Supreme

Government Interviews of Employees of Represented Organizations: Know the Rules

by with No Comment Blog

Attorneys representing organizations or health care providers frequently come across a scenario during which federal law enforcement officers seek to interview employees of the corporation. As an advocate, the attorney for the organization has an obligation to vigorously represent the interests of the organization. See ABA Model Rule of Professional Responsibility 1.13, Organization as Client (“A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.”)’ So, the notion of permitting federal law enforcement officers to swarm an office building and go hog wild with the client’s employees and proceed with interviews which more closely resemble interrogations is probably not in the best interests of that client. Obvious enough. But, witnesses do not belong to either party. Each party should be given equal access to witnesses and counsel for the organization does not want to act in any way that might be considered obstructive. See ABA Criminal Justice Defense Function Standards, Standard 4-4.3, Comment (“Because witnesses do not “belong” to either party, it is improper for a prosecutor, defense counsel, or anyone acting for either side to suggest to a witness that the witness not submit to an interview by opposing counsel.”)  But what happens when the Government or its agents insist on moving forward with certain interviews of employees when they know the corporation is represented?

  1. DOJ Guidelines and State Ethics Rules vs. Federal Courts

Department of Justice internal guidelines broadly address communications with employees of represented organizations:

The contacts rules vary from state to state in how they define a “represented person” when that “person” is an organizational entity. Some states prohibit communications only with those high-level employees who can bind the organization in the matter on which the organization is represented. Other states prohibit communications concerning the matter in representation with persons having managerial responsibility on behalf of the organization. Many states prohibit communications with any person whose act or omission in connection with that matter may be imputed to the organization for purposes of civil or criminal liability. And a number of states preclude contact with a corporate employee or constituent whose statement may constitute an admission on the part of the organization.

See Department of Justice Criminal Resource Manual 296, “Communications with Represented Persons – Issues for Consideration.”

One of those states is Florida. Florida Rules of Professional Conduct governing these scenarios state that

In the case of a represented organization, this rule prohibits communications with a constituent of the organization who supervises, directs, or regularly consults with the organization’s lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability.

See Florida Bar Professional Rule of Conduct 4-4.2, Comment

Despite these DOJ internal guidelines and state ethics rules specifically acknowledging that state rules of professional conduct governing communications with represented persons and organizations, including employees of represented organizations, apply to federal prosecutors, federal courts have consistently held that pre-indictment, non-custodial interviews with employees of represented organizations are not contrary to professional rules of conduct and do not warrant suppression of employee statements when the government agent or attorney does not know that the employee is represented by counsel at the time of the interview.  U.S. v. Powe, 9 F.3d 68 (9th Cir.1993); In Re Disciplinary Proceedings, 876 F. Supp. 265, 268 (M.D. Fla. 1993); See also United States v. Marcus, 849 F.Supp. 417, 422 (D.Md.1994) (citing United States v. Sutton, 801 F.2d 1346 (D.C.Cir.1986); U.S. v. Lemonakis, 485 F.2d 941 (D.C.Cir.1973); U.S. v. Heinz, 983 F.2d 609 (5th Cir.1993);U.S. v. Fitterer, 710 F.2d 1328 (8th Cir.1983);U.S. v. Ryans, 903 F.2d 731 (10th Cir.1990);United States v. Joseph Binder, 167 F. Supp. 2d 862 (E.D.N.C. 2001) ((pre-indictment discussion between agents and an employee represented by an attorney in a matter separate and apart from the criminal investigation).

Remarkably, in Powe, the Ninth Circuit concluded that a professional rule was not violated and that the tape recording of defendant’s conversation with a confidential informant was admissible when the government used that same informant to obtain statements from defendant prior to an indictment but after counsel for the defendant sent a letter to the AUSA stating that all contacts by investigators with defendant must be made through counsel.

Similarly, in In Re Disciplinary Proceedings, the court held that the professional rule was not violated when agents interviewed a current employee of a corporation that was the ongoing subject to a grand jury investigation even though agents knew that the corporation was represented by counsel. Yet, the district court also highlighted that the agents specifically informed the employee that she had a right to an attorney prior to conducting the pre-indictment interview.

