Individual Penalties and Third-Party Rights: The US Perspective

43.1 Investigative actors

43.1.1 Generally

Individuals may find themselves the target or subject of investigation by several different actors at the federal or state level for the same conduct. Countless federal, state and local agencies have investigative authority or the power to prosecute violations of laws, regulations and policies through criminal charges, civil litigation, enforcement proceedings or regulatory action. The plethora of government enforcers often results in parallel prosecution or proceedings – concurrent criminal and civil cases or investigations against the same person or entity, for conduct arising out of the same facts.

First, this chapter discusses the various investigative actors often involved in parallel prosecution at the federal and state levels. Second, this chapter gives an overview of prosecutorial discretion generally, how that discretion has focused on individual accountability, and the ability of such investigative actors to share information and participate in simultaneous investigations of individuals. Simultaneous investigations can lead to parallel proceedings that can involve a combination of criminal, civil or regulatory authorities, as well as private plaintiffs. Third, this chapter gives an overview of the sources of penalties that individuals can face because of prosecution by multiple investigative actors. Last, this chapter briefly covers the collateral impact on third parties that may be related to a given investigation or parallel prosecution.

43.1.2 Department of Justice – US Attorney General

The Department of Justice (DOJ) is the central agency for the enforcement of federal laws.[2] It has control over criminal prosecutions and civil suits in which the United States has an interest.[3] The DOJ is headed by the US Attorney General, who is the chief law enforcement officer of the federal government.[4] The DOJ investigates both criminal and civil violations of federal laws through several components and 93 US Attorney’s Offices located throughout the United States and its territories. The DOJ enforces federal criminal and civil laws through several divisions, including its Civil Division, Criminal Division, Antitrust Division, Civil Rights Division, Tax Division, and Environment and Natural Resources Division.[5]

43.1.3 Federal regulatory agencies

The United States Government Manual – a regularly updated special edition of the Federal Register known as the ‘official handbook’ of the federal government – lists 47 independent federal agencies of the executive branch, many of which perform regulatory functions, such as the Securities and Exchange Commission (SEC), the Federal Trade Commission and the Environmental Protection Agency.[6] The powers of a regulatory agency ordinarily include the power of investigation.[7] A regulatory or administrative investigation is distinct from any litigation or action that may flow from it.[8] The purpose of a regulatory investigation is to obtain information to govern future action and is not tied to proving a pending charge or dependent on having received any complaint.[9]

After a regulatory investigation, the regulating body can determine how to dispose of the matter. For instance, upon completion of an investigation into possible violation of securities laws, the SEC may take no action, settle with the alleged violators, bring an action in federal court or initiate an administrative proceeding.

43.1.4 State prosecutors and regulatory agencies

A state’s attorney general is considered the chief law enforcement officer of the state. The authority of a state attorney general is determined by state constitutions, statutes or both. State attorneys general typically possess both civil and criminal enforcement authority as well as regulatory authority in certain instances, although criminal prosecution usually is left to the purview of state and local prosecutors in the first instance, with certain exceptions. A state attorney general usually may not usurp the criminal law enforcement function of local prosecutors in the absence of statutory authority[10] but nonetheless in some instances may supersede them.[11]

Depending on the state, a state attorney general may investigate possible violations of criminal law in some instances upon its own initiative or at the request or direction of a specified state official.[12] In all instances, an attorney general’s criminal investigative authority must comport with statutory directives.[13] This authority is similar to that of a grand jury and may include the power to compel the production of documents, witnesses to give sworn testimony and responses to written interrogatories.[14]

Just as the SEC enforces the federal securities laws, each state has its own securities regulator. State securities regulators enforce what are known as ‘blue sky’ laws. Blue sky laws cover many of the same activities regulated by the SEC but are confined to securities sold or persons who sell them within each state.[15]

43.2 Prosecutorial discretion

43.2.1 Generally

43.2.1.1 Federal

It is firmly entrenched in US federal law that prosecuting attorneys are vested with broad discretion to decide when to prosecute and when not to.[16] Prosecutors generally have broad discretion to determine whether to investigate, who should be investigated and whether an individual should be charged with an offence.[17] According to the Supreme Court, so long as the prosecutor has probable cause to believe that the accused committed an offence, the decision whether to prosecute and which charges to file or bring before grand jury, generally rests entirely in their discretion.[18]

To charge an individual with a criminal offence, a federal prosecutor must conclude that there is probable cause that the conduct at issue violates a federal statute.[19] The DOJ’s Principles of Federal Prosecution provide federal prosecutors with guidelines for exercising their prosecutorial discretion.[20] Per the Principles, upon a determination that probable cause exists that a person has committed a federal offence, prosecutors should consider whether to:

(1) Request or conduct further investigation; (2) Commence or recommend prosecution; (3) Decline prosecution and refer the matter for prosecutorial consideration in another jurisdiction; (4) Decline prosecution and commence or recommend pretrial diversion or other non-criminal disposition; or (5) Decline prosecution without taking other action.[21]

According to current federal guidelines, if the prosecutor believes that there is admissible evidence sufficient to sustain a conviction, the prosecutor should commence or recommend federal prosecution unless doing so would not serve a ‘substantial federal interest’, the person is subject to effective prosecution in another jurisdiction or an adequate alternative to prosecution exists.[22]

