Update: California Appeals Court Overturns Ban on Use of Grand Juries in Police Deadly Force Cases

In a post last year on grand jury secrecy, I wrote about how the state of California had banned the use of grand jury proceedings in cases involving the use of deadly force by police officers. The California state constitution provides that all felony cases shall be prosecuted by either grand jury indictment or by an information following a probable cause hearing before a magistrate. Which method to use is generally left up to the district attorney.

But in the wake of several controversial cases nationwide involving police use of deadly force, California legislators concluded that the secrecy of grand jury proceedings contributed to an atmosphere of suspicion surrounding such cases. They argued that the outcomes of grand jury investigations “can seem unfair or inexplicable” because the secret proceedings lack “transparency and accountability.” They concluded that, due to the intense public interest in and concern about cases involving the police, more openness was necessary. Accordingly, they amended the California Penal Code to prohibit the use of a grand jury to investigate any case involving the use of deadly force by a law enforcement officer. As a result, such cases could be charged only via a public hearing before a magistrate.

In that earlier post, I argued that this legislation was misguided and would likely make it more difficult to conduct fair investigations of cases involving police officers. As the California legislature noted, such cases often involve intense public scrutiny and interest. Whether they support the prosecution or the defense, witnesses in those cases may face tremendous public pressure related to their testimony. Grand jury secrecy allows the witnesses in such high-profile investigations to testify truthfully without fear of becoming the target of a vitriolic social media campaign or finding protestors on their front lawn. The grand jury proceeding provides a confidential forum where representatives of the community — the grand jurors themselves — can explore what happened largely free from the political pressure and social passions that may surround these cases.

The California legislation took effect on January 1, 2016 and was immediately challenged by a group of district attorneys led by Vern Pierson, the DA for El Dorado County. They argued that the law was unconstitutional and inhibited their ability to do their jobs effectively. This week a California Court of Appeals ruled in their favor and held that the legislation violated the California constitution.

The court noted that the law was the “first legislative effort in 167 years to constrict the grand jury’s power under the Constitution to exercise its power of indictment.” The state constitution provides for the potential use of the grand jury in all felonies, and the legislature was not free simply to disregard this mandate for a particular category of cases. If the legislature had that power, the court reasoned, the logical implication would be that it could abolish grand juries altogether, which would plainly conflict with the constitutional mandate.

The court noted that if the legislature wanted to restrict the use of grand juries, it was not powerless. It could pursue a constitutional amendment to alter the current language providing for the option of a grand jury investigation in all felony cases. It could also follow the “less cumbersome route” of modifying the rules of grand jury secrecy, which are not constitutionally mandated, to provide for more openness and public disclosure in grand jury investigations. But given the constitutional language, the legislature was not free simply to ban the use of grand jury proceedings altogether for a particular class of cases.

This is a good result for the people of California. As the prosecutors who challenged the law recognized, they are more likely to achieve a just result in police investigations if they are able to utilize the grand jury and the safeguards that it provides. The irony of the California legislation was always that it potentially sacrificed justice on the altar of transparency.

The opinion is narrow; it focuses only on the fact that the legislation was inconsistent with the state constitution. The court does not discuss the benefits of secret grand jury proceedings, particularly in high-profile cases, and why the legislation may have been a bad idea. That’s understandable, but unfortunate. It would have been nice to see a judicial recognition and discussion of how grand jury proceedings can best serve the interests of justice by providing a dispassionate forum to investigate controversial cases.

The concern now has to be that the legislature will follow the court’s suggestion and pass a law to limit or abrogate grand jury secrecy in police cases, or perhaps in all cases. But secrecy is a fundamental characteristic of grand jury proceedings and provides a number of important benefits. Hopefully cooler heads will prevail and the legislature will recognize that the solution to concerns about the police and use of deadly force is not to start tinkering with the essential nature of the ancient institution of the grand jury.

The case is The People ex rel. Vern Pierson v. The Superior Court of El Dorado County, CA Court of Appeal, Third Appellate District, No. C081603 (Jan. 10, 2017). (Click here to download the opinion.) Hat tip to Patrick O’Toole, a district attorney in California, who was involved in the case from the beginning, co-argued it in the California Appeals Court, and kept me updated on its progress.

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In Defense of the Grand Jury (Part 3): Disclosure of Exculpatory Information

During the course of a grand jury investigation, a federal prosecutor may learn information favorable to the defense, perhaps even suggesting that the target of the investigation is innocent of any crime. What is the prosecutor required to do with that information – and perhaps more important, what should the prosecutor do?

In my earlier posts on the federal grand jury (available here and here), I discussed how the grand jury, whose proceedings take place in secret, is a frequently misunderstood and sometimes controversial institution. One source of controversy is the one-sided nature of a grand jury presentation.

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The grand jury generally hears only from the government. The prosecutor presents the witnesses, documents and other evidence and ultimately asks the grand jury to return an indictment if the evidence establishes probable cause. The defense has no right to call witnesses or otherwise present its case. There is no defense attorney to object, cross-examine, or offer contrary evidence. The defendant himself has no right to testify.

This one-sided nature of the proceeding may seem to run counter to our most fundamental concepts of justice. How can the grand jury possibly make the right determination if it only hears one side of the story? But this argument misperceives the grand jury’s function.

The grand jury is merely accusatory, not adjudicatory. Its purpose is not to decide guilt or innocence or to weigh both sides of the case but to determine whether there is sufficient evidence to justify bringing the defendant into court to answer the charges. As such, part of its historic function is to serve as a shield against executive power. The government cannot simply run into court and file criminal charges on its own; it must first convince a panel of citizens in the same community that there is a basis for those charges.

In making that determination the grand jury needs to find only probable cause that the crimes took place, not the far higher standard of proof beyond a reasonable doubt that would be required for conviction at trial. And unlike a trial jury, a grand jury does not need to be unanimous; only twelve out of sixteen jurors need to find probable cause in order to return an indictment.

Many of the procedural protections we associate with a trial do not apply in the grand jury. If they did, grand jury proceedings could quickly become bogged down with endless hearings and disputes about the evidence being presented. A grand jury is simply making a threshold determination about whether there is a basis to proceed. It is not supposed to be “trial #1,” where we litigate every dispute and evidentiary issue, to be followed later by “trial #2” where we do it all over again with a higher standard of proof.

Accordingly, the defense generally is not able to challenge the evidence being presented to the grand jury or to present evidence of its own. With few exceptions, any such matters have to wait until pre-trial court proceedings or the trial itself, once the grand jury investigation is over and the case is indicted.

But this system must acknowledge a major caveat: an indictment alone can be devastating. It’s not much comfort to tell a wrongly indicted defendant, “It’s okay, now you can present your side of the case and be found not guilty at trial.” Trial may come only after two years of delay, a million dollars in legal fees, and severe damage to the defendant’s family, business, and reputation. That “not guilty” verdict at the end, even if it comes, is not going to feel like much of a victory. Simply being indicted can ruin someone’s life.

This fact, in turn, highlights the critical importance of the prosecutor’s obligations in the grand jury. Prosecutors, of course, must do everything they can to avoid indicting the wrong people. A fundamental part of the prosecutor’s role is to ensure that the innocent do not suffer. This requires recognition of the gravity of the decision to return an indictment and the potential impact on the person being indicted. The prosecutor’s duty is not to “win” by securing an indictment by any means necessary, but to ensure that justice is done. In the grand jury, the one-sided nature of the presentation makes that duty all the more critical.

Given these obligations and the nature of the grand jury, what should a prosecutor do when she comes across information favorable to the defense during a grand jury investigation?

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The Supreme Court’s Answer: United States v. Williams

The Supreme Court confronted this issue in 1992 in United States v. Williams. Williams was indicted for bank fraud for allegedly misrepresenting the nature of some of his assets when applying for a loan. After he was indicted, he argued the prosecutor should have disclosed to the grand jury information demonstrating that he had always treated those assets the same way for his tax and other accounting purposes. This information, Williams claimed, would have demonstrated he did not misrepresent his financial position and lacked any intent to defraud the bank.

After a hearing, the trial court agreed with Williams that the prosecutor’s failure to disclose the information rendered the grand jury’s decision to indict “gravely suspect.” The court dismissed the indictment without prejudice (which would have allowed the government to present the case to a new grand jury, this time including the allegedly exculpatory information). The court of appeals agreed and upheld the dismissal.

Given the nature and history of grand jury proceedings, Williams did not claim in the Supreme Court that the Constitution itself required the government to present exculpatory evidence to the grand jury. But he argued the Court should create such a rule on its own, as part of its general supervisory role over the justice system, in order to ensure the fairness of grand jury proceedings.