  1. Statements Can Be Imputed to the Organization

Employees of a represented organization, especially managers, may be in a unique position to make statements that will later be imputed to the organization to establish civil or, worse yet, criminal liability. For instance, employee statements under the Federal (and state) rules of evidence may be directly imputed to the organization. See Federal Rule of Evidence 801(d)(2)(D) (a statement is a non-hearsay statement if the “statement is offered against an opposing party and was made by the party’s agent or employee on a matter within the scope of that relationship and while it existed.”).

Further, in many employee interview scenarios, the employee is not in custody and is free to leave. The employee might be in his home. Notwithstanding the fact that they may legally “out of custody,” these uninformed, random employee interviews have the potential to seriously undermine the corporation’s critical interests given that acts or omissions of most employees – especially managers – may be imputed to the organization, One act of course that may be imputed is the act of making an incriminating or inculpatory statement to a federal law officer.

Therefore, because of this incongruity between DOJ standards and federal jurisprudence, counsel for the corporation should put the AUSA assigned to the investigation on notice of the representation as soon as possible and remind the AUSA, if necessary, to advise all agents assigned to the case that the corporation is represented. If the AUSA or a government agents forges ahead, then he or she must be advised that the ethics rules specifically prohibit the proposed communications, that you are not attempting to obstruct or preclude the interview, but that such interview should not be had until the employee has the opportunity to obtain separate counsel.

But, what if the employee wants to speak to the agents, is a possible whistleblower, or has interests which are likely adverse to those of the organization? Those are all complex issues and counsel for the organization should not act in any way to “block” an interview of an employee who wants to freely speak with the government. Nor should counsel attempt to knowingly impede an interview of an employee with interests adverse to the organization. But these points are subordinate to the critical point here which is that Government efforts to interview employees of represented organizations are a clear violation of established DOJ Guidelines tethered to state ethics rules. For example, in Florida, no “communications” are permitted with employees of represented organizations regardless of whether that organization has been indicted or not. See Florida Bar Professional Rule of Conduct 4-4.2. That means no interviews period and Florida is not alone.

Bookshelf-2

Under Investigation Part II

by with No Comment Blog

UNDER INVESTIGATION PART II: AM I A TARGET, SUBJECT, OR WITNESS?

Am I a target, a subject, or a witness? In this Article which is Part II in the “Under Investigation” series, we will discuss these various designations used by the Government to describe a person’s relative culpability during the course of a criminal investigation and will focus on targets and subjects. Such designations are a harbinger of robust investigations targeting businesses operating in regulated industries such as health care, securities, banking, mining, transportation, logistics, insurance, aviation, and telecommunications.

 

Targets and Target Letters

If someone or something (a corporation) is a target, then this means that the Government has substantial evidence linking the person or thing (a corporation) to a federal crime and the chances are greater that the Government will present evidence before a grand jury to return an indictment.

The Government has a few ways of telling (or not telling) someone or something that they are a target.

The US Attorney’s Office responsible for the investigation can send a target letter to that person in the mail.

The federal agents primarily responsible for the investigation of the target, can show up at the targets business or home and hand her the target letter.

The federal agents can show up at the target’s home or business and try to interview her during which they may or may not tell the target she is in fact a target.

The target may receive a grand jury subpoena to appear for testimony or produce documents.

In the third and fourth scenarios, notice that the Government has not come right out and said “you’re a target” and these are the situations where even sophisticated, highly educated professionals might make the biggest tactical error they can make during the investigation and predetermine their fate.

To ensure this does not happen, a person receiving the subpoena or a visit from federal agents should retain an experienced government investigations lawyer before making any statements to federal law enforcement or responding to a subpoena. Once retained, the attorney will contact the federal prosecutor assigned to the investigation and ask her whether the client is a target, subject, or witness.

Sounds simple enough, right? In practice, however, there have been (and will continue to be) countless episodes where the person receiving the subpoena or the visit will employ a “do it yourself” approach to the investigation and decide to speak to the agents or respond to the subpoena without consulting an attorney first.

