When the FBI Comes to the Door
If your civil client is contacted by a
federal agent, will you know what to advise? This primer on criminal
investigations is for civil lawyers who find their clients and practices
suddenly immersed in a federal criminal case.
by David Cannon & Steven Biskupic
ot many civil clients are prepared for a knock on the door
from federal agents.
When it happens, even in the most innocent of circumstances, the
business owner or other professional may immediately telephone a lawyer
- and often, that lawyer is not someone who practices in criminal law.
In all likelihood, the attorney will be a civil practitioner who may
have helped the client on a will, a real estate purchase, or a
bankruptcy.
In such cases, the civil practitioners may find
themselves searching their memory of criminal law courses to comprehend
some of the terms that federal agents and prosecutors routinely use. Is
a simple subpoena for records a cause for concern? What is the
difference between a subject and a target? Do conflicts exist between
representing the corporation and individual employees? And almost
always: Is there a need to consult with a criminal attorney? The answers
will vary with the context.
The following article is a primer on criminal investigations for
civil lawyers who find their practices suddenly immersed in a federal
criminal case.
The Routine Process of a Grand Jury
While the common public perception speaks of the impaneling of grand
juries as an escalation of an investigation, the reality is quite
different. Under the U.S. Constitution and federal rules, all federal
felonies must be presented to a grand jury. 1 The only exception arises if the accused waives
the process; then a criminal Information is issued directly by the
United States Attorney.2
The grand jury, which meets and considers evidence in secret, is the
federal equivalent of a preliminary hearing.3 The grand jury, composed of between 16 and 23
persons, votes on whether probable cause exists to issue a public
charge. Only 12 votes are needed, and the process is almost unilaterally
controlled by the prosecutor. No defense counsel or judge is present. In
1992 the U.S. Supreme Court held that the prosecutor is not required to
introduce evidence that suggests the defendant may be innocent.4 The one-sided nature of the proceedings leads
cynics to claim that a grand jury would indict a ham sandwich if asked
by the prosecution.
In white collar cases, however, the grand jury serves an added
dimension as an investigative tool. Certain evidence-gathering
procedures require the use of the grand jury. For example, under the
Right to Financial Privacy Act, bank financial records can be obtained
in an investigation only through the use of a grand jury
subpoena.5 In addition, prosecutors
confronted with certain practice areas of the law - such as
environmental regulation - may use the lay background of the individual
grand jurors to test public comprehension of the alleged wrongdoing.
Thus, even in the most preliminary stage of an investigation, grand
jury subpoenas often are used. The appearance of the subpoenas does not
mean that an investigation has become heightened or that the grand jury
is ready to charge the recipient. All felony investigations start this
way.
Witness - Subject - Target
In most white collar cases, the government attorneys will inform
counsel of the client's status. The United States Attorneys Manual, used
by all federal prosecutors, formalizes the classifications into three
categories.6 A target is a person linked to
an offense by substantial evidence and one the prosecutor is
contemplating charging.7 A subject is a step
removed; the person's conduct falls within the scope of the
investigation, but the person is not considered a target.8 The last category is witness.9
The distinction between the categories, especially in a white collar
case, may be fluid. For example, the bookkeeper who unknowingly records
personal expenses for the owner as business deductions may end up as a
witness in a tax fraud investigation. If the bookkeeper knows the books
are being doctored, he has moved into the subject category. Finally, if
the bookkeeper ran his own expenses through the business as well, the
bookkeeper also may become a target.
Immunity
Invariably, the first thought of a noncriminal lawyer faced with FBI
agents on the doorstep is: Does my client need immunity? Just as
invariably, the immediate response of a prosecutor supervising the
agents is: No. From both perspectives, the problem is the unknown. The
lawyer does not want to unwittingly expose the client to questioning
that may be used against the client; the prosecutor does not want to
give immunity only to learn that the client was the most culpable of the
targets, or worse, that prosecution of the most culpable has now been
made impossible because of the immunity.
While keeping silent is the client's constitutional right, it may not
be the best strategy in every situation. For example, the blanket
refusal to answer all questions may draw increased scrutiny from agents
wondering what is being hidden. Also, if other witnesses are
cooperating, the client may find her credibility hurt simply by being
the last one to tell her version of the events.
The most common compromise is informal immunity; that is, an
agreement between the parties as to how the statements can be used.
Formal immunity exists under federal law and is memorialized by judicial
order.10 Informal immunity is nothing more
than an agreement or contract between the parties.11
As such, informal immunity (and its multiple variations) has come to
be called by a variety of terms: letter immunity (since it often is
memorialized solely in a letter signed by the parties); proffer
agreements (because the information is considered a description through
counsel of information the client would proffer under the immunity
agreement); or king or queen for the day (since the words given by the
client during that particular interview on that particular day will not
be used against the client).
