The current federal grand jury investigation regarding employees and officials of the Pennsylvania State Senate has raised numerous issues in which the role of the defense attorneys has been called into question. In a district court decision with possible far reaching ramifications, a respected Philadelphia criminal defense law firm was disqualified from representing several witnesses in a grand investigation. See In Re Grand Jury Investigation, 2006 U.S. Dist. LEXIS 57756, G.J. No. 03-123 (E.D. PA May 16, 2006 (hereinafter Grand Jury Investigation). Two aspects of that decision are the subject of this column. I make the following observations while acknowledging a great respect for the district court judge who is the author of the decision in that case.
The purpose of this column is not to examine the ultimate conclusion of whether the law firm had a potential or actual conflict of interest and if the clients were capable of making an informed waiver of the conflict. Those are complex questions requiring a detailed factual and legal discussion that is beyond the scope of this article.
The purpose of this article is to examine two criteria applied by the court as an indication that there was a conflict of interest on the part of the law firm representing two targets of the grand jury. These two criteria are: (1) failure to advise the clients to negotiate with the United States for immunity, i.e., make a proffer to the United States Attorney and (2) the fact the law firm’s fees for the representation of the two targets of the Grand Jury were being paid by the employer of two targets, from a fund which is ostensibly controlled by the ultimate target. I submit that neither of these criteria should carry any weight in a determination of whether an attorney has a conflict of interest in representing witnesses in a grand jury investigation.Carried to their ultimate conclusion, application of these factors will seriously affect the proper functioning of the adversarial system in grand jury investigations.
At the outset there are several terms and concepts that should be explained.
Immunity. As discussed in this article immunity means formal immunity granted by court order pursuant to 18 U.S.C. § 6001-6005. Once a witness is granted immunity any testimony given by that witness, and evidence obtained from leads from that testimony, may not be used to prosecute the witness for any crime, except for perjury in testifying under the grant of immunity.
Proffer. This is a procedure instituted by the United States Attorney as a method to determine if a witness is a likely candidate for a grant of immunity.The proffer procedure was devised because prosecutors dislike granting immunity cold; i.e., without some idea of what the witness may say upon being immunized. In the proffer process, the witness is examined by government attorneys in an interview to determine the essence of his or her probable testimony, and whether the witness is credible. In the event that the government elects not to grant immunity, any statements given in this proffer session may not be used against the witness in any future prosecution with some very definite exceptions. These exceptions will be explained below. One major drawback of these proffer sessions is that any leads the prosecutor learns from this interview may be used to obtain other evidence against the witness which can be used in a prosecution of the witness. Thus, if in the interview, the witness gives information that uncovers other witnesses or other evidence against the proffering witness, that newly obtained evidence can be used against the witness.
Subject or Target. These are terms used by the prosecutor to describe the witness’ involvement in the matter under investigation. A subject is a person who has relevant information about the matter under investigation. A target is someone for whom the prosecutor feels there is probable cause to bring criminal charges, i.e., a putative defendant. United States Attorney’s Manual, Chap. 9-11.250.
In addition, there are several legal tenets that are applicable to grand jury matters.
Representation of grand jury witnesses and representation of defendants in a criminal trial are two very different situations, and the cases cited for one situation usually do not apply to the other. Compare United States v. Dolan, 570 F.2d 1177 (3d Cir. 1978) and In Re Grand Jury Empanelled, January 21, 1975, 536 F.2d 1009 (3rd Cir. 1976).
The Anglo-Saxon legal system followed in this country in the criminal law is one of accusation, and the government must prove that a defendant committed a crime. There is no burden on the defendant to come forward and prove his innocence. In our system, the government is not entitled as a matter of right to a cooperating witness.
Counsel advising several witnesses to “stonewall”, i.e., refusing to cooperate with the government by asserting the Fifth Amendment does nothing improper. As a tactic, “. . . a common defense gives strength against a common attack.” Cuyler v. Sullivan, 446 U.S. 335, 346 (1980).
The reader should be aware that once, during my career as the United States Attorney, I proposed to the Third Circuit conference that in grand jury investigations there should be one attorney for one witness. I published a law review article in the Dickinson Law Review on the same subject. See 85 Dickinson L. Rev. 381 (Spring 1981). My proposal was met with intense opposition by the attendees at the Third Circuit conference. The law review article has never been adopted by any court nor was it ever discussed in any opinion. I take that response as stare decisis that a mandatory requirement of one-lawyer-one client for Grand Jury Investigations is not a proposition that will be enforced by any court.
