grand jury 101 - from the magna carta to the present in 60 minutes
TRANSCRIPT
Grand Jury 101From the Magna Carta to the Presentin 60 Minutes
CLE Seminar for In-House CounselJune 8, 2016Chicago, Illinois
Rachel CannonPartnerDentonsChicago+1 312 876 [email protected]
Steve SenderowitzPartnerDentonsChicago+1 312 876 [email protected]
• Chief Justice of the Supreme Court Earl Warren:
"Historically, [the grand jury] has been regarded as a primary security tothe innocent against the hasty, malicious and oppressive persecution; itserves the invaluable function in our society of standing between theaccuser and the accused,…to determine whether a charge is foundedupon reason or was dictated by an intimidating power or by malice andpersonal ill will." Wood v. Georgia, 370 U.S. 375, 390 (1962).
• Chief Judge of the New York Court of Appeals Sol Wachtler:
"[D]istrict attorneys now have so much influence on grand juries that byand large they could get them to indict a ham sandwich." January 1985interview with New York Daily News.*
*Wachtler, in 1992, was indicted by a federal grand jury for extortion and later pled guilty.
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Judicial Observations
• Grand juries were formally recognized in the Magna Carta in 1215.
• Initially, the English grand jury consisted of 12 men who were summonedto inquire into crimes alleged to have been committed in their localcommunity. Grand jury proceedings were secret. Grand juries chose toindict or not. England abolished the grand jury system in 1933.
• Colonists brought the grand jury system to America in1635.
• Massachusetts was the first colony to have a grand jury system whichfailed miserably in the Salem witch trials in 1692.
• Grand juries are presently used in half of the states and all federal courts,and perform both investigatory and accusatory functions.
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Grand Jury Origins
• As part of the Bill of Rights passed in 1791, ten amendments were addedto the United States Constitution.
• The Fifth Amendment to the United States Constitution provides:
"no person shall be held to answer for a capital, or otherwise infamouscrime, unless on a presentment or indictment of a Grand Jury … ."
• Unlike other rights contained in the Bill of Rights, the Fifth Amendment'srequirement that felonies be charged by grand jury indictment does notapply to state crimes.
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Federal Grand Jury
• Grand jurors are selected at random from a fair cross-section of thecommunity in which the grand jury sits, typically from lists of registeredvoters.
• In federal court, 23 qualified persons will become members of the grandjury. Indictments can be returned in federal court with 12 affirmativevotes.
• Terms of service can last 12 - 18 months, with weekly attendancerequirements running from 9:30 a.m. - 4:30 p.m.
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Composition of Grand Juries
• Grand jurors, the witnesses, the prosecutors, and the court reporter canbe present. The prosecutors are not allowed to be present during grandjury deliberations.
• No defense lawyers can be present, even if and when their clients testifyin the grand jury room.
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Who can be present?
• Investigatory function is to obtain documents and other evidence andhear witness testimony.
• Only hears evidence presented by witnesses called by the prosecutor– usually no evidence presented for the defense
• Accusatory function is to determine whether or not there is probablecause to believe a person(s) committed a crime.
• Only determines whether there is probable cause that personcommitted a crime – does not determine guilt or innocence.
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Functions of Grand Juries
• Federal Grand Jury: "probable cause" means a fair probability, which inturn is something less than a preponderance. The substance of all thedefinitions of probable cause is a reasonable ground for belief of guilt.
• Contrasts with "beyond a reasonable doubt," the proof required of thegovernment at trial in order to convict a defendant.
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Probable Cause: The Standard
• Grand jurors typically sit in chairs facing the witness and prosecutor.
• Court reporter records proceedings.
• Prosecutors typically "lead" witnesses through questioning, unless thewitness is hostile or has prepared a statement in advance to be read tothe grand jurors.
• Witnesses are often government agents or police, but can also becooperating defendants or other "lay" witnesses with knowledge of facts.
• Once the witness has finished testifying, grand jurors are given theopportunity to ask questions of the witness.
• If the prosecutor is seeking an indictment, she will ask witness to leave,summarize evidence and necessary legal instructions for the grandjurors, and ask grand jurors if they have additional questions.
• Grand jurors will then privately vote for a "true bill" or a "no bill."
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What Actually Happens Inside a Grand Jury Room?
