Portland Chief District Judge Ancer Haggerty (left) writes a compelling decision detailing how the Oregon United States Attorney's Office abused civil SEC proceedings while it really developed its criminal case, and dismisses the indictment. Great stuff; brims with righteous indignation and a cause for much celebration -- until it was reversed in a very disappointing decision from the Ninth. United States v. Stringer III, __ F.3d __, 2008 WL 901563 (9th Cir. April 4, 2008) (decision available here).
Players: Judge Schroeder authors; Silverman & Bybee.
Facts: The SEC began investigation of a camera company, then starting working with a USAO – without revealing the cooperation to counsel for the company or defendants. Id. at *1 - *2. The SEC did provide a stock form, the “1662,” that warned evidence would be shared with prosecutors. Id. at *3. SEC counsel, however, refused to give a straight answer when asked if criminal proceedings were underway. Id. at *3-*4.
Meanwhile, one defense counsel represented several individuals and the company. Id. at *4. To curry favor for the company she disclosed incriminating information to the SEC about the (intriguing-sounding) “Swedish Drop Shipment” – information that she had learned from her representation of one of the individuals. Id. at *4. Predictably, the “Swedish Drop” showed up in the later criminal indictment against the individual defendant. Id. at *5. The district court dismissed the indictment.
Issue(s): 1. Fifth Amendment: “The defendants argue that the district court properly held that the use of the evidence obtained by the SEC in a criminal prosecution would violate defendants’ Fifth Amendment privilege against self-incrimination.” Id. at *6.
2. Due Process: “The defendants next contend that the district court properly concluded that the government used the civil investigation solely to obtain evidence for a subsequent criminal prosecution, in violation of due process.” Id. at *7.
3. Evidence from Conflicted Attorney: “The district court concluded that the government violated defendant Samper’s due process rights when it obtained evidence about the ‘Swedish Drop Shipment’ from Samper’s attorney, knowing that she had a conflict of interest.” Id. at *10.
Held: 1. Fifth Amendment: “The SEC Form 1662 used in this case alerts SEC investigative witnesses that the information can be used in a criminal proceeding. Defendants were on sufficient notice, and so were their attorneys . . . . Defendants have forfeited any claims that the use of their testimony against them in the criminal proceedings violates their privilege against self-incrimination.” Id. at *7 (internal citation and quotations omitted);
2. Due Process: “It is significant to our analysis that the SEC began its civil investigation first and brought in the U.S. Attorney later . . . . We must conclude the SEC interviewed the defendants in support of a bona fide civil investigation. There was no violation of due process.” Id. at *8.
3. Evidence from Conflicted Attorney: “We have held that the government’s asking a defendant’s former attorney to turn over privileged information does not constitute deliberate intrusion on the part of the government when the attorney complies . . . For similar reasons, there was no deliberate government interference here.” Id. at *11.
Of Note: The tone of Stringer is remarkable – it is so flat, and so placid, that it reads like an opinion on a contract dispute. Where’s the, “while we are troubled by the conduct of government, we nevertheless conclude . . . .?”
For a thoughtful and forceful discussion on really happened in the case, read District Judge Haggerty’s decision that was reversed by the Ninth: 408 F. Supp. 2d 1083 (D. Or. 2006). Judge Haggerty lays out in great detail how the SEC was used as a stalking horse by AUSAs. “The USAO spent years hiding behind the civil investigation to obtain evidence, avoid criminal discovery rules, and avoid constitutional protections.” Id. at 1089. The dissonance between the facts and tenor of Haggerty’s decision, and the soothing defense of the SEC in the Ninth’s decision, is striking.
How to Use: For better or worse, Stringer is the lead Ninth Circuit case on the relationship between parallel civil and criminal prosecutions, and when that relationship crosses the due process line. It is an interesting idea for other contexts as well – like ICE investigations that are fronts for § 1001 (false statement) prosecutions. Id. at *6.
For Further Reading: After Stringer, there’s a lot of white collar folks spending a lovely spring weekend inside, reading and re-reading SEC Form 1662 and wondering about that last SEC deposition. To review this masterpiece yourself, visit the SEC webpage here.
Steven Kalar, Senior Litigator N.D. Cal. FPD. Website at www.ndcalfpd.org