The discretionary power of federal prosecutors encompasses ‘causing investigations to be conducted by the appropriate federal law enforcement agencies’.[23] So, while United States Attorneys have plenary authority with regard to federal criminal matters within their jurisdiction,[24] they also are authorised to request the appropriate federal agency to investigate alleged or suspected violations of federal law.[25]

43.2.1.2 State and local

States or localities may impose varying standards for prosecutorial discretion. As such, some prosecutor’s offices may be subject to a higher standard for charging decisions. For instance, the San Francisco District Attorney’s Office standard for charging cases requires that prosecutors believe guilt beyond a reasonable doubt has been proven by the evidence before bringing charges.[26]

Where there is probable cause, or other applicable standard, state and local prosecutors similarly possess broad discretion to determine whether and what charges to bring. However, state prosecutors usually lack detailed prosecutorial guidance like the federal Justice Manual. Local prosecutorial offices at the state level that have formally adopted written standards or criteria to guide prosecutorial discretion are in the minority.[27]

The broad discretion in the charging decision directly impacts sentencing. The same unlawful conduct often implicates numerous potential civil and criminal statutes, with a wide variety of potential penalties. Furthermore, decisions such as deciding whether to charge an offence as a felony or a misdemeanour and whether to charge any applicable enhancements may also greatly impact the range of potential penalties at stake. These charging decisions are crucial because the charges of which an individual is convicted determine the potential penalties they face.

43.2.2 Individual accountability

As stated in the Justice Manual, ‘the prosecution of corporate crime is a high priority for the Department of Justice’.[28] The types of crimes often attracting parallel prosecutions or investigations are those that go to the core interests outlined by the DOJ for its focus on prosecution of corporate crime:

(1) protecting the integrity of our economic and capital markets by enforcing the rule of law; (2) protecting consumers, investors, and business entities against competitors who gain unfair advantage by violating the law; (3) preventing violations of environmental laws; and (4) discouraging business practices that would permit or promote unlawful conduct at the expense of the public interest.[29]

The DOJ’s policies regarding corporate prosecution have evolved significantly to increase the priority of prosecuting individuals. In September 2015, the DOJ, through the then Deputy Attorney General Sally Quillian Yates, issued the Memorandum on Individual Accountability for Corporate Wrongdoing, commonly referred to as the Yates Memorandum.[30] The Yates Memorandum set forth new policy guidance focused on prosecuting individual wrongdoers with responsibility for the corporate crimes companies could be liable for.[31] The Yates Memorandum is incorporated into the Justice Manual, revising the ‘Principles of Federal Prosecution of Business Organizations’ and the ‘Commercial Litigation’ provisions.[32] The Yates Memorandum strengthened the DOJ’s pursuit of individual wrongdoers by tying corporate co-operation credit to organisations’ identification of culpable individuals and incorporating individual outcomes into prosecutors’ investigations and resolutions. The Yates Memorandum focuses the DOJ on individual accountability by outlining six key items:

  1. To receive any co-operation credit, a corporation must investigate and identify all individuals involved in, or responsible for, the misconduct at issue and disclose all relevant facts to the DOJ.[33]
  2. Both criminal and civil DOJ attorneys should focus on individual culpability from the inception of any investigation of corporate misconduct.[34]
  3. Criminal, civil and agency attorneys should be in early and regular consultation when conducting corporate investigations and will consider bringing parallel proceedings to take advantage of the full range of the government’s potential remedies (including incarceration, fines, penalties, damages, restitution to victims, asset seizure, civil and criminal forfeiture, and exclusion, suspension and debarment).[35]
  4. In the absence of extraordinary circumstances, civil or criminal corporate resolutions should not include dismissal of criminal charges or the release of civil claims, or provide immunity for any individual officer or employee.[36]
  5. Corporate cases should not be resolved without a clear plan to resolve ongoing investigations of individual misconduct prior to the expiration of any statute of limitations.[37]
  6. Civil attorneys should consistently focus on bringing civil actions against individual corporate wrongdoers by assessing several factors in pursuit of the DOJ’s goals to recover as much as money as possible for the public, to hold individuals accountable and the long-term deterrence of corporate fraud.[38]

In November 2018, the then Deputy Attorney General Rod Rosenstein announced revisions to the Yates Memorandum. Still illustrating the DOJ’s sustained focus on individual accountability, Rosenstein stated that: ‘[u]nder our revised policy, pursuing individuals responsible for wrongdoing will be a top priority in very corporate investigation’.[39] The Rosenstein revisions clarified that ‘absent extraordinary circumstances, a corporate resolution should not protect individuals from criminal liability’.[40] Rosenstein deviated from a position whereby corporations must identify every individual wrongdoer to obtain co-operation credit, but instead stated that the new policy permits credit when a corporation identifies ‘every individual who was substantially involved in or responsible for the criminal conduct’.[41] These Rosenstein revisions are currently reflected in the Justice Manual.[42] However, in October 2021, Rosenstein’s ‘substantially involved’ amendment was expressly rescinded.[43] Now, to receive consideration for co-operation, a ‘company must identify all individuals involved in or responsible for the misconduct at issue’.[44]

