When the FBI Comes to the Door

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."

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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