On May 2, 2019, a court in the Southern District of New York ruled in United States v. Connolly (16-CR-370) that statements made by an employee to outside counsel during an internal investigation were subject to certain constitutional protections because the government had “outsourced” its investigation to company counsel and company counsel’s actions were consequently “fairly attributable” to the government. A number of the steps taken by company counsel in the matter are standard for a company hoping to receive cooperation credit in related regulatory or law enforcement proceedings. This decision, therefore, raises significant questions about how boards of directors, companies, law firms and the government will approach internal investigations in the future.
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In October 2018, two former Deutsche Bank employees were convicted of wire fraud and conspiracy charges in connection with alleged manipulation of the LIBOR benchmark. Defendant Gavin Black moved to vacate his conviction on the basis that certain statements he had made to the bank’s outside lawyers while still an employee had been used against him in the criminal case. Black argued that even though those statements had been made to a private party, the statements had been effectively compelled by the government. Black relied on the reasoning of Garrity v. New Jersey, 385 U.S. 493 (1966), in which the Supreme Court held that in a trial against former police officers the government could not introduce incriminating statements those officers had made to prosecutors in interviews the police officers had been compelled to sit for under threat of termination. Id. at 500. Black argued that his statements to the bank’s lawyers were effectively compelled by the government because of the manner in which the government coordinated with and relied on the investigation conducted by the bank, and because he understood he would be terminated if he refused.
The court ruled on May 2 that the bank’s actions were fairly attributable to the government. The court cited a number of factors; among the most important were:
- Evidence of government influence over the bank’s interviews. The court found that “the Government directed Deutsche Bank to investigate Gavin Black on its behalf.” In reaching its conclusion, the court pointed to (i) CFTC requests that the bank conduct interviews of various categories of employees (including Black); (ii) the fact that, late in the investigation, the bank’s counsel sought permission from the DOJ before interviewing Black a final time; and (iii) a separate instance in which—after bank counsel had concluded its four interviews of Black—a “[g]overnment official”...