In September 2022, Deputy Attorney General Lisa O Monaco announced policy changes designed to expedite investigations and prosecutions of culpable individuals and stated that the DOJ’s ‘number one priority is individual accountability’.[45] The announcement coincided with the release of the Memorandum on Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group, which instructs prosecutors on key component policy updates, including Guidance on Individual Accountability.[46] This memorandum builds on prior DOJ policy and outlines three updates with respect to the investigation and prosecution of individuals involved in corporate misconduct:

  • To receive full co-operation credit, corporations must timely produce all relevant, no-privileged facts and evidence concerning individual misconduct.[47] Production of information relevant for assessing individual culpability should be prioritised. And prosecutors must specifically assess the timeliness of co-operation in connection with every corporate resolution.[48]
  • Co-operation credit will be reduced or eliminated for the undue or intentional delay of the production of information or documents, particularly with respect to information concerning individual culpability.[49]
  • Prosecutors must strive to complete investigations into individuals and seek any individual criminal charges, prior to or simultaneously with corporate resolution.[50]

Regulators have also expressed commitment to charging individuals for white-collar crimes and securities violations. In 2014, the then SEC Chairwoman Mary Jo White expressed what she called three pressure points in the current enforcement environment: (1) the pressure of multiple regulators in the same or overlapping investigations; (2) the decision to charge individuals or entities, or both; and (3) the range of remedies and ultimate resolutions.[51] A review of recent actions taken illustrates that the regulatory landscape continues to focus on these issues and the prosecution of individuals.[52]

43.2.3 Parallel prosecution

Regulatory agencies are often at the centre of parallel investigations concerning common sets of fact or conduct. For instance, both the FTC and the Antitrust Division of the DOJ have the authority to enforce US antitrust laws, violations of which can lead to private civil litigation. SEC investigates entities and individuals for potential civil violations of federal securities laws while the DOJ carries out criminal prosecution of those same securities violations.

Parallel proceedings can also involve state agencies and law enforcement such as state attorney general’s offices or local prosecutors. Parallel proceedings are especially common in areas of law that can carry both civil and criminal penalties, such as securities, antitrust, advertising, anti-bribery, anti-money laundering, environmental, health care, sanctions and tax.[53] These areas also give rise to parallel proceedings involving multiple countries’ enforcers.

For instance, government and industry regulators that enforce securities laws include the SEC, the Financial Industry Regulatory Authority, the DOJ and other agencies, including state regulatory and criminal authorities. Several provisions of the securities laws also provide for a private right of action, which can lead to securities class action lawsuits or derivative shareholder claims.

Parallel proceedings thus carry the potential to expose an individual to a wider range of penalties. As expressed by the DOJ: ‘The potential for parallel proceedings arises in many of the Department’s white collar enforcement priorities, and it is essential that an effective and successful response involve an evaluation of criminal, civil, regulatory, and administrative remedies.’[54]

It is well established under US law that investigative actors may conduct simultaneous civil and criminal investigations of the same conduct, and that civil and criminal authorities may co-operate and share information in doing so.[55] Many investigations may also involve multiple parties, individuals or companies that are being investigated.

Parallel prosecution is a concept entrenched in the efforts of the DOJ. The Justice Manual Section 1-12.000, ‘Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings’, states:

Parallel actions are important to the Department’s efforts to hold accountable individuals who commit corporate malfeasance. Early and regular communication between civil attorneys and criminal prosecutors handling corporate investigations can be crucial to our ability to effectively pursue individuals in these matters. Consultation between the Department’s civil and criminal attorneys, together with agency attorneys, permits consideration of the fullest range of the government’s potential remedies . . .[56]

It goes on to state: ‘Department attorneys should be alert for circumstances where concurrent criminal and civil investigations of individual misconduct should be pursued.’[57] The DOJ also has issued guidance emphasising coordination with state, local and tribal enforcement agencies.[58]

Regulatory agencies are also well versed in navigating parallel investigations and enforcement proceedings, including the complexities and sensitivities around parallel proceedings. For instance, securities regulators and criminal authorities routinely share evidence and refer cases to each other, which is supported by statute, case law and internal practices.[59] The SEC’s Enforcement Manual directs staff to work co-operatively with criminal authorities to share information and coordinate parallel investigations.[60]

Under US law, parallel investigations by several agencies should not be blocked unless special circumstances demonstrably prejudice substantial rights of the party being investigated or the government.[61]

43.3 Sources of penalties and sentencing

Individuals convicted of violations of criminal law or found liable in civil or regulatory enforcement proceedings face a range of potential penalties. An individual may be subject to penalties through criminal conviction or plea bargaining, or civil settlements of enforcement actions or litigation. In the criminal context, once an individual has been convicted of or agrees to plead guilty to certain offences, their penalties are determined by a judge at sentencing. In the civil and regulatory enforcement contexts, penalties are determined through judgments issued by a judge or jury, or agreed in settlements.

