Protecting Attorney-Client Privilege and Respecting Fifth Amendment Rights While Cooperating with the Government

by John F. Savarese and Carol Miller

In 2018, two cases illustrated the potential hazards that can arise when companies’ efforts to cooperate with the government later provide a basis for individuals questioned during internal investigations to claim that their Fifth Amendment rights against self-incrimination were compromised.  While these cases, which we summarize below, have the greatest impact in connection with the representation of individuals in such investigations, companies responding to white collar inquiries need to keep these new developments in mind, particularly in conducting internal investigations and working in a cooperative mode with the government.  Companies and their counsel must be mindful of these issues both to insure that individual employee rights are protected and to protect as much as possible the confidentiality and integrity of the company’s review.

In United States v Connelly, No. 16-cr-370 (CM), a former Deutsche Bank trader on trial in the Southern District of New York for manipulating LIBOR rates argued that statements he made to the bank’s counsel during an internal investigation should be suppressed under the Fifth Amendment because they were improperly compelled.  The trader invoked Garrity v. New Jersey, 385 U.S. 493 (1967), which held that statements obtained from government employees under threat of termination were involuntary.  Noting that Deutsche Bank’s policies required employees to cooperate with internal investigations or face termination, the defendant argued that the bank was effectively acting as an arm of the government when it interviewed employees, thus precluding use of his statements at trial.  This was especially so, the defense argued, because Deutsche Bank sought to get full cooperation credit by, among other things, accepting the government’s input on which employees would be interviewed, and taking into consideration the government’s outlining the scope and priorities of the internal investigation.  During an evidentiary hearing on the issue outside the presence of the jury, the Court noted that the evidence “creates a problem for the government on the state actor question.”  See Trial Transcript at 2360.  To avoid an adverse ruling, prosecutors chose not to introduce the defendant’s statements at trial.

Following the Deutsche Bank FX trader’s conviction, he filed post-trial motions challenging the verdict and seeking a judgment of acquittal or a new trial, arguing, among other things, that the government’s use of statements he made to Deutsche Bank’s lawyers violated the Fifth Amendment.  In ruling on procedural motions by the government, the trial judge stated that she believes the defendant’s “outsourced investigation motion” is the “real deal,” See Memorandum and Order Disposing of Government Motion to Strike Defense Briefs for Exceeding Page Limitation (2/19/18).  The Court further suggested that the government be prepared to document precisely what it, rather than the outside lawyers conducting the internal investigation, actually did to investigate in the first few years of the case.

Prosecutors have pushed back, warning in papers filed in opposition to the motions for post-trial relief of “ruinous consequences for corporate governance and the investigation of corporate crimes” should the judge accept the defendant’s argument and find that his fear of being fired was enough to implicate the Fifth Amendment.  See United States’ Response to Defendant Black’s Motion for Kastigar Relief (2/4/19).  They also argued that such a ruling would permit companies or their employees to try to suppress any statement, even statements made to a civil regulator pursuant to a subpoena, any time an employee had a reason to fear being fired for not speaking.  The government’s brief asserted that “ruling that Deutsche Bank’s compliance policy was effectively an instrument of coercion would put responsible companies in the impossible position of choosing between effective internal controls and cooperation with criminal authorities.” Id.

Similarly, in United States v. Blumberg, No. 14-cr-458 (JLL), a former executive of ConvergeEx, a securities brokerage firm, argued that the government had violated his Fifth Amendment due process rights by delegating its investigative work to the brokerage firm’s lawyers to such an extent that the files from the company’s internal investigation were essentially part of the government’s files, thus obligating the prosecutors to search those files for exculpatory materials under Brady v. Maryland.  The defendant’s motion sought Brady material in ConvergEx’s files.  Blumberg claimed that ConvergEx’s counsel had “played an active and instrumental role” in the government’s investigation, and argued that, as in the Connolly case, the government had assigned investigative tasks to ConvergEx, including conducting the entire document and audio recording review, creating binders of key documents, and conducting dozens of witness interviews.  The court held an evidentiary hearing on the issue, noting that it had “questions regarding the exact relationship between the Government and ConvergeX…and the extent to which the Government outsourced and/or delegated discovery and investigation tasks” to the firm. See No. 14-cr-458 (JLL), ECF No. 113 at 2 (D.N.J. June 7, 2016).  Blumberg’s decision to enter into a plea agreement rendered the issue moot.  

In light of these recent developments, lawyers conducting internal corporate investigations — while also seeking full cooperation credit on behalf of the company from the government — must be careful to design an internal review genuinely independent from the government and make clear when conducting employee interviews that counsel has been engaged by the company (or its board in appropriate cases) and that it will be up to the company (or board) to decide what use to make of information obtained in the interview.  Such precautions will not only ensure that the company’s attorney-client privilege under Upjohn v. United States will be properly protected, they will also help to blunt any later effort by inculpated employees to claim that the company participated in a violation of their Fifth Amendment rights. 

John F. Savarese is a partner and Carol Miller is an associate at Wachtell, Lipton, Rosen & Katz.


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