“Department policy is that criminal prosecutors and civil trial counsel should timely communicate, coordinate, and cooperate with one another and agency attorneys to the fullest extent appropriate to the case and permissible by law, whenever an alleged offense or violation of federal law gives rise to the potential for criminal, civil, regulatory, and/or agency administrative parallel (simultaneous or successive) proceedings.” Memorandum from the Attorney General of the United States. January 30, 2012.
“To be parallel, by definition, the separate investigations should be like the side-by-side train tracks that never intersect.” U.S. v. Scrushy
The federal government regularly initiates simultaneous or consecutive civil and criminal proceedings (parallel proceedings). In United States v. Kordel, 397 U.S. 1 (1970), the United States Supreme Court granted its imprimatur for this practice when the Government acts in good faith. In that case, the government served interrogatories on a corporate defendant during a civil proceeding. The government then notified the corporation that it was contemplating a criminal action against the corporation and its officers. The corporation’s vice president answered the interrogatories and, in the subsequent criminal action, the government utilized the evidence gleaned in the civil action and the vice president was eventually convicted along with the corporation and its president. The Supreme Court found no Fifth Amendment violation or “departure from proper standards in the administration of justice”. According to the Court, even though the corporation itself did not have the privilege, the vice president could have refused to answer the interrogatories based on his Fifth Amendment privilege against compulsory self-incrimination, had he chosen to invoke it. However, the Court did identify situations in which due process and other concerns could arise, particularly when the government brings a civil action “solely to obtain evidence for its criminal prosecution or has failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution”.
In United States v. Scrushy, 366 F. Supp. 2d 1134 (N.D. Ala. 2005), the District Court for the Northern District of Alabama, Southern Division, granted a criminal defendant’s motion to suppress deposition testimony taken during an SEC civil investigation. The court found that the United States Attorney’s Office (USAO) “departed from the proper administration of criminal justice” and the civil and criminal cases “improperly merged” when the USAO gave explicit directions to the SEC regarding the deposition. The USAO gave the SEC specific questions to ask the defendant, it advised the SEC to keep the defendant “in the dark” about the criminal investigation and it requested that the SEC move the deposition from Georgia to Alabama to secure criminal jurisdiction. While Scrushy seems to address the concerns laid out in Kordel; another notable case, United States v. Stringer, also seemed to follow suit – until it didn’t.
The Scrushy court noted that neither side in that case could cite “any controlling law” as to “what distinguishes a legitimate, parallel investigation from an improper one”. The court conceded that it could not find any controlling authority either. The following year in United States v. Stringer, 408 F. Supp. 2d 1083 (D. Or. 2006), the court found that the USAO and the SEC worked side by side delaying the parallel criminal proceeding while allowing the SEC to gather evidence for the criminal investigation. And when the defendant testified before the SEC, his attorney received an evasive reply when he asked the SEC if it was working with “any other department of the United States” including the USAO. The court concluded that the investigations were not parallel. In dismissing the indictments, the court noted that “it is a due process violation if government agents make affirmative misrepresentations as to the nature or existence of parallel proceedings or otherwise use trickery or deceit”.
In 2008, the Ninth Circuit vacated the dismissal of the indictments. U.S. v. Stringer, 521 F.3d 1189 (9th Cir. 2008). The court found that the SEC did advise the defendants of the possibility of a criminal investigation because they were provided with SEC Form 1662 contained a warning to defendants. Certainly not exactly the same impact as a Miranda warning. The court approved the government conduct so long as it does not “affirmatively mislead the subject of parallel civil and criminal investigations into believing that the investigation is exclusively civil in nature and will not lead to criminal charges”.
The parallel tracks may or may not intersect out there, and parties to civil actions would be wise to remember that the Fifth Amendment privilege (except in certain qualified situations such as where immunity, stays in criminal proceedings and protective orders are available) “can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory”. Kastigar v. U.S, 406 U.S. 441 (1972)
© 12/2/2015 Matthew E. Zekala of Hunt & Associates, P.C. All rights reserved.