In the criminal context, the determination of the range of potential penalties or sentences for convictions is informed by criminal statutes or other guidance, such as sentencing guidelines. Criminal codes define what constitutes a crime and the type and length of punishment for offenders. Sentencing guidelines are a set of standards that generally are put in place to establish rational and consistent sentencing practices within a particular jurisdiction.[62]

At the federal level, two sources inform the length of a sentence: the United States Code[63] and the US Sentencing Guidelines (Guidelines).[64] While once mandatory, the Guidelines are no longer binding on a sentencing court but act as advisory recommendations[65] that should be a court’s starting point and initial benchmark to determine an appropriate sentence.[66] The Guidelines prescribe a range of penalties that depend first on a calculation of the base offence level of the charged offence, which is assigned based on its seriousness.[67] The base offence level is then adjusted upwards or downwards for various factors to calculate a total offence level.[68] The total offence level is then combined with the defendant’s criminal history category to provide the presumed sentencing range for a particular defendant.[69] A sentencing court may use its discretion to depart upwards or downwards from the Guidelines range but must explain its reasons for doing so. When a defendant is sentenced within the applicable range calculated correctly within the Guidelines, the sentence imposed is presumed reasonable.[70]

States take varied approaches to the determination of criminal sentences. Every state has established a criminal code, which enumerates crimes and the potential penalties for violations. In addition to statutory criminal codes, some states have sentencing guidelines, or sentencing commissions, or both. Some states have neither. The Robina Institute of Criminal Law and Criminal Justices catalogues the attributes of sentencing systems across the United States through its Sentencing Guidelines Resource Center. The Resource Center currently highlights information for 21 state jurisdictions that have either guidelines or a commission.[71] This number is constantly in flux, as over time states may create permanent or temporary commissions to create or modify guidelines or disband commissions, have sentencing guidelines and later create commissions, or have commissions that never create guidelines, etc.

In the civil context, individuals can also seek to negotiate resolutions with US authorities. Individuals may settle with regulators, such as the SEC, by agreeing to certain conditions usually set out in a consent judgment (in a litigation settlement) or in an order instituting proceeding (in an administrative proceeding settlement).

In the context of parallel prosecution, the same conduct may subject an individual to both criminal and civil penalties. For example, in parallel prosecution contexts, liability for violating the US securities laws may expose an individual to criminal penalties, civil penalties, administrative fines and private lawsuits.

43.3.1 Imprisonment

Potential incarceration for violation of federal criminal laws is calculated using the Guidelines, as outlined above. Similarly, sentences for convictions of state criminal laws that include potential imprisonment are determined pursuant to that given state’s criminal penal code and sentencing system. Individuals convicted of federal crimes and sentenced to prison will go to federal prison, run by the Federal Bureau of Prisons. Individuals convicted and sentenced for violation of state crimes will serve their sentence in a local or state correctional facility depending on that state’s corrections system.

Individuals may be convicted of both federal and state crimes, and separately sentenced, based on the same conduct.[72] Under the dual-sovereignty doctrine, a crime under one sovereign’s laws is not ‘the same offence’ as a crime under the laws of another sovereign.[73] A federal prosecutor may prosecute a defendant under a US federal statute even if a US state has prosecuted them for the same conduct under state law, and vice versa.[74]

43.3.2 Financial penalties

An individual convicted of a federal or state crime or liable in a civil or regulatory proceeding may be subject to monetary fines.

Federal criminal statutes outline four main types of financial penalties: fines, forfeiture, restitution and special assessments.[75] Such financial penalties may be imposed in addition to imprisonment or probation. Likewise, where a criminal statute does not require imprisonment, a fine may be a stand-alone sentence.[76] State criminal penal codes generally allow for these same categories of monetary penalties. Unless defined by the particular criminal statute at issue, the maximum amount of criminal penal fines depends on the class of felony or misdemeanour convicted.[77]

Civil monetary penalties depend on the agency and type of proceeding brought. The same conduct may be subject to multiple financial penalties, civil or criminal, under multiple statutes by multiple enforcers, and may also be subject to civil damages awards on behalf of private plaintiffs. While criminal matters can result in fines, restitution and forfeiture, the most common financial remedies sought in the civil context are disgorgement, pre-judgment interest and civil penalties, such as forfeiture. Of note, for policy reasons, several types of financial penalties are non-dischargeable in US bankruptcy.[78]

Restitution is often awarded in relation to financial crimes and in civil cases where victims have suffered a pecuniary loss. Restitution is the ‘return or restoration of some specific thing to its rightful owner or status’ or simply ‘compensation for loss’.[79] The intent and purpose behind restitution is to make victims whole or to restore them to the position they would have been in if the illegal activity had not occurred.

Disgorgement requires a defendant to pay back the fruits of illegal activity.[80] The intent behind disgorgement is to ensure that wrongdoers do not benefit from their unlawful conduct. While in some instances there may be several methods to estimate the amount disgorgement, the straightforward purpose is to strip the defendant of ill-gotten gains.

