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Sixth Amendment Violated When Government Pressures Employer Not To Fund Employees' Criminal Defense:

That's what the U.S. Court of Appeals for the Second Circuit just held today in U.S. v. Stein, in a case involving the prosecution of 13 former KPMG partners and employees. "We affirm the district court's ruling that the government deprived Defendants-Appellees of their right to counsel under the Sixth Amendment by causing KPMG to place conditions on the advancement of legal fees to Defendants-Appellees, and to cap the fees and ultimately end them."

I'm not an expert on this particular area of the law, and the state action caselaw on which the court relied to get to this result is murky. But I tentatively think the court's decision is right. Constitutional rights generally (with some exceptions not applicable here) include the rights to pay for what it takes to exercise the right -- to pay for counsel, advertising space, private schooling, contraceptives, abortion, and the like. They likewise include the rights to pay for what it takes to exercise the right using money donated by friends, family, well-wishers, or others.

Thus, if the government pressures (using the threat of indictment and financial ruin) your customary benefactors to stop paying you the money you need to exercise your rights, precisely to affect your exercise of the right, that would itself presumptively violate the constitution. If the government is investigating (say) a pro-life public advocacy organization's funder for some crime, offers more lenient treatment if the funder cooperates, and tells the funder that one factor in deciding whether he's cooperating is whether he cuts off funding for the advocacy group, I think that would violate the Free Speech Clause. If the government is investigating a Planned Parenthood funder for some crime, offers more lenient treatment if the funder cooperates, and tells the funder that one factor in deciding whether he's cooperating is whether he cuts off funding that goes to paying for abortions for poor women, that would violate the Supreme-Court-recognized right to abortion. Likewise, if the government is investigating a company, offers more lenient treatment if the company cooperates, and tells the company that one factor in deciding whether it's cooperating is whether it cuts off funding for its employees' exercise of their right to hire counsel, that would violate the Sixth Amendment.

It's true that the company might well have been free to voluntarily cut off the payment for its employees' lawyers (apparently such payment was the norm at KPMG and similar companies, but probably wasn't part of any enforceable promise on KPMG's part). Likewise, the funders in the examples above might well have been free to voluntarily cut off funding for others' political advocacy, abortions, and the like. But when the government coercively pressures the funder, the government's actions may violate the funded party's constitutional rights even if purely voluntary actions on the funder's part would be entirely lawful.

In any case, that's my tentative thinking. Thanks to Paul Caron (TaxProf Blog) for the pointer.

tvk:
This seemed a relatively easy case because the DOJ left a clear paper trail. But how would the rule work in practice? Government prosecutors are never going to be very happy when the company is paying a defendant's fees, and companies know that. Government prosecutors also have a tremendous amount of leverage over a company that is in trouble. So how do you stop the wink-and-nudge deal if a purely voluntary denial of fees is OK (which of course it is, absent state law to the contrary).
8.29.2008 2:58am
J. Aldridge:
I recall a Supreme Court holding that said the denial to "select" ones own counsel did not rise to the level to warrant a writ of error.
8.29.2008 3:13am
Eugene Volokh (www):
J. Aldridge: Do you suppose you could give some more details on your argument (and on any counterargument that the panel's opinion may offer)? My experience is that these general one-liners about what some anonymous person recalls don't tend to be very persuasive; nor do I see why they should be persuasive.
8.29.2008 3:28am
m.:
Fee advancement is often contractual between executives and companies. I'm not sure how it works in a partnership structure. But tvk's objection can be alleviated by executives negotiating fee advancement in their contracts -- a fairly likely outcome after this decision, since it is pretty common already.

a complicating point, clear in the KPMG decision, is that once an executive or partner is a subject of a DOJ investigation, relations between the company and the individual can become strained. The company decides to "clean house" or sue the employee for breach of contract. As a result, the company itself doesn't want to pay fees. After all, it certainly doesn't look good in front of shareholders. And so you see suits like this.
8.29.2008 3:29am
Avatar (mail):
It becomes difficult if the government can't "signal" that it would like the company to leave the employees/partners hanging, legal-representation-wise, because without that, it's much harder for the company to secure the "non-prosecution" agreement that shields it from the government.

