Coming to the States?

The long arm of U.S. jurisdiction generates a number of worries for counsel advising foreign businesses and executives who may be “of interest” to authorities here. One such worry is the status of foreign nationals entering the United States on business during the course of a criminal or civil investigation. While we all wish our foreign clients might heed our advice that it's best to stay home, reality is never so easy.

What specific advice should you give to your foreign business clients whose powerful executives insist on coming over in spite of an ongoing investigation? Let's assume the typical case where the state of the investigation indicates no risk that the executive might actually be arrested and charged. Your specific concerns are now with potential jurisdiction-conferring legal process and, as a worst case, possible arrest as a material witness.

A Game of Tag

A “border watch” list exists that investigators may use to “flag” your client upon entry into the United States. While the listing system is far from perfect, the Department of Homeland Security is steadily improving the system to provide tighter and more coordinated vigilance at international airports and land crossings. The watch list, of course, is not public, and there are no means of confirming which of your client's personnel may be on it.

Once flagged under the watch system, your client's executive will likely be taken to the secondary inspection area at customs and questioned about the visit. The questions typically include the precise purpose of the visit, the locations the executive will be visiting, and the places where he or she will be staying. Such questioning usually does not last longer than one hour. Often, the customs officer will call the designated investigations agent or prosecutor in order to confirm arrival and learn precisely what is to be asked. Occasionally this is done in a sufficiently quick and clever way so as not to raise obvious concerns. After gathering the necessary information, your client's executive will be processed normally and allowed to enter the United States.

You should also be cognizant that customs agents' warrantless “border search” authority extends to the contents of laptops. Such intrusive authority has been subject to numerous constitutional challenges without success. As explained below, it is critical that you advise your client of this possibility.

You're It

Process servers may then attempt to serve your client's executive at a place of business or a hotel based upon information gathered at the border crossing. There have even been widely reported instances of agents “raiding” industry conferences with subpoenas for the conference participants. Subpoenas may be administrative (issued, for example, by the agency that placed your client's executive on the border watch list), or prosecutors may attempt service of a grand jury subpoena. A subpoena may be for a personal appearance, for documents, or both. Normal rules of service apply: personal service is required and “indirect” service ' in the form of leaving a subpoena at the front desk of a business or hotel ' typically is ineffective. There are process-server tricks to alert your client to, such as calls to a hotel room to confirm presence, or even paging in airports.

The scope and effectiveness of such subpoenas are well litigated. Proper service upon your client's executive subjects that individual to personal jurisdiction in the United States. This is informally known as “tag” jurisdiction. The type of subpoena makes a significant difference. Administrative subpoenas are not “self-executing”; in other words, the agency must seek judicial enforcement of the subpoena. Should you chose to do so, you can oppose the subpoena in the court where the agency seeks to compel compliance. Grand jury subpoenas, by contrast, are self-executing, and a failure to respond may lead to the issuance of a bench warrant or a finding of contempt. In order to contest a grand jury subpoena, the recipient has the burden of bringing a motion to quash.

As noted, a key concern is the material your client's executive has brought on the trip. Today's laptops and zip drives can store huge swaths of your client's most sensitive information. That information is at risk in this scenario. A subpoena duces tecum is valid and enforceable upon all responsive documents in the executive's possession when she entered, even if she later returns to the home country. It is vital that you warn your client and its executives about this reality.

What is also clear, however, is that attempted service of a subpoena upon the client company itself is not valid if made only upon an executive or a board member, no matter what title she may hold. The exception to this rule is a narrow one for individuals who embody the corporation itself. For typical foreign businesses or multinational corporations, custody and control over company documents is not embodied in a single individual. In this situation, U.S. law respects foreign corporate distinctions and protections.

Because proper service of a subpoena confers jurisdiction over the individual, that individual may now be compelled to appear before a grand jury or to submit to an agency interview or deposition. Legal challenges to such compulsion raise the significant risk of exposing both the executive and your client company to undesirable publicity. Compliance, on the other hand, usually will not force your executive to stay in the United States until the nominal date on the subpoena. Investigators know that leaving the country without detection is much easier than entering. Agencies, therefore, will reach agreement with you on better timing or a more convenient place for an appearance, perhaps even one overseas if the true interest is in an interview rather than a more formal proceeding. It is vital to document such agreements to protect your client and the individual. A headstrong executive who defies your advice and nonetheless departs for home does so at some risk (although admittedly small) of later being “red-noticed” in the Interpol system and held to answer either by the home country or a U.S.-friendly country to which she later travels. Interpol, however, is not the only weapon in an investigator's arsenal.