A divided Supreme Court disagreed. Writing for a 5-4 majority, Justice Scalia discussed the historical independence of the grand jury, which is mandated by the Bill of Rights but is not textually assigned to any one of the three branches of government. As such, it functions as a “constitutional fixture in its own right.” Given the grand jury’s independence, he concluded, the Court does not have a general supervisory power that would allow it to create rules for grand jury proceedings.

The Court also relied on the role of the grand jury, which is “not to determine guilt or innocence, but to assess whether there is adequate basis for bringing a criminal charge.” Williams’ proposed rule, the Court said, would effectively turn the grand jury into an adjudicatory body required to weigh both sides of the case. This would threaten to tie up grand jury proceedings in evidentiary hearings and disputes. It would also run counter to a long history of Court decisions refusing to scrutinize the adequacy of the evidence before the grand jury; such scrutiny would “run counter to the whole history of the grand jury institution.”

The Court concluded that if a rule requiring the disclosure of exculpatory information was good policy, Congress was free to enact a law requiring prosecutors to do so. The Court itself, however, declined to create such a rule on its own. Four dissenting Justices argued that a court should have the power to dismiss an indictment if the prosecutor withheld evidence that would “plainly preclude a finding of probable cause,” and that such a rule was necessary to limit potential prosecutorial misconduct.

Practical Challenges of Legally Mandating Disclosure

Congress has not taken the Williams Court up on the suggestion that it could pass a law requiring disclosure of exculpatory information. If Congress did so, enforcing such a requirement would raise a number of challenges. For example, what would happen when the defense and prosecution don’t agree over whether information is truly exculpatory? (Even the dissenting Justices in Williams agreed there was some doubt whether the proffered information really exculpated the defendant. If he treated the financial information the same way for tax and other purposes, might that not simply mean that he was a consistent crook?)

If the prosecutor didn’t agree that information proffered by the defense was exculpatory and declined to put it before the grand jury, what would be the remedy? Presumably the defense would file a motion with a judge and there would have to be a hearing. But reluctance to bog down grand jury proceedings with hearings and delays is precisely why the Court has consistently held that rules of evidence and procedure that apply during a trial do not apply in the grand jury. In a large, hard-fought white collar investigation, it would be easy to imagine the defense filing multiple motions concerning exculpatory information and potentially grinding the investigation to a halt.

In addition, it would be difficult to litigate such a motion while still preserving grand jury secrecy. How would the government demonstrate information was not truly exculpatory without being forced to reveal confidential information about the investigation? Even if the judge reviewed the papers in camera and did not disclose them to the defense, ruling on such a motion would require the judge to become enmeshed in the details and merits of the grand jury investigation to a degree completely contrary to the grand jury’s historically independent function.

Or suppose the prosecutor agrees that the information is potentially exculpatory, but it is contained in documents that are not self-explanatory. Does the defense then have the right to designate the witness who will explain the documents, to make sure they are properly understood? To write out the examination to make sure it is effective – or to conduct the examination itself? The same questions arise if the evidence consists of testimony from a witness: how does the defense ensure that the testimony is presented effectively without compromising grand jury secrecy? And if there are disputes about how to present the evidence, presumably a judge would again need to get involved.

In short, although creating a legal rule mandating the disclosure of exculpatory information may sound good in theory, it’s not difficult to see why the Court in Williams was reluctant to create such a rule, or why Congress has declined to do so.

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DOJ Policy and Prosecutor Best Practices

Simply because disclosure is not legally mandated does not mean it should not take place. The Department of Justice has recognized this in the U.S. Attorneys’ Manual, which provides that if the prosecutor is “personally aware of substantial evidence that directly negates the guilt” of the target, that evidence should be disclosed to the grand jury. USAM 9-11.233.

Of course, although policies in the U.S. Attorneys’ Manual provide important guidance to prosecutors, they do not create enforceable rights. The prosecutor may be subject to discipline for violating a rule, but a defendant cannot move to dismiss an indictment on that basis. Some might also argue that terms such as “substantial evidence” and “directly negates the guilt” leave a fair amount of wiggle room and that DOJ policy should require more fulsome disclosure.

But for the good prosecutor there are many sound reasons to disclose exculpatory information to the grand jury, whether or not the information is substantial enough to require disclosure under the DOJ policy.

The first reason is simply fairness: disclosing such information is the right thing to do. A good prosecutor has no interest in “hiding the ball,” misleading the grand jury, or giving even a perception that the grand jury process was unfair. The U.S. Attorneys’ Manual also provides that a prosecutor must be “scrupulously fair” in the grand jury and ensure that the grand jury is not misled. USAM 9-11.010. That may require disclosing even information that is only marginally or potentially exculpatory.

A prosecutor with a good case should have nothing to fear from disclosing potentially exculpatory information to the grand jury. After all, such evidence will undoubtedly come up at trial. If you as a prosecutor are so concerned about the information that you think it might result in the grand jury not finding probable cause, then how are you ever going to get a trial jury with the same information to find guilt beyond a reasonable doubt?

Indeed, if you’re a prosecutor and you have information you fear might cause the grand jury not to indict, then you shouldn’t be thinking merely about whether you should disclose that information to the grand jury. You should be thinking about whether you should pursue the case at all. Certainly if you have “substantial evidence” that “directly negates the guilt” of the defendant, you’d better stop and consider whether the investigation should proceed.

There also are sound tactical reasons to introduce exculpatory information in the grand jury. It allows the prosecutor to probe and explore the evidence completely, through examination of witnesses and possible additional investigation. A full review of the information may lead to additional evidence that further exonerates the defendant, or evidence that demonstrates the information is not truly exculpatory. It is better to explore those details in the grand jury than to wait and potentially be surprised at trial.

Presenting the evidence to the grand jury also allows the prosecutor to see how the grand jurors react to the evidence, to hear what questions they have, and to discuss the evidence with them. Again, all of that can be incredibly useful to guide further investigative efforts, prepare more fully for trial, or to decide that the case should not be indicted and the investigation should be closed.

It All Comes Down to the Prosecutor’s Responsibility

Critics of the grand jury may argue that we need a rule mandating the presentation of exculpatory evidence because most cases never make it to trial. An unscrupulous prosecutor could conceal substantial exculpatory information from the grand jury, thinking that he or she will be able to coerce a guilty plea once the case is indicted and the exculpatory information will never come to light.

There is no doubt, as I’ve noted in other posts in this series, that a prosecutor bent on misconduct can abuse the grand jury process, cause tremendous harm, and perhaps even indict a ham sandwich. But a legal rule that tries to regulate the type of evidence put before the grand jury is probably not the solution.  Good prosecutors are already going to consider themselves bound by DOJ policy and will want to disclose exculpatory information for the reasons I discussed above. Bad prosecutors who intend to abuse the process likely would find the rule easy to avoid. And the rule would raise all of the practical difficulties discussed above and fundamentally alter the nature of the grand jury.

Although concerns about prosecutorial misconduct in the grand jury are valid, the solutions need to focus primarily on the prosecutors themselves; on whom we hire to be prosecutors and how they are trained. Unless we do away with the grand jury entirely or fundamentally alter its centuries-old function, prosecutors in the grand jury are always going to have a great deal of autonomy and power. Given the one-sided nature of grand jury proceedings, it is particularly critical that prosecutors respect their obligations and recognize that with that great power comes great responsibility.

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Click here to read part one in this series, “The Guilty Ham Sandwich.”

Click here to read part two in this series, “Grand Jury Secrecy.”

In Defense of the Grand Jury (Part 2): Grand Jury Secrecy

Update: On January 10, 2017, a California Appeals Court struck down the legislation discussed in this post, holding that prohibiting the use of grand juries in police deadly force investigations violated the California constitution. You can read my update about that case here.

Imagine you are a criminal defense attorney whose client has received a subpoena to testify before a federal grand jury. You investigate the case, talk with the prosecutor, and gather as much information as you can. You spend hours with your client preparing him for his testimony. You drive to the federal courthouse together and proceed to the grand jury room. The door opens, the foreperson steps out and calls your client, he steps in, and the door closes behind him.

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And you remain outside, sitting in an uncomfortable government chair and wondering what’s happening behind those closed doors.

I’ve never practiced criminal defense, but I’ve always imagined this must be one of the strangest parts of the job: staying outside the grand jury room while your client is led into the proverbial lion’s den. It seems contrary to everything in an advocate’s DNA. While your client is in there you can’t object, you can’t cross-examine, and you can’t protect him. Sure, he has a right to come out and talk to you, but he may be reluctant to do that if he thinks it makes him look bad, or he may forget.

And while waiting to see whether he will come out and talk to you there’s not much you can do — except maybe work on today’s Sudoku puzzle for hundreds of dollars an hour.

