The United States Court of Appeals for the Second Circuit, based in New York City, has rendered a decision that will impact prosecutions that result from multi-jurisdictional investigations.
In United States v. Allen, No. 16-898-cr, the Second Circuit unanimously reversed wire fraud and conspiracy convictions of two employees of Rabobank, located in London, for attempting to manipulate the London interbank offered rate known as ‘LIBOR’ and dismissed the indictment against them on the basis of Fifth Amendment violations stemming from the misuse of compelled testimony obtained by a foreign government. The defendants had been compelled to testify about their role in manipulating LIBOR by The U.K. Financial Conduct Authority (“FCA”); their compelled testimony was subsequently disclosed to a third person who became the prosecution’s star witness. On appeal, the Second Circuit held the Fifth Amendment prohibited the prosecutors from using testimony compelled by the foreign government and reversed the convictions as the prosecutors had failed to prove that disclosure of the compelled testimony had not affected the star witness’ testimony at trial against the defendants.
Joven Narwal, who regularly acts for individuals and corporations under investigation by both domestic regulatory bodies in Canada with the power to compel testimony and who also face the parallel risk of criminal prosecution for the same alleged conduct in the United States, said that the decision is both a positive development but also raises new issues in the context of global investigations.
“On the one hand, it is significantly positive in that prior to this ruling there was no clear indication of what treatment a US Court would give to the Fifth Amendment concerns arising from the use of testimony compelled by a foreign jurisdiction. On the other hand, the Second Circuit’s ruling is limited in its application to the jurisdiction in which it was rendered and is not binding on the entire United States. This means that when acting for targets of US prosecutions we must remain vigilant in ensuring that constitutional rights associated with compelled testimony are adequately respected and protected. The ruling also creates an additional hurdle for us when we attempt to take the position here in Canada that a client should not be compelled to testify because of the threat of prosecution in the United States”.
From the investigative perspective, Narwal says the decision will signal to U.S. authorities that “if their investigations are contaminated by foreign compelled evidence, they risk the entire prosecution” and he believes “this will prompt early consideration of the priority of investigations and may result in an element of jurisdiction shopping”. For instance, he “fully expects that there will be early discussions between US and foreign authorities about who should do what and when, and probably a frank discussion about where enforcement action should ultimately be taken. It could be that domestic action will be stalled pending the completion of US investigations, or alternatively, an early decision by US prosecutors about whether they can even make a case without cooperation from the foreign jurisdiction. If the answer to that latter question is no, we may be able to achieve a level of comfort for our clients if we are able to carefully engage with the agencies early on. However, we are also braced for a more insidious outcome in which investigators develop clever ways to overcome the Fifth Amendment concerns emanating from the ruling. At the end of the day, we roll with the punches and adjust our litigation strategy to new developments in the jurisprudence such as the Second Circuit’s ruling here and the new investigative techniques that may emerge from it”.
Narwal Litigation LLP remains on the cutting edge of international criminal defence advocacy by continually studying the evolution of international enforcement regimes and the development of investigative techniques and jurisprudence, and through experience litigating these issues in court.