A 9th Circuit panel found that a district court improperly dismissed criminal securities fraud charges against two former corporate officers. The district court concluded that the government had engaged in quotedeceitful conduct quote in violation of due process by simultaneously pursuing civil and criminal investigations. In the alternative, the trial court ruled that if there was a criminal trial, all evidence provided by the individual defendants in response to SEC subpoenas should be suppressed. Additionally, the district court found that the government improperly interfered with or intruded into the attorney-client relationship of one of the defendants by accepting incriminating evidence about the entry from a defense attorney. The attorney had an apparent conflict of interest because she represented the corporation as well as an individual defendant.
The 9th Circuit panel vacated the dismissal of the indictments, however. According to the appellate court, a "standard form" letter sent to the defendants "fully disclosed the possibility that information received in the course of the civil investigation could be used for criminal proceedings." The panel reasoned that there was "no deceit," and that the government did not act wrongfully in its decision not to conduct the criminal investigation openly. "There is nothing improper about the government undertaking simultaneous criminal and civil investigations, and nothing in the government's actual conduct of those investigations amounted to deceit or an affirmative misrepresentation justifying the rare sanction of dismissal of criminal charges or suppression of evidence received in the course of the investigations," stated the court.
The court found the government had no duty to disclose the criminal investigation beyond what was stated in the form letter sent to the defendants. The civil investigation was also not a sham or pretext to produce information for the criminal prosecution. Claims that the conduct of SEC staff attorneys who instructed court reporters to refrain from mentioning the U.S. Attorney's involvement in the case and gave "evasive" answers to questions about the dual investigations were rejected.
According to the court,
in this case, the SEC made no affirmative misrepresentations. The SEC did advise defendants of the possibility of criminal prosecution. The SEC engaged in no tricks to deceive defendants into believing that the investigation was exclusively civil in nature. The SEC's Form 1662 explicitly warned defendants that the civil investigation could lead to criminal charges against them: "Information you give may be used against you in any federal . . . civil or criminal proceeding brought by the Commission or any other agency. " Defendants were represented by counsel, and the government provided counsel, so far as this record reflects, with accurate information.Finally, the court agreed with the government that it did not deliberately intrude into one of the defendants' attorney-client relationship because it received information that the attorney offered the government, wholly independent of any government conduct. According to the court, the defendant was fully aware of the attorney's potential conflicts of interest and had been advised of the risks of employing an attorney who also represented the corporation.
U.S. v. Stringer (9thCir)