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One for my defense attorney friends

One of the most distinctive features of the grand jury is secrecy. Grand jury proceedings take place out of public view and generally remain sealed even after an investigation is concluded. When a witness is testifying no one is present in the grand jury room except the prosecutor, the grand jurors, and the court reporter. When the grand jurors are deliberating over whether to return an indictment there is no one else in the room at all, and the deliberations are not even transcribed. Everyone involved in the process (other than the witness) is sworn to secrecy and prohibited from discussing what goes on in the grand jury room.

This secrecy can lead to mistrust of grand jury proceedings. After all, bad things happen in secret, and much of our government is rightly premised on the belief that sunlight and disclosure are good things. Some argue that this secrecy contributes to the ability of prosecutors to manipulate the grand jurors and convince them to do whatever the prosecutor desires, even if that means indicting a ham sandwich.

These concerns have been amplified in recent state grand jury cases involving investigations of police officers for use of deadly force. When grand juries in Ferguson MO and Staten Island NY failed to indict police officers in the deaths of Michael Brown and Eric Garner, there was widespread criticism and suspicion. Critics claimed that the prosecutors were hiding behind the secret grand jury process and manipulating it in order to avoid indicting police officers with whom they worked closely.

Reacting to such concerns, the state of California last year banned the use of grand juries to investigate cases involving police use of deadly force. California prosecutors in such cases must now decide on their own whether to bring charges.

There’s no doubt that grand jury secrecy contributes to suspicion of the grand jury and to a lack of information and understanding about the grand jury process. But grand jury secrecy is a valuable part of the criminal justice system and serves a number of important goals. Chipping away at that secrecy or prohibiting use of the grand jury in certain types of cases is a bad idea.

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The Rules Governing Grand Jury Secrecy

In the federal system, grand jury secrecy is spelled out in Federal Rule of Criminal Procedure 6(e). Rule 6(e) provides that, with some limited exceptions, no one involved in the grand jury proceeding (other than a witness) may disclose any “matter occurring before the grand jury.” A knowing violation of Rule 6(e) is punishable as contempt of court, the possible sanctions for which include prison.

Grand jury secrecy is not just some aspirational guideline; federal judges take it extremely seriously. Good prosecutors take it seriously as well, not only because it’s their duty to protect 6(e) material but also because of the potential consequences if they don’t. If newspaper articles about a grand jury investigation attribute leaked information to “government sources,” the prosecutor is likely to receive an order from a judge demanding she appear in court to show cause why she and her colleagues should not be held in contempt – never a fun career prospect.

There has been a lot of litigation over what actually constitutes “matters occurring before the grand jury.” At the core of Rule 6(e)’s protection is information about what actually took place inside the grand jury room itself, including the transcripts of testimony, information about exhibits introduced in the grand jury, and the names of witnesses who appeared. Information that would tend to reveal such matters, such as names of witnesses who are slated to testify or the substance of their expected testimony, may also be covered.

On the other hand, it is clear that Rule 6(e) does not shield all aspects of a criminal investigation. Agents may interview ten or a hundred witnesses for each one who actually testifies in the grand jury, and thousands of documents may be reviewed that never end up as grand jury exhibits. Information that exists as part of the broader investigation is not automatically covered by 6(e). Typically the actual grand jury material will be only a small subset of all information gathered during the overall investigation.

But for everything that is covered by Rule 6(e), it is part of the prosecutor’s job to protect the secrecy of that material. She must ensure that confidentiality is maintained, that grand jury materials are appropriately secure, and that access to those materials is controlled. This obligation does not end once an investigation is over; absent a court order, grand jury materials continue to be protected by Rule 6(e) indefinitely.

This secrecy is one thing that makes the grand jury proceeding fundamentally different from a trial, which usually takes place in public view and with the participation of a judge and defense counsel. And it necessarily means that when the grand jury indicts – or particularly when it fails to indict – the public typically has very little information about the basis for that action.

The Benefits of Grand Jury Secrecy

Grand jury secrecy has a number of important benefits. First, it protects the privacy and reputations of those who may be investigated but ultimately not charged. Many grand jury investigations, particularly in the area of white collar crime, end with no charges being filed. The grand jury is an investigative body, and part of its role is to determine whether probable cause exists to justify criminal charges. Sometimes the answer to that question is no, and the investigation is closed down.

Absent grand jury secrecy, those under investigation in such cases could be subject to months of media reports and speculation about their criminal culpability. Grand jury secrecy prevents their names from being unfairly dragged through the mud concerning a matter where ultimately no criminal charges might be filed. Of course, in some high profile cases such as those involving politicians or celebrities – or police shootings — the investigation is known about and widely reported. But grand jury secrecy prevents public disclosure of grand jury investigations from being the norm.

Grand jury secrecy may also protect the integrity of the investigation itself. In some cases there may be concerns that the targets of the investigation will respond to any inquiry by destroying evidence, tampering with witnesses, fleeing the jurisdiction, or otherwise obstructing justice. If the targets of the investigation are not aware it is going on, such dangers are minimized.

Similarly, there may be concerns that potential defendants will collude to “get their story straight” and present a consistent false version of events to the grand jury. If proceedings were public and witness transcripts were readily available, such efforts would be much easier.

Secrecy also protects the privacy and safety of grand jury witnesses. Absent the guarantee of secrecy, some witnesses would be reluctant to come forward or to be fully forthcoming. Witnesses may fear personal or professional retaliation or even violence based on their testimony. A corporate employee may be extremely reluctant to testify against the company if he knows his boss can review the transcript. Officers in a police corruption investigation may be far less likely to provide information against their fellow officers if they know those officers have access to the testimony.

Even when it is known that a certain witness has testified, grand jury secrecy helps to protect that witness. I recall many occasions, dealing with reluctant or frightened witnesses, when I was able to tell them: “Look, I know you don’t want to be here and are nervous/afraid about testifying. But all you need to do is tell the truth. Your boss/fellow officers/ colleagues will not know what you said. In fact, you can walk out of here and tell them whatever you want – tell them you didn’t say anything, or that you told some completely different story. They won’t know the difference.”

The comfort and insulation that grand jury secrecy provides to frightened or reluctant witnesses is probably the greatest benefit of grand jury secrecy. If witnesses routinely had to testify instead at a public preliminary hearing after a prosecutor filed charges, getting information from reluctant or frightened witnesses would be much more difficult.

Grand Jury Secrecy and the California Legislation

All federal felonies will continue to require a grand jury indictment, but the states are free to experiment with their own systems, consistent with their own laws and constitutions. Apparently California prosecutors already had the option of bypassing the grand jury and filing charges on their own in cases involving a police officer. The new law simply means that now using the grand jury in such a case is not even an option. Once the prosecutor files charges, a preliminary hearing before a judge is held to determine whether the case can go forward.

The law was opposed by California prosecutors and law enforcement officials, and with good reason. In general, grand jury secrecy should make investigations of police officers more effective, not less. Witnesses required to testify in a public preliminary hearing are going to face tremendous public pressure. In the grand jury, witnesses can testify as to what they actually observed without worrying about becoming the subject of a vitriolic social media campaign or having protestors picketing outside their home.

The benefits of secrecy in such cases cut both ways. A civilian witness who would testify in favor of the officer need not fear the reaction and outcry from a public outraged about the case. Similarly, a police officer who would testify against his colleague can do so without fearing the reaction from fellow officers. Particularly in cases where the public passions are running high, grand jury secrecy plays a crucial role in allowing witnesses to resist any perceived public pressures and simply testify as to what happened.

The grand jury also serves as the voice and conscience of the community in such high profile, emotional cases. It’s appropriate to have the facts of such cases presented to representatives of the community as embodied in the grand jury, rather than simply have the charging decision made by a prosecutor. Unless one believes (which I don’t) that grand jurors are all just mindless sheep, the members of the community that make up the grand jury are in the best position to bring the perspective and experiences of that community to bear when evaluating a case.

There was a great deal of criticism of the decision of the Ferguson grand jury not to indict officer Darren Wilson in the shooting of Michael Brown. The sponsor of the California legislation said that the failure to indict in that and other cases had fostered an “atmosphere of suspicion” about grand juries. But the grand jurors were members of the same communities that were so outraged by the shootings. And although the grand jury investigation in Ferguson does appear to have been unorthodox in some ways, an independent investigation by the U.S. Department of Justice also concluded that criminal charges against Wilson were not appropriate. There is no evidence that the grand jury process somehow led to an unjust result.

Charging decisions can’t be made in the heat of the moment, or be based on the outrage of persons who were not on the scene and who form their views of the case largely from media reports. The grand jury process and grand jury secrecy help to ensure that decisions are made with time, care and deliberation, largely free from public pressure and media scrutiny, and based on sworn testimony of those actually involved.