• Each grand juror takes an oath of secrecy.
• Strict rules govern the release of grand jury information, even after acase is indicted and resolved.
• There is no presumed First Amendment access to grand jury information.
• To obtain the release of grand jury information for use in anotherproceeding, the petitioner must demonstrate that:
• The information is needed to avoid a possible injustice in the otherjudicial proceeding;
• The need for disclosure is greater than the need for continuingsecrecy; and
• The request is narrowly structured only for the purpose needed.
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Secrecy
• Prosecutors can present hearsay evidence to grand juries.
• Any individual witness is permitted to assert his or her Fifth Amendmentrights and refuse to answer any questions before the grand jury if there isa good faith basis to do so.
• There is no Fifth Amendment privilege for corporations.
• Act of production can be evidence.
• Even if witnesses assert the Fifth Amendment, they can be compelled totestify through "use" or "transactional" immunity.
• Federal-State Immunity Reciprocity: federal grant of immunity almostalways results in reciprocal state grant of immunity, but the reverse is notalways true.
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Hearsay, the Fifth Amendment, Privileges & Immunity
• In general, a corporation can be held criminally liable for any criminalact carried out by one of its agents (1) if that act occurs within thescope of the agent's employment, and (2) the act was done for thebenefit of the corporation.
• A corporation is less likely to face criminal liability if it is the victim ofwrongdoing committed by a small number of employees.
• "Within the scope of that agent's employment"
• The agent was exercising the duties and authority conferred on himby his job, NOT that the corporation authorized the agent to commitillegal acts.
• For example, a salesman agreeing with a competing salesman tofix prices vs. a salesman who gets mad at a fellow employee andembezzles from his bank account.
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Indicting A Corporation: Corporate Criminal Liability
• "For the benefit of the corporation"
• The agent's acts were intended to benefit the corporation in someway, NOT that the benefit to the corporation was the sole reason forthe agent's acts, NOR that the corporation received some actualbenefit.
• For example, a salesman gets a kickback for sending business to aparticular vendor - a personal benefit to the salesman, but also abenefit to the corporation because the kickback allowed thecorporation to do business.
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Corporate Criminal Liability (cont'd.)
• Officers, directors, managers/supervisors, and employees at alllevels
• Subsidiaries: once a parent acquires a subsidiary, it has an obligation tosupervise its conduct and assure it complies with applicable law.
• Independent contractors: did a corporation delegate its authority to theindependent contractor to perform tasks, and did the corporation receivethe benefit of the contractor's acts? If so, the corporation can be liable forthe independent contractor's acts.
• Law of agency generally governs liability analysis.
• "Collective knowledge doctrine" is used to impute relevant mental stateto the corporation, as it is often hard to locate any single agent who hadknowledge of all the operative facts.
• Compliance programs alone will seldom prevent prosecution.
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Whose Conduct Creates Corporate Liability?
• Federal Prosecutors will look to DOJ's principles governing corporateprosecutions to determine whether a corporation merits prosecution:
• the nature and seriousness of the offense, including the risk of harm tothe public, and applicable policies and priorities, if any, governing theprosecution of corporations for particular categories of crime;
• the pervasiveness of wrongdoing within the corporation, including thecomplicity in, or the condoning of, the wrongdoing by corporate officers;
• the corporation's history of similar misconduct, including prior criminal,civil, and regulatory enforcement actions against it;
• the corporation's willingness to cooperate in the investigation of itsagents;
• the existence and effectiveness of the corporation's pre-existingcompliance program;
• the corporation’s timely and voluntary disclosure of wrongdoing;
(cont.)
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DOJ Principles Of Corporate Prosecution
(cont.)
• the corporation's remedial actions, including any efforts to implement aneffective corporate compliance program or to improve an existing one, toreplace responsible management, to discipline or terminate wrongdoers,to pay restitution, and to cooperate with the relevant governmentagencies;
• collateral consequences, including whether there is disproportionateharm to shareholders, pension holders, employees, and others notproven personally culpable, as well as impact on the public arising fromthe prosecution;
• the adequacy of remedies such as civil or regulatory enforcementactions; and
• the adequacy of the prosecution of individuals responsible for thecorporation's malfeasance.