This mistake should be avoided at all costs.

Subject- You are Within the Scope of the Investigation

A subject is someone who is within the scope of the Government’s investigation. If that seems vague and confusing to you then you are not alone.

What if the scope of the investigation spans three continents and involves 25 companies?

If I work at one of the companies then am I “within the scope of this investigation?”

What if I am only a former employee or executive of one of the companies?

These questions abound in this context, but the bottom line is: if a person were designated by a federal prosecutor as a “subject” then that person has potential exposure to criminal charges. That does not mean that federal agents will arrive at your doorstep armed and ready to make an arrest next week. Nor does it mean that a person designated as subject may not be in a position to obtain a redesignation to a witness. Rest assured though, depending on the factual nuances in the particular case, the Government may send subpoenas, request interviews with counsel, and/or request active cooperation with the Government from a subject.

Whether a person is a subject or a target, it is incumbent upon that person to consult with an experienced government investigations attorney when it becomes clear that a government investigation is underway.

Bookshelf-2

Under Investigation Part I

by with No Comment Blog

UNDER INVESTIGATION PART I: HOW IS THE GOVERNMENT INVESTIGATING ME OR MY BUSINESS?

In this Article which is Part I in the “Under Investigation” series, we will discuss some of the investigative tools which are available to the government in the course of a criminal (or civil) investigation targeting businesses operating in regulated industries such as health care, securities, banking, mining, transportation, logistics, insurance, aviation, and telecommunications.

 

Subpoenas and Other Things Demanding Documents and Appearances

The Government can send subpoenas to the financial institution where the company under investigation maintains business and/or personal accounts demanding that those institutions produce financial account information. They can send subpoenas to the company under investigation demanding production of documents or they can send the subpoena to a specific person demanding that she testify before a grand jury. Frequently though, the recipient of that subpoena can produce the requested documents by a specific date to avoid having to appear for testimony.

In anti-trust, consumer protection (banking), and health care fraud investigations, the Government can also send something called a civil investigative demand requiring a company or a person to produce documents, submit sworn answers to written questions, or in some cases, appear for testimony before a federal prosecutor.

In investigations related to violations of federal tax laws, the IRS frequently uses summonses demanding the production and/or appearance of the taxpayer. Sometimes those summonses will be issued by a special agent or “IRS-CI” and demand an appearance before that special agent to answer questions about specific tax years and/or tax returns. That is an unequivocal “tip off” that the investigation is criminal.

In investigations related to violations of federal securities laws, the SEC may send a subpoena to produce documents and/or appear for sworn testimony based on a formal order of investigation authorizing SEC enforcement attorneys to demand production of documents and testimony.

“Interviews”

Beyond these written demands for paper or people, the Government conducts “interviews” with employees, former employees, competitors, etc. Anyone approached by a government agent for an “interview” should politely decline the interview until they have had an opportunity to talk to an experienced government investigations attorney. Interviewers are trained, highly educated, and generally familiar with the particular industry they are investigating. Diving right into an interview without counsel – even if you have nothing to hide or have gained a reputation for being persuasive – is, at best, a very bad choice, and, at worst, the equivalent of gift-wrapping a roadmap to an indictment.

Informants

The Government can also embed an informant, whistle-blower, or “cooperator” at your business to unearth information they believe will corroborate their theory of what happened and who did what and when. The informant will likely be wired with audio and video recording equipment and has the ability to record what people are doing or saying in real time. The informant can also work for law enforcement at a distance by making controlled calls or emails or communicating via text message. All of these surreptitious investigative techniques are designed for one purpose: to gather more possible evidence of guilt.

The informant might also do things he should not do. He might go “rogue” and begin his own investigation and have a momentary identity crises believing that he is 007 on a top secret mission. Or, he might attempt to actively upload or download proprietary information from company servers without the company’s authorization or consent.