It’s hard to see the rationale for singling out a particular category of crimes or potential defendants and denying them the protections afforded by the grand jury process. Police officers under investigation are entitled to the same procedural rights – including, of course, the presumption of innocence – as other suspects. The grand jury process can play an important role in preserving those rights.

The irony of the California law is that, in the name of increasing transparency, it likely will make it more difficult to gather accurate information in police cases and increase the likelihood of bad charging decisions. There is understandable public concern about cases involving police use of deadly force, and broader concerns about law enforcement in general in a number of communities, including Ferguson. But the response to those concerns should not be to prohibit the use of an institution that has been a valuable component of our criminal justice system for centuries.

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Click here to read part one of this post, “The Guilty Ham Sandwich.”

Click here to read part three of this post, “Disclosure of Exculpatory Information”

In Defense of the Grand Jury (Part 1): The Guilty Ham Sandwich

The Fifth Amendment to the Constitution requires that federal felonies be charged by grand jury indictment, unless the defendant waives that right. (Most states also use grand juries for at least some criminal cases, although their practices vary.)

Absent a constitutional amendment, therefore, the federal grand jury is here to stay. But does it still serve a useful purpose, or is it simply a historical relic?

The grand jury has a pedigree far longer than that of our own Constitution. Its roots extend back to 12th century England, and the requirement that potential charges be presented to a jury of the King’s subjects was part of the Magna Carta. The founders of our own country considered the grand jury a vital part of the common law justice system and enshrined it in the Bill of Rights.

The grand jury is designed to act as both a sword and a shield. As a sword, it is the required process through which the executive brings charges that ultimately could result in a citizen being deprived of his property, liberty, or even his life. As a shield, it guards against abuses of state power, preventing the executive from simply hauling citizens into court for political or other improper purposes without the approval of a representative panel of the community.

Some argue that the grand jury today is simply a powerful tool wielded by the prosecutor and no longer plays any meaningful role as a check on government power. In other words, the critics claim, the grand jury now operates only as sword, not shield. The most famous formulation of this critique came from former New York judge Sol Wachtler, who once said that a prosecutor so inclined could get a grand jury to “indict a ham sandwich.”

As someone who spent a lot of time presenting cases to grand juries, I think these criticisms are misplaced. This venerable common-law institution still has an important part to play in our criminal system.

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How the Grand Jury Operates

The federal grand jury is one of the most powerful institutions in the entire government. Grand juries have brought down titans of industry and the nation’s most powerful political figures. The grand jury has a right to hear every person’s evidence, and can force even the most reluctant witnesses and companies to reveal their most closely-held secrets. No one has the right to defy its demands; those who do risk federal prison.

But despite the grand jury’s tremendous power, the grand jury process itself remains shrouded in mystery. Everyone is familiar with trial juries from seeing them in movies or on television or from serving on jury duty themselves. But most people — including most lawyers — know relatively little about what a grand jury is or how it operates.

(Part of this mystery undoubtedly stems from grand jury secrecy, the requirement that grand jury proceedings take place shielded from public view and remain strictly confidential. I’ll have more to say about grand jury secrecy later in Part II of this post.)

Federal grand juries today consist of between 16 and 23 people who, like trial jurors, are drawn from the local community and selected to serve. Federal prosecutors present sworn witness testimony, documents, and other evidence concerning potential federal crimes to the grand jury. Unlike in a trial, the grand jurors participate in questioning the witnesses. They also decide which witnesses and documents to subpoena, although in practice these decisions typically are made by prosecutors acting on the grand jury’s behalf. Throughout the process the prosecutor also acts as the grand jury’s legal advisor, explaining the charges and answering legal questions from the jurors.

At the end of a grand jury investigation the prosecutor may ask the grand jury to return an indictment, a document drafted by the prosecutor and containing the criminal charges. The vote does not need to be unanimous; only 12 grand jurors (out of a minimum quorum of 16) are required to approve the indictment. The standard for voting to indict is only a finding of probable cause to support the charges, not the much more stringent proof beyond a reasonable doubt that would be required for a conviction at trial. If the grand jury votes to indict (called a “true bill”), the indictment becomes document #1 in the public court file. The criminal trial process, with which everyone is more familiar, proceeds from there.

Subpoena power is the key to the grand jury’s might. Grand jury subpoenas may compel the production of documents and other evidence from corporations and individuals who would never surrender those materials voluntarily. They also may compel sworn testimony, subject to penalty of perjury, from recalcitrant witnesses who might otherwise refuse to cooperate. Those who defy a grand jury subpoena without a valid legal excuse may be jailed for contempt.

Practically speaking, the function of the grand jury differs depending on the type of case involved. In a routine drug prosecution or other simple case, law enforcement officers will do much of the investigative work outside of the grand jury. Witnesses and victims may provide statements voluntarily and there may be little need to compel production of documents or other evidence from reluctant third parties. The entire grand jury presentation might consist of a single law enforcement officer summarizing the evidence for the grand jurors, with a vote on the proposed indictment immediately following. In such routine cases the grand jury still must vote to indict, but it does not play a significant investigative role.

By contrast, in a large white collar, organized crime, or other complex investigation the grand jury proceeding may stretch on for several years and is a much more important part of the process. Reluctant witnesses are compelled to testify and corporate wrongdoers are forced to surrender documents they would otherwise keep secret. The power of the grand jury is what in large part makes the investigation possible. In white collar cases in particular, the investigative power of the grand jury often is critical in order to allow prosecutors not only to unearth what happened but also to determine whether it was a crime at all.

The Grand Jury and Fairness

I’ve always thought it unfortunate that the word “jury” appears in the title of the grand jury. It really would be better if it were called something else entirely. For lawyers and non-lawyers alike, the word “jury” conjures up images of an entire panoply of rights and procedures we associate with a trial, such as the right to confront and cross examine witnesses against you, the right to present your own evidence, adherence to formal rules of evidence, and a neutral judge overseeing the proceedings. These features are absent from a grand jury proceeding.

This is not to say that the grand jury is a sort of Wild West, “anything goes” environment. Prosecutors are still bound by multiple constitutional, legal and ethical principles. Privileges, such as the Fifth Amendment privilege against self-incrimination, still apply. There are also Department of Justice rules that govern questions such as when prosecutors should provide exculpatory evidence to the grand jury or when they should avoid the use of certain kinds of evidence. But there is no question that a grand jury proceeding and a trial are very different animals.

To make the probable cause determination, the grand jury has always heard only the government’s side of the case. In this regard, it’s not unlike a judge relying upon the sworn affidavit of a government agent to find probable cause to issue an arrest warrant. The judge doesn’t call additional witnesses or bring in defense counsel to cross examine the agent; for purposes of establishing probable cause, the government’s sworn statement of the evidence is deemed sufficient. If there are legitimate challenges to the government’s version of events, they generally will be considered only at later court proceedings.

The one-sided nature of the grand jury proceeding is perhaps its most controversial characteristic. After all, from childhood we are taught that fairness demands hearing both sides of the story. Surely that should be true in the grand jury context as well.

But what is fair in any proceeding depends upon the nature of that proceeding. As the Supreme Court has consistently recognized, the grand jury is accusatory, not adjudicatory; its job is not to decide guilt or innocence. Resolving disputes about the evidence largely takes place at post-indictment proceedings and trial. The grand jury is not intended to be “trial number one,” with hearings and motions to challenge the government’s case, followed later by “trial number two” where we do it all over again. Its role is simply to make certain there is a reasonable basis to proceed.

In other words, the grand jury’s job is not to determine how the story ends, but simply to decide whether the story should begin to be told at all. In making that determination, it has always been deemed sufficient — and fair — for the grand jury to hear predominantly the government’s side of the case.

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The Grand Jury as Shield

Those who argue that the grand jury is simply a rubber stamp for the prosecution frequently point out that the grand jury returns an indictment almost every time the prosecutor asks for one. This is true. Out of tens of thousands of federal cases presented in a year, only a handful are dropped because of the grand jury’s refusal to indict (a “no true bill”). This is proof, critics claim, that the grand jury no longer acts as any kind of meaningful check on government power.

But this criticism ignores the screening function performed by the very existence of the grand jury process itself. A fair percentage of grand jury investigations, particularly in white collar cases, end with prosecutors deciding not to seek an indictment. By going through the grand jury process, prosecutors learn about their cases and, in some instances, determine that no provable crime took place. When that happens, the investigation is simply closed down without asking the grand jury to vote. These cases are not reflected in statistics that show how often the grand jury agrees with the prosecutor’s request for an indictment.

