Where Did You Go, Batman? Martin Shkreli, Congress, the Fifth Amendment and You

It does not help that the most recent symbol of the Fifth Amendment is The Joker:

The First Amendment.

The First Amendment.

The Fifth Amendment.

The Fifth Amendment.

 

There has been plenty of news coverage about Martin Shkreli, “pharma bro” and alleged securities fraudster, and his appearance before Congress.  (Examples are herehere and here).   The proceeding itself was snarky, entertaining and time-wasting:


Congressional testimony is political theater, no more and no less, but some observations are in order for us non-Joker citizens, as well.

As a refresher, it never hurts to take a look at what the Constitution actually says:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

White-collar lawyer Sara Kropf has an excellent post here on Shkreli’s invocation of his Fifth Amendment rights.  She notes:

Congress does this All. The. Time. And every time it is a colossal waste of time and taxpayer dollars. If Congress wants to investigate drug prices, then do that. But don’t haul someone before a committee to testify, knowing that he will take the Fifth. It’s a constitutional right, for goodness’ sake. There’s an ongoing criminal investigation, and any lawyer worth her salt would tell him to take it.

Read the entire post: Why Does Congress Put Witnesses Through This Charade?

Law professor, former AUSA and blogger Randall Eliason has an extensive piece here about various aspects of the Shkreli saga:

Shkreli’s attorney made it clear in advance of the hearing that Shkreli would invoke his Fifth Amendment right against self-incrimination. That was no surprise. Even though the hearing was not specifically about Shkreli’s criminal case, there would be too much risk that something he said might end up facilitating his own prosecution. Almost any lawyer would likely give him the same advice.

Shkreli’s lawyer asked that his client be excused from attending the hearing, since he was not going to be able to answer questions. But Congress insisted that he appear, threatening him with additional criminal sanctions if he ignored the subpoena. And so, in a familiar Washington theater production, Shkreli sat before the committee, with his attorney in the “I am not a potted plant” seat directly behind him, and repeatedly invoked his right to remain silent in response to every question.

Read the entire post: The Ongoing Legal Saga of Martin Shkreli.

For corporations, executives and businesspersons of all stripes, there is a great deal to learn from Congressional investigations:

As the former Special Counsel to House Committee on Banking and Financial Services for the Whitewater investigation involving President and Mrs. Clinton,  I have written before about the perils (and weirdnesses) of Congressional testimony: Lessons From An Ex-Congressional Lawyer:

Although the Congress respects constitutional privileges (e.g., the Fifth Amendment privilege against self-incrimination), it does not officially recognize common-law protections such as the attorney-client privilege or the work-product doctrine.  Rather, many committees will often take the position that recognition of such privileges is discretionary with the committee.  As a practical matter, however, committee counsel and staff will often accept a well-grounded privilege claim.  Companies that are the target of major parallel investigations will often waive common-law privilege, either to show good faith and cooperation, or as part of a settlement with the government.

Unlike a criminal defendant, a witness before a Congressional committee cannot refuse to testify altogether, but  must rather invoke the privilege in response to specific questions.

Very '90s.

Very ’90s.

Remarkably, the theater can be simultaneously stressful and boring:

Because most people are familiar with Congressional investigations only through television, they assume that if they are caught up in an investigation they will be summoned to testify before a committee like John Dean or Oliver North, with cameras clicking amid vigorous partisan drama.  Although your client may indeed be called to testify in a public hearing — and you should prepare as though your client will be called — it is more likely that constraints of time, the demands of the media, and political pressure and compromise having little to do with your client will result in your client never being called.  If your client testifies, remember that in many instances the committee members’ “questions” are not actually designed to elicit information from the witness.  Rather, questioning is often more like speech-making designed to maximize camera time on the questioner or to score political points against the opposition.

Despite Mr. Shkreli’s cartoonish image – and it may be nothing more than that, just an image – there is something refreshing when one witnesses defiance, with constitutional grounding, in the face of massed political power. The Members’ frustration arose not so much from Shkreli’s attitude as from the fact that the Members knew they lacked the political will to actually hold him in contempt (and then to try and convince the United States Attorney for the District of Columbia to prosecute him).