If there's no explicit agreement between the government and the company that the company's role in the matter won't be pursued legally, then pulling the legal rug out from under key employees involved in the matter is a tremendously bad idea. The company stands to lose a lot if these employees present evidence or testimony that the company as a whole was complicit... whether it's factual or not. That's a lot more dangerous to the company.

But if the company does secure such an agreement, without an implicit agreement to remove the funding for the individuals' legal counsel, then... what's its incentive to do so? I suppose if the company was being completely supine, it could do it of its own volition... except in cases where it was contractually or legally obligated to provide such funding, anyway.

The moral, of course, is that it's essential to exhaustively document any dealings you have with any law enforcement official. Video, audio recordings, total preservation of any written records, DNA sample of saliva from the half-eaten donut, everything.
8.29.2008 3:57am
J. Aldridge:
Eugene: My argument is simply the act of government in this case is a separate issue from assistance of counsel under the sixth. If a defendant cannot afford a counsel of his choice or obtain funding for one, for whatever reason, he isn't being denied assistance to counsel under the 6th in light of the fact public defenders are available.
8.29.2008 4:16am
SKardner (mail):
I do not think that Stein can be generalized to abortion funding cases. Indeed, the Second Circuit panel made certain that its principles could barely be generalized to purely pre-indictment cases and, if so, only under the Fifth Amendment, a theory of unconstitutionality that was untouched in the opinion. (Or left solid, depending on your perspective.)

The funding here relates to funding a criminal defense. In the context of an investigation that switches over to prosecution before indictment is filed, a prosecutor hamstringing the defense by cutting off attorney's fees is egregious precisely because he knows the Sixth Amendment will not attach until indictment is filed, which he controls. The deliberate act to operate in a constitutional black hole is offensive to fair play.

That seems quite different than discouraging abortion funders from funding abortions. There is no trial. There is no impending indictment. There is no constitutional right whose applicability is purely within the control of a prosecutor who seeks to send you to trial on unfair terms. There is no prosecutor. There is no prospect of a life in prison. It also has nothing to do with the Sixth Amendment.
8.29.2008 4:59am
matthewh:
<i>Caplin &Drysdale v. U.S.</i>, 491 U.S. 617 (1989), should have resolved this case ("A defendant has no Sixth Amendment right to spend another person's money for services rendered by an attorney, even if those funds are the only way that that defendant will be able to retain the attorney of his choice.").

The Second Circuit responds that the government conceded that "it is in the government’s interest that every defendant receive the best possible representation he or she can obtain," and that blocking the employees from receiving funds from the firm was therefore purposeless.

I don't know why the government lawyers made this concession. It makes their bargain with the firm irrational. What other purpose could they possibly have been pursuing?

The government can have a legitimate interest in preventing people from exercising their constitutional rights. The government has a legitimate interest in getting criminals to confess, even though they have a constitutional right not to. Similarly, it seems evident that the government has a legitimate interest in depriving suspected criminals of the funds they might otherwise use to mount a defense; and, there's dicta in <i>Caplin</i> legitimating such a government interest.
8.29.2008 6:36am
PersonFromPorlock:
matthewh:

The government can have a legitimate interest in preventing people from exercising their constitutional rights.

Interest, yes; legitimate interest, no: it's one thing to persuade people not to exercise a right, quite another to prevent them from it. The latter is a crime under 18 USC 242.
8.29.2008 7:38am
Richard Aubrey (mail):
matthew
The government may have an interest, but do the citizenry?
Those are separate entities.
8.29.2008 8:08am
David M. Nieporent (www):
I recall a Supreme Court holding that said the denial to "select" ones own counsel did not rise to the level to warrant a writ of error.
I seem to recall U.S. v. Gonzalez-Lopez saying the opposite. (1)



(1) And now that I read the opinion, they cite the case.
8.29.2008 9:24am
zippypinhead:
Professor Volokh:

This issue, of course, is but one of the controversies surrounding the evoloution of the DOJ "Principles of Federal Prosecution of Business Organizations" over the years (e.g., the so-called Thompson Memo, McNulty Memo, etc.).

