U.S. acting assistant attorney general Kenneth Blanco speaks at the Atlantic Council Inter-American Dialogue event on July 19 in Washington D.C. (AP/Daniel Trielli)
Federal law enforcement’s growing reliance on foreign partners as U.S. prosecutors build cases against targets abroad will have to adjust to a new reality after the U.S. Court of Appeals for the Second Circuit curtailed compelled testimony use in cross-border prosecutions.
The same day the decision came down in United States v. Allen, 16-898-cr, acting assistant attorney general Kenneth Blanco, in remarks to the Atlantic Council Inter-American Dialogue, said the Department of Justice’s “biggest investigations are increasingly transnational, often involving multiple foreign jurisdictions.”
“As transnational crime continues to grow in scope and complexity, we increasingly find ourselves looking across the globe to collect evidence and identify witnesses necessary to build cases, requiring greater and closer collaboration with our foreign counterparts,” Blanco said.
But under Allen, U.S.-based investigators and prosecutors will have to redouble their coordination efforts with foreign partners to better control who is compelled to testify, and who gets access to that testimony after.
“The Department of Justice has always been sensitive to the need to avoid potential Kastigar issues,” said Debevoise & Plimpton partner Sean Hecker. The issue is that foreign authorities, such as the U.K.’s Financial Conduct Authority, that are able to compel testimony are usually in control of the initial investigation.
Without U.S. authorities there at the outset to steer witnesses clear of potential testimony taint that would raise the Fifth Amendment issues identified in Allen, “it’s too late as a practical matter” for the DOJ.
“The die was cast by the time the Department of Justice moved forward on this case,” Hecker said.
Keeping this from happening going forward is likely the first priority for the department. The “business model” of being able to “sit tight and watch what was going on overseas, and not stick their nose in it … has been broken,” according to Cole Schotz member Michael Weinstein, a former prosecutor.
A new model, one that focuses on even greater cooperation and an earlier presence of U.S. officials in foreign cases that may result in U.S. prosecutions, could be in the offing.
“It’s going to allow DOJ and the policy people to make the argument, ‘Hey, we need to get even deeper in bed with the folks abroad, because when we’re not, this is what will happen,’” Weinstein said, referring to Allen.
In countries with which the United States already has a strong working relationship, like the U.K., the change is unlikely to create insurmountable jurisdictional issues, Morvillo Abramowitz Grand Iason & Anello name attorney Robert Anello said. With other sovereign actors, where the relationship is less cooperative, issues are more likely to arise.
“It’s not seamless,” Anello said of the relationships with the United States in some countries. “Many of them are like bulls in china shops with the prosecutors over there.”
The fallout from Allen is likely to extend to the defense bar as well.
“The defense has to be very aware of how compelled testimony may have made its way into prosecutors’ offices,” Hughes Hubbard & Reed partner Edward Little said, echoing a sentiment broadly shared by defense attorneys.
The Court of Appeals’ decision also opens up options for litigators looking for ways to protect their clients. Little saw a scenario where it was “almost to a client’s benefit” to opt for compelled testimony “in detail and covering all bases” to build in Kastigar hearing protections should the testimony get shared with prosecutors and other witnesses. There was a threat, he noted, that “taint may not be noticed or slide through” in a hearing, ultimately harming a client.
On the flip side, as Debevoise’s Hecker noted, anyone hoping to cooperate with the government faces new challenges.
“If they want to be able to be sign a cooperation agreement and potentially testify in front of a grand jury or at trial they will need to steer clear of accessing compelled witness testimony,” he said.
Companies caught up in cross-border investigations will also face potential choices in how they proceed, according to Hecker. Internal investigations coordinating with outside regulators and prosecutors will need to ensure better control of employee testimony.
“If there’s compelled testimony outside the U.S., and the company inadvertently shares the compelled testimony with employees in the context of an internal investigation, that could be construed as taint,” Hecker said.
Despite the concerns, some like Willkie Farr & Gallagher partner Martin Weinstein in the firm’s Washington, D.C., office see the ultimate impact of the decision as narrow. (Weinstein’s colleague in the firm’s New York office, Michael Schachter, handled the winning appeal in the Allen case.) The DOJ will quickly adapt, Weinstein said, while the actual impact on white-collar cross-border prosecutions will only be felt when they go to trial, which represent “a pretty small subset in the criminal justice system.”
“Let’s put it this way: we’re not going to be sitting here three years from now talking about this issue,” he said.
If there is an outstanding impact made by Allen, New York University School of Law professor and director of the school’s Center for Research in Crime and Justice, James Jacobs, fears it will be to limit needed prosecution of white-collar criminals.
“I think it’s so hard to bring these white-collar criminal cases of important frauds and other kinds of crimes in high places. This makes it even harder,” Jacobs said. “We don’t want to be in a position where, in effect, people in powerful positions have a kind of de facto immunity from prosecution and punishment. I think this is a major concern.”