Presenting a case to the grand jury requires the prosecutor to investigate, analyze, and organize the case into a thorough and coherent presentation. That discipline brings to light a lot of weaknesses and weeds out bad cases.

Accordingly, the cases where prosecutors end up asking the grand jury to indict are only those where the prosecutors have gone through the grand jury process and have concluded the evidence is likely to sustain a conviction beyond a reasonable doubt. That the grand jury almost always votes to indict those cases demonstrates not that the grand jury is playing no role but rather that the screening process of the grand jury is functioning as it should.

If the grand jury were merely a rubber stamp for prosecutors bringing unjustified charges, you would expect a lot more cases to fall apart once they got past the indictment stage and a judge and defense counsel got involved. But of the cases that are indicted, nearly all result in some kind of conviction; dismissals and acquittals are very rare. This suggests the grand jury is largely doing its job by ensuring the cases that make it through to indictment actually have merit. Turns out that ham sandwich was guilty after all.

The grand jury today still acts as a shield: not primarily by refusing to agree when the prosecutor asks for an indictment, but by forcing the prosecution to go through the discipline of the grand jury process itself. If a prosecutor could simply run off and file charges without going through the grand jury process, I’m convinced many more weak or unjustified cases would end up getting filed. And for prosecutors bent on misconduct, it would be far easier and faster to file frivolous charges for political or other improper purposes if those charges did not have to be vetted first by a panel of citizens.

For a good prosecutor, the grand jurors serve another useful purpose: they act as the community’s reality check on the prosecution. Grand jurors look at the evidence not as government agents (who may have fallen in love with their case), but as members of the same community that will ultimately provide the trial jury. The questions and reactions of grand jurors may help the prosecutor ensure that he or she has a balanced and realistic view of the evidence. This human and often relatively informal interaction with the grand jurors throughout the investigation helps ensure that prosecutors maintain the proper perspective on their cases – another valuable shield function.

Grand Jury and the Risk of Abuse

There’s no doubt the grand jury is an incredibly powerful institution, and I don’t want to downplay the risk of abuse. There’s a reason the U.S. Attorneys’ Manual specifies that the prosecutor in the grand jury is an officer of the court whose job “is to ensure that justice is done and that guilt shall not escape nor innocence suffer,” and that the prosecutor must be “scrupulously fair” in the grand jury. With great power comes great responsibility.

An unjustified indictment can ruin a person’s life. It will be cold comfort to the wrongfully indicted individual to hear, “well, all of your claims can be addressed at trial.” Trial may come only after the defendant’s reputation is dragged through the mud, she pays hundreds of thousands in legal fees, and she spends months or years with the threat of a conviction and prison looming over her. An indictment alone can do tremendous harm, regardless of the eventual outcome.

A prosecutor with bad motives can indeed manipulate the grand jury process. He can conceal substantial exculpatory evidence, mislead the grand jury, and indict innocent people – or even ham sandwiches.

But if such misconduct occurs, the problem lies with the prosecutor, not with the institution of the grand jury itself. If grand juries did not exist, a prosecutor bent on misconduct could still file unjustified charges, conceal evidence, and manipulate any alternative charging system. Indeed, as I’ve argued above, I believe a system without the grand jury would in some ways make such misconduct far easier.

Where there are concerns about misconduct, the answer lies in better screening and training of those selected to be prosecutors, and in prompt and meaningful sanctions for those who abuse their power. But it’s not the much-maligned grand jury that creates misconduct or allows it to take place.

Fortunately, most prosecutors do not have bad motives and cases of deliberate misconduct are rare. For good prosecutors who recognize the grand jury’s proper role and their own responsibilities, the grand jury continues to play a vital role as the voice of the community in criminal investigations, just as it has for more than eight centuries.

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Click here to read part two of this post, “Grand Jury Secrecy.”

Click here to read part three of this post, “Disclosure of Exculpatory Information.”

The Ongoing Legal Saga of Martin Shkreli

When we last checked in on former pharmaceutical executive Martin Shkreli, he had just been indicted for securities fraud and related charges. Shkreli – a/k/a the “pharma bro” and “most hated man in America” – is best known for purchasing the rights to an anti-cancer drug called Daraprim and promptly raising the price by 5,000%. His defiant attitude in the face of the resulting outcry, along with his insult-laden Twitter feed, only heightened his notoriety.

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Pharma Bro Martin Shkreli

But Shkreli’s indictment last December had nothing to do with extortionate drug prices. The charges are based on Shkreli’s earlier conduct at two different hedge funds and at a company he founded called Retrophin. Shkreli allegedly defrauded his hedge fund investors by lying to them about their investments, and then defrauded Retrophin by wrongfully using company assets to settle claims from those hedge fund investors. An attorney who worked as Retrophin’s outside counsel, Evan Greebel, was charged with Shkreli in one count of conspiracy. (You can read a more detailed analysis of the indictment in my earlier post here.)

The criminal proceeding against Shkreli and Greebel is still in the early stages, but there have been a couple of interesting related developments in the past couple of weeks.

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Congressional Testimony – or Lack Thereof

Shkreli was subpoenaed to testify last Thursday, February 4, before the House Committee on Oversight and Government Reform. The committee was holding a hearing about skyrocketing drug prices, and the incident where Shkreli raised the price of Daraprim by 5,000% was Exhibit One.

Shkreli’s attorney made it clear in advance of the hearing that Shkreli would invoke his Fifth Amendment right against self-incrimination. That was no surprise. Even though the hearing was not specifically about Shkreli’s criminal case, there would be too much risk that something he said might end up facilitating his own prosecution. Almost any lawyer would likely give him the same advice.

Shkreli’s lawyer asked that his client be excused from attending the hearing, since he was not going to be able to answer questions. But Congress insisted that he appear, threatening him with additional criminal sanctions if he ignored the subpoena. And so, in a familiar Washington theater production, Shkreli sat before the committee, with his attorney in the “I am not a potted plant” seat directly behind him, and repeatedly invoked his right to remain silent in response to every question.

This type of scene unfortunately plays out quite regularly on Capitol Hill. In most legal proceedings, if a witness is going to take the Fifth it is relatively rare for him to be called to the stand. There may be a hearing before a judge to determine whether the assertion of privilege is valid, but if it is, the witness generally will not be forced to appear simply to assert the privilege over and over. For one thing, it’s a waste of everyone’s time if the witness is not going to answer. But more important, it is grossly unfair: repeatedly forcing a witness to assert his right to remain silent can’t help but lead to the impression he is hiding something and must have done something wrong. What should be a constitutional shield is turned into a bludgeon wielded to suggest the witness must be guilty of something – if not, why not answer the questions?

But Congress routinely compels witnesses to appear even when it is perfectly clear they are going to take the Fifth. Then they pepper the witness with speeches masquerading as questions, forcing the witness repeatedly to invoke his or her right to remain silent.

This is a tawdry business. Perhaps the reason it continues is that some Members of Congress are less concerned about actually getting answers and more concerned with trying to create a good video clip that will get replayed on cable news or social media. And indeed Shkreli’s brief appearance was a made-for-TV event, carried live on CNBC and elsewhere.

Shkreli didn’t do his image any good at the hearing. He smirked, rolled his eyes, and generally seemed annoyed that he had to be there. After he was finally excused, he sent out a Tweet calling the Members of Congress “imbeciles.”

But if Shkreli didn’t exactly cover himself in glory, neither did the Members of the committee. I’m no apologist for the pharma bro, but this practice of publicly pillorying a witness who is simply asserting his basic constitutional rights is pretty disgraceful.

Congress may be one of the few things in this country currently held in lower esteem than Shkreli. The spectacle before the House committee last week will do nothing to boost the approval ratings of either.

Attorney-Client Privilege – or Lack Thereof

In another development, we learned a couple of weeks ago that back in December U.S. District Judge Jack Weinstein ruled the grand jury investigating Shkreli could have access to emails that Shkreli and his former company had claimed were protected by attorney-client privilege.

One aspect of the fraud charged in Shkreli’s indictment relates to Retrophin, the pharmaceutical company he founded in 2011 and took public in 2012. The indictment charges that Shkreli defrauded Retrophin by using its assets to pay off debts that Shkreli incurred while running his hedge funds.

While acting as CEO of Retrophin and engaging in the alleged fraud, Shkreli had email exchanges with his outside counsel (and now co-defendant) Evan Greebel. Greebel, who is now a partner with Kaye Scholer LLP, was employed at the law firm of Katten Muchin Rosenman LLP at the time.

The grand jury subpoenaed documents from Retrophin, including copies of emails between Shkreli and Greebel. Retrophin produced the emails but redacted many of them, based on a claim by Shkreli’s attorney that the documents were protected by the attorney-client privilege.