In fact, the exact issue was most recently addressed in yet another revision announced by DAG Mark Filip just yesterday. See Press Release here.

On the exact issue raised in this post, as stated in the press release, DOJ policy is now:
"The new Principles . . . instruct prosecutors not to consider a corporation’s advancement of attorneys’ fees to employees when evaluating cooperativeness. They also make clear that the mere participation in a joint defense agreement will not render a corporation ineligible for cooperation credit. In addition, the new guidance provides that prosecutors may not consider whether a corporation has sanctioned or retained culpable employees in evaluating whether to assign cooperation credit to the corporation."

Of some interest, the Principles are finally going to be formally incorporated into the U.S. Attorney's Manual.
8.29.2008 10:43am
zippypinhead:
For those interested in what the newly revised "Principles of Federeal Prosecution of Business Organizations" actually say, here's a link to the USAM version. See ¶9-28.730 for the discussion of the fee payment issue.

And here's the prepared text of the DAG's speech announcing the revision.
8.29.2008 10:58am
Yankev (mail):
Didn't either DOJ or the FBI get their hands slapped for using this same tactic in the prosecution of some AIPAC employees?
8.29.2008 11:00am
Oren:
This ruling is very confusing to me because it brings into question behavior that I thought was standard practice. For instance, suppose I'm a low level mob guy picked up for whacking some guy, it seems eminently reasonable for the government to offer me leniency in exchange for cooperation. In a literal sense, the government is coercing me to waive my 5A rights -- I must talk about my crimes or else I will be sent to jail for a long time.

In fact, according to this logic, every time a criminal defendant pleads to a lesser charge, you could argue that the prosecution coerced him into waiving his right to trial by threatening to try him on all those other counts.

Most likely I'm missing some important distinction here but I can't put my finger on it . . .
8.29.2008 11:26am
Houston Lawyer:
Corporations shouldn't be pressured to fire and cut off all funds to employees who are accused of criminal conduct. That constitutes punishment prior to conviction, the equivalent of a fine.

As is pointed out above, those Corporations should be free to fire and cut off all funds to such employees (subject to their contractual rights), but prosecutors shouldn't be allowed put a gun to their head to require it.
8.29.2008 11:50am
zippypinhead:
those Corporations should be free to fire and cut off all funds to such employees (subject to their contractual rights), but prosecutors shouldn't be allowed put a gun to their head to require it.
Um, prosecutors can't. Read the links in my posts above. Really, haven't been able to do so since the McNulty Memo came out in 2006. And certainly not in light of the revised Principals of Federal Prosecution of Business Organizations that have now been incorporated in the USAM.

While legal minds can differ about whether the Sixth Amendment really protects reimbursement of legal fees by one's employer, as a practical matter the issue raised in Stein is basically moot insofar as future Federal prosecutions are concerned. It's not gonna happen without solid evidence to believe that providing legal representation is in fact part of a scheme to obstruct justice (e.g., the old "nobody talks, everybody walks" scheme -- such as the Mob paying the hit man's legal fees to ensure he has counsel with an obvious conflict of interest who will prevent the individual from flipping and cooperating, even if that is in his best legal interest).
8.29.2008 12:11pm
Crafty Hunter (www):
What about the way prosecutors and cops routinely rob people at gunpoint of their assets, then dare them to prove they are innocent (of drug charges specifically) without the assets they need to pay their attorneys?
8.29.2008 12:13pm
David Schwartz (mail):
This is plain and simple incompetence and blatant stupidity on the part of the Prosecutors. Every first year law student knows that the government has a significant interest in ensuring every Defendant have the most qualified representation possible. These Prosecutors were completely rogue and idiotically operating against the interests of their employers and instead furthering their personal interests in successful (that is, resulting in conviction) prosecutions.