In Grand Jury Investigation, one law firm represented seven witnesses who were subpoenaed before the grand jury. All but one were employees of the Pennsylvania State Senate. Five of the witnesses were designated as subjects or non-targets by the prosecutors. The law firm advised those five to engage in proffer sessions with the United States Attorney and they testified before the grand jury. The remaining two witnesses were designated as potential targets by the United States Attorney and the law firm declined to permit them to engage in proffer sessions. The United States Attorney informed the court that he wanted to immunize only one of the two, but could not do so unless he received a proffer. (This is a tactic often used by prosecutors and will be discussed below). The United States Attorney further argued that each of these two witnesses could incriminate the other. He argued that because the law firm represented both witnesses, the law firm had a conflict of interest and could not ethically advise one or the other to engage in a proffer as one could incriminate the other. The law firm informed the court that if the government filed a motion to immunize one of the two targets, the law firm could no longer represent that person, and would advise the immunized witness to engage other counsel. The law firm further stated that if, as the result of the immunized testimony of one target, the other target was indicted, the firm could not represent that person at trial under United States v. Dolan, supra.
The court disqualified the law firm from further representing the two targets and also from further representing the other five witnesses. The court based its ruling as to the targets in large part on the law firm’s refusal to negotiate immunity with the government. As a practical matter this means producing either one for a proffer session with the government. The court viewed such a process as completely a favorable step for either witness.
A refusal by an attorney to advise a client to engage in a proffer session should not be deemed a factor in determining whether an attorney has a conflict of interest. Simply stated, a proffer session is not a trip to Hollywood and certainly is not a guaranteed safe passage to immunity. There are numerous downsides to agreeing to a proffer session.
An invitation to proffer is not a guarantee of immunity. As a result of the proffer session, the prosecutor will know the witness’ involvement and worse, his or her likely defenses; the cat is out of the bag. The prosecutor, after hearing the witness’ story, may decline to offer immunity, as is his right, for numerous reasons. He may feel the witness is too involved in the illegal activity to be given complete immunity and must enter a plea of guilty to some charge. This often occurs and the witness is worse off because the prosecutor knows the gravity of his conduct and the possible defenses.
A serious problem is that the prosecutor may not believe the witness. The prosecutor may have other witnesses, already cooperating, that have given a different version of the facts, and he may choose to believe them. Even though these other witnesses may be giving an incorrect version of the facts, and may be pursuing their own agenda, the one giving the proffer has played all his cards, has given the prosecutor unique facts about his situation, and has given the prosecutor a road map to his conviction.
There are other serious ramifications to a proffer. If the witness is indicted and takes the stand on his own behalf and his testimony differs from that given in his proffer, there are drastic ramifications. Pursuant to the proffer agreement, the prosecutor is free to offer the proffer statement at trial as a prior inconsistent statement. This is devastating evidence. Moreover, the same situation may result, even if the witness does not testify at trial but offers witnesses or other evidence, contra to his proffer statement, or his attorney cross-examines witnesses, or produces evidence contra to his proffer statement. Robert E. Welsh, Jr., a former Assistant United States Attorney, and an experienced defense attorney, said that even the slightest attempt to offer any evidence that mildly contradicts the proffer statement, will permit the United States Attorney to offer the proffer statement in evidence. According to Welsh, “If you tell the jury in your opening statement my client is not guilty or even offer character evidence you may trigger the provision which permits the government to offer the proffer statement.” If convicted, the prosecutor will most likely attempt to enhance the severity of the sentence by demonstrating that the witness lied to the prosecutor in the proffer session. This could add as much as one year’s imprisonment under the federal sentencing guidelines calculations.
Creed Black, Jr., a Philadelphia defense attorney and former federal prosecutor, states that proffer letters are viewed with growing disfavor among the defense bar. Although proffer letters were once presumed to involve an acceptable level of risk, Black says that has changed. “United States Attorneys around the country have ratcheted up the stakes by toughening standard proffer language to impose stricter penalties if the proffering witness is indicted and goes to trial. Experienced criminal defense lawyers are now more wary of the proffer process,” according to Black. “It’s definitely not for every client.”