Normally, of course, communications between attorney and client would be privileged and would not need to be produced. But the privilege is subject to something called the crime-fraud exception: if the client communicates with the attorney in furtherance of a crime or fraud, the law will not protect those communications.

The exception applies only if the communications are used to further an ongoing or future crime or fraud. If a client communicates with a lawyer about past criminal conduct, that of course is fully protected. Indeed, such communications are at the very heart of the privilege in the criminal context.

But a client will not be allowed to use an attorney’s services to help him commit a crime and then turn around and try to protect the very communications with counsel that made the crime possible. In other words, clients are not allowed to convert the shield of the attorney-client privilege into a sword that affirmatively helps them engage in criminal activity.

The crime-fraud exception can apply even when the attorney doesn’t know about the criminal conduct. I recall one case where I was arguing as a prosecutor that the crime-fraud exception applied to certain communications between a major corporation and its lawyers. Some of those communications were with a very distinguished former DOJ official who was now a partner at the firm. The firm brought him into the courtroom during the hearing to sit in the front row and glower at the judge, while the corporation’s lawyers expressed outrage at the suggestion that this gray-haired pillar of the bar might have been involved in any criminal activity.

It was all for show, of course — more theater —  because the attorney does not need to be involved. The client may be lying to his own counsel, just as he is to the victims of his fraud. If the attorney was deceived by the client and was assisting in the crime or fraud unwittingly, the privilege may still be overridden. The focus is on what the client intended, not on the intent or knowledge of the attorney.

In this case, of course, the government has done more than simply allege the attorney was involved – it has indicted the attorney, Greebel, as a co-defendant. Although it’s not legally required, that the attorney has been charged as a co-conspirator in committing the alleged fraud certainly bolsters the government’s argument for the crime-fraud exception.

The burden is on the government to establish that the exception applies. In support of its claim, the government submitted a 47-page affidavit from an FBI agent involved in the investigation. The affidavit alleges that the emails in question directly relate to fraudulent activities carried out by the co-defendants, including the backdating of documents to deceive the SEC and the creation of other phony documents used to defraud Retrophin.

In a December 3 order that was just recently unsealed, Judge Weinstein agreed with the government that the emails were not privileged. He noted first that to the extent the communications between Shkreli and Greebel related to Retrophin’s business, the privilege belonged to the company, not to Shkreli, and the company had already waived any privilege claims. But even if there were a personal attorney-client relationship, the judge ruled, “exchanges in redacted emails between the attorney [Greebel] and employee [Shkreli] were part of a scheme, conspiracy or fraudulent attempt to commit a securities fraud. The attorney-client relationship and privilege, if any, is voided by the criminal conduct.”

Accordingly, the unredacted emails were produced to the grand jury, were referenced in the indictment, and will undoubtedly play a major role at trial. There’s a reason prosecutors often say that “email” is short for “evidence mail” – it is frequently a rich source of incriminating information.

The fact that Shkreli was unable to shield his communications with his alleged co-conspirator attorney is not particularly surprising, but it nevertheless has to be considered a blow to the defense.

And in other news, Shkreli recently replaced his legal team with a celebrity lawyer who previously defended rappers Jay Z and Sean “Diddy” Combs. It appears this is only going to get weirder. Stay tuned.

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DOJ Doubles Down on the FIFA Indictment

This past May the U.S. Department of Justice stunned the international sports world by unveiling a 161 page, 47 count federal indictment charging widespread corruption within the Federation Internationale de Football Association (FIFA), the global soccer organization. Last week, DOJ made it clear that the May indictment was merely the tip of the FIFA corruption iceberg.

The original indictment charged fourteen defendants: nine current and former FIFA officials, four sports marketing executives, and one intermediary. (I wrote about that indictment in a post you can find here.) Now a superseding indictment, unsealed last week, has added sixteen additional FIFA defendants and has nearly doubled the number of charges: the new indictment runs 236 pages and contains 92 felony counts. (The DOJ press release and a link to the superseding indictment can be found here.)

A superseding indictment, as the name implies, replaces the original indictment in a case that is already pending. It generally means the grand jury has continued to investigate and has voted to add additional charges, additional defendants, or — as in this case — both.

The fundamental nature of the case remains the same: senior FIFA officials and officials within FIFA’s constituent organizations are alleged to have accepted more than $200 million in bribes and kickbacks in exchange for being influenced in awarding lucrative sports marketing contracts, rigging FIFA elections, agreeing to participate in certain competitions, and awarding the right to host soccer’s premier event, the World Cup.

When the superseding indictment was unsealed, DOJ also announced that eight additional defendants have pleaded guilty since the first indictment, bringing the total number of known guilty pleas to fourteen. Three of the eight – Jeffrey Webb, a former senior FIFA official; Alejandro Burzaco, former manager of an Argentinian sports marketing company; and José Marguilies, who acted as an intermediary for bribe payments – were among the fourteen defendants charged in the original indictment. Due to their pleas, they are not charged in the superseding indictment. The remaining five new guilty pleas came from FIFA officials and sports executives who waived indictment and pleaded guilty under seal.

The sixteen new defendants thus join the eleven remaining original defendants in the superseding indictment. Although the basic nature of the allegations is unchanged, the superseding indictment against the (now) twenty-seven defendants dramatically expands the universe of charges, including not only charges against the new defendants but also additional charges against the original defendants.

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The Structure of the Superseding Indictment

Despite its length, the superseding indictment, like the original, consists almost entirely of three types of charges:

  • The Racketeer Influenced and Corrupt Organizations Act (RICO)
  • Money laundering and money laundering conspiracy
  • Wire fraud and wire fraud conspiracy

A massive RICO conspiracy lasting for more than twenty years continues to be the heart of the indictment. RICO is the statutory glue that allows the many different corruption schemes and far-flung defendants to be joined together in a single prosecution.

RICO requires that the defendants conducted of the affairs of an “enterprise” through a pattern of racketeering activity. As in the original indictment, the government charges that FIFA, its six continental confederate organizations, and other soccer organizations and sports marketing companies together constitute a single RICO enterprise, bound together by the common purpose and goal of promoting soccer worldwide. Because FIFA soccer organizations are present in more than 200 countries and territories around the world, this RICO enterprise is undoubtedly one of the most sweeping ever charged.

The alleged enterprise includes all six of FIFA’s continental confederate organizations, including those governing soccer in Asia, Africa and Europe. Almost all of the alleged corruption, however, relates to officials and events in only two of those organizations: CONCACAF, the confederation covering North and Central America and the Caribbean; and CONMEBOL, the confederation covering South America. (The United States Soccer Federation is a member of CONCACAF.)

To establish the required “pattern of racketeering activity,” the indictment alleges a series of different corruption schemes involving various soccer tournaments, different sports marketing and media agreements, and events such as the selection of the host city for the World Cup. The original indictment charged twelve such schemes. The superseding indictment has expanded one of those schemes and added three new ones, for a total of fifteen.

The individual criminal schemes are charged using two principal statutes: wire fraud and money laundering. The essence of each scheme is a series of bribes and/or kickbacks involving FIFA officials or officials from FIFA member organizations, along with financial transactions designed to facilitate or disguise the payments. Most of the alleged bribes were paid by individuals (a number of whom have been indicted or have pleaded guilty) seeking lucrative contracts for soccer media and marketing rights or to have certain countries participate in tournaments they were promoting.

To charge bribery and kickbacks the indictment uses honest services wire fraud, charging that various officials violated the duty of honest services they owed to FIFA and its member organizations. (For a more detailed analysis of the use of honest services fraud to charge bribery, see my posts here and here.)

The money laundering charges stem from financial transactions, many of them international wire transfers, used to facilitate the bribe payments and/or to conceal those payments. The defendants are accused of using various intermediaries, secret bank accounts, shell companies, and other methods to disguise the nature, source and ownership of the funds involved in various bribery transactions. They are also charged with transmitting funds across the U.S. border in order to promote their criminal activity, a form of international money laundering.

Following the overarching RICO conspiracy charge that encompasses all defendants, the great bulk of the indictment consists of a series of wire fraud and money laundering charges related to each of the fifteen different schemes in turn. Each of these schemes involves a different set of corruption allegations and a different combination of defendants. There are also a handful of additional charges, including tax fraud and obstruction of justice, that apply to only a couple of the defendants.

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What’s New in the Superseding Indictment

The most significant change in the superseding indictment is, of course, the addition of the sixteen new defendants. All of the new defendants are current or former FIFA or FIFA-affiliated officials, seven from CONCACAF and nine from CONMEBOL.