43.3.3 Asset forfeiture

The temporary or permanent confiscation of property by the government may occur in both criminal and civil contexts. Seizure of assets involves the physical restraint of an asset or its transfer from the owner or possessor to the custody or control of the government.[81] Forfeiture is the legal process by which title to an asset is transferred to the government, because it was derived from or used to facilitate a crime in a manner that subjects it to forfeiture under an applicable statute.[82] Legal seizure of assets happens in a number of ways but generally occurs: incident to an arrest; pursuant to a search warrant; pursuant to a civil or criminal seizure warrant for specific items subject to forfeiture; or pursuant to a preliminary order of forfeiture.[83] When forfeiture occurs, the government obtains permanent title to the asset upon obtaining a declaration of forfeiture in administrative proceedings, a judgment of forfeiture in a civil forfeiture proceedings or a final order of forfeiture in a criminal case.[84] Orders of forfeiture generally include language directing forfeiture of the property to the United States ‘for disposition in accordance with law’.[85] The US Attorney General has complete authority to dispose of forfeited property in civil and criminal cases by ‘sale or any other commercially feasible means’, without subsequent court approval.[86]

Administrative forfeiture allows a federal agency to seize movable personal property without a judicial proceeding.[87] Civil forfeiture is a judicial proceeding brought directly against the real or personal property that is derived from or traceable to the crimes at issue.[88] Criminal forfeiture is an action brought as part of a criminal case against a defendant, in which the government will attempt to prove that property was used or derived from the crime or crimes charged.[89]

43.3.4 Regulatory restrictions

Penalties may also be imposed on individuals in administrative proceedings outside court. For instance, in an administrative proceeding, the SEC may, among other things, impose civil monetary penalties, disgorgement of illegally gained profits, debarment or suspension.

43.4 US third-party rights

Criminal, civil and regulatory investigations may also impact third parties who are not the subject or target of the investigation, or a party to a proceeding. Such individuals or entities, even though they are not being charged, sued or regulated, may be related to a subject or target or otherwise identified during an investigation. These related third parties also must be cognisant of various considerations and rights throughout an investigation to avoid becoming a target or eventual defendant, to avoid their exposure to potential penalties. For instance, during a criminal investigation, the DOJ categorises an individual or entity as either a target, a subject or a witness.[90] A witness is an individual possessing information that is relevant to the investigation but has not been identified as a target or subject; however, these designations may change at any time during an investigation.

Third parties may become involved in investigations or proceedings through the information gathering or discovery phase. Investigative actors in the criminal, civil and regulatory contexts have various investigative powers that include many mechanisms for obtaining information. These mechanisms include the authority of these agencies to seek or compel information from third parties. So, while a third party may not be the target of an investigation or a party to a proceeding, they may be asked for information or documents.

The DOJ has several mechanisms of formal information gathering, including using undercover operatives or agents, electronic surveillance, issuing subpoenas or civil investigative demands (CIDs) or executing search warrants. It also may employ informal information-gathering tactics, such as making in-person visits, sending a letter or making a telephone call. State attorneys general, local prosecutors and local law enforcement agencies also utilise many of these same methods to gather information. Third parties may retain counsel to represent their interests upon receiving any such formal and informal information requests.

Regulatory or administrative agencies are established by statutes that provide the basis of their investigatory powers, including administrative subpoena power.[91] Administrative subpoena power allows agencies to issue compulsory requests for information without prior approval from a grand jury or court.[92] Typically, administrative subpoenas are enforced via a court proceeding, whether brought by the administrative agency to force compliance or by the recipient to quash or modify the subpoena.[93] The SEC, for instance, may issue subpoenas for testimony or documents, and the refusal to comply to the SEC’s satisfaction may be punished as contempt of court upon court order.[94]

Third parties faced with investigative requests or demands should assume that any information produced to one agency may be shared with any other state, federal or local agency that could have an interest in the information.[95] Provided the agencies have acted in good faith, any evidence obtained by a civil regulator during its investigation can be used in connection with a subsequent criminal action.[96] As an example, securities regulators such as the SEC routinely share information with criminal enforcement authorities such as the DOJ.[97] In United States v. Rhodes, the SEC issued Rhodes a third-party witness subpoena, collected voluminous information, including cell phone data, and turned the data over to the United States Attorney’s Office, which then used text messages produced to the SEC in its criminal complaint to charge Rhodes with criminal violations of the securities laws.[98]

Given the prevalence and acceptance of parallel prosecution under US law, third parties must consider the potential risks when responding to investigative requests or demands for information. These include the risk of self-incrimination, adverse inferences in civil proceedings from invoking their Fifth Amendment rights and collateral consequences in other forums or proceedings. However, the most common way information will be sought from third parties is through subpoenas or CIDs. While agencies and enforcers generally have a broad purview to seek information within their jurisdiction from third parties, the power to subpoena information is not without limit. Thus, third parties should educate themselves about the statutory and regulatory limits of the subpoenaing entity’s powers and of their rights and the grounds on which they can challenge these investigative requests.