Data Mining

Data mining is a commonly used investigative tool in health care fraud investigations. Indeed, very recently, Attorney General Jeff Sessions announced that a new, specialized Opioid Fraud Unit would rely heavily on data mining to detect and prosecute fraud. Further, both specialized investigative units (SIUs) working for private health care plans and private government contractors known as Zone Program Integrity Contractors (ZPICs) responsible for auditing specific Medicare providers, depending on their geographic region, rely on and employ data mining to investigate health care fraud and abuse.

Search Warrants

The Government can also apply for and obtain search warrants which give government agents the authority to enter a business and search for documents, computers, hard drives, cell phones, thumb-drives, and any other electronic data or communications within the scope of the search warrant. Search warrants should be more of a last resort for the agency responsible for the investigation but they are increasingly common tools employed by law enforcement in investigations involving highly regulated industries and they are nerve-wrecking. It is important that employees know their rights prior to any search. Government agents are on the premises to conduct a search and to “interview” people. But, the warrant only authorizes a search, not a full blown interrogation. So while being cooperative might expedite a search. Cooperation should never include volunteering for an interview without an experienced government investigations lawyer at your side.

Given these seemingly unlimited resources, it is incumbent upon professionals and employees operating in regulated industries to consult with an experienced government investigations attorney when they are confronted with a government investigation.

Business-3

Small Businesses Have a Right to Remain Silent

by with No Comment Blog

Small businesses have a right to remain silent too. In the white collar and government investigations world, it is common for defense attorneys to receive a grand jury subpoena addressed to the corporation, partnership, or corporate entity controlled by the client.  This is a preferred practice of many US Attorney’s Offices because of the collective entity doctrine which, courts have held, prohibits a corporation from invoking a Fifth Amendment privilege against self-incrimination in response to a subpoena since, after all, only people – not artificial entities – can testify against themselves.  Indeed, following the rationale of this doctrine, the corporation has no Fifth Amendment privilege to invoke and therefore the client cannot refuse to produce any corporate documents based on the assertion of that privilege. This is the case even if the corporate documents – or emails – are rife with potentially incriminating material or statements. This practice of sending subpoenas to the corporation to avoid a possible Fifth Amendment defense is also rarely challenged and rarely litigated, but, in certain circumstances, it should be challenged.

Collective Entity Doctrine

Many district courts and some appellate courts have issued decisions championing the collective entity doctrine. See United States v. Roe, 421 F. App’x 881, 884-85 (10th Cir. 2011) (“[T]he district court held the Roes could not assert … personal [Fourth and Fifth Amendment] rights to oppose summonses seeking materials from [their LLC], a collective entity. We take the district court’s view of the matter.”); United States v. Lu, 248 F. App’x 806, 807-08 (9th Cir. 2007) (“[T]he business records of Lu’s [single-member limited liability companies] are not protected by the Fifth Amendment); United States v. Greenleaf, 546 F.2d 123, 128 (5th Cir. 1977) (recognizing the “small family partnership” exception, but concluding that the defendant partnership did not qualify for the exception);  In Re: In The Matter Of The Grand Jury Empaneled on May 9, 2012, Slip Op. No. 15-1264 (3d Cir. May 15, 2015) (finding that the medical practice, identified as “ABC Entity,” could not invoke the Fifth Amendment because it was incorporated as a professional association under New Jersey law even though an individual doctor was the sole proprietor, employee and custodian of ABC Entity’s records).

Yet challenges to grand jury subpoenas are still viable. For example, at least 3 district courts have allowed corporate clients to invoke the Fifth Amendment privilege in response to grand jury subpoenas. See United States v. Slutsky, 352 F. Supp. 1105 (S.D.N.Y. 1972)(two-person family partnership responsible for managing country club resort with gross receipts of more than $4 million and employees was permitted to invoke the Fifth Amendment in response to a subpoena requesting production of business records); see In re Subpoena Duces Tecum, 81 F. Supp. 418, 421 (N.D. Cal. 1948)( granting a small partnership Fifth Amendment rights, stating that “the partnership’s sole purpose was to “conduct the personal business of the partners … [and while] some partnerships, which have a large number of partners … might … take on the habilaments of an association or corporation … certainly this small family partnership [did] not reach such a stature.”); see In re Grand Jury Subpoena Duces Tecum (Doe), 605 F. Supp. 174, 178 (E.D.N.Y. 1985) (permitted a husband-wife partnership to invoke the Fifth Amendment and said “the Bellis Court contemplated that individual owners of the proverbial “Mom and Pop” stores would continue to enjoy the protection of the Fifth Amendment even though they elected to conduct business as a partnership. If the Bellis Court intended to hold that no partners could ever invoke the Fifth Amendment with respect to partnership records it could have easily said so.”).