The superseding indictment answers a lot of questions that were raised by the original charges in May. That first indictment included many allegations that described the criminal acts of anonymous individuals identified only by number, as in “co-conspirator #1” and “co-conspirator #2.” The superseding indictment includes many of those same allegations, but with formerly anonymous co-conspirators now identified as among the new defendants. As a result, a fuller picture of many of the corruption allegations has started to emerge.

The other significant change is the addition of three entirely new corruption schemes and the expansion of a fourth. One new scheme, titled “CONMEBOL Copa Libertadores Scheme #2,” charges a number of CONMEBOL officials with accepting millions of dollars in bribes over more than a decade in connection with selling the broadcast rights to a popular South American soccer tournament. A second, titled the “UNCAF Region Friendlies Scheme,” alleges that FIFA officials in El Salvador, Guatemala, Costa Rica and elsewhere accepted bribes in exchange for agreeing to participate in various “friendlies” soccer matches organized by private promoters. (UNCAF is a regional federation within CONCACAF that includes the soccer organizations of countries in Central America.)

The third new scheme, the “CONCACAF Media and Marketing Rights Scheme,” charges that several CONCACAF officials accepted hundreds of thousands of dollars in bribes in connection with an unsuccessful attempt to influence the sale of the media marketing rights to CONCACAF tournaments. It also alleges that various conspirators — including current FIFA vice president and CONCACAF president Alfredo Hawit — obstructed justice in July 2015, following the first indictment, by creating phony contracts and other documents to attempt to conceal their participation in this scheme.

Finally, the superseding indictment greatly expands the allegations in a scheme contained the original indictment titled the “UNCAF Region World Cup Qualifiers Scheme.” The scheme alleges that soccer officials from nearly every country in Central America solicited and accepted hundreds of thousands of dollars in bribes in connection with the sale of the media rights to their country’s World Cup qualifying matches.

The Nature of the Case and What to Watch Going Forward

The superseding indictment seems to take great pains to describe the effect of the FIFA corruption scheme on the United States. As did the original indictment, it stresses that a number of financial transactions related to the bribe payments were routed through U.S. banks. A number of the new charges also emphasize how some soccer matches in tournaments that were the subject of various bribe schemes were played in the U.S., or how the U.S. media market made up a significant portion of some media rights that were the subject of bribes, or how some bribes were actually paid within the U.S. These details may help address questions that have been raised over whether the United States was really the appropriate place to prosecute a massive corruption scheme in which the overwhelming majority of criminal acts took place in other countries.

The heart of the case remains bribery, on a massive and worldwide scale. The “victims” in a bribery case often do not suffer any identifiable economic damages. For example, if a Congressman takes a bribe in exchange for awarding a defense contract, the money for the bribe comes not from the Congressman’s constituents but from the bribe payer. The constituents are harmed not by losing money but in a more intangible way: by losing their right to the fair, honest, and unbiased services of the person elected to represent them. The harm is more diffuse; the damage is the corruption of the system, not a direct monetary loss as in a fraud case.

Similarly, in the FIFA case, the principal harm is the deprivation of the right of various FIFA member organizations and individuals to the honest and impartial services of the FIFA defendants who were supposed to represent their interests, and the resultant corruption of the entire FIFA decision-making process. The indictment does suggest other types of harm as well; for example, the wire fraud allegations claim that the defendants deprived their victims not only of the intangible right to honest services (the bribery allegation) but also of tangible money or property. But how this deprivation of money or property allegedly took place is never spelled out, and it appears that honest services fraud is definitely the primary theory.

There is one very interesting paragraph in the superseding indictment that did not appear in the original. It appears in the description of the racketeering conspiracy and is titled “Embezzlement and Misappropriation.” It alleges that “The conspirators’ corruption of the enterprise extended beyond the payment and receipt of bribes and kickbacks,” and notes that FIFA maintained hundreds of millions of dollars in various programs intended to benefit its member organizations, including youth leagues. It further alleges that certain defendants, including former CONCACAF executives Jack Warner and Jeffrey Webb, embezzled or otherwise misappropriated some of these funds, “including funds intended for natural disaster relief.”  News reports suggest this last clause refers to alleged embezzlement of funds intended to aid the victims of the 2010 earthquake in Haiti.

But after unveiling this tantalizing new allegation, the indictment provides no further detail and no specific charges related to this embezzlement. The DOJ press release concerning the superseding indictment does not mention embezzlement at all. We will have to await further developments to learn more details about any such misappropriation of FIFA funds, whether related to natural disaster relief or otherwise. Webb has already pleaded guilty and may well be a key source of this information for the prosecution.

The defendants who have pleaded guilty have agreed to forfeit more than $40 million, and DOJ is seeking tens of millions more in forfeiture. Typically, forfeited proceeds would go to the U.S. treasury, but this case is a bit unusual because the U.S. and its citizens are not the primary victims of most of the alleged misconduct. The DOJ press release notes that all forfeited money is being held in reserve so it can be used to satisfy any future orders of restitution entered at sentencing, “for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.” This could mean that some of the forfeited money ends up being distributed to the soccer organizations outside the U.S. whose officials were involved in the corruption.

The eight additional guilty pleas that DOJ announced last week are significant. Most, if not all, of these defendants are likely cooperating in the ongoing investigation, providing DOJ with information and testimony that will allow it to pursue the corruption allegations even further.

But in terms of the future of the investigation, the most significant thing to note about the superseding indictment is that it contains references to another 24 still unnamed and unidentified co-conspirators. That means there are at least two dozen more potential defendants out there – some of whom likely have already pleaded guilty under seal and are cooperating as the grand jury investigation continues.

And that means when it comes to FIFA corruption, the Department of Justice is just getting warmed up.

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Charges and Issues in the FIFA Indictment

Trying to wade through the indictment in the FIFA criminal case is a bit like reading a Game of Thrones novel: there are so many different characters, schemes, kingdoms and sub-plots that it’s easy to become lost.

The 161-page, 47-count federal indictment was unsealed in the Eastern District of New York last week.  (The DOJ press release and a link to the indictment can be found here.)  It alleges a more than twenty-year history of rampant corruption within the Federation Internationale de Football Association (FIFA), the global soccer organization based in Switzerland.

FIFA’s mission is to develop and promote the sport of soccer internationally. There are 209 member associations, each representing soccer in a particular territory or country.  The individual member associations are grouped into six continental confederate organizations, each of which assists with governing soccer in a different area of the world. For example, CONCACAF, the North American organization, is a major focus of the indictment. It has forty-one members, including the United States Soccer Federation, and is headquartered in Miami.

The indictment charges fourteen defendants: nine current and former FIFA officials, four sports marketing executives, and one man who acted as an intermediary. (A helpful summary describing the different defendants can be found here.)  In addition to the fourteen defendants, the indictment names twenty-five unindicted co-conspirators and describes no fewer than twelve different corruption schemes taking place around the world over the past two decades. FIFA officials are alleged to have accepted more than $150 million in bribes in exchange for being influenced in awarding lucrative marketing and television contracts, rigging FIFA elections, and awarding the right to host soccer’s premier event, the World Cup.

FIFA logo: the FIFA criminal case alleges a global corruption conspiracy

The FIFA Criminal Case

Although it’s lengthy, the bulk of the charges in the indictment fall into only three categories:

  • The Racketeer Influenced and Corrupt Organizations Act (RICO)
  • Money laundering and money laundering conspiracy
  • Wire fraud and wire fraud conspiracy

RICO:  The heart of the indictment is an overarching and massive RICO conspiracy lasting more than twenty years and including all fourteen defendants. RICO was passed in the early 1970’s as part of the effort to battle organized crime. It doesn’t really define a new crime so much as criminalize ongoing and organized patterns of already criminal behavior. Over the years, as a result of its expansive language and some equally expansive Supreme Court decisions, RICO has become essentially a glorified conspiracy statute — although considering its twenty-year penalty and provision for forfeiture, maybe it’s more accurate to call RICO conspiracy on steroids.

The use of RICO in white collar cases is sometimes criticized as unnecessary and heavy-handed; a statute aimed at bringing down the mafia does not really seem called for in most white collar crimes. But the scope and magnitude of the FIFA corruption makes it an ideal RICO case. The powerful RICO statute allows the prosecution to bring in all members of a global criminal conspiracy, along with evidence of the criminal acts they committed all around the world, and prosecute everything in a single location.  Although FIFA, unlike an organized crime family, is not primarily a criminal organization, the scope and depth of the alleged criminal conduct makes it the type of case for which RICO was born.

RICO requires that the defendants participate in the conduct of the affairs of an “enterprise” through a “pattern of racketeering activity.” The enterprise may be a single legal entity, such as a corporation, or it may be a group of individuals or entities “associated in fact” for a common purpose.  In this case, the government has alleged that FIFA and its six continental confederate organizations together form an “association in fact” enterprise, bound together by their common mission of promoting soccer around the world. (Considering FIFA’s global reach, this must be one of the most sweeping RICO enterprises ever charged.)

