Responding to a Government Subpoena or RFI

In-house counsel have taken notice of the federal criminal indictment and trial of Lauren Stevens, former in-house counsel with a pharmaceutical company, on charges she obstructed justice and made false statements in the course of responding to government requests for information. She has now been acquitted after the court dismissed the charges during the trial. Nevertheless, her mere indictment should give all in-house counsel a moment of pause because it shows the government's willingness to prosecute any individual ' including an in-house lawyer representing a client ' whom it believes has knowingly misled an agency or obstructed an investigation.

Notably, this is not the first case in which the government charged an in-house attorney with obstructing justice, and it is unlikely to be the last. Four brief case studies illustrate the government's reactions when it does not receive what it believes it is entitled to in response to a request for information (“RFI”) or subpoena. Based on the government's actions, ordinary approaches to civil discovery are ill-fitting in response to a government agency's efforts to obtain information, and in-house counsel must take extra care.

Indictments Resulting from RFI Responses the Government Believes Are Deficient

United States v. Stevens, Case No. 10 CR 0694 (D. Md.)

Lauren Stevens was vice president and associate general counsel for a pharmaceutical corporation that received FDA requests and subpoenas for materials regarding promotional programs relating to a particular drug. The government alleged Stevens had assured the FDA she would gather all responsive documents, including those outside her company's custody and control (i.e., those within certain physicians' possession) and produce them in response to the subpoena. It further claimed that after doing so, she gathered documents, slides, notes, tapes and other materials, some of which were responsive yet incriminating. The government alleged that among other actions she took in crafting the company's response to the government, Stevens sought advice from her team of attorneys about whether to produce the incriminating materials. After weighing the pros of production (e.g., “responds to the FDA's request”) against the cons of doing so (e.g., “provides incriminating evidence”), Stevens, the government alleged, decided to withhold evidence, despite the subpoena ordering its production and Stevens' previous assurances the company would produce all responsive documents (even those outside the company's immediate custody or control). According to the government, Stevens additionally informed the government there was no such evidence, and further stated the company was in compliance with the applicable laws for which it was being investigated. The government saw her communications and production as failing to adequately respond to the subpoena and charged her with obstructing an agency's proceeding and making false statements to a federal agency. At trial, the government introduced evidence it had received the incriminating, withheld documents from other sources, calling Stevens' response into question.

On May 10, 2011, the court granted Stevens' motion for acquittal, ruling the documents Stevens withheld were protected by the attorney-client privilege, and further that Stevens had withheld them in good faith reliance upon external and internal counsel. The court ruled this reliance brought Stevens' actions within the good faith safe harbor in 18 U.S.C. ' 1515(c). The court noted Stevens had indeed made misrepresentations to the government, but her good faith reliance on counsel negated criminal intent, and thus, any liability for the false statements charges.

United States v. Siemens Medical Systems, et al., Case No. 05 CR 792 (N.D. Ill.)

In 2008, Ellen Roth, an in-house counsel at Siemens Medical Systems, pleaded guilty to obstructing a public corruption investigation. According to the plea agreement, in the course of the FBI's work on the case, agents visited Roth at her home and asked questions about her knowledge of a joint venture agreement with a minority business enterprise (“MBE”). According to the plea agreement, despite having knowledge about the agreement (whose terms did not comply with county requirements), Roth denied such knowledge and mischaracterized the joint venture arrangement to the federal agents. In doing so, she was reiterating the position her company had publicly taken during civil proceedings, which, according to her plea agreement, she knew to be false. Roth also admitted in her guilty plea that she knew the company's outside counsel had made material misrepresentations in court during civil proceedings, yet she did nothing to correct them. She further admitted hiding from the county and the court the true agreement with the MBE.

For her misrepresentations, Roth was charged with wire fraud, mail fraud and making false statements to a federal agency. She pleaded guilty to the false statement charge, in violation of 18 U.S.C. ' 1001; she was sentenced to four years probation and ordered to pay a $12,500 fine.

United States v. Stein, et al., Case No. 07 CR 3742 (S.D. N.Y.)

In 2007, the government charged 19 individuals, including KPMG in-house attorney Steven Gremminger, with participating in a fraudulent tax shelter scheme. In addition to substantive tax charges, Gremminger was alleged to have prepared “false and fraudulent” documents to provide the IRS if it inquired about the activities of the tax shelter. The government further alleged Gremminger obstructed the government's investigation by lying to the IRS about his employer's role in the tax shelters and compliance with IRS summonses, and by proceeding with the shelters after he had participated in a meeting at which time their possible illegal nature was discussed.

