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.


Barry Bonds, Ramblin’ Man

The federal appeals court in San Francisco recently reversed baseball player Barry Bonds’s conviction for obstruction of justice.

Grand jury slugfest.

Grand jury slugfest.

The criminal charge and conviction arose out of testimony that Bonds gave to a grand jury investigating the illegal provision and use of steroids in major league baseball.  As the Ninth Circuit Court of Appeals summarized it:

During a grand jury proceeding, defendant gave a rambling, nonresponsive answer to a simple question.  Because there is insufficient evidence that Statement C was material, defendant’s conviction for obstruction of justice in violation of 18 U.S.C. 1503 is not supported by the record. Whatever section 1503’s scope may be in other circumstances, defendant’s conviction here must be reversed.

Why is this decision relevant to corporations, their employees and their lawyers?

Interview

In interviews by government agents, in grand jury testimony led by prosecutors or in testimony at trial, a witness gets a lot of bad questions and gives a lot of bad answers. “Bad” answers are not necessarily untruthful. They may be vague; or not responsive to the question; or simply an observation made into the air in order to fill the silence.

Even well-prepared witnesses fall victim to this syndrome. Invariably, they fail to (a) listen to the question; (b) answer the question; and (c) stop. If it’s incomprehensible question, they fail to ask for a new question.  If it’s a question they don’t like, they answer some other, unasked question.

This problem is particularly acute with business people. In general, business people are compensated for having answers to questions and solutions to problems. To respond “I just don’t know” or “I don’t get your question” is not well received in commerce. Business people are trying to do a deal and “get to yes.”  “Yes” is not the place that agents, prosecutors and regulators seek. (At least, not that kind of “yes.”)

Sharp haircuts, dull questions.

Sharp haircuts, dull questions.

We have discussed here and here  and here the do’s and don’t’s of interactions with government agents.  In particular, do not fall prey to the Efrem Zimbalist, Jr. syndrome.

That lesson is worth repeating:

“Government Agents,” a Lightfoot140 by Jack Sharman. from LFW on Vimeo.


For Corporate Counsel || Stalking Horses, Pitchfork Crowds, Narrow Neckties, Mr. Rogers’s Slippers and Indicted Employees: 6 Steps To Dodge Being Deweyed

" . . . brave, clean and reverent.  And, cooperative in the civil investigation."

” . . . brave, clean and reverent. And, cooperative in the civil investigation.”

You may (or may not) recall the Boy Scout Law:

“A Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, friendly, brave, clean and reverent.”

Your corporate employees, officers and colleagues may exhibit all, some or none of those characteristics.  Even if one masters all the peculiars of the Boy Scout Law, however, strict adherence is no shield against indictment in the situation where one moves from “witness” to “target” for reasons outside the control of the “Scout.”

So: herewith 6 lessons to heed if you wish to avoid ending up like a young man named Zachary Warren.

 

Mother's Day.

Mother’s Day.

It is unusual for the government to indict leaders of a major law firm, as the Manhattan District Attorney’s office indicted three of the leaders of the now very-defunct Dewey & LeBoeuf.  What has caused the most discussion, controversy and even introspection is the indictment of a fourth defendant, one Zachary Warren, a 29 year-old “client relations manager”  — apparently, a glorified internal bill collector with a distinguished resume, both before and after Dewey.

What can inside counsel, or those who advise them, learn from the path that led these four men — but young Mr. Warren, in particular — to being charged and perp-walked?  More remains to be told of this tale: as in all such white-collar sagas, there are likely at least two sides to every side.  I do not know Mr. Warren, nor do I have any special insight into what he, the investigating agents and the prosecutors were or might have been thinking.

Nevertheless, I can at least provide six lessons on how to minimize the likelihood that you — inside corporate counsel, risk manager or chief compliance officer — will have to explain to the boss or the board how your own Mr. or Ms. Warren got himself in a criminal fix.