The “pattern of racketeering activity” element requires that the defendants participated in the conduct of the enterprise’s affairs through a sustained pattern of criminal acts. Here the government charges that the pattern consisted primarily of three types of crimes: bribery and kickbacks, wire fraud, and money laundering.

Wire fraud and wire fraud conspiracy: At its core, the FIFA case is about bribery. But the federal bribery statute applies only to federal government officials and those acting on the government’s behalf. FIFA is a private organization, and even FIFA officials located within the United States would not be covered by the federal bribery law.

Accordingly, to charge bribery of officials within a private sector organization, the indictment relies on honest services wire fraud. The wire fraud statute criminalizes the use of an interstate wire or wireless transmission in furtherance of a “scheme or artifice to defraud.” This commonly involves a scheme to obtain money or property from a victim. However, wire fraud also may be used to charge a defendant who engages in a scheme to deprive another of the intangible right of “honest services.”  Honest services fraud is a popular vehicle for charging bribery involving state or local public officials, as well as private sector bribery.

A duty of honest services arises when there is a relationship of trust and responsibility between the parties that gives rise to special obligations of loyalty and candor that do not arise in ordinary contractual or arms-length relationships. The most common private sector example is the duty of honest services that an employee owes to an employer. Those who accept bribes in exchange for violating that duty may be found to have committed honest services fraud.  (For a more detailed discussion of the law of honest services fraud, see my earlier post here.)

The FIFA officials are charged with violating the duty of honest services that they owed to FIFA and its member organizations by accepting bribe payments in exchange for the exercise of their official powers concerning the awarding of contracts for sports marketing and other decisions. The non-FIFA defendants, as the bribe payers, are similarly charged with causing the FIFA defendants to violate those duties. As a legal matter this is a relatively straightforward application of honest services fraud. There is little doubt that FIFA officials did owe a duty of honest services to the organization, and if they did accept the bribes as alleged it would be a clear violation of that duty.

Wire fraud also requires that there be a wire or wireless transmission in furtherance of the fraud. The indictment relies primarily on bank wire transfers, many of them international and involving U.S. banks, that allegedly were used to facilitate the bribe payments.

Money laundering and money laundering conspiracy:  The money laundering statutes prohibit engaging in financial transactions involving criminal proceeds in order to conceal the nature, origin, source, or ownership of those proceeds, and also prohibit transporting fund across the U.S. border in order to promote certain kinds of criminal activity. The FIFA indictment charges many of the defendants with both kinds of money laundering: they are accused of using various intermediaries, secret bank accounts, shell companies, and other methods to disguise the source and ownership of various bribe payments, and with transmitting funds across the U.S. border to promote their underlying criminal activity of wire fraud.

Once again, if the allegations of the indictment are true, these seem like strong and uncontroversial money laundering charges.

Other charges: Eugenio Figueredo, a current FIFA vice president, alone is charged with falsifying documents in connection with his application for U.S. citizenship and with five counts of tax fraud. And Aaron Davidson, a sports marketing executive, alone is charged with one count of obstruction of justice for alerting other co-conspirators during the grand jury investigation to the possibility that their conversations were being recorded.

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Other Issues and Questions in the FIFA Case

On the same day the indictment was unsealed, the government also unsealed the guilty pleas and criminal charges of four other individual defendants and two corporations. These guilty pleas date back to mid-2013 and had remained under seal. That suggests the defendants who pleaded guilty likely were cooperating in the investigation for some time, including recording conversations with their co-conspirators. Such evidence can be crucial to building a complicated conspiracy cases and will be very important at trial.

A case this large will take some time to unfold. Seven of the defendants were arrested in Switzerland at the same time the indictment was being unsealed in the United States, and the process of extraditing those defendants alone could take months. One would also expect a number of additional guilty pleas, as other co-conspirators seek to cooperate with the prosecution and reduce their own potential criminal exposure.

It’s noteworthy that the FIFA case is being prosecuted in the United States.  Most of the defendants are not U.S. citizens, and much of the alleged criminal activity took place in other countries. Soccer is not nearly as big in the U.S. as it is in much of the world. One could argue that FIFA corruption should not really be a U.S. priority. But this appears to be one of those, “If not us, then who?” situations – most of the other nations affected simply could not hope to bring such a case. FIFA affects hundreds of millions of people and billions of dollars of economic activity world-wide, and although the corruption was deplored for years, nothing much had been done about it. It took the prosecutorial chops and criminal laws of the U.S. finally to put together such a massive global prosecution.

(As an aside, the Swiss government has opened a separate investigation into allegations of corruption in connection with the selection of the sites for the next two World Cups – Russia in 2018 and Qatar in 2022.  There were immediate cries of foul after the selection of Qatar, a country with a spotty record on human rights and where it gets so hot during World Cup season that soccer balls — not to mention soccer players — are known to melt spontaneously.  It’s hard to understand such a choice unless someone was getting paid off. These specific allegations are not, however, part of the U.S. indictment.)

The Department of Justice has been pretty aggressive in recent years about asserting jurisdiction over criminal acts that took place in other countries, particularly in cases involving terrorism and the Foreign Corrupt Practices Act. That expansive assertion of extraterritorial jurisdiction  has been criticized on occasion. In this case, though, because so many of the corrupt payments went through the U.S. banking system and because of CONCACAF’s location in the U.S., there should be little question about the appropriateness of U.S. criminal jurisdiction.

What I find more interesting is the question of where within the U.S. the case is being prosecuted. The case was investigated and indicted in the Eastern District of New York, the district that covers Long Island and where the new Attorney General, Loretta Lynch, previously served as U.S. Attorney. I’ve seen some commentary suggesting that the E.D.N.Y may have been awarded the case based on its relationship with the new Attorney General, but that doesn’t make much sense. This investigation had been going on in that district for several years, long before anyone knew that Ms. Lynch would be the Attorney General. It’s not as though she moved to D.C. and then decided to hand the prosecution to her former colleagues.

But reviewing the indictment, one is left to wonder how exactly the case ended up where it did. Proper venue in criminal cases is not just a matter of convenience or choice; the Constitution requires that criminal cases be brought in the state in which the offense took place. So although the U.S. may have federal criminal jurisdiction, the question remains which court or courts within the U.S. would have venue.

It appears there would be several other, more logical venues than the E.D.N.Y. For example, CONCACAF, the North American FIFA federation, has its headquarters in Miami (and the FBI executed a search warrant there the day the indictment was unsealed). A number of the bank wire transfers that form the basis of the wire fraud charges also went through Miami banks, and meetings of conspirators and other events are alleged to have taken place there as well. The Southern District of Florida seems a much more logical location for the case.

The Southern District of New York in Manhattan, right next door to the E.D.N.Y., would be another likely venue. When jurisdiction is based in large part on use of the U.S. banking system, the Southern District, as the nation’s financial capital, is often the forum of choice.

The indictment is pretty vague concerning what relationship there is between Brooklyn (the heart of the Eastern District of New York) and the actions of the FIFA co-conspirators. For RICO and the other conspiracy charges, as long as there is at least one overt act in furtherance of the conspiracy within the E.D.N.Y, venue should not be an issue. But for some of the non-conspiracy charges it’s not at all clear on the face of the indictment why venue is proper in the Eastern District of New York.

In some circumstances, if criminal acts do not fall within the jurisdiction of any particular state, venue will be considered proper in any district in which the defendant is first arrested or brought.  Perhaps the government hopes to rely on this argument by ensuring that when the defendants arrested in Switzerland are extradited to the U.S. their plane lands at JFK or LaGuardia – both of which are within the E.D.N.Y.  But it’s unclear whether that argument would be successful.

It’s possible the case ended up where it is partly by accident. The New York Times reported that the case originally arose out of an unrelated investigation in New York concerning Russian organized crime. Perhaps that original unrelated case had a clearer connection to Brooklyn, but once the prosecutors started focusing on the FIFA allegations that emerged they were reluctant to give the case up. Or perhaps, as sometimes happens, there was a “turf battle” between different U.S. Attorney’s offices over which should take the case, and the E.D.N.Y. prevailed. In any event, it’s going to be interesting to see whether any of these venue issues end up forming the basis for defense motions and possible trouble for the prosecution.

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It will be fascinating to watch how the FIFA case plays out over the months to come.  For now, the indictment tells a remarkable and gripping tale of worldwide greed and corruption.  Maybe HBO will turn it into a television series — all it needs is a little gratuitous sex and violence.  And maybe a dragon.

dragon

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