Permissible Parameters of Parallel Proceedings

The term “parallel proceedings” is commonly used in American jurisprudence to refer to simultaneous criminal and civil investigations of the same person. A century ago, the Supreme Court recognized the government’s need to conduct parallel investigations and explained that a “rule that the civil suit must await the trial of the criminal action might result in injustice or take from the statute a great deal of its power.”[1] While Standard Sanitary established that there is no per se constitutional ban on parallel civil and criminal proceedings, later cases have made clear that the manner in which the government conducts these proceedings is not entirely unfettered.[2]

To date, Kordel is the only Supreme Court case to address the constitutional limitations on parallel proceedings and, as a result, it is the necessary starting point for an analysis regarding the limitations placed on the government’s use of parallel proceedings.[3] In Kordel, the Supreme Court faced the issue of whether the convictions of two corporate officers for violation of the Food, Drug and Cosmetic Act were proper where the convictions were, at least in part, based upon the corporation’s answers to interrogatories that were propounded in a parallel civil proceeding.[4] In reversing the Sixth Circuit’s dismissal of the convictions, the court explained that the use of the interrogatories did not amount to a “violation of due process or a departure from proper standards in the administration of justice.”[5] Notably, the court also went on to suggest the circumstances in which a violation of due process or the “administration of justice” might occur:

We do not deal here with a case where the Government has brought a civil action solely to obtain evidence for its criminal prosecution or has failed to advise the defendant in its civil proceeding that it contemplates his criminal prosecution; nor with a case where the defendant is without counsel or reasonably fears prejudice from adverse pretrial publicity or other unfair injury; nor with any other special circumstances that might suggest the unconstitutionality or even the impropriety of this criminal prosecution.[6]

Relying on this guidance offered by Kordel, courts have fashioned parameters defining what the government may and may not do in conducting parallel proceedings. It is clear, for example, that an impermissible violation of due process or of the “proper administration of justice” occurs where a civil proceeding is surreptitiously used to collect evidence to support a criminal investigation.[7]

Notwithstanding a contrary suggestion in the above quoted passage from Kordel, courts have routinely held that the government does not have an obligation to inform one under investigation of the existence of the parallel proceedings, so long as the government does not make any misrepresentations or otherwise engage in affirmative deceit.[8]

Conversely, when the individual being investigated inquires about the existence of a criminal investigation, if the government chooses to respond, it must respond accurately regarding whether a criminal investigation is ongoing or whether it is contemplated that the information provided in the civil proceedings may later be used in a criminal context. Perhaps the quintessential application of this rule is found in United States v. Tweel.[9] In Tweel, the Fifth Circuit reversed the defendant’s criminal conviction because the IRS had deliberately deceived the defendant as to the existence of a criminal IRS investigation.[10] During a civil audit of the defendant, the defendant’s accountant asked if an IRS “special agent” was involved in the investigation.[11] The court observed that the involvement of a special agent is generally determinative of whether the IRS is pursuing criminal charges and held that the IRS’s failure to respond affirmatively to the accountant’s question “was a sneaky deliberate deception by the agent” and “a flagrant disregard” of the defendant’s constitutional rights.[12] The court concluded that the evidence obtained as a result of this misrepresentation was not admissible and should be suppressed.[13]

Moreover, at least according to one district court, even when the individual being investigated fails to ask the civil authorities whether a criminal investigation is also being conducted, he must be advised of the existence of the criminal investigation when those conducting the criminal investigation are playing a significant role in the conduct of the civil proceeding. In United States v. Scrushy, Justice Department lawyers, in order to aid their ongoing criminal investigation of the defendant, advised the SEC on the questions that it should and should not ask during its deposition of the defendant.[14] The court held that the Justice Department’s actions, given the defendant’s lack of awareness of the existence of the criminal investigation, departed from the proper administration of justice.[15] The court thus excluded the deposition testimony from evidence and reversed the perjury convictions that had been based on that testimony.[16]

Today, parallel civil and criminal investigations are both permissible and prevalent. Trial lawyers must be vigilant about pressing civil investigators to acknowledge unequivocally whether a criminal investigation is either under way or could take place. Without this information, a lawyer cannot properly advise the client on how to proceed in the civil investigation.

Notes

  1. Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 52 (1912).
  2. See, e.g., United States v. Kordel, 397 U.S. 1, 11 (1970).
  3. Id.
  4. Id. at 2-3.
  5. Id. at 11.
  6. Id. at 11-12.
  7. See, e.g., Kordel, 397 U.S. at 11 (suggesting violation of defendant’s rights exists where “the [g]overnment has brought a civil action solely to obtain evidence for its criminal prosecution”); United States v. Mahaffy, 446 F.Supp.2d 115, 124 (E.D.N.Y. 2006) (citing Kordel and recognizing that a violation occurs where a civil action is instituted solely for the purpose of obtaining evidence to support a criminal proceeding); United States v. Scrushy, 366 F.Supp.2d 1134, 1140 (N.D. Ala. 2005) (holding that a departure from the proper administration of justice had occurred where Justice Department surreptitiously directed the conduct of the SEC’s deposition of the defendant).
  8. See, e.g., United States v. Rutherford, 555 F.3d 190, 197-98 (6th Cir. 2009) (finding denial of motion to suppress of evidence collected in civil IRS proceeding proper where the government did not engage in “deception or trickery”); United States v. Carriles, 541 F.3d 344, 355 (5th Cir. 2008) (recognizing that “while the government may not make affirmative misrepresentations about the nature of its inquiry, it is under no general obligation of disclosure”); United States v. Stringer, 535 F.3d 929, 940 (9th Cir. 2008) (collecting cases and explaining that “[a]lmost every other circuit has denied suppression, even when government agents did not disclose the possibility or existence of a criminal investigation, so long as they made no affirmative misrepresentation”).
  9. 550 F.2d 297 (5th Cir. 1977).
  10. Id.
  11. Id. at 298.
  12. Id. at 298-299.
  13. Id. at 300.
  14. 366 F.Supp.2d 1134, 1139-40 (N.D. Ala. 2005).
  15. Id. at 1140.
  16. Id.

Brook Lathram J. BROOK LATHRAM is a member of Bass, Berry & Sims in its Memphis office. He focuses his practice on federal criminal trials and internal investigations; on complex business and commercial litigation, including antitrust, business tort and breach-of-contract cases; and on the defense of product liability claims. Before joining Bass, Berry & Sims, Lathram spent his entire career at Burch, Porter & Johnson PLLC in Memphis. He is a graduate of Vanderbilt University and Columbia Law School.

 

 

David S. Mitchell Jr. DAVID S. MITCHELL JR. is an associate attorney at Bass, Berry & Sims in its Memphis office. He focuses his practice on complex commercial and bankruptcy litigation. He is a graduate of Washington and Lee University and the University of Arkansas School of Law.