The court’s decision in holding that counsel’s failure to permit their client to proffer was evidence of a conflict fails to consider the reality of the role of competent defense counsel in representing a witness, either subject or target. Counsel may believe that the government has limited knowledge about his or her client. Counsel may believe the best possible strategy is not to give the prosecutor a single fact about his client, nor will he verify any facts that the government perceives. There is nothing unethical about such a stance and it is one frequently adopted by some of the best criminal lawyers in the country.
Equally important, the attorney may not be confident his client is telling him the truth or, at least, not telling him all the facts. This often occurs. Those engaged in criminal practice are well aware of this. Corporate employees and corporate executives as clients are no exception. The attorney in this position does not want the client making statements to anyone. A lawyer’s refusal to permit a proffer under these circumstances is perfectly legitimate. An attorney permitting a proffer under such circumstances would place the client in jeopardy.
As one prominent defense attorney said, “The decision whether to engage in a proffer is often as difficult as deciding whether a defendant should take the stand at trial.” It depends in part on the attorney’s evaluation of the truthfulness of the defendant’s version of the offense. If the attorney has doubts of the truthfulness of the defendant’s version or simply feels that his version, even if true, would appear illogical and may not be believed, the attorney should not put that person on the stand or even permit the prosecutors to hear it. This is the lawyer’s professional evaluation and is entirely ethical.
In this matter, the United States Attorney stated that he would immunize only one of the two target witnesses, but would not do so without being able to negotiate with one or the other to determine their proposed testimony. This is an often used tactic. Assuming this is a good faith assertion, the United States Attorney, after hearing one or both of the witnesses in a proffer session, may decline to offer immunity to either one, for any number of reasons. Prosecution decisions are not that simple. The court should not be put in a position of making a judicial determination on some theoretical, non-binding, proposed strategy of the prosecutor. The prosecutor could make the same argument in disqualifying two lawyers who each represent a single target. The argument is easy to predict: “Your Honor, we will offer immunity to one of these two witnesses. Each of their attorneys has declined to proffer. Obviously, they have made a decision to stonewall the government, to the detriment of the clients. We move that both be replaced by other counsel.” This is not too far fetched under the decision in question.
Joe Tate, of Dechert, who has an extensive practice dealing with grand jury matters commented, “We have increasingly run into instances where the government contends it has information incriminating several witnesses and insists that individual clients be spun off to separate counsel so that a proffer can be made. Quite often, it turns out the government has no evidence at all incriminating the witnesses.”
The prosecutor’s contention that he cannot offer immunity without knowing the possible testimony is a hollow argument. The court should not aid the prosecutor in making a purely executive decision. Congress provided the prosecutor with a remedy for such a situation by enacting the use immunity statute, 18 U.S.C. 6001-6005. Immunizing the witness does not prevent a prosecution of the witness under the proper circumstances. The prosecutor is free to seal his evidence, and then immunize the witness. If the witness’ testimony is not helpful, the prosecutor is free to prosecute the witness using the sealed evidence, after demonstrating he obtained no leads from the immunized testimony. See United States v. Lipkis, 770 F.2d 1447 (9th Cir. 1985); United States v. Mavro, 846 F.Supp. 245 (W.D.NY 1994); United States v. Kilroy, 27 F.3d 679 (D.C. Cir. 1994). The Court in In Re Investigation Before April 1975 Grand Jury, 531 F.2 600, 609 (D.C. Cir. 1976), faced a similar situation where the prosecutor desired to offer immunity to some witnesses but complained that multiple representation required him to make “blind selections” as to whom to immunize. The court said “It seems to us that the circumstances of this case present precisely the type of situation for which Congress intended to provide he Government with an effective tool [18 U.S.C. 6001-6005] for discovering the truth without risking violations of the Constitution in the delicate areas of freedom of association and representation by counsel of one’s choice.”
Installment Two
The second troublesome aspect of the decision in question is that the court found that the law firm was conflicted because its fees were being paid by a legislative committee, chaired by a certain state senator, who is the ostensible target of the grand jury investigation. The court said, “. . . this financial arrangement therefore imparts a desire, however sub-consciously embedded, to protect (from indictment) the public official who pays the client’s legal fees.” The court found that such payments created, “. . . the possibility of a subtle allegiance to the public official that challenges the purity of the law firm’s current advice to the target clients . . . but also the independence of any future advice to the non-target clients.” Curiously, these payments become an issue only when there is a refusal to cooperate. The government counsel never complains when one lawyer represents multiple cooperators.