And the Supreme Court in Bellis v. United States, 417 U.S. 85, 89-90 (1974) held in favor of the collective entity doctrine finding that a three-person partnership possessed no Fifth Amendment right but said “[t]his might be a different case if it involved a small family partnership or if there were some other pre-existing relationship of confidentiality among the partners.” If the high court in Bellis simply wanted to kill any type of Fifth Amendment privilege it could have said so, but it did not.

Takeaways

With this in mind, the success of any such challenge should be case specific. In determining whether to challenge the subpoena, focus on the following:

-How damning are the documents for the client? If, upon review, the documents are not incriminating or potentially incriminating, is it worthwhile to engage in protracted and costly subpoena litigation especially when the case law is unfavorable to the client? After reviewing the documents, only counsel can discern the extent to which the documents might severely harm the client if produced. The fight has to be worthwhile.

–Is the client a small family partnership? The district court decisions finding that a privilege applied to the partnership generally involved small family partnerships which is consistent with the dicta in Bellis. By comparison, the Third Circuit recently held that a sole proprietorship managed by one physician was not entitled to Fifth Amendment protection. Thus, the courts have not established a black and white rule conditioned on the number of partners or members.

-Can the client’s company meet the Bellis test? In Bellis, the Supreme Court formulated a two prong test to determine when a company might invoke the privilege:

First, does the partnership have a distinct institutional identity? In deciding this question, counsel should examine the structure of the firm, i.e., whether it is merely an informal or temporary agreement, how the firm is regulated by state law, how it holds itself out to third parties, and whether it files a separate income tax return.

Second, does the partner claiming the privilege hold the requested records in a personal or in a representative capacity? As at least one court has recognized, all partnership records are partnership property under state law and therefore most partnerships would fail under this prong of Bellis. So, if the company fits into the first prong, then that might be sufficient to warrant constitutional protection especially if:

-There is a pre-existing relationship of confidentiality between the partners;

-The interests of the company are intertwined with the personal interests of the partners or members, or

-The company is composed of a single director/officer or member as part of an LLC and files a single tax return as a “pass through” entity. See Braswell v. United States, 487 U.S. 99, 118 n.11 (1988) (holding that president of corporation and sole shareholder was not protected by 5th Amendment from grand jury subpoena but leaving “open the question whether the agency rationale supports compelling a custodian to produce corporate records when the custodian is able to establish, by showing for example that he is the sole employee and officer of the corporation, that the jury would inevitably conclude that he produced the records.”

Despite the seeming invincibility of the collective entity doctrine, if the client is a small business or partnership and the requested documents in the grand jury subpoena merit the challenge and the likely costs of litigation, any and all of these arguments should be raised. After all, “[i]t seems clear that the Bellis Court contemplated that individual owners of the proverbial “Mom and Pop” stores would continue to enjoy the protection of the Fifth Amendment even though they elected to conduct business as a partnership.” In re Grand Jury Subpoena Duces Tecum (Doe), 605 F. Supp. at 178

 

 

 

 

 

 

 

 

 

Medicine-4

Sessions Announces Formation of Opioid Fraud Unit

by with No Comment Blog

Formation of Opioid Fraud and Abuse Unit

Opioid fraud and abuse is rampant. Yet, the epidemic demands a collaborative solution fashioned by regulators, medical professionals, professional boards, Congress, U.S. Attorney’s offices, and law enforcement.