There are several potential grounds on which to challenge administrative subpoenas, including scope of authority, privilege against self-incrimination and the attorney–client privilege.[99] For an administrative subpoena to be judicially enforceable, it must meet a test of reasonableness evaluated based on a ‘good faith’ standard of issuance. In United States v. Powell, the Supreme Court set the following factors for judicial review of administrative action: (1) the investigation is conducted pursuant to a legitimate purpose; (2) the information requested under the subpoena is relevant to that purpose; (3) the agency does not already have the information it is seeking with the subpoena; and (4) the agency has followed the necessary administrative steps in issuing the subpoena.[100]

Second, no investigative actor may compel any person to violate their Fifth Amendment right against self-incrimination. The Fifth Amendment privilege against self-incrimination found in the US Constitution gives an individual the right to refuse to make any statement that could be used against them in a criminal proceeding to establish guilt.[101] Importantly, except in limited situations, the Fifth Amendment does not shield potentially incriminating documents from production to the government.[102] A person may invoke the Fifth Amendment privilege against compelled testimony in any context, including a formal or informal investigation, a criminal case, civil proceedings or administrative hearing, at the state or federal level.[103] Third parties who are concerned with potential criminal exposure from making any particular statement must carefully weigh the risks of responding and waiving their Fifth Amendment right against self-incrimination in potential future criminal proceedings or invoking the Fifth Amendment but potentially facing an ‘adverse inference’ in potential future civil proceedings.[104]

Last, the attorney–client and other privileges may be asserted by third parties in response to investigative enquiries.


Footnotes

[1] Victoria L Weatherford is a partner and Tera N Coleman is an associate at Baker & Hostetler LLP.

[2] US Dep’t of Justice, US Department of Justice Overview, https://www.justice.gov/jmd/file/821911/download.

[3] Id.

[4] Id.

[5] US Dep’t of Justice, Organizational Chart, https://www.justice.gov/agencies/chart.

[6] The United States Government Manual 2021, https://www.usgovernmentmanual.gov.

[7] F.T.C. v. Hunt Foods & Indus., Inc., 178 F. Supp. 448, 453 (S.D. Cal. 1959), aff’d, 286 F.2d 803 (9th Cir. 1960).

[8] Linde Thomson Langworthy Kohn & Van Dyke, P.C. v. Resol. Tr. Corp., 5 F.3d 1508, 1513 (D.C. Cir. 1993).

[9] Oklahoma Press Publishing Company v. Walling, 327 U.S. 186, 201 (1946) (‘The very purpose of the subpoena . . . is to discover and procure evidence, not to prove a pending charge or complaint, but upon which to make one if . . . the facts thus discovered should justify doing so.’).

[10] 7A C.J.S. Attorney General § 62.

[11] Id.

[12] 7A C.J.S. Attorney General § 61.

[13] Id.

[14] Id.

[16] Pugach v. Klein, 193 F.Supp. 630 (S.D.N.Y. 1961). See also United States v. Molina, 530 F.3d 326 (5th Cir. 2008); United States v. Curtis, 344 F.3d 1057 (10th Cir. 2003).

[17] See United States v. Armstrong, 517 U.S. 456, 464 (1996) (holding that the constitutional separation of powers requires broad prosecutorial discretion); Young v. United States ex. Rel. Vuitton et Fils S.A., 481 U.S. 787, 807 (1987) (holding that prosecutors have discretion to decide which persons should be the target of an investigation).

[18] Bordenkircher v. Hayes, 434 U.S. 357, 364 (1978).

[19] Id. (holding that, if a prosecutor has probable cause to believe that the accused committed an offence, the decisions whether to prosecute and what charges to file rest entirely within their discretion).

[20] US Dep’t of Justice, Justice Manual, Principles of Federal Prosecution, § 9-27.00 et seq., https://www.justice.gov/jm/jm-9-27000-principles-federal-prosecution.

[21] Id., at § 9-27.200 (Initiating ad Declining Prosecution – Probable Cause Requirement).

[22] Id., at § 9-27.220 (Grounds for Commencing or Declining Prosecution).

[23] US Dep’t of Justice, Justice Manual, ‘Authority of the US Attorney in Criminal Division Matters/Prior Approvals’, § 9-2.001 (Introduction), https://www.justice.gov/jm/jm-9-2000 -authority-us-attorney-criminal-division-mattersprior-approvals.

[24] Id.

[25] Id., at § 9-2.010 (Investigations).

[26] City and County of San Francisco Board of Supervisors, Section 1.4 The DA’s Standard for Charging Cases, https://sfbos.org/section-14-das-standard-charging-cases#1.

[27] Peter Krug, ‘Prosecutorial Discretion and Its Limits’, 50 Am. J. Comp. L. 643, 650 (2002); Rachel E Barkow, ‘Federalism and Criminal Law: What the Feds Can Learn from the States’, 109 Mich. L. Rev. 519, 569 (2011) (finding almost no comparable effort in the states to the DOJ’s detailed memos and manuals); Ronald F Wright and Marc L Miller, ‘The Worldwide Accountability Deficit for Prosecutors’, 67 Wash. & Lee L. Rev. 1587, 1608 (2010) (‘Use of general written guidelines is sporadic.’).

[28] US Dep’t of Justice, Justice Manual, Principles of Federal Prosecution of Business Organizations, § 9-28.010, https://www.justice.gov/jm/jm-9-28000-principles-federal -prosecution-business-organizations.

[29] Id.

[30] Office of the Deputy Attorney General, DOJ, Individual Accountability for Corporate Wrongdoing (9 Sep. 2015), https://www.justice.gov/archives/dag/file/769036/download.