In practical terms, the informal immunity often boils down to this
middle ground: The actual words of the witness will not be used against
the witness; however, future prosecution remains a possibility. Most
importantly, law enforcement may pursue leads that arise from the
statement, including those that later may be used to prosecute the
witness.
Multiple Representations
No clash between civil and criminal law seems as great as the issue
of multiple representations. In civil practice, the idea that a lawyer
can represent multiple similar interests is routine. Simultaneous
representation of a corporation, chief shareholder, and employees would
not necessarily set off alarms.
To the prosecutor, however, these interests appear to almost always
conflict. Given varying degrees of involvement in suspect conduct, or
even the same levels of culpability, there will always be an incentive
for someone out of the group to strike a deal with prosecutors. A
strategy of divide and conquer is not unusual.
Also in a criminal investigation, corporate and individual interests
usually will differ since only the individual can be sentenced to jail,
thus providing an incentive to the individual to have only the
corporation face charges. On the other hand, it may serve the corporate
interest to simply have an employee admit individual culpability since a
corporate conviction may bar the business from certain future dealings,
such as government contracts.12 In
addition, the government contract may require the business to cooperate
in any investigation, even though it may serve the individual interest
to assert his right to remain silent.13
Federal rules provide a mechanism for prosecutors to challenge
multiple representations.14 The presumption
is that a client gets to pick the attorney, though that may be overcome
by the prosecutor's demonstration of an actual conflict or a serious
potential for conflict.15 In addition,
Wisconsin Supreme Court rules place an ethical obligation upon attorneys
to maintain conflict-free representation, though the rules do provide
for a waiver by clients under certain circumstances.16
Responding to Subpoenas for Records
The most frequent overlap of civil practice with
federal criminal cases is where a client company receives a federal
request for copies of records. As mentioned above, in most instances,
this will be in the form of a grand jury subpoena and may simply be the
routine gathering of information. The subpoena itself may in no way
suggest any impropriety of the client. For example, if a target has
submitted false statements to secure a mortgage loan, the prosecutor may
need the broker file to link the flow of false information to the victim
lender, even if the broker committed no wrongdoing. In such cases, the
prosecutor routinely will inform the attorney of the client's status as
a witness. (In some instances, however, it may be too soon in the
investigation for the prosecutor to classify the recipient of the
subpoena; and, as stated above, the situation may be fluid and the
broker's status could change.)
A discussion between attorneys on the practical aspects of responding
to a records subpoena also is routine. Topics generally include the
scope of the records search, extensions of time to retrieve records, and
copying costs. Matters regarding scope are important to both sides,
since no one wants to review thousands of pages of documents when only a
few are relevant. In addition, if records are stored off site, an
extension of time to gather the records may be needed.
Reporting a Federal Crime
Another public misconception is how federal cases develop. Unlike
television portrayals, no one swears out a complaint to start an
investigation. In many white collar cases, a citizen (or business)
simply reports the matter to the FBI or U.S. Attorney's Office or some
other federal agency, and an investigation is begun. Usually a victim is
prompted to report a matter because of a loss of money. Also generating
cases are banks, which under federal law are required to report
suspicious activity;17 and federal agencies
that monitor particular conduct, such as the U.S. Trustee's role in
bankruptcy cases.18
Civil attorneys also are common initiators of criminal fraud cases.
Having developed an expertise in a particular field, such attorneys can
easily recognize when unusual, and possibly criminal, conduct may have
been present. In such instances, a letter or telephone call to the U.S.
Attorney's Office or the FBI often is enough to prompt at least an
initial review. A civil attorney making such a report carries important
credibility for law enforcement officers evaluating how to devote
limited resources.
Restitution and the Victim Company
Where a client company has been found to be the victim of a federal
offense, various provisions of federal law allow remedies that assist
the civil attorney.19 When restitution has
been ordered, the U.S. Attorney's Office and the U.S. Probation Office
will monitor the defendant's finances to ensure compliance with a
court's order of restitution. This monitoring carries the threat that if
a defendant is not making good-faith restitution efforts, the court can
order an additional prison sentence.20
In addition, for the victim company pursuing civil remedies, a
federal criminal conviction may estop the defendant from denying the
essential allegations of that offense in any subsequent civil
proceeding.21 The criminal judgment also
may be used by a victim as a lien on property of the defendant.22
The Public Record
As mentioned above, a grand jury investigation is conducted in
secret. Certain aspects, though, result in the public filing of
documents. Search warrants, for example, are obtained through probable
cause findings generally made on the public record.23 Indictments, motions, plea agreements, and trial
transcripts also are public documents.
For civil attorneys, this public record can be a help and a burden.
An attorney pursuing civil remedies for a client may find the FBI has
uncovered a wealth of information that otherwise would not be found
during civil discovery. On the other hand, when a client has
participated in criminal proceedings, even as just a witness, there is
no sealing of that participation from public notice and unwanted
notoriety may take place.