That lack of will, coupled with the fact that Congressional hearings are political theater, means that such events are not the best teaching grounds for lawyers or clients.  Nevertheless, we can all learn a few lessons from Mr. Shkreli.

Getting carded, back when there was no casual Friday.

Getting carded, back when there was no casual Friday.

First, don’t be a chicken about keeping your mouth shut: your business, your family and your liberty depend on it.  People in business, whether senior executives, middle managers or line employees, recoil from the notion of refusing to answer questions from any representative of the Government (including Members of Congress).  Separately, I have elsewhere described this impulse as The Efrem Zimbalist, Jr. Syndrome:

“Everyone will think I did it” is a common theme, as is “I can just explain it so they can understand it.”  The former statement is likely true, but it is irrelevant if you can avoid prison or a business-crippling indictment, fine or government-contracting debarment.  The latter statement is almost never true: by the time a Government agent wants your statement, he or she already has a pretty good idea of what he or she understands.

And let your lawyer toot your horn.

And let your lawyer toot your horn.

Second, in declining to speak to the Government, be civil and professional, but cool.  “Cool” not like, say, Miles Davis, but “cool” as in “calm” or “settled.”  Investigators, agents and regulators can be very persistent and can make you feel as if it’s un-American to not speak with them.

Third, follow your lawyer’s instructions.  It is surprising how many otherwise prudent, savvy businesspeople will keep talking after their lawyer has counseled them to not do so.  In the Times video embedded above, even Mr. Shkreli says that he he will follow his lawyer’s advice.

Go thou forth and do likewise.

Lawyer up

 


The Five Best Ways for Your Client’s Employees to Get Indicted

A glass of ice water, please.

A glass of ice water, please.

The nice folks at the Birmingham Bar Association (and white-collar criminal defense lawyer Steve Shaw in particular) invited me to deliver a lunchtime CLE on a white-collar subject of my choice.  The topic ended up being “The Five Best Ways for Your Client’s Employees to Get Indicted.”

One could come up with more ways your client’s employees could get indicted, but life is short.

Hunting for 18 U.S.C. Section 1001.

Hunting for 18 U.S.C. Section 1001.

Here is the handout: The Five Best Ways for Your Client’s Employees to Get Indicted. Download it.  It’s not legal advice, but it has some fairly useful material about bribery, obstruction and honest-services fraud in the Eleventh Circuit, as well as quotes from Men In Black (1997).  We spent a fair amount of time on practical considerations in working with businesspeople involved in white-collar investigations, including this piece: Stalking Horses, Pitchfork Crowds, Narrow Neckties, Mr. Rogers’s Slippers and Indicted Employees: 6 Steps To Dodge Being Deweyed.

All about the ratings.

All about the ratings.

And, there was even a caution against the “Efrem Zimbalist, Jr. Syndrome,” named after the star of the old television series The FBI.  Watch this 140-second video on the Efrem Zimbalist, Jr. Syndrome.




The Border, Searches and the Digital Devices of Executives and Employees

Here’s a story (via @nytimes) about how the border is a back door for device searches.

There is, of course, a “border exception” to the Fourth Amendment, a constitutional doctrine that came of age when national physical borders were also, usually, information-borders as well.  Although the discussion in the article takes place in the national-security context, it’s worth American companies giving more careful thought to how they address the way their executives and employees work and travel.  Employees usually love using their own devices and storing company data in ways that are readily accessible to and productive for them.

At the border, though, all that corporate data is free game.

As the article notes:

TECS is a computer system used to screen travelers at the border, and includes records from law enforcement, immigration and antiterrorism databases. A report from the Department of Homeland Security about border searches of electronic devices says a traveler may be searched “because he is the subject of, or person-of-interest-in, an ongoing law enforcement investigation and was flagged by a law enforcement ‘lookout’ ” in the Immigration and Customs Enforcement computer system.

For now, the law remains murky about any limits on intrusive border inspections, including how long travelers can be detained, whether they are required to provide passwords for their devices . . . and whether they must answer any question an agent asks. Responses may be recorded in a traveler’s TECS file and shared with other government agencies.

Detention is an inconvenience.  To answer (or not answer) an agent’s question is another matter entirely, one that implicates both the company’s legal exposure and the individual’s Fifth Amendment rights.

