When Is an Investigation ‘Joint,’ Anyway?

All you criminal procedure mavens out there might be interested in a ruling from a federal district court in New Jersey this week, where two business executives facing FCPA charges were quibbling over whether the Justice Department and the SEC conducted a “joint” investigation into their alleged crimes. 

Apparently that question matters because the defendants — Gordon Coburn and Steven Schwartz, formerly the president and chief legal officer of Cognizant Technology, respectively — want to compel discovery of potentially exculpatory evidence they say the Securities and Exchange Commission might have. 

Except, Coburn and Schwartz aren’t facing off against the SEC, where they could compel discovery; they’re facing criminal charges brought by the Justice Department. So did Justice and the SEC truly conduct a joint investigation, where the Justice Department might be forced to search through SEC evidence? (The Justice Department would have “constructive possession” of SEC materials, in legal terms.) Or were the investigations parallel but separate, in which case the defendants are out of luck? 

That was the question put before U.S. district court judge Kevin McNulty, hearing the case in New Jersey. The short version of his answer: there was enough cooperation between the Justice Department and SEC at least to warrant a further hearing on the matter. 

McNulty’s longer answer is a rumination on the nature of joint investigations, and on the criteria previous court rulings have laid down to assess when such cooperation might have ramifications at criminal trial. (Thank you to Global Investigations Review for posting the decision online.) Let’s take a look.

Factors to Consider

Several appellate court rulings address when two government agencies are acting as one team jointly investigating a matter, but McNulty emphasized one: US v. Risha, decided in 2006. In that case, the Third Circuit outlined three factors a judge should consider:

• whether the party with knowledge of the information is acting on the government’s “behalf” or is under its “control”; 
• the extent to which state and federal governments are part of a “team,” are participating in a “joint investigation” or are sharing resources; and 
• whether the entity charged with constructive possession has “ready access” to the evidence.

Of those three factors, Coburn and Schwarz focused on the second: how much Justice and the SEC acted as a team, on issues such as planning investigation strategy, interviewing witnesses together, or even just who took notes during a witness interview and who asked the questions.

For example, Coburn and Schwartz argued that SEC agents were present in half of the several dozen interviews Justice Department lawyers conducted with Cognizant employees. The two agencies also praised each other when they announced a settlement of FCPA charges against Cognizant, where the Justice Department specifically thanked the SEC for “significant cooperation.” The SEC also attended a few meetings Cognizant had with Justice Department lawyers, where Cognizant briefed them on the status of its internal FCPA investigation.

So given all those facts, Coburn and Schwartz’s lawyers said, this was a joint investigation. Therefore the Justice Department is in “constructive possession” of SEC investigation materials and those files are subject to discovery.

The Justice Department countered that the FCPA probes were parallel, but separate. For example, while the SEC did attend 13 of 24 witness interviews, the SEC agents asked no questions and took no notes. Nor did SEC agents participate in the prosecution’s decision-making process and grand jury activities. 

Perhaps above all, the Justice Department also said an investigation is joint when all three factors in Risha exist — but Coburn and Schwartz were mostly arguing about the second factor, rather than the other two.

Take a moment if you want to crack open your CrimPro textbook and ponder the answer here. Then let’s see how McNulty decided. 

There’s Some ‘There’ There

Right away, McNulty said: “I do not agree that all three Risha factors need to be present to support a finding of constructive possession… The Risha factors, I think, are intended to guide a more general inquiry into whether the two worked so closely that the prosecution may be deemed to be in constructive possession of the materials gathered by the agency.”

OK, if I were an appellate lawyer at the Justice Department, I might circle that paragraph in red ink. Anyway… 

McNulty said that joint fact-gathering can establish at least some constructive possession — but, he added, “that there was some joint activity does not render the entire investigation a joint effort.” Constructive possession would only apply to those facts specifically gathered when the agencies were working together; it wouldn’t exist in some blanket fashion for all facts, if some were gathered by one agency and other facts by the second one.

Yes, McNulty said, the SEC did attend a bunch of Justice Department interviews with Cognizant employees — but that’s all the SEC seems to have done. “There is no current indication that it played any role in the selection of the interviewees, the selection of questions, the questioning itself, or the prosecution’s analyses of the results,” McNulty wrote. 

Put simply: If all the SEC did was sit in the back row while the Justice Department interviewed witnesses, that unto itself is not enough to establish a joint investigation. 

The wrinkle is that while the Justice Department has denied some steps that would qualify as a joint investigation, it hasn’t specified all steps that Justice and the SEC did take. Given that incomplete disclosure, and the back-slapping language both agencies included in their original press releases about “significant cooperation” — OK, McNulty ruled. There’s enough there to merit a hearing to determine exactly how much the two agencies did cooperate on the Cognizant case. 

And so the case law for white-collar crime grinds on.