On Monday, April 30, 2012, two of the remaining defendants in the Carson FCPA case submitted Reply Briefs in support of motions that raise significant issues about the impact on the employees when a corporation conducts an internal investigation and ultimately cooperates with the Government. The briefs argued that: (1) certain statements should be suppressed because the Government offered no evidence from the participants in discussions between the corporation's counsel and DOJ prior to interviews of employees during an internal investigation (thereby failing to rebut defendants' arguments that their Fifth Amendment rights were violated); and (2) the Government's tactics during discovery violated defendants' rights by denying them the opportunity to present a complete defense. The arguments on these issues are set to be heard on May 14, 2012.
On July 31, 2009, DOJ announced that Control Components, Inc. ("CCI"), a California company that designs and manufactures valves, had pled guilty to a three-count criminal information for its involvement "in a decade-long scheme to secure contracts in approximately 36 countries by paying bribes to officials and employees of various foreign state-owned companies as well as foreign and domestic private companies." That plea marked the culmination of an internal investigation by CCI and the company's cooperation with DOJ. The cooperation led to other CCI executives being indicted even before CCI pled guilty. For example, on April 8, 2009, prosecutors indicted six former executives of CCI, alleging that the group conspired to pay bribes to officials of foreign state-owned companies in order to secure contracts which yielded approximately $46.5 million in profits.
As discussed here, on March 5, 2012, the defendants in that case filed a Motion to Dismiss and a Motion to Suppress regarding DOJ's relationship with CCI. In the Motion to Suppress, defendants argued that because CCI had collaborated with DOJ during the investigation, CCI and its counsel "were de facto public actors" and acted as "an agent of the government during the interviews." Defendants further argued that "CCI compelled the Defendants' statements under a classic 'penalty situation' – CCI required them to answer all questions regardless of their Fifth Amendment right against self-incrimination or be fired." This conduct, defendants claimed, "violated their Fifth Amendment rights and the statements must be suppressed."
In the Motion to Dismiss, the defendants argued that they had been prejudiced by the Government's investigative tactics (including its relationship with CCI, who, according to defendants, "worked hand-in-hand with DOJ to investigate the matters at issue in this case), including: (1) tactics precluding defendants access to millions of pages of normally-discoverable evidence; (2) the lack of a meaningful review under Brady (including the fact that CCI would not turn over material to DOJ); (3) CCI’s loss of crucial documents underlying many of the counts and transactions; and (4) CCI's instructions to its employees not to speak with the defense. The defendants argued that that combination of tactics "deprived [them] of their Due Process and Sixth Amendment rights, including the right to present a complete defense." According to the motion, the "only appropriate remedy" for such severe prejudice is dismissal.
As discussed here, the Government filed its Opposition to the Motion to Suppress on April 2, 2012, arguing the statements should not be suppressed because the employer's "actions were not the result of any pressure or influence from the government sufficient to convert the Company’s lawyers to state actors," and because defendants could not "show that their statements were involuntary." On April 6, 2012, the Government filed its Opposition to the Motion to Dismiss, arguing that the motion to dismiss was meritless because, among other things, the Government "has gone beyond its discovery obligations in ensuring that defendants receive Brady/Giglio material in the possession of CCI."
In an interesting development on April 16, 2012, two of the four defendants who had filed the Motion to Dismiss and the Motion to Suppress – Stuart and Hong ("Rose") Carson – pled guilty to one count of violating the FCPA. However, the remaining movants, Paul Cosgrove and David Edmonds, continue to pursue the motions.
In filing the Reply Brief in support of the Motion to Suppress, Messrs. Cosgrove and Edmonds highlighted the fact that the Government had not offered any evidence from any witness who participated in the discussions between CCI (or their counsel) and DOJ during the key time frame. As a result, defendants argue, it is uncontroverted that CCI's counsel was a state actor when its attorneys interviewed defendants, those defendants had a reasonable fear that that they could lose their jobs if they did not answer, and that counsel did not warn them of their rights under the Fifth Amendment. As a result, the statements should be suppressed, according to defendants.
In their Reply Brief regarding the Motion to Dismiss, defendants argue that the "real issue" is whether the Government's tactics, whether undertaken in good faith or bad faith, deny defendants the opportunity to present a complete defense. The defendants also point to the Government's Brady obligations, asserting that the government significantly reduced the requests defendants made for Brady items when it (the Government) forwarded those requests to CCI, essentially exercising "unfettered discretion to unilaterally redact requests and deprive Defendants of a comprehensive Brady review."
Both motions are scheduled to be heard on May 14, 2012 and have the potential to provide insight and guidance regarding the interaction between counsel for the corporation and the employees in future investigations.
The case is presently scheduled to go to trial on June 5, 2012.