A district court eventually found the government had violated Gremminger's and others' rights to counsel and due process by pressuring KPMG not to pay its employees' legal fees. The district court dismissed the indictment against him, and the Second Circuit upheld the decision.

United States v. Ralph's Grocery Co., Case No. 05 CR 01210 (C.D. Cal.)

In this 2005 case, the government alleged Ralph's Grocery Co. unlawfully hired “locked out” union employees in a labor dispute and provided false names and social security numbers on paychecks and employee benefits forms in violation of the National Labor Relations Act. The government charged the company with false representations, identity fraud, concealment of facts, and obstruction of justice. The obstruction charges centered around the company's alleged concealment from the grand jury of responsive documents, particularly internal memoranda created by employees and allegedly improperly characterized as protected by the attorney-client privilege or the attorney work product privilege.

In 2006, Ralph's Grocery Co. pleaded guilty to: 1) conspiracy to commit federal offenses; 2) false representation of a social security number; 3) identity fraud; and, 4) concealment of facts relating to an employee benefit plan. Ralph's was sentenced to three years probation, and ordered to pay restitution of $50 million. The obstruction charges, stemming from the alleged mischaracterization of documents as protected by the attorney-client privilege and attorney work product doctrine, were ultimately dismissed.

Four Principles to Follow When Responding to the Government's Subpoena or RFI

When responding to government RFIs, consider the following four principles:

1. Consult with Outside Counsel

Putting another lawyer, or team of lawyers, between in-house counsel and the government insulates in-house counsel from direct contact with the government. In Stevens' case, this insulation bolstered her defenses of good faith and attorney-client privilege. Consulting with external counsel significantly reduces the likelihood of any obstruction or false representation charges being investigated where in-house counsel would be a subject or target of the investigation. Additionally, outside counsel will generally be viewed as more objective because they do not have “a horse in the race”; therefore, if some documents are inadvertently not produced or uncovered later in the process, the government is far less likely to view it as intentional concealment or obstruction.

Most importantly, engage outside counsel early in the process, to gain a distinct advantage in responding to government inquiries. Had Stevens' outside attorneys responded to discovery, the privilege would have been clear, lessening her chance of indictment.

2. Assume a Criminal Investigation Is Underway

When responding to any RFI by any government entity, assume the civil agency may be working hand-in-glove with a criminal investigator. By doing so, an in-house attorney will likely think carefully before deciding which information to provide, or withhold, from the government and how to provide the government with transparency about the scope of any search for documents. In a civil case between private litigants, the price for withholding information is relatively low: A court may order production or an opponent may obtain sanctions. Rarely in a civil case is an attorney held in civil contempt for failure to comply with a subpoena.

In a criminal investigation, the stakes are high: If an attorney withholds material information, makes a material misrepresentation or otherwise obstructs an investigation ' civil or criminal ' she may be indicted for the discovery decision. The entity reviewing the lawyer's response is the same entity deciding whether the attorney has accurately and thoroughly responded to the request, and it alone has the power to recommend criminal charges if the attorney does not comply as the government deems appropriate. Even where there is no criminal case at the outset, every government agency can easily refer an instance of non-compliance with a request to a federal prosecutor to have an attorney charged.

3. Proceed As Though the Company Is a Subject of a Criminal Investigation

Sometimes subpoenas are just subpoenas that seek documents from a third-party witness. But in certain instances, the government's subpoena or RFI to a company is served for the purpose of investigating the corporation's actions. That subpoena is more than a mere request for documents; it is the beginning of an investigation of the actions of the company and its people.

Recently, the U.S. attorney general, the chair of SEC's Enforcement Division, and the Secretary of Health and Human Services (to name a few) have each announced they intend to also hold individuals responsible for corporate wrongdoing, whenever possible. If an in-house lawyer responds as if she herself is under the government's microscope, she will be exceedingly careful in her response because she will evaluate each statement made and each document produced as a possible statement against her own interest.