Worst-Case Scenario

Investigators who consider your client's executive to be a crucial witness may also seek a “material-witness warrant.” Such warrants have a long history in the United States at both the federal and state levels. At the federal level, 18 U.S.C. ' 3144 governs the detention and release of persons deemed to be material witnesses in a criminal proceeding. The widespread use and abuse of such warrants, especially in terrorism investigations, has been the subject of much controversy. Even cursory research demonstrates that the use of material-witness warrants is on the rise in business crimes cases as well.

Your headstrong executive who defies a subpoena is the perfect case for a material-witness warrant should he or she later return to the United States. To obtain a warrant, a prosecutor must show probable cause that the testimony sought is material to an ongoing criminal investigation and that a subpoena is insufficient to secure the witness's cooperation. The issuance of a material-witness warrant means your client's executive may be arrested and held until an appearance or until a deposition can be taken pursuant to Rule 15, Fed. R. Cr. P. The personal costs are high. The arrest typically means that your client's executive is held with the local criminal population until you or, more likely, specially retained counsel can obtain release upon probation-like restrictions that invariably require surrender of a passport and other, onerous travel limitations.

Much of the current controversy surrounding material-witness warrants concerns the lack of procedural protections for detainees, who may later be charged on the basis of statements made while in detention. The material-witness statute specifies no maximum length of detention, and language authorizing bail hearings was deleted when it was amended in 1984. Not even presentation to a magistrate within 48 hours is required for such detainees, as it is for persons actually charged with crimes. Accordingly, potential arrest on such a warrant is a risk that your client or the executive should not voluntarily take.

Conclusion

To obtain assistance, investigators often will try simple and direct requests first. Should your foreign client decline such an invitation, the risks described above increase significantly. The nature of these risks also makes it advisable in many cases to obtain or alert local counsel at the location where your client's executive is entering the country. Perhaps the need to hire more lawyers will move your client's company and their executives to avoid the trip and have a conference call instead.

Jeffrey T. Green ([email protected]), a member of this newsletter's Board of Editors, is a partner in the Washington, D.C., office of Sidley Austin LLP and a member of the firm's White Collar Group.

The long arm of U.S. jurisdiction generates a number of worries for counsel advising foreign businesses and executives who may be “of interest” to authorities here. One such worry is the status of foreign nationals entering the United States on business during the course of a criminal or civil investigation. While we all wish our foreign clients might heed our advice that it's best to stay home, reality is never so easy.

What specific advice should you give to your foreign business clients whose powerful executives insist on coming over in spite of an ongoing investigation? Let's assume the typical case where the state of the investigation indicates no risk that the executive might actually be arrested and charged. Your specific concerns are now with potential jurisdiction-conferring legal process and, as a worst case, possible arrest as a material witness.

A Game of Tag

A “border watch” list exists that investigators may use to “flag” your client upon entry into the United States. While the listing system is far from perfect, the Department of Homeland Security is steadily improving the system to provide tighter and more coordinated vigilance at international airports and land crossings. The watch list, of course, is not public, and there are no means of confirming which of your client's personnel may be on it.

Once flagged under the watch system, your client's executive will likely be taken to the secondary inspection area at customs and questioned about the visit. The questions typically include the precise purpose of the visit, the locations the executive will be visiting, and the places where he or she will be staying. Such questioning usually does not last longer than one hour. Often, the customs officer will call the designated investigations agent or prosecutor in order to confirm arrival and learn precisely what is to be asked. Occasionally this is done in a sufficiently quick and clever way so as not to raise obvious concerns. After gathering the necessary information, your client's executive will be processed normally and allowed to enter the United States.

You should also be cognizant that customs agents' warrantless “border search” authority extends to the contents of laptops. Such intrusive authority has been subject to numerous constitutional challenges without success. As explained below, it is critical that you advise your client of this possibility.

You're It

Process servers may then attempt to serve your client's executive at a place of business or a hotel based upon information gathered at the border crossing. There have even been widely reported instances of agents “raiding” industry conferences with subpoenas for the conference participants. Subpoenas may be administrative (issued, for example, by the agency that placed your client's executive on the border watch list), or prosecutors may attempt service of a grand jury subpoena. A subpoena may be for a personal appearance, for documents, or both. Normal rules of service apply: personal service is required and “indirect” service ' in the form of leaving a subpoena at the front desk of a business or hotel ' typically is ineffective. There are process-server tricks to alert your client to, such as calls to a hotel room to confirm presence, or even paging in airports.