The decision is very well-argued, by the way. It's worth reading.
8.29.2008 12:51pm
Oren:

Every first year law student knows that the government has a significant interest in ensuring every Defendant have the most qualified representation possible.

This doesn't seem to be true. A mob-hired law firm might be more qualified than what a defendant can hire on his own but will almost certainly work contrary to the defendant's best interests (e.g. getting him to plead when he should roll over).
8.29.2008 1:09pm
m.:

Every first year law student knows that the government has a significant interest in ensuring every Defendant have the most qualified representation possible. These Prosecutors were completely rogue and idiotically operating against the interests of their employers and instead furthering their personal interests in successful (that is, resulting in conviction) prosecutions.


A first year law student would be one of the last people familiar with how this works in practice. And considering the Thompson memo, that first year law student would be deeply, deeply misguided.
8.29.2008 2:11pm
Tatil:
If the company is arguing that some managers were acting on their own while breaking the law without the knowledge of the rest of the company or the board, hence the company should not be punished harshly, how come it would want to pay for the legal representation of the same managers. It seems they want to have it both ways.

If some low level employee was accused of theft and the evidence seemed strong, he would be fired and would not be provided any legal or financial help.
8.29.2008 3:53pm
David Schwartz (mail):
Oren and m.: From the ruling: "The government conceded at oral argument that it is in the government’s interest that every defendant receive the best possible representation he or she can obtain." So the government, at least, agrees with me.
8.29.2008 4:10pm
David Schwartz (mail):
Oren and m.: From the ruling: "The government conceded at oral argument that it is in the government’s interest that every defendant receive the best possible representation he or she can obtain." So the government, at least, agrees with me.

Tatil: In the type of work they do, right at the edge of what is legal, criminal charges are an occupational hazard. It makes sense for a partnership to spread the risk as it spreads the profits of that risk.
8.29.2008 4:10pm
Oren:

The government conceded at oral argument that it is in the government’s interest that every defendant receive the best possible representation he or she can obtain.

cf

[SNIP] the government has a significant interest in ensuring every Defendant have the most qualified representation possible.

Those are not the same thing! A more qualified attorney that underhandedly represents your boss' interests is not really better than a less qualified attorney that actually has your best interests at heart.
8.29.2008 5:11pm
Oren:

If the company is arguing that some managers were acting on their own while breaking the law without the knowledge of the rest of the company or the board, hence the company should not be punished harshly, how come it would want to pay for the legal representation of the same managers. It seems they want to have it both ways.

Because it undercuts their case if the managers defend themselves by arguing that it was accepted company practice. They can't have that, so they need to make sure that their attorneys are directing the defense.

That said, they should bring the hammer down on KPMG now.
8.29.2008 5:20pm
David Schwartz (mail):
Oren: With respect to 'most qualified' versus 'best', I think they're essentially synonymous. The term 'most qualified' means able to give the best. Someone who could give better representation would be more qualified. Other than formal qualifications (like being a lawyer), the definition of a 'qualification' is whatever you need to do something.

An attorney who does not represent his client's interests is not qualified. He is lacking the 'represents his client's interests' qualification.

With respect to the issue of employees' defense undercut the company, obviously that's a possibility and a risk. However, I think the idea that shared risks should go with shared profits is at least as much of a factor.

The firm may suffer in many ways if its employees have poor representation. One of the key purposes of the representation was to avoid indictments.
8.29.2008 8:44pm
Oren:
David, that's a fairly tortured reading of the word qualified. At any rate, if we adopt your definition, than I think in many cases attorneys hired by the firm are unqualified to represent the employees. This is the archetypical such case -- the company claims the employees are 'rogue', the employees (if given the chance to testify honestly) will probably say that they operated under company guidance.

It is in everyone's best interest for the employees to turn state's.
8.30.2008 12:28pm