[31] Office of the Deputy Attorney General, DOJ, Memorandum: Individual Accountability for Corporate Wrongdoing (Yates Memorandum) (9 Sep. 2015), https://www.justice.gov/archives/dag/file/769036/download.

[32] US Dep’t of Justice, Justice Manual § § 9-28.000 and 4-4.000.

[33] Yates Memorandum, at 3–4.

[34] Id., at 4.

[35] Id., at 4–5.

[36] Id., at 5.

[37] Id., at 6.

[38] Id., at 6–7.

[39] Deputy Attorney General Rod J Rosenstein Delivers Remarks at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act (29 November 2018), https://www.justice.gov/opa/speech/deputy-attorney-general-rod-j -rosenstein-delivers-remarks-american-conference-institute-0.

[40] Id.

[41] Id. (emphasis added).

[42] US Dep’t of Justice, Justice Manual § 9-28.700.

[43] Office of the Deputy Attorney General, DOJ, Corporate Advisory Group and Initial Revisions to Corporate Criminal Enforcement Policies (October 2021 Memorandum) (28 Oct. 2021), https://www.justice.gov/dag/page/file/1445106/download (clarifying to receive any consideration for co-operation a company cannot limit disclosure to those individuals believed to be only substantially involved in the criminal conduct).

[44] Id., at 3 (emphasis added).

[45] Deputy Attorney General Lisa O Monaco Delivers Remarks on Corporate Criminal Enforcement (15 September 2022), https://www.justice.gov/opa/speech/deputy-attorney -general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcement.

[46] Office of the Deputy Attorney General, DOJ, Memorandum: Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group (September 2022 Memorandum) (15 September 2022), https://www.justice.gov/opa/speech/file/1535301/download.

[47] The September 2022 Memorandum is consistent with the October 2021 Memorandum and simply updates that such disclosure must be timely. Revisions to the Justice Manual to reflect the changes and policies set forth in the October 21 Memorandum and September 2022 Memorandum are forthcoming.

[48] September 2022 Memorandum, at 3.

[49] Id.

[50] Id.

[51] Three Key Pressure Points in the Current Enforcement Environment, Address to N.Y. City Bar Ass’n Third Annual White Collar Crime Institute (19 May 2014), https://www.sec.gov/news/speech/2014-spch051914mjw.

[52] See, e.g., US Securities and Exchange Commission (SEC), Press Release, SEC Charges Eleven Individuals in $300 Million Crypto Pyramid Scheme (1 August 2022), https://www.sec.gov/news/press-release/2022-134; SEC, Press Release, SEC Charges Two Individuals for Wash Trading Scheme Involving Options of ‘Meme Stocks’ (27 September 2021), https://www.sec.gov/news/press-release/2021-195; SEC, Press Release, SEC Charges Three Individuals with Insider Trading, (9 July 2021), https://www.sec.gov/news/press-release/2021-121.

[53] Defending Parallel Proceedings: Key Considerations and Best Practices, Practical Law Practice Note w-003-8906.

[54] US Dep’t of Justice, Organization and Functions Manual, § 27. Coordination of Parallel Criminal, Civil, Regulatory and Administrative Proceedings, https://www.justice.gov/jm/organization-and-functions-manual-27-parallel-proceedings.

[55] See United States v. Kordel, 397 U.S. 1 (1970); see also United States v. Gel Spice Co., 773 F.2d 427, 434 (2d Cir. 1985) (‘Civil and criminal enforcement may proceed simultaneously.’).

[56] US Dep’t of Justice, Justice Manual, Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings, § 1-12.000, https://www.justice.gov/jm/jm-1-12000 -coordination-parallel-criminal-civil-regulatory-and-administrative-proceedings.

[57] Id.

[58] Office of the Deputy Attorney General, DOJ, Memorandum: Ensuring Appropriate Coordination with State, Local and Tribal Enforcement Authorities, (1 October 2021), https://www.justice.gov/dag/page/file/1438236/download.

[59] SEC v. Dresser, 628 F.2d 1368, 1377 (D.C. Cir. 1980) (effective enforcement requires that the SEC and the DOJ be able to investigate possible violations of the securities laws simultaneously).

[60] SEC Enforcement Manual § 5.6.

[61] Sec. & Exch. Comm’n v. Dresser Indus., Inc., 628 F.2d 1368, 1377 (D.C. Cir. 1980).

[62] Robina Institute of Criminal Law and Criminal Justice, What are sentencing guidelines? (21 March 2018), https://robinainstitute.umn.edu/articles/what-are-sentencing-guidelines.

[63] United States Code (U.S.C.), US Government Publishing Office, https://www.govino.gov/app/collection/uscode/.

[64] United States Sentencing Commission, Guidelines Manual (1 November 2021), https://www.ussc.gov/sites/default/files/pdf/guidelines-manual/2021/GLMFull.pdf.

[65] United States v. Booker, 543 U.S. 220, 245 (2005) (holding that the provision of the federal sentencing statute that made the US Sentencing Guidelines mandatory was unconstitutional and must be severed and excised). The federal sentencing statute as modified makes the Guidelines effectively advisory, requiring a sentencing court to consider the Guidelines’ ranges, but permitting the court to tailor the sentence in light of other statutory concerns. Id.

