In November, the US Circuit Court for the Second Circuit declined to rehear en banc its July 19, 2017 decision in United States v. Allen, which recognized the testimony of a criminal defendant that is compelled by law in a foreign jurisdiction cannot be used, either directly or indirectly, as evidence against him at trial. The Second Circuit’s decision has far-reaching consequences for individuals involved in criminal investigations with a multijurisdictional dimension in both the United States and countries where testimony can be compelled. This includes investigations inherently transnational in character, such as FCPA investigations, as well as investigations that can arise in other areas of cross-border activity, such as those involving civil agencies like the SEC and CFTC.
Allen resulted from a decision by the US District Court, Southern District of New York regarding the conviction of two individuals on charges stemming from alleged manipulation of the London Interbank Offered Rate (LIBOR). The conviction was based in significant part on evidence arising from compelled testimony the defendants, both Rabobank employees and British citizens, gave to the United Kingdom’s Financial Conduct Authority (FCA). Under UK law the defendants could have faced criminal penalties for failing to respond to the FCA’s inquiry. During the US government’s investigation, another Rabobank employee interviewed by the FCA reviewed the defendants’ FCA testimony before deciding to cooperate with the US government, and later testified both before the grand jury and at the defendants’ US trial. The district court rejected the defendants’ argument that the government’s use of the cooperating witness’s testimony at trial, because it was tainted by his review of defendants’ compelled FCA testimony, violated the defendants’ Fifth Amendment rights. Although the government argued that the Fifth Amendment does not preclude its use of testimony compelled by a foreign sovereign, the district court declined to address the issue and held that the cooperating witness’s testimony had not been tainted by his review of the defendants’ compelled testimony.
In July, the Second Circuit reversed the district court’s decision. The court held that because the defendants’ testimony was compelled by UK law, the government’s use of it in securing an indictment and at the trial violated their Fifth Amendment right against self-incrimination. The court emphasized that the Fifth Amendment’s self-incrimination clause applies even where the defendant’s testimony was compelled “pursuant to foreign legal process.” The court ruled the Fifth Amendment prohibited the use of the compelled testimony because the United States was the “prosecuting sovereign” seeking to use it. The court concluded the compelled testimony tainted both the cooperator’s grand jury and trial testimony and vacated the defendants’ convictions and dismissed the indictment.
The court’s refusal to rehear the case confirms that Allen is now the controlling law in the Second Circuit, and is in general accord with decisions of the DC Circuit and the Fourth, Fifth, Ninth, and Tenth Circuits (though those circuits have not addressed this specific issue squarely). As such, foreign nationals under investigation in the United States and elsewhere can take some degree of comfort testimony that is truly compelled in a non-US jurisdiction will not be able to be used against them in a US prosecution.
We expect in future cases addressing this issue, one topic that will likely be hotly contested involves whether testimony taken by the foreign authority at issue was truly “compelled.” It will be interesting to see whether non-US enforcement agencies will re-evaluate laws and policies that require the provision of other witness’s testimony to “targets” of their investigation, and whether US prosecutors will work with their international counterparts in seeking to limit this type of information-sharing with witnesses, so as to avoid the type of tainting of witness testimony that occurred here. In its motion for rehearing en banc, the government made clear its view that Allen“will discourage the commitment of resources necessary to bring close cases, due to the possibility that prosecutions will be dismissed,” and that it “has already elected to forgo cross-border investigations that, absent the panel’s decision, it would have vigorously pursued.” Given these concerns, it is a virtual certainty the government will seek certiorari review of the Second Circuit’s decision.