The scope and effectiveness of such subpoenas are well litigated. Proper service upon your client's executive subjects that individual to personal jurisdiction in the United States. This is informally known as “tag” jurisdiction. The type of subpoena makes a significant difference. Administrative subpoenas are not “self-executing”; in other words, the agency must seek judicial enforcement of the subpoena. Should you chose to do so, you can oppose the subpoena in the court where the agency seeks to compel compliance. Grand jury subpoenas, by contrast, are self-executing, and a failure to respond may lead to the issuance of a bench warrant or a finding of contempt. In order to contest a grand jury subpoena, the recipient has the burden of bringing a motion to quash.

As noted, a key concern is the material your client's executive has brought on the trip. Today's laptops and zip drives can store huge swaths of your client's most sensitive information. That information is at risk in this scenario. A subpoena duces tecum is valid and enforceable upon all responsive documents in the executive's possession when she entered, even if she later returns to the home country. It is vital that you warn your client and its executives about this reality.

What is also clear, however, is that attempted service of a subpoena upon the client company itself is not valid if made only upon an executive or a board member, no matter what title she may hold. The exception to this rule is a narrow one for individuals who embody the corporation itself. For typical foreign businesses or multinational corporations, custody and control over company documents is not embodied in a single individual. In this situation, U.S. law respects foreign corporate distinctions and protections.

Because proper service of a subpoena confers jurisdiction over the individual, that individual may now be compelled to appear before a grand jury or to submit to an agency interview or deposition. Legal challenges to such compulsion raise the significant risk of exposing both the executive and your client company to undesirable publicity. Compliance, on the other hand, usually will not force your executive to stay in the United States until the nominal date on the subpoena. Investigators know that leaving the country without detection is much easier than entering. Agencies, therefore, will reach agreement with you on better timing or a more convenient place for an appearance, perhaps even one overseas if the true interest is in an interview rather than a more formal proceeding. It is vital to document such agreements to protect your client and the individual. A headstrong executive who defies your advice and nonetheless departs for home does so at some risk (although admittedly small) of later being “red-noticed” in the Interpol system and held to answer either by the home country or a U.S.-friendly country to which she later travels. Interpol, however, is not the only weapon in an investigator's arsenal.

Worst-Case Scenario

Investigators who consider your client's executive to be a crucial witness may also seek a “material-witness warrant.” Such warrants have a long history in the United States at both the federal and state levels. At the federal level, 18 U.S.C. ' 3144 governs the detention and release of persons deemed to be material witnesses in a criminal proceeding. The widespread use and abuse of such warrants, especially in terrorism investigations, has been the subject of much controversy. Even cursory research demonstrates that the use of material-witness warrants is on the rise in business crimes cases as well.

Your headstrong executive who defies a subpoena is the perfect case for a material-witness warrant should he or she later return to the United States. To obtain a warrant, a prosecutor must show probable cause that the testimony sought is material to an ongoing criminal investigation and that a subpoena is insufficient to secure the witness's cooperation. The issuance of a material-witness warrant means your client's executive may be arrested and held until an appearance or until a deposition can be taken pursuant to Rule 15, Fed. R. Cr. P. The personal costs are high. The arrest typically means that your client's executive is held with the local criminal population until you or, more likely, specially retained counsel can obtain release upon probation-like restrictions that invariably require surrender of a passport and other, onerous travel limitations.

Much of the current controversy surrounding material-witness warrants concerns the lack of procedural protections for detainees, who may later be charged on the basis of statements made while in detention. The material-witness statute specifies no maximum length of detention, and language authorizing bail hearings was deleted when it was amended in 1984. Not even presentation to a magistrate within 48 hours is required for such detainees, as it is for persons actually charged with crimes. Accordingly, potential arrest on such a warrant is a risk that your client or the executive should not voluntarily take.

Conclusion

To obtain assistance, investigators often will try simple and direct requests first. Should your foreign client decline such an invitation, the risks described above increase significantly. The nature of these risks also makes it advisable in many cases to obtain or alert local counsel at the location where your client's executive is entering the country. Perhaps the need to hire more lawyers will move your client's company and their executives to avoid the trip and have a conference call instead.

Jeffrey T. Green ([email protected]), a member of this newsletter's Board of Editors, is a partner in the Washington, D.C., office of Sidley Austin LLP and a member of the firm's White Collar Group.