If you find yourself in a lawsuit or prosecution based on a seizure at the border, it’s worth asking for this document from ICE:

 


Complimentary One-Day Financial Services CLE SuperCourse in NYC

If you are in the New York area, this is an excellent source of free CLE: Network of Trial Law Firms Financial Services CLE Supercourse

When?  Friday, September 20, when experienced financial services practitioners from across the U.S. and Canada convene in New York City.  Breakfast and lunch at the City Bar Building (44th St. near Sixth Ave.) are included.  Presentations are short (20 minutes each).

Sign-up?  on-line.

Why? I admit it —  I’m speaking (actually, I’m leading a breakout session on “White-Collar Crime.”).

Topics:

  • Litigating against FINRA and the SEC
  • 18 USC 1519: The Changing Face of Obstruction
  • Traditional and Alternative Products: Suitability and Supervisory Issues
  • FINRA Arbitration – Panel Selection
  • Whether Non-Member Registered Investment Advisors (“RIAs”) Should Voluntary Agree to FINRA Arbitration
  • Regulatory Trends for RIAs
  • Federal Preemption of State Securities Law Claims
  • Impact of Canadian Class Actions on the US Capital Market
  • Discovery in FINRA Arbitration
  • Panel: Chief Compliance Officers Under Siege
  • Regulatory and Enforcement Actions Arising from Fiduciary Relationships
  • Continued Erosion of Rule 10b-5
  • Data Breach and Cyber Liability
  • Erosion of Over-Broad Class Actions

 

Breakout Discussion Sections (with coursebook materials) on:

  • Developments in Securities Liability of Attorneys, CPA’s and Other Professionals
  • FINRA Arbitrations
  • White Collar Crime
  • Litigating Customer Disputes

 

Hope to see you there.

 

 


Men In Black, the Salinas Decision and Employee Interviews

 

The FBI: Movies and Real Life

Beatrice: You here to make fun of me too?
Kay: No, ma’am. We at the FBI do not have a sense of humor we’re aware of. May we come in?
Beatrice: Sure.

                                         — from Men In Black (1997)

Set out below is an excerpt from an actual government training-manual on how to interview witnesses.  Coupled with the Supreme Court’s recent decision in Salinas, it bespeaks caution to any corporate officer or employee who submits to a government interview without counsel (or, at least, without preparation by counsel).

Ten Techniques for Building Rapport

1) Establish artificial time constraints. Allow the potential source to feel that there is
an end in sight.
2) Remember nonverbals. Ensure that both your body language and voice are nonthreatening.
3) Speak slower. Do not oversell and talk too fast. You lose credibility quickly and appear too strong and threatening.
4) Have a sympathy or assistance theme. Human beings want to provide assistance and help. It also appeals to their ego that they may know more than you.
5) Suspend your ego. This probably represents the hardest technique but, without a doubt, is the most effective. Do not build yourself up—build someone else up, and you will have strong rapport.
6) Validate others. Human beings crave feeling connected and accepted. Validation feeds this need, and few offer it. Be the great validator and have instant, valuable rapport.
7) Ask “how, when, and why” questions. When you want to dig deep and make a connection, asking these questions serves as the safest, most effective way. People will tell you what they are willing to talk about.
8) Connect using quid pro quo. Some people are more guarded than others. Allow them to feel comfortable by sharing a little about yourself if needed. Do not overdo it.
9) Give gifts (reciprocal altruism). Human beings reciprocate gifts given. Give a gift, either intangible or material, and seek a conversation and rapport in return.
10) Manage expectations. Avoid feeling and embodying disappointment by ensuring that your methods focus on benefiting the targeted individual, not you. Ultimately, you will win, but your mind-set needs to focus on the other person.


SAC Trader Seeks Access To Some Witnesses In SEC Civil Case – Law Blog – WSJ

In parallel proceedings, the civil case is frequently stayed pending the outcome of the criminal case.  Sometimes, the stay can significantly hamper the trial preparation of a defendant in the criminal proceeding (for example, by restricting access to cooperating witnesses).    SAC Trader Seeks Access To Some Witnesses In SEC Civil Case – Law Blog – WSJ

How does the court best balance these principles?