April 30, 2012 Articles

The Benefits of a Miranda-Type Approach to Upjohn Warnings

Employees should know that lying during an internal investigation could result in criminal penalties, even if it causes the employees to be less forthcoming

by Sehyung Daniel Lee

Prosecutors have begun to charge corporate employees with obstruction of justice when an employee lies or tampers with evidence during an internal corporate investigation, even if no government investigation of the company is pending at the time. Because employees can now be charged with a crime that carries penalties including up to 20 years in prison, investigating attorneys may want to consider expanding the Upjohn warnings provided to corporate employees to include a warning derived from the criminal Miranda warning context, notifying them that lying or providing false documents in an internal investigation can lead to criminal punishment.

Following the seminal decision in Upjohn Co. v. United States, 449 U.S. 383 (1981), attorneys conducting internal corporate investigations typically provide certain warnings to corporate employees they interview, including that counsel is working for the employer, not the employee; the attorney-client privilege is in effect; and the privilege is held by the employer, and the employer alone can decide to waive it. In light of increasing prosecutions of employees, there are two good reasons why investigating counsel should now include a criminal Miranda-type warning to its Upjohn warnings: first, as matter of fairness to inform employees that they could be committing a crime; and, second, to prevent employees from muddying investigations by providing misinformation.

Although an investigating attorney would prefer candor when interviewing employees, if given the choice of hearing a lie or hearing nothing, most investigating attorneys will choose an employee's silence. Silence tells the investigating attorney that the employee thinks that he or she did something wrong, whereas a lie will waste time until the investigating attorney discovers that the employee is lying. Unfortunately, to prevent lying, investigating attorneys do not have a magic pen that will write the words "I must not tell lies" on an employee's hand. However, in light of these new prosecutions, investigating attorneys can warn employees of the criminal consequences of lying and prevent the introduction of misinformation into their investigation.

The Criminal Statute
The new prosecutions stem from 18 U.S.C. § 1519, which provides as follows:

Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

Courts have found that section 1519 applies in three scenarios: when there is a federal investigation, when the defendant anticipates there will be a pending federal investigation, or when there is no pending federal investigation. Therefore, whether there is a federal investigation pending is irrelevant to a section 1519 violation. Even where there is only an internal corporate investigation, a violation may arise where a defendant tampers with documents with the "intent to impede, obstruct, or influence" the investigation. United States v. Yielding, 657 F.3d 688 (8th Cir. 2011).

Although the statute was originally considered an anti-shredding statute, courts have recently interpreted section 1519 to include a wide range of conduct, including falsifying documents provided to the government during a kick-back investigation, id.; destroying computer records from a personal computer before the Federal Bureau of Investigation started its investigation, United States v. Kernell, No. 10-cr-6450, 2012 WL 255765, at *1 (6th Cir. Jan. 30, 2012); and throwing undersized fish overboard before the Coast Guard could inspect the fish, United States v. Yates, No. 2:10-cr-66, 2011 WL 344093, at *1 (M.D. Fla. Aug. 8, 2011).

A Second Circuit case illustrates how section 1519 could apply in the context of internal corporate investigations. In United States v. Gray, 642 F.3d 371 (2d Cir. 2011), one of the guards at a privately owned prison assaulted a prisoner, who was hospitalized for treatment of injuries in the assault. During an internal prison investigation, the other guards who witnessed the incident submitted false reports, stating that no force had been used on the prisoner. However, some of the guards had a change of heart and submitted new reports stating that force had been used. Several months later, Office of the Inspector General of the Department of Justice (DOJ) commenced a federal investigation of the incident. The guards who submitted false reports were eventually convicted of violating section 1519. The guards appealed, arguing that the statements they submitted did not violate section 1519 because they were employed by a private entity, not the government, and because there was no evidence that the guards knew or contemplated that their false reports would be submitted to the government during its investigation. The Second Circuit found that because the DOJ is charged with addressing allegations of excessive force, and the guards were aware of the DOJ policy of investigating charges of excessive force, the false reports were made in a matter "within the jurisdiction" of the federal department, and the court thus upheld the section 1519 convictions.

Prosecutors have also recently used section 1519 in a corporate setting to prosecute employees who destroyed records or lied to corporate counsel during an internal investigation before the government investigation began. In United States v. Ray, No. 2:08-cr-01443 (C.D. Cal. 2008), the defendant, a vice president (VP) of human resources, and the chief executive officer (CEO) lied and provided false reports to in-house counsel concerning the back-dating of stock options. Based on that information, the in-house counsel submitted reports to the Securities and Exchange Commission (SEC), which then conducted an investigation and discovered the two corporate officers' misrepresentations. The VP, who agreed to help the government and testify against the CEO, was charged with and pled guilty to conspiracy to violate section 1519. The CEO, on the other hand, was not charged with any counts related to section 1519.