The court based its decision on Rule 1.8(f) of the Pennsylvania Rules of Professional Conduct. The Rule provides:
A lawyer shall not accept compensation for representing a client from one other than the client unless:
- the client gives informed consent;
- there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and
- information relating to a representation of a client is protected as required by Rule 1.6.
Obviously, the Rule permits third party cooperation, if its conditions are met. The court’s ruling is equally applicable to disqualifying attorneys representing employees and officers of a corporation under investigation, where the corporation is advancing their legal fees.
Courts have long approved of employers advancing fees for employees. In United States v. Stein, 435 F. Supp. 2d 330, 2006 U.S. Dist. LEXIS 42915 (S.D.N.Y. 2006), the court said:
[A]n employer often must reimburse an employee for legal expenses when the employee is sued, or even charged with a crime, as a result of doing his or her job. Indeed, the employer often must advance legal expenses to an employee up front, although the employee sometimes must pay the employer back if the employee has been guilty of wrongdoing.
This . . . is not the stuff of television and movie drama. It does not remotely approach Miranda warnings in popular culture. But it is very much a part of American life. Persons in jobs big and small, private and public, rely on it every day. Bus drivers sued for accidents, cops sued for allegedly wrongful arrests, nurses named in malpractice cases, news reporters sued in libel cases, and corporate chieftains embroiled in securities litigation generally have similar rights to have their employers pay their legal expenses if they are sued as a result of their doing their jobs. This right is as much a part of the bargain between employer and employee as salary or wages.
The Court cited no evidence in the record that the committee or the targeted Senator was controlling the law firm’s direction, or made payment of the fees contingent on the firm’s actions. It should be noted that the government did not object to the law firm receiving fees from the committee for the five individuals whom the law firm had offered for proffers.
The only grand jury case cited by the court for this aspect of the decision was Pirillo v. Takiff, 341 A.2d 896 (Pa. 1975). Pirillo involved an attorney, retained by the Fraternal Order of Police to represent 12 officers subpoenaed in a grand jury investigating police corruption. All the officers’ fees were paid by the FOP. Pirillo was also the FOP’s attorney for other matters. Pirillo took his orders from his client, the FOP. The FOP had a stated policy of non-cooperation with any investigation into police corruption. If any of the officers wanted to cooperate, the attorney would “immediately remove himself as counsel and advise the witness to hire another attorney.” The FOP would not pay for such separate representation. It was clear that the attorney was simply furthering the interests of the employer and not the interests of the client. The Third Circuit distinguished the unusual facts of Pirillo in the matter of Grand Jury Investigation, January 21, 1975, 536 F.21 1009 (3d Cir. 1976).
The district court’s position that payment of fees by an employer raises an inference of conflict of interest is a troublesome statement. This is a substantial indictment of the criminal defense bar. Payment of legal fees by a corporation for its employees is specifically authorized by the statutory Pennsylvania Business Code, 15 Pa. C.S. § 1741, as well as the business codes of Delaware, Delaware Gen Corp. L § 145, and New York, New York Bus. Corp. L § 721, et seq. The holding that payment of counsel fees by an employer raises an inference of conflict that may be used to disqualify counsel representing employees in almost any grand jury investigation involving a corporate, non-profit entity, labor union, or other business entity. Under certain circumstances, the payment by an employer of counsel fees can be used to raise a conflict disqualifying two attorneys who represent single targets, or a single attorney who represents a single target.
Payment by an employer of the employee’s fees in a grand jury investigation is a generally accepted practice. In a recent case in the Eastern District, my own law firm represented a target of a federal grand jury. The target paid the legal fees of several of his employees who were subpoenaed to testify before the grand jury. My firm suggested the names of attorneys to the employees who would represent them. The employees engaged those attorneys. One employee cooperated immediately, another refused to do so. The government immunized the non-cooperating employee who then testified against the employer. The employer continued to pay their legal fees throughout. The Untied States Attorney raised no objection to these fee arrangements, even though the United States Attorney’s office was aware that the employer was paying the fees.
I submit that the two criteria discussed above should not be used in any future cases regarding conflicts of interest. They are broad-brush criteria, and give a misleading impression of an attorney’s lawful defense tactics.