Most of the time, the government is not searching for a way to “trap” unwitting in-house counsel. However, any half-truth or incomplete production opens such persons up to the possibility the government may look again to determine whether the mistake was intentional. As the Stevens and Siemens indictments demonstrate, there are many ways an individual can be held responsible for the acts of a corporation. Stevens and Roth were charged under a few such legal theories ' two different obstruction statutes, a false statement statute, mail fraud and wire fraud ' but other charging possibilities existed. Consider this: A prosecutor might believe each written communication that takes a position on behalf of a target corporation can reasonably be viewed as aiding and abetting the substantive crime under investigation and might believe it constitutes a separate criminal act by the individual. A carefully worded, truthful response reduces the possibility the government will add a corporate attorney to the list of subjects in an investigation.

4. Assume You Are Not Alone

When suing an adversary, most attorneys would not act on a single piece of evidence. They should make the same assumption about a government investigation. Federal agents and agencies frequently work together or coordinate what information to seek via administrative subpoenas, civil investigative demands, civil subpoenas, and criminal grand jury subpoenas. Often they seek the same information from many different, corroborative sources. These individuals or entities have no obligation to consult with corporate counsel beforehand, and in-house counsel cannot review or control their responses.

Whenever an in-house attorney responds to an RFI, she should document her collection efforts and detail the efforts she took to provide a full and accurate response, including the fact that there may be additional documents and sources of information she was not able to gather. A careful attorney should not speak for anyone outside her control, and should not assume she may speak for others. In this way, she makes it less likely the government will see her response as the only possible response, and she makes it clear there may be others with more pertinent and direct information.

Conclusion

Responding on behalf of a large company to a broad government subpoena can be very difficult and can draw the in-house lawyer, at times, into choppy waters. The government wants answers and assurances, but it can be difficult to provide them. The two key take-aways from these cases are: 1) to be transparent with the government about the documents and information being provided as well as those items being withheld, and 2) to seek and obtain advice from outside counsel so that you can rely on it if the government seeks to hold you responsible.

Pamela L. Johnston, who chairs Foley & Lardner LLP's Government Enforcement, Compliance & White Collar Defense Practice, was a federal prosecutor in the U.S. Attorney's Office in Los Angeles for 14 years, where she worked in both the civil and criminal divisions. Lisa M. Noller recently joined Foley & Lardner's Government Enforcement, Compliance & White Collar Defense Practice as a partner after serving 10 years as an Assistant United States Attorney in Chicago, where she worked in both the civil and criminal divisions of the office. Mary R. Conklin is an associate in the firm's Los Angeles office.

In-house counsel have taken notice of the federal criminal indictment and trial of Lauren Stevens, former in-house counsel with a pharmaceutical company, on charges she obstructed justice and made false statements in the course of responding to government requests for information. She has now been acquitted after the court dismissed the charges during the trial. Nevertheless, her mere indictment should give all in-house counsel a moment of pause because it shows the government's willingness to prosecute any individual ' including an in-house lawyer representing a client ' whom it believes has knowingly misled an agency or obstructed an investigation.

Notably, this is not the first case in which the government charged an in-house attorney with obstructing justice, and it is unlikely to be the last. Four brief case studies illustrate the government's reactions when it does not receive what it believes it is entitled to in response to a request for information (“RFI”) or subpoena. Based on the government's actions, ordinary approaches to civil discovery are ill-fitting in response to a government agency's efforts to obtain information, and in-house counsel must take extra care.

Indictments Resulting from RFI Responses the Government Believes Are Deficient

United States v. Stevens, Case No. 10 CR 0694 (D. Md.)

Lauren Stevens was vice president and associate general counsel for a pharmaceutical corporation that received FDA requests and subpoenas for materials regarding promotional programs relating to a particular drug. The government alleged Stevens had assured the FDA she would gather all responsive documents, including those outside her company's custody and control (i.e., those within certain physicians' possession) and produce them in response to the subpoena. It further claimed that after doing so, she gathered documents, slides, notes, tapes and other materials, some of which were responsive yet incriminating. The government alleged that among other actions she took in crafting the company's response to the government, Stevens sought advice from her team of attorneys about whether to produce the incriminating materials. After weighing the pros of production (e.g., “responds to the FDA's request”) against the cons of doing so (e.g., “provides incriminating evidence”), Stevens, the government alleged, decided to withhold evidence, despite the subpoena ordering its production and Stevens' previous assurances the company would produce all responsive documents (even those outside the company's immediate custody or control). According to the government, Stevens additionally informed the government there was no such evidence, and further stated the company was in compliance with the applicable laws for which it was being investigated. The government saw her communications and production as failing to adequately respond to the subpoena and charged her with obstructing an agency's proceeding and making false statements to a federal agency. At trial, the government introduced evidence it had received the incriminating, withheld documents from other sources, calling Stevens' response into question.

