Hypothetical Bad News. You or your company has been served with a civil investigative demand requiring you to produce documents and answer questions from the government. The Department of Justice (DOJ) is investigating you for suspected violations of the False Claims Act, or perhaps for participating in a price-fixing conspiracy in violation of the antitrust laws. The investigation could drag on for years and—if you’re found liable—you may be on the hook for millions of dollars.
Hypothetical Worse News. Government agents have also inspected your premises pursuant to a search warrant, and you learn that associates of yours have been subpoenaed to testify before a grand jury. You are the target—or at least the subject—of a criminal investigation. For a company, a criminal conviction and associated fines could be devastating. For an individual, it could result in the loss of your liberty.
To provide a more concrete example, there have been dozens of administrative and criminal proceedings over the last few years that grew out of a massive public corruption scandal involving the bribing of dozens of Navy officials in exchange for participating in or turning a blind eye to baseless bills from an overseas defense contractor. Many participants have been criminally prosecuted, but the criminal investigation (which remains ongoing) has also coincided with administrative enforcement actions that resulted in the debarment of numerous contractors, permanently preventing them from doing business with the government.
More and more, government officials and agencies bring to bear all of the enforcement tools—civil, criminal, and administrative—in parallel investigations and proceedings to put a stop to unlawful conduct. If you’re the target of parallel investigations, you and your lawyer will need to be mindful about the different discovery tools available to the government, the risks of compromising your rights in one investigation through your response to another, and the need for a global settlement with the government.
All of that could fill a treatise, so I won’t try to cover it here. Instead, I’ll cover:
- A brief overview of the DOJ’s approach to parallel investigations and proceedings (they’re favored).
- Your chances of halting either a civil or administrative proceeding pending resolution of the criminal case (spoiler alert: not great).
- The importance of thinking strategically at every stage of your response—not just about the individual request or process you’re responding to—but also about how it affects the other investigations (it’s really important).
The Holder Memo, AKA the Government Loves Parallel Proceedings
While the government has used a variety of simultaneous investigatory and enforcement techniques for a long time, there has been a very strong policy in favor of cooperation among criminal, civil, and administrative investigators since at least January 2012, when then-Attorney General Eric Holder issued a memorandum requiring extensive cooperation among DOJ components. The Holder Memorandum requires that civil and criminal divisions share information and cooperate on enforcement actions “to the fullest extent appropriate to the case and permissible by law.”
The Memorandum requires that “[e]very United States Attorney’s Office and Department [of Justice] litigating component . . . have policies and procedures for early and appropriate coordination of the government’s criminal, civil, regulatory and administrative remedies.” Critically, a case referral “from any source” is considered a referral “for all purposes,” and DOJ components are expected to communicate with one another from the beginning of an investigation. The government should coordinate its various investigations to ensure the maximum permissible ability to share information among various components. Finally, DOJ lawyers and investigators should consider the effect their decisions will have on parallel proceedings at every stage, including in resolving their own cases.
Blocking Parallel Investigations—Not Likely
The Supreme Court explained in United States v. Kordel that the government is free to conduct parallel civil and criminal investigations without violating a target’s due process rights, as long as the government acts in good faith. Kordel ruled that to mandate a stay of parallel civil proceedings while the criminal case progressed would undermine the government’s ability to enforce federal law. The government may be deemed to have acted in bad faith if it brings a civil action—with its broad discovery tools—for the sole purpose of obtaining evidence to use in a criminal prosecution.
Since Kordel, several other federal courts have weighed in to emphasize that government agencies must be able to investigate alleged violations of laws simultaneously to effectively enforce those laws. See SEC v. Dresser Industries., Inc. Where the government begins a civil or administrative investigation before a criminal investigation, there is unlikely to be a finding of bad faith. See United States v. Stringer.
Courts have the discretion to stay civil proceedings, and some do so if on balance: the party asking for the stay will be substantially harmed; the other party’s interests will not be burdened by a long delay; and the public interest favors a stay. If you are a defendant in parallel proceedings, your best chance for a civil stay is probably post-indictment. At that point, a court overseeing a civil case might think that any stay would be shorter, and the danger that the criminal prosecutor will use testimony and other evidence from the civil proceeding in the criminal prosecution is at its most acute.
One place you may have slightly better odds in halting a civil case is in litigation initiated by private plaintiffs, particularly in state court. For example, the California Court of Appeal has said that it was appropriate to grant a stay of discovery in private civil litigation until the statute of limitations for crimes based on the same conduct had passed to avoid forcing the defendants to choose between invoking their Fifth Amendment right to remain silent and a “meaningful chance of avoiding the loss through judicial process of a substantial amount of property.” See Pacers, Inc. v. Superior Court. Washington state courts are similarly required to at least consider the possible burdens on a party’s Fifth Amendment rights in deciding whether to stay discovery. See King v. Olympic Pipeline Co.
Sometimes the government itself might try to stay civil proceedings if discovery in the case could affect the integrity of its criminal investigation. Last August, the DOJ asked a federal court in San Diego to temporary halt discovery in a private investor lawsuit against SeaWorld, arguing that discovery in the case could compromise the criminal probe. The court ultimately granted the government’s request after asking for further detail to examine in chambers.
There’s a lot to think about if you’re the target of parallel investigations by the government. In the future, I hope to explore some of the different discovery tools available to the government and the risks that they pose for defendants trying to preserve their right against self-incrimination. At a minimum, a dual target should be aware of the prevalence of parallel proceedings and the importance of thinking about the ways in which each investigation—criminal, civil, or administrative—can affect the outcome in the others.