How to Properly Handle Witness Proffers in Criminal and Regulatory Investigations
When you think of Martha Stewart, do you think of cooking shows or white collar criminal cases? Martha Stewart’s case is one of the more infamous and recent to come to mind for most regulatory attorneys. Stewart participated in what’s known as a “proffer.” A proffer is a voluntary interview with government agents and prosecutors. In parallel criminal and regulatory investigations, representatives of both the Department of Justice (“DOJ”) and the applicable federal agency, such as the Securities and Exchange Commission (“SEC”), will usually be present at the proffer. Witness proffers are a critical piece for the government. Without them, the SEC and DOJ would have challenges obtaining information during criminal and regulatory investigations. Don’t fret! You will have your regulatory counsel present through the entire process.
Stewart was prosecuted, in part, for statements made during a proffer with government prosecutors and government agents. The case is summarized below:
The Charges (June 4, 2003):
- False statements to federal agents, 18 USC §1001 (2 counts)
- Obstruction of Justice
- Criminal Conspiracy
The Trial and Conviction:
- 5-week jury trial
- Conviction on March 10, 2004 on all 4 counts
- CNN legal analyst Jeffery Toobin:
“This was a total rout. The story she told investigators after she made a stock trade simply didn’t add up.”
- Stewart was sentenced in July 2004 to 5 months in federal prison and two years of supervised release, including five months of home confinement with electronic monitoring. She served her sentence at the women’s federal prison in Alderson, West Virginia.
What Stewart Should Have Done
- Refused to speak with the government and kept quiet, as she was the target of an insider trading investigation.
- Taken the 5th if compelled by subpoena to testify before a grand jury or under oath before the SEC.
- If determined to talk to the government (perhaps to try and protect her image), she simply had to tell the truth.
Learn from Martha’s mistakes! If you are involved in a criminal investigation, more than likely you are hoping for the best outcome possible. Cooperating with the government by participating in a witness proffer is one of the most effective ways to do it, so long as you are equipped with experienced regulatory counsel to guide you through this complicated process.
Proffers can be a beneficial method to help mitigate your case, but there are also many pitfalls associated with proffers if not handled correctly.
Preparation is the Key
I have been a white collar defense attorney for decades, and have dealt with hundreds of various cases involving proffers. These are my top five tips if you have received a witness proffer:
- Retain an experienced white-collar defense attorney.
- Your attorney should reach out to the government to learn as much as he or she can about the investigation, the areas of inquiry at the proffer, and the key documents.
- The government may or may not answer such questions.
- Carefully review the known facts of the case.
- Carefully review any relevant documents that you have access to.
- Then decide whether to participate in the proffer.
- Proffers with prosecutors and agents are, after all, voluntary.
Seek a “Proffer Agreement” (If Immunity Is Unavailable)
If your attorney is wise, the first agreement they should seek for their client is immunity from prosecution before an interview takes place. If immunity is not an option, and often it is not, then a written “proffer agreement” should be obtained, both from the DOJ and from any federal agency participating in the proffer.
A “proffer agreement” provides limited legal protections to an individual. If the government later prosecutes you, they cannot offer into evidence during their case-in-chief or at sentencing any statements you made during the proffer interview.
Now for the pitfalls — the legal protections are quite limited.
The government can use any information obtained from you during the proffer to pursue leads to other evidence and use such evidence in your potential prosecution.
For example, suppose you admit during the proffer that you embezzled $1 million from your company on a particular date and then deposited this money into your accounts at three different banks over the next few weeks. The DOJ or the federal agency can then subpoena the three banks for records of the relevant deposits into your accounts.
While the government cannot use your admission that you embezzled $1 million from your company as evidence, they can use the depository records of your accounts obtained from the three banks. These records establish that $1 million was deposited into those accounts shortly after the charged embezzlement.
It is critical to be mindful of making any contradictory statements on all parties involved in the proffer. You, your witnesses, and your attorney may be held liable for any contradictory statements if you are prosecuted by the government.
Also, the government can use false or inaccurate statements against you during the proffer in a prosecution for false statements, obstruction of justice, or perjury.
What to Do (and Not Do) During the Proffer
- Tell the truth.
- Tell only what you remember or know – it’s okay to say, “I don’t remember” or “I don’t know.”
- Ask for clarification of a question if needed.
- Talk to your attorney alone if you need to, such as when you are surprised by a question.
- Have your attorney end the proffer if you become uncomfortable.
- Overstate or exaggerate
- Keep silent if it may mislead the government
- Conceal or cover-up
Proffers Are Not Plea Negotiations or Settlement Discussions
The proffer is not considered a plea negotiation in a criminal investigation or a settlement discussion in a civil case. This provision in the proffer agreement is necessary because Federal Rule of Evidence 410(a)(4) provides as follows:
(a)Prohibited Uses. In a civil or criminal case, evidence of the following is not admissible against the defendant who . . . participated in the plea discussions:
(4) a statement made during plea discussions with an attorney for the prosecuting authority if the discussions did not result in a guilty plea or they resulted in a later-withdrawn guilty plea.
Moreover, Federal Rule of Criminal Procedure 11(f) provides that, “[t]he admissibility or inadmissibility of a plea, a plea discussion, and any related statement is governed by Federal Rule of Evidence 410.” Both Rules are mentioned explicitly in proffer agreements as not being applicable to the proffer.
As an alternative to your own proffer, your attorney can meet with the government without you present. The attorney proffer will occur before, but not as a replacement for your proffer.
- This will allow your attorney to present and often control the case overview while preventing you from making potentially prosecutable misstatements.
- The attorney can seek feedback from the government representatives on whether they believe what is being said is accurate. If the feedback is negative, you can refuse to go forward with your own proffer.
- Your attorney can ask the government the areas of inquiry and key documents which will be covered at your proffer.
- An attorney proffer will typically be followed by the client’s proffer in a matter of days or weeks.
Grand Jury Subpoenas
Unlike proffers, which, as noted, are voluntary, you can be compelled to appear before a grand jury by subpoena.
- If you are granted immunity, you will be required to testify concerning the facts you are questioned about at your grand jury appearance.
- If you are compelled to appear but not given immunity, and you have criminal exposure, you can invoke your 5th Amendment rights and refuse to answer the questions asked.
If you agree to a proffer with the government, you must be well prepared for it. During the proffer, follow the “Dos” and “Don’ts” discussed herein. Do not go to the proffer alone. Retain an experienced white collar defense attorney to prepare you and go with you to the proffer session.
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