The Mind-set of the Federal Criminal Bar
Wisconsin has four federal judges and three magistrate judges in
Milwaukee that routinely hear criminal cases; in Madison, two judges and
one magistrate preside. Federal prosecutors are located in offices in
both cities and only occasionally will a prosecutor from outside the
respective offices handle a case. The defense attorneys who routinely
handle federal white collar cases is also a small group.
As such, the federal criminal bar in Wisconsin is considered to be
well known by individual judges. Many attorneys believe that, whether
intentional or not, judges monitor the performance of attorneys to
ensure compliance with standards that the judges want to have followed
in federal court. As one attorney has joked: You don't really know the
rules unless you know the judges' views of the rules.
The result is an emphasis on the long run. One case, no matter how
important to an individual client, usually is not considered a
justification for departing from expected norms. Prosecutors, knowing
that they may be in front of the same judge the next day, certainly
consider this factor. Defense attorneys, many of whom are former
prosecutors, carry the same concerns. Attorneys unfamiliar with such
standards, however, may find themselves losing credibility by fighting
issues that have long been settled but not necessarily published.
Avoiding Malpractice
Attorneys almost daily face the dilemma of whether they are getting
too far afield from their regular areas of practice. If an FBI agent
comes to the door of your civil client, are you competent to advise the
client?
Wisconsin Supreme Court Rule
20:1.1 states, "A lawyer shall provide competent representation to a
client. Competent representation requires the legal knowledge, skill,
thoroughness and preparation reasonably necessary for the
representation." The comment to the rule provides, in part: "A lawyer
need not necessarily have special training or prior experience to handle
legal problems of a type with which the lawyer is unfamiliar. A lawyer
can provide adequate representation in a wholly novel field through
necessary study."
![Biskupic](/SiteCollectionImages/WisconsinLawyer/2000/02/biskupic.jpg)
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![Cannon](/SiteCollectionImages/WisconsinLawyer/2000/02/cannon.jpg)
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Steven Biskupic, Marquette 1987, is a prosecutor in the U.S.
Attorney's Office, Milwaukee, prosecuting white collar crimes. His views
do not necessarily reflect those of the U.S. Department of Justice.
David Cannon, Marquette 1960, is a litigation partner at Michael Best
& Friedrich LLP, where he has represented several clients in federal
investigations. He is a former Milwaukee County District Attorney and
U.S. Attorney for the Eastern District of Wisconsin.
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For those not involved in the economic ramifications, the easy answer
would be to consult a criminal lawyer in every instance. But for the
paying client, that may not be the best solution.
If the client is simply a witness producing records or other
historical information, there is a certain amount of overkill involved
with calling in a defense attorney in every instance. After all, FBI and
other federal agents interview citizens every day. The defense bar would
remain awfully busy if that were the standard.
The key is ascertaining whether the civil client is simply a witness;
or, as discussed above, a subject or target. If the client is a witness,
there should not be a problem with a civil lawyer advising the client on
the contact. If the client is a subject or target, the civil lawyer
should make sure he or she has knowledge of criminal proceedings -
otherwise, consultation with a criminal attorney would be a good first
step.
In any case, however, it helps to understand the terms that agents
and prosecutors routinely use.
Endnotes
1 See U.S.
Const. Amend. V; Fed. R. Crim. P. 6, 7.
2 Fed. R. Crim. P. 7(b). The waiver
must be in open court after the defendant has been apprized of the
nature of the charges.
3 See Fed. R. Crim. P. 5,
6.
4 United
States v. Williams, 504 U.S. 36 (1992).
5 See Title 12,
U.S.C., §§ 3401-22.
6 U.S. Attorney's Manual,
Title 9, Ch. 11-150. See also United States v. Gillespie, 974
F.2d 796, 798 n. 1-2 (7th Cir. 1992).
7 Id.
8 Id.
9 Id.
10 See Title 18, U.S.C.,
§§ 6001, et seq.
11 See United
States v. $87,118 in United States Currency, 95 F.3d 511, 516
(7th Cir. 1996).
12 See, e.g., Title 42, U.S.C.,
§ 7606.
13 See Title 41, U.S.C.,
§ 57.
14 Fed. R. Crim. P. 44(c)
provides for a hearing when a single counsel represents more than one
charged party. Litigation in a precharging setting may arise from the
prosecutor's attempt to contact one of the represented parties.
See U.S. ex
rel O'Keefe v. McDonnell, Douglas Corp., 152 F.3d 1252 (8th
Cir. 1998).
15 See Wheat v.
United States, 486 U.S. 153 (1998).
16 See SCR
20:1.7, et seq.
17See, e.g., 12 C.F.R.
353.
18 Title 18, U.S.C.,
§ 3057.
19 See Title 18, U.S.C.,
§§ 3663, 3663A,
3664.
20 Title 18, U.S.C.,
§ 3583(e)(3).
21 Title 18, U.S.C.,
§ 3664(l).
22 Title 18, U.S.C.,
§ 3664(m)(1)(B).
23 See Fed. R. Crim. P.
41.
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