On May 10, 2011, the court granted Stevens' motion for acquittal, ruling the documents Stevens withheld were protected by the attorney-client privilege, and further that Stevens had withheld them in good faith reliance upon external and internal counsel. The court ruled this reliance brought Stevens' actions within the good faith safe harbor in 18 U.S.C. ' 1515(c). The court noted Stevens had indeed made misrepresentations to the government, but her good faith reliance on counsel negated criminal intent, and thus, any liability for the false statements charges.

United States v. Siemens Medical Systems, et al., Case No. 05 CR 792 (N.D. Ill.)

In 2008, Ellen Roth, an in-house counsel at Siemens Medical Systems, pleaded guilty to obstructing a public corruption investigation. According to the plea agreement, in the course of the FBI's work on the case, agents visited Roth at her home and asked questions about her knowledge of a joint venture agreement with a minority business enterprise (“MBE”). According to the plea agreement, despite having knowledge about the agreement (whose terms did not comply with county requirements), Roth denied such knowledge and mischaracterized the joint venture arrangement to the federal agents. In doing so, she was reiterating the position her company had publicly taken during civil proceedings, which, according to her plea agreement, she knew to be false. Roth also admitted in her guilty plea that she knew the company's outside counsel had made material misrepresentations in court during civil proceedings, yet she did nothing to correct them. She further admitted hiding from the county and the court the true agreement with the MBE.

For her misrepresentations, Roth was charged with wire fraud, mail fraud and making false statements to a federal agency. She pleaded guilty to the false statement charge, in violation of 18 U.S.C. ' 1001; she was sentenced to four years probation and ordered to pay a $12,500 fine.

United States v. Stein, et al., Case No. 07 CR 3742 (S.D. N.Y.)

In 2007, the government charged 19 individuals, including KPMG in-house attorney Steven Gremminger, with participating in a fraudulent tax shelter scheme. In addition to substantive tax charges, Gremminger was alleged to have prepared “false and fraudulent” documents to provide the IRS if it inquired about the activities of the tax shelter. The government further alleged Gremminger obstructed the government's investigation by lying to the IRS about his employer's role in the tax shelters and compliance with IRS summonses, and by proceeding with the shelters after he had participated in a meeting at which time their possible illegal nature was discussed.

A district court eventually found the government had violated Gremminger's and others' rights to counsel and due process by pressuring KPMG not to pay its employees' legal fees. The district court dismissed the indictment against him, and the Second Circuit upheld the decision.

United States v. Ralph's Grocery Co., Case No. 05 CR 01210 (C.D. Cal.)

In this 2005 case, the government alleged Ralph's Grocery Co. unlawfully hired “locked out” union employees in a labor dispute and provided false names and social security numbers on paychecks and employee benefits forms in violation of the National Labor Relations Act. The government charged the company with false representations, identity fraud, concealment of facts, and obstruction of justice. The obstruction charges centered around the company's alleged concealment from the grand jury of responsive documents, particularly internal memoranda created by employees and allegedly improperly characterized as protected by the attorney-client privilege or the attorney work product privilege.

In 2006, Ralph's Grocery Co. pleaded guilty to: 1) conspiracy to commit federal offenses; 2) false representation of a social security number; 3) identity fraud; and, 4) concealment of facts relating to an employee benefit plan. Ralph's was sentenced to three years probation, and ordered to pay restitution of $50 million. The obstruction charges, stemming from the alleged mischaracterization of documents as protected by the attorney-client privilege and attorney work product doctrine, were ultimately dismissed.

Four Principles to Follow When Responding to the Government's Subpoena or RFI

When responding to government RFIs, consider the following four principles:

1. Consult with Outside Counsel

Putting another lawyer, or team of lawyers, between in-house counsel and the government insulates in-house counsel from direct contact with the government. In Stevens' case, this insulation bolstered her defenses of good faith and attorney-client privilege. Consulting with external counsel significantly reduces the likelihood of any obstruction or false representation charges being investigated where in-house counsel would be a subject or target of the investigation. Additionally, outside counsel will generally be viewed as more objective because they do not have “a horse in the race”; therefore, if some documents are inadvertently not produced or uncovered later in the process, the government is far less likely to view it as intentional concealment or obstruction.

Most importantly, engage outside counsel early in the process, to gain a distinct advantage in responding to government inquiries. Had Stevens' outside attorneys responded to discovery, the privilege would have been clear, lessening her chance of indictment.