As part of these efforts to address the epidemic, Attorney General Jeff Sessions announced the formation of a new Opioid Fraud and Abuse Detection Unit, yesterday to help battle the opioid crisis. As part of the new Unit, prosecutors will be deployed for a 3 year term to specific Districts including:

  1. Middle District of Florida,
  2. Eastern District of Michigan,
  3. Northern District of Alabama,
  4. Eastern District of Tennessee,
  5. District of Nevada,
  6. Eastern District of Kentucky,
  7. District of Maryland,
  8. Western District of Pennsylvania,
  9. Southern District of Ohio,
  10. Eastern District of California,
  11. Middle District of North Carolina, and
  12. Southern District of West Virginia.

Recent Cases

Sessions is not messing around. More and more health care fraud prosecutions and investigations are also targeting health care providers, pharmacies, pharmacists, and sales and marketing professionals related to the prescription, dispensing, or marketing of opioids.

During the 2017 national health care fraud takedown, in Houston, a doctor and clinic owner were accused of a conspiracy to distribute and dispense controlled substances in connection with a purported pain management clinic that is alleged to have been the highest prescribing hydrocodone clinic in Houston, where approximately 60-70 people were seen daily, and were issued medically unnecessary prescriptions for hydrocodone in exchange for approximately $300 cash per visit. In Iowa, 5 individuals in were arrested for distribution of opioids, and in Tennessee, three defendants were charged in a scheme involving fraudulent billings and the distribution of opioids.

In the last year, federal prosecutors in Boston, Miami, and New York obtained indictments against pharmaceutical sales representatives alleging that they received and paid kickbacks in connection with speaker programs promoting Fetanyl sprays (an opioid).

Further, this does not include any of the dozens of compounding pharmacy fraud investigations and prosecutions involving the prescription and dispensing of pain creams containing controlled substances, for example, ketamine.

Unit Driven by Data

What is also interesting about the new Unit is that investigations will rely heavily on data:

“I am announcing a new data analytics program – the Opioid Fraud and Abuse Detection Unit. I have created this unit to focus specifically on opioid-related health care fraud using data to identify and prosecute individuals that are contributing to this opioid epidemic. This sort of data analytics team can tell us important information about prescription opioids—like (1) which physicians are writing opioid prescriptions at a rate that far exceeds their peers; (2) how many of a doctor’s patients died within 60 days of an opioid prescription; (3) the average age of the patients receiving these prescriptions; (4) pharmacies that are dispensing disproportionately large amounts of opioids; and (5) regional hot spots for opioid issues.

Indeed, the Government’s use of data mining has become an indispensable part of its effort to combat health care fraud and drug diversion. Data never tells the whole story though. As an example, a patient may have died within 60 days of a prescription for an opioid from Doctor X but that same patient may have procured diverted opioids on the black market and overdosed. Item (4) will also require a geographical comparison of Pharmacy X to other pharmacies in that area. Who decides what is “disproportionate” though? Another metric, which the Unit will likely incorporate, might be the rate of out of state patients procuring prescriptions from Doctor X and/or the rate of out of prescriptions dispensed by Pharmacy X to out of state patients.

Pre-Trial Diversion Eligibility for Addicts Requiring Recovery and Treatment

It would be a step in the right direction if US Attorney’s Offices in these high volume opioid districts also treated addicts found in possession of opioids with a degree of leniency and offered pre-trial diversion programs contingent on completion of drug recovery programs. Such diversion programs are much more common in state courts but in the District of New Hampshire, for example, which is not included on this list, Oxycontin addicts are potentially eligible for pre-trial diversion. If Sessions really wants to take the lead on this issue, there must be a level of compassion afforded to true addicts. Imprisonment is not the answer.

Pharmacies, Clinics, DEA Registrants, Pain Management Physicians, and Sales and Marketing Professionals

If you regularly prescribe, dispense, or promote medications containing opioids – especially in one of the geographic areas listed as a hot spot region –you should be aware of the formation of Sessions’ new Unit and should take steps to reevaluate and reassess internal controls, auditing, and compliance functions.