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DOJ Principles Of Corporate Prosecution (cont'd)
• The 2015 Yates Memo declared that the DOJ will make prosecutingindividual corporate wrongdoers a top priority.
• DOJ will not be satisfied with charging a corporation alone.
• Now, to be eligible for any cooperation credit, corporations must provideto DOJ all relevant facts about the individuals involved in corporatemisconduct.
• Corporations cannot "decline to learn of such facts or to provide theDepartment with complete factual information about individualwrongdoers."
• Once a corporation has provided all relevant facts with respect toindividuals, DOJ will then assess the timeliness of the cooperation,the diligence, thoroughness, and speed of the internal investigation,the proactive nature of the cooperation, etc. in determining whether toaward cooperation credit.
• These considerations apply equally to corporations seeking tocooperate in civil matters, including False Claims Act suits.
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The Yates Memo (Sept. 2015)
• DOJ cannot ask for privileged information, and Yates has publicly saidDOJ is only interested in "facts," not privileged confidences.
• But in order to harvest out individual wrongdoers, in some situations acorporation may have to waive, or partially waive, privilege as toinformation about certain individuals who have committed wrongdoing.
• i.e. may have to turn over substance of once-privileged employeeinterviews with counsel where significant admissions or inconsistentstatements were made.
• Results in a series of considerations for the corporation:
• Does a company's privilege waiver have to be complete?
• Can a corporation selectively decide to withhold or volunteerprivileged materials?
• Does selectively producing privileged materials result in a subjectmatter waiver by the corporation?
• Will courts honor partial privilege waivers?
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Are Privilege Waivers Now Mandatory?
• Michael Macagnone, Internal Probes Need Outside Counsel, Gov'tRegulators Say, Law360, April 28, 2016
• During panel discussion on receiving corporate cooperation credit, DOJ'sDeputy Assistant Attorney General, SEC's Deputy Director ofEnforcement, and Delaware's State Prosecutor reported:
• "Government regulators may disregard internal investigations that haven'tincluded outside counsel when considering whether to give companies'cooperation credit' in criminal and civil enforcement, federal prosecutors andregulators said … maintaining that internal investigations need to be thoroughand credible to ward off serious punishment."
• "[O]utside counsel can help convince the government of the integrity of morebroad and serious internal investigations of alleged criminal or civilmisconduct."
• "[A]dding outside counsel can help get 'cooperation credit,' whether in a formalprogram or otherwise[.]"
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Should Internal Or External Counsel Lead ACorporate Internal Investigation?
• The title, role and responsibility of the person(s) alleged to have engagedin wrongdoing;
• The potential dollar value or harm to the company or to the public;
• The nature, length, and scope of the alleged conduct in question;
• The contact of the person(s) alleged to have engaged in wrongdoing withcustomers, the government, or other persons outside the corporation;
• Whether internal counsel would have any kind of conflict investigating thecase, i.e. formally, because they were a witness to the conduct, orinformally, because they are too close to the person(s) involved;
• How the company or its shareholders would feel about reading about theconduct in the newspaper;
• Whether any regulator would be interested in charging the conductcriminally or civilly
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Rule Of Thumb: Is The Investigation Major Or Minor?
• Is there a statutory duty to disclose discovered wrongdoing, i.e. iscorporation a public company with SEC filing requirements?
• Will the government discover the misconduct and investigate anyway?
• Will someone with knowledge of the misconduct become a"whistleblower" in an attempt to profit financially?
• Is the company already on regulators' radar for past misconduct?
• Will disclosure subject officers and/or directors to lawsuits for breach offiduciary duty or other causes of action?
• How bad will the fallout be from unfavorable press, including the failureto disclose?
• Need to consider the delay, or refusal to disclose, in light of Yates Memo
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To Disclose Or Not To Disclose? That Is TheQuestion!
• Document preservation notice
• Work product doctrine
• Segregation of privileged material
• Attorney – expert privilege
• Joint defense group
• Upjohn warnings to employees
• Criminal/regulatory dilemma
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Other Investigative and Grand Jury RelatedConsiderations
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Thank You!We are very interested in your feedback -please take a moment to leave a note about this class and thepresenters on your evaluation form.
Rachel Cannon
Partner
Dentons
T +1 312 876 2474
Steve Senderowitz
Partner
Dentons
T +1 312 876 8141