2. Assume a Criminal Investigation Is Underway

When responding to any RFI by any government entity, assume the civil agency may be working hand-in-glove with a criminal investigator. By doing so, an in-house attorney will likely think carefully before deciding which information to provide, or withhold, from the government and how to provide the government with transparency about the scope of any search for documents. In a civil case between private litigants, the price for withholding information is relatively low: A court may order production or an opponent may obtain sanctions. Rarely in a civil case is an attorney held in civil contempt for failure to comply with a subpoena.

In a criminal investigation, the stakes are high: If an attorney withholds material information, makes a material misrepresentation or otherwise obstructs an investigation ' civil or criminal ' she may be indicted for the discovery decision. The entity reviewing the lawyer's response is the same entity deciding whether the attorney has accurately and thoroughly responded to the request, and it alone has the power to recommend criminal charges if the attorney does not comply as the government deems appropriate. Even where there is no criminal case at the outset, every government agency can easily refer an instance of non-compliance with a request to a federal prosecutor to have an attorney charged.

3. Proceed As Though the Company Is a Subject of a Criminal Investigation

Sometimes subpoenas are just subpoenas that seek documents from a third-party witness. But in certain instances, the government's subpoena or RFI to a company is served for the purpose of investigating the corporation's actions. That subpoena is more than a mere request for documents; it is the beginning of an investigation of the actions of the company and its people.

Recently, the U.S. attorney general, the chair of SEC's Enforcement Division, and the Secretary of Health and Human Services (to name a few) have each announced they intend to also hold individuals responsible for corporate wrongdoing, whenever possible. If an in-house lawyer responds as if she herself is under the government's microscope, she will be exceedingly careful in her response because she will evaluate each statement made and each document produced as a possible statement against her own interest.

Most of the time, the government is not searching for a way to “trap” unwitting in-house counsel. However, any half-truth or incomplete production opens such persons up to the possibility the government may look again to determine whether the mistake was intentional. As the Stevens and Siemens indictments demonstrate, there are many ways an individual can be held responsible for the acts of a corporation. Stevens and Roth were charged under a few such legal theories ' two different obstruction statutes, a false statement statute, mail fraud and wire fraud ' but other charging possibilities existed. Consider this: A prosecutor might believe each written communication that takes a position on behalf of a target corporation can reasonably be viewed as aiding and abetting the substantive crime under investigation and might believe it constitutes a separate criminal act by the individual. A carefully worded, truthful response reduces the possibility the government will add a corporate attorney to the list of subjects in an investigation.

4. Assume You Are Not Alone

When suing an adversary, most attorneys would not act on a single piece of evidence. They should make the same assumption about a government investigation. Federal agents and agencies frequently work together or coordinate what information to seek via administrative subpoenas, civil investigative demands, civil subpoenas, and criminal grand jury subpoenas. Often they seek the same information from many different, corroborative sources. These individuals or entities have no obligation to consult with corporate counsel beforehand, and in-house counsel cannot review or control their responses.

Whenever an in-house attorney responds to an RFI, she should document her collection efforts and detail the efforts she took to provide a full and accurate response, including the fact that there may be additional documents and sources of information she was not able to gather. A careful attorney should not speak for anyone outside her control, and should not assume she may speak for others. In this way, she makes it less likely the government will see her response as the only possible response, and she makes it clear there may be others with more pertinent and direct information.

Conclusion

Responding on behalf of a large company to a broad government subpoena can be very difficult and can draw the in-house lawyer, at times, into choppy waters. The government wants answers and assurances, but it can be difficult to provide them. The two key take-aways from these cases are: 1) to be transparent with the government about the documents and information being provided as well as those items being withheld, and 2) to seek and obtain advice from outside counsel so that you can rely on it if the government seeks to hold you responsible.

Pamela L. Johnston, who chairs Foley & Lardner LLP's Government Enforcement, Compliance & White Collar Defense Practice, was a federal prosecutor in the U.S. Attorney's Office in Los Angeles for 14 years, where she worked in both the civil and criminal divisions. Lisa M. Noller recently joined Foley & Lardner's Government Enforcement, Compliance & White Collar Defense Practice as a partner after serving 10 years as an Assistant United States Attorney in Chicago, where she worked in both the civil and criminal divisions of the office. Mary R. Conklin is an associate in the firm's Los Angeles office.