Some background is unavoidable.  The best places to start are an article by James B. Stewart in the New York Times (A Dragnet at Dewey & LeBoeuf Snares a Minnow); an Atlantic article by Stewart (In Dewey’s Wreckage, Indictments); and a post by David Lat at Above The Law (What Dewey Know About Zachary Warren, Defendant No. 4 In The Criminal Case?).  Read the articles in full, but here are some relevant portions:

From James B. Stewart in the Times:

“You’ve been indicted,” an assistant Manhattan district attorney, Peirce Moser, told Zachary Warren, a 29-year-old magna cum laude graduate of Georgetown Law School with a prestigious clerkship on the Federal Court of Appeals for the Sixth Circuit in Memphis.

“Can you say that again?” a stunned Mr. Warren asked when he received the call two weeks ago Friday.

Almost as surprised as Mr. Warren himself were Mr. Warren’s cellmates before his arraignment a week ago — the top managers of Dewey & LeBoeuf, the global law firm that imploded in 2012. Although some of them had trouble remembering who Mr. Warren was, the indictment claims that all four were co-conspirators in a major accounting fraud. The firm’s chairman, executive director and chief financial officer, ages 60, 57 and 55, had long known that they were the subjects of a criminal investigation. All had prominent criminal lawyers, while Mr. Warren had hired a lawyer only after the phone call that Friday.

Alone among the defendants, Mr. Warren was charged in two separate indictments, one accusing him of a “scheme to defraud” and falsifying business records and the other charging him with six felony counts of having “made and caused” false entries in books and records. Mr. Warren pleaded not guilty and was released on $200,000 bail. His once-bright future has now been threatened.

How did a 29-year-old with an impeccable record, someone who had never even taken an accounting course, end up as an accused mastermind of what the Manhattan district attorney, Cyrus Vance Jr., called “a massive effort to cook the books” of the once-giant law firm? And how did he get there without realizing he should hire a lawyer?

From Mr. Lat:

I fall somewhere in between the extremes of “naive youngster ambushed by the DA’s office” and “arrogant lawyer full of hubris.” Here’s my theory as to why Zachary Warren didn’t bring a lawyer with him to the interview: he didn’t see himself as one of “those people,” i.e., a potential criminal defendant.

And now for the 6 lessons.

And now for the 6 lessons.

Lesson Number 1: Recognize that the danger is not innocence or naivete on the one hand, nor guilt or arrogance on the other, but rather the conviction that “I” am not one of them.

What’s the tag line of the blog you’re reading?  Don’t read us because you’re a criminal.  Read us because, some time or other, someone may think you are.  In his Above The Law post, Mr. Lat alludes to the problem, which is perhaps the most common trait among people charged with white-collar offenses.  No employee, colleague, officer or director thinks that he or she is a criminal.  Ready to do what you have to do for your family and future?  Absolutely.  Willing to throw an elbow?  When needed, sure.  Holding your nose through something unethical?  Well, there was that one time, back in 1990.

But something criminal?  Nope.  No way.  Criminals are people who break the law.  They steal stuff and hurt people.

The Government point-of view (via New Line Cinema).

The Government point-of view (via New Line Cinema).

The task that arises from lesson number 1 is to convince those you are guiding that their assessment of their culpability (or lack of culpability) is irrelevant to how agents, investigators, prosecutors, regulators and politicians will view their culpability.  Indeed, some of the facts that your employee trumpets as an emblem of innocence may, in the government’s eyes — or “Eye,” if you’re a Lord of the Rings fan — be just as likely a badge of fraud.

Lesson Number 2: The civil case is always a stalking horse for the criminal case.

Not very sporting.

Not very sporting.

Of course, “always” is not “always,” but it is often enough to make it reliable.  If a person believes he or she is part of a civil inquiry only, he or she will conclude — wrongly — that the exposure is limited.  An employee or officer being interviewed by law enforcement or prosecutors should assume that there is a shadow criminal investigation and that he or she is at least a “subject” of that investigation.

We'd like a word.

We’d like a word.

Lesson Number 3: The company’s civil case and the individual officer or employee’s criminal case are on two different planets because of the current pitchfork mentality about putting “somebody” in jail. 

