Use of Compelled Testimony Obtained Abroad in US Government Investigations

You’re a senior executive in a global corporation living in the United Kingdom, where you are a citizen.  Your company is under investigation by criminal and regulatory enforcement agencies in both the United States and the UK for potential securities fraud and market abuse.  In addition, there are a number of securities class action claims filed in the US.  There are public new stories accusing you, personally, of having been involved in the fraudulent activities of your company.  Now, you have received an order to appear and provide evidence in an enforcement investigation conducted by the UK’s Serious Fraud Office. 

Your lawyers have advised you that the SFO can compel you to provide evidence and any refusals to answer questions may be used against you in a criminal proceeding under UK law.  The have also informed you that, in the US, such compelled evidence violates constitutional prohibitions on requiring criminal defendants to provide evidence against themselves.  However, the US authorities may, through mutual legal assistance agreements and treaties between the two countries, obtain any statements you may make to the SFO.  Although you believe that the UK authorities will weigh the evidence carefully and not bring charges unless there is good reason to believe you have committed a crime, you are much less confident about what might happen in the US, particularly considering that the federal prosecutor whose office is investigating your company has made public statements to the effect that individual executives must be held accountable for what he has called an “egregious fraud” at your company. 

What do you do?  Should you appear before the SFO and provide answers to their questions or should you take the chance that the SFO will use the negative inferences from your refusal to provide responses to bolster a potential criminal prosecution in the UK but deprive the US prosecutors of the use of your answers in a criminal prosecution in the US?  In addition, what if there is every indication that the US civil and criminal authorities are attempting to work through the UK authorities to obtain evidence that they would be prohibited from obtaining directly because the use of involuntary, compelled statements of defendants violates the US Constitution?

This was a fact pattern faced by a former client of mine in 2005, if you substitute the UK Financial Services Authority, which no longer exists, for the SFO.  My client was the Chairman of the Committee of Managing Directors of Royal Dutch Shell.  On the above facts, he chose to provide responses to the FSA and take the risk that prosecutors in the United States might use his responses against him.  He was confident that he had not committed any fraud and he was unwilling to refuse to respond to questions posed by the regulators in his home country, the UK.  At the time my client made his decision to testify before the FSA, there were no recent precedents for how this evidence might be used in the US (although Bram v. United States, an 1897 US Supreme Court case, had held that US prosecutors could not use a defendant’s involuntary statements obtained by foreign authorities).  Accordingly, my client prefaced his statements to the FSA by introducing a statement, accompanied by a letter from his lawyers, noting that he could be compelled to testify under UK law but that such compelled evidence would violate his rights against self-incrimination under the US Constitution and attempted to preserve his rights by objecting to the use, in the US, of his compelled statements.  One interesting development was that the SEC sent its enforcement attorneys to attend the FSA testimony, which indicated that the US authorities did, in fact, intend to use the compelled statements against my client.  As it turned out, the US authorities ultimately concluded that there was no case of securities fraud, civil or criminal, to answer for, and we did not have to test the effectiveness of our strategy in the US.  A recent Second Circuit case (in July 2017) has now provided further guidance in this area.

In U.S. v. Robson, Case No. 16-898, the U.S. Court of Appeals for the Second Circuit overturned the 2015 conviction of two executives at Rabobank for manipulating the London Interbank Offered Rate (“Libor”).  The executives had been interviewed under compulsion by the UK’s Financial Conduct Authority (the successor to the FSA) and required to answer questions or face imprisonment under UK law.  A cooperating witness in the subsequent US prosecution had reviewed transcripts of the FCA’s interviews of the executives prior to testifying.  The Court concluded that the prosecutors were required, but failed, to show that this witness’ testimony had not been shaped or altered by the review of the tainted statements.  The Second Circuit concluded that “compelled testimony cannot be used to secure a conviction in an American court.  This is so even when the testimony was compelled by a foreign government in full accordance with its own law.”  On November 9, 2017, the Second Circuit denied the Department of Justice’s request for an en banc rehearing of Robson.  The government has not indicated whether it will appeal to the Supreme Court.  The DOJ had noted in its request for a rehearing that it had started skipping the prosecution of otherwise valid cases because of the Second Circuit’s decision.

For now, this decision means that executives caught up in parallel, cross-border white-collar investigations should (absent further guidance from the Supreme Court), decide what evidence to provide in their home jurisdictions based upon domestic considerations only.  They should not be placed on the horns of a dilemma: wanting to cooperate with domestic authorities while concerned that such cooperation places them in legal jeopardy with US authorities.  For now, the Robson decision prevents US authorities, through collaboration with foreign authorities, from obtaining and using compelled testimony that, if attempted in the US, would be unavailable due to the Fifth Amendment of the US Constitution.

Adriaen Morse