[66] Gall v. United States, 552 U.S. 38, 49 (2007) (‘As a matter of administration and to secure nationwide consistency, the Guidelines should be the starting point and the initial benchmark.’).

[67] Guidelines §§ 1B1.1(a)(1), 1B1.2(a).

[68] Guidelines §§ 1B1.1(a)(2), 1B1.1(c).

[69] Guidelines § 1B1.1(a)(7).

[70] See Rita v. United States, 551 U.S. 338, 341 (2007).

[71] Robina Institute of Criminal Law and Criminal Justice, Sentencing Guidelines Resource Center: In-Depth Jurisdiction Profiles, https://robinainstitute.umn.edu/publications/sentencing-guidelines-resource-center-depth-jurisdiction-profiles.

[72] Gamble v. United States, 139 S. Ct. 1960 (2019).

[73] Id. at 139 S. Ct. 1964.

[74] Id.

[75] See 18 U.S.C. §§ 3571 (fines), 3554 (forfeiture), 3663–3663A (restitution) and 3013 (special assessment).

[76] United States v. Elliot, 971 F.2d 620, 622 (10th Cir. 1992).

[77] See, e.g., 18 U.S.C. § 3571(b) (generally providing that, for felonies, the maximum fine amount is US$250,000, and for Class A misdemeanours the maximum fine amount is US$100,000); but cf., e.g., 21 U.S.C. § 841(b)(1)(A) (providing for a maximum fine of US$10 million for a defendant convicted of certain drug-trafficking offences).

[78] § 523(a)(13), Bankruptcy Code (Debts for any payment under a restitution order issued under title 18 of the US Code, governing criminal law and procedure in federal court are non-dischargeable in Chapter 7 bankruptcy.)

[79] Black’s Law Dictionary (11th ed. 2019).

[80] Id. (The act of giving up something (such as profits illegally obtained) on demand or by legal compulsion.)

[81] US Dep’t of Justice, Criminal Division, Money Laundering and Asset Recovery Section, Asset Forfeiture Policy Manual (2021), p. 17, https://www.justice.gov/criminal-afmls/file/ 839521/download.

[82] Id.

[83] Id.

[84] Id.

[85] Id. at 128.

[86] Id. at 129 (citing 21 U.S.C. §§ 853(h) and 881(e)(1)(B); see also 18 U.S.C. §§ 1467(b), 1963(f), and 2253(b)).

[87] 19 U.S.C. § 1607.

[88] 18 U.S.C. §§ 981 and 983-5.

[89] 18 U.S.C. § 982.

[90] US Dep’t of Justice, Justice Manual, Grand Jury § 9-11.151, https://www.justice.gov/jm/jm-9-11000-grand-jury.

[91] US Dep’t of Justice, Office of Legal Policy, Report to Congress on the Use of Administrative Subpoena Authorities by Executive Branch Agencies and Entities, https://www.justice.gov/archive/olp/rpt_to_congress.htm (citing Bernard Schwartz, Administrative Law §3.8, at 125 (3d ed.1991)).

[92] Id.

[93] Id.

[94] 15 U.S.C. §§ 78u(b) and (c) (2021).

[95] See supra, Section 43.2.3 (investigative actors and agencies often coordinate and are encouraged to share information).

[96] United States v. Kordel, 397 U.S. 1, 11-12 (1970).

[97] 15 U.S.C. § § 77t(b) and78u(d) (expressly allowing the SEC to share evidence of potential violations of the securities laws with criminal authorities); United States v. Stringer, 535 F.3d 929, 933 (9th Cir. 2008) (federal securities laws authorise the SEC to transmit evidence it gathered to the US Attorney’s Office to help its criminal investigation).

[98] United States v. Rhodes, No. 18-CR-887 (JMF), 2019 WL 3162221 (S.D.N.Y. 16 July 2019).

[99] US Dep’t of Justice, Office of Legal Policy, Report to Congress on the Use of Administrative Subpoena Authorities by Executive Branch Agencies and Entities, https://www.justice.gov/archive/olp/rpt_to_congress.htm.

[100] 379 U.S. 48 (1964).

[101] U.S. Const. Amend. V.

[102] ‘Documents and Compulsory Self-Incrimination: Fifth Amendment Considerations’ (1988) 57 FBI Law Enforcement Bulletin 17 (the Fifth Amendment serves as a bar to the introduction into evidence of the contents of a defendant’s documents only in extremely limited circumstances).

[103] United States v. Balsys, 524 U.S. 666, 672 (1998) (‘It ‘can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory,’ in which the witness reasonably believes that the information sought, or discoverable as a result of his testimony, could be used in a subsequent state or federal criminal proceeding.’) (citing Kastigar v. United States, 406 U.S. 441, 444–45 (1972)); see Malloy v. Hogan, 378 U.S. 1, 7 (1964) (the Fifth Amendment privilege is applicable in state proceedings under the Fourteenth Amendment to the US Constitution).

[104] Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) (a jury or administrative body is permitted to draw an adverse inference against a party who refuses to testify in response to evidence offered against them).

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