Bank’s “internal” investigation, combined with the absence of any meaningful independent investigative efforts by the DOJ, led Judge Colleen McMahon to find that the Bank and its counsel “were de facto the Government.” Id. at 2. As such, statements made by defendant Black during interviews by outside counsel were unusable by the government at trial. Id. at 40. While the court declined to dismiss the indictment under Kastigar v. United States, 406 U.S. 441 (1972)—because the government had not improperly used Black’s compelled statements to outside counsel—the Connolly decision has significant implications for the manner in which the government deals with companies and their counsel going forward. If the government exercises too much control over internal investigations, it could jeopardize individual criminal prosecutions in a number of respects. The decision also arguably gives companies a basis for resisting onerous government requests and attempts by the government to micromanage corporate investigations.

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