Corporations are not natural persons and cannot be imprisoned.  When very bad things happen, the natural impulse is to determine (or shift) blame.  The fruit of that impulse is to hope someone goes to jail — even where the civil and criminal standards are different; where “knowledge” and “intent” must be discerned differently; and where the rules of evidence and Constitutional principles apply to individuals in ways that differ from the manner in which they apply to corporate entities.  Judges are not immune from such sentiments, as where a federal judge publicly urges the Department of Justice to prosecute individuals:

U.S. District Judge William H. Pauley approved the auto maker’s settlement with prosecutors Thursday, saying it “painted a reprehensible picture of corporate misconduct.” But he added that ultimately individuals are responsible for corporate misconduct and urged the Manhattan U.S. attorney’s office, which conducted the investigation into Toyota, to continue its probe.

“I sincerely hope that this is not the end but rather the beginning to seek to hold those individuals responsible for making these decisions accountable,” Judge Pauley said during a roughly 20-minute hearing in Manhattan federal court.

When asked if prosecutors would pursue individuals during a news conference Wednesday, Manhattan U.S. Attorney Preet Bharara said he wasn’t “foreclosing anything” but believed the settlement is the “final resolution” of the case.

“[T]he rules of evidence sometimes do not allow you to use certain kinds of evidence and certain documents against individuals, although they might be admissible against the company itself,” said Mr. Bharara. “And so although there is an admission that there were individuals who engaged in conduct which provides for a basis to bring a case against the company, they are not charged here.”

The comments add to a growing chorus from judges who have criticized prosecutors for settling claims of wrongdoing with companies while not bringing charges against executives or others who actually made the decisions.

 

Lesson Number 4: Government agents and investigators lie to you.  They deceive you all the time; it is ethical for them to do so; and there is little you can do about it.

Many employees think that, in general, law-enforcement agents do not lie (or, at least, that law-enforcement agents do like lie to people like them).

Not so forbidden, actually.

Not so forbidden, actually.

Surprisingly large numbers of otherwise savvy, well-educated people profess shock and dismay when they find out that an agent has misled them, told them an untruth or left out an important fact that might have changed their answer to a question.

However heartfelt, such dismay is misplaced.  Much of what we expect law-enforcement to do — especially with regard to undercover operations, searches-and-seizures and interrogations — is premised on not being forthcoming.  Like any other witness, an FBI agent or a sheriff’s deputy must testify truthfully in court proceedings, and is subject to perjury and other sanctions if he or she fails to do so.  By the time we reach that stage of an investigation and prosecution, however, our employee or colleague has already spoken with the agents out of a desire to cooperate; from fear of being perceived as not cooperating; or from embarrassment at being associated with particular events, even by implication.

This compulsion to speak leads us to the next lesson: avoid the Efrem Zimbalist, Jr. Syndrome.

Lesson Number 5: Teach your employees and colleagues to avoid the Efrem Zimbalist, Jr. Syndrome.

Getting carded, back when there was no casual Friday.

Getting carded, back when there was no casual Friday.

I’ve spoken before on why businesspeople talk to agents without having their lawyer or the company lawyer present.  I call it 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, then keep reading.

(An aside: I’ve written before on the relationship between crime and narrow neckties: Criminals In Ties: Contract Law and Reservoir Dogs)

 

 

 

Lesson Number 6: Tell the truth in response to questions you understand, and demand a new question if you don’t understand the old one, but don’t put on Fred Rogers’s slippers.

If your employee or colleague decides to cooperate in an investigation, they need to meditate on the old chestnut “in for a penny, in for a pound.”  Lying is the quickest path to indictment.  In complicated, expensive, protracted business-crime or regulatory investigations, false-statement or obstruction charges are easier and cheaper to prove that the underlying, substantive conduct.  And, judges and juries jump to conclusions about liars and document-shredders.

Foot powder and an immunity letter.

Foot powder and an immunity letter.

On the other hand, answering “truthfully” does not mean answering “cuddly.”  Assume that the agent knows the answer (or has a decent guess about the answer, or has a preconceived notion about the answer) to every question that he or she poses.  Further, assume that each question, and therefore each answer, is at best a “neutral” event from the perspective of the person being questioned.

Good luck.