As in the Gray matter, no federal investigation had begun when the VP in Ray made his false statements. In-house counsel was investigating because of the recent SEC practice of scrutinizing companies' stock option back-dating practices, as opposed to the company having been alerted to any suspected wrongdoing. To clearly implicate section 1519, the plea agreement specifically noted that the VP was aware that the SEC was investigating corporate stock option back-dating practices, thus placing the issue within the jurisdiction of a federal agency. However, the prosecutors also expanded section 1519 to apply to the VP's false statements to in-house counsel, in addition to his submission of false reports. The VP received three years of probation and a $10,000 fine.

In another recent prosecution, United States v. Carson, No. 8:09-cr-00077 (C.D. Cal. 2009), the defendant was accused of violating section 1519 by tearing up documents and flushing them down the toilet before her meeting with in-house counsel concerning a bribery investigation. However, the government later filed an ex parte application to dismiss the count, the sole reason being that the dismissal would be "in the interests of justice."

Although the defendant in Ray pleaded guilty to conspiracy to violate section 1519 and although the section 1519 charge in Carson was dismissed, employees should be aware that lying to in-house counsel during the course of an internal investigation could result in criminal prosecution. Inevitably, this will place some employees between a rock and a hard place. Assuming that an employee did something wrong, if he or she keeps quiet or refuses to cooperate, the employee could be fired by the company for impeding an internal investigation. However, if the employee lies to the investigating attorney to save his or her job, he or she can now face criminal punishment, including jail time. Therefore, the best time to warn an employee of the consequences of lying would be before the employee has an opportunity to lie—namely, at the beginning of the employee interview.

The Limitations of an Upjohn Warning
When a company suspects that it might have committed wrongdoing, it will usually ask its in-house counsel, or hire outside counsel, to conduct an internal investigation of the matter. During the course of an internal investigation, employees are interviewed to determine whether the company committed wrongdoing and, if so, the potential ramifications. If a company determines that it is in its own best interest to release the employee interviews to the government, companies can and will release the interviews, even if it will be to the detriment of the employee.

In order for the company to release employee interviews to the government, the company must have the right to do so. In other words, if the conversations between an employee and counsel are protected by attorney-client privilege but the company is the client, the company can release the employee's interview to the government. However, if the employee is the attorney's client, counsel must not release the interview to the government without the employee's consent.

Under Upjohn, investigating counsel will give warnings to employees so that the company will have the right to release its employees' interviews. According to the American Bar Association, it is recommended that counsel give the Upjohn warnings at the outset of the employee interview, with the minimum warnings that (1) counsel is retained by the company, not the employee; (2) the attorney-client privilege is in effect; and (3) the privilege is held by the company, which alone can decide to waive it. See ABA WCCC Working Group, Upjohn Warnings: Recommended Best Practices When Corporate Counsel Interacts with Corporate Employees [PDF] (July 17, 2009). These warnings do not address potential criminal liability.

The Proposed Solution: A Miranda-Type Warning
Notably absent in the ABA-suggested Upjohn warnings is the Miranda-type warning of the right to remain silent and that anything the person says or does can and will be used against that person in a court of law. In the past, a Miranda-type warning in corporate investigations was usually unnecessary because the purpose of the Upjohn warnings was to inform an employee that although the employee interview would be protected under attorney-client privilege, the investigating attorney did not represent the employee. In fairness, the Upjohn warnings also made sure that an employee would understand the reason for the warning, that the company held the attorney-client privilege, and that it was the company's choice whether to disclose the employee's interview. In this way, the employee can make an informed decision on what to disclose to the investigating attorney.

In light of recent prosecutions under section 1519 for lying to an investigating attorney, a natural extension of the Upjohn warnings would be to include a Miranda-type warning that would inform the employee of the potential criminal consequences for lying to the internal investigator, and allow the employee to make an informed decision on the nature and accuracy of information he or she will provide to the investigating attorney.

However, repeating the entire criminal Miranda warning verbatim to give the employee notice would be counterproductive. The stigma of a complete Miranda warning is more likely to instill unnecessary fear and suspicion, both of which would hamper an internal investigation. Rather, a mere instruction that making false statements during the interview or producing falsified documents could result in criminal prosecution should suffice.

Obviously, adding a Miranda-type warning to the Upjohn warnings might cause employees to be less candid. However, an employee who has nothing to fear will probably tell the truth (as do most innocent people when given the Miranda warning), and employees who have done something wrong might be less willing to lie to cover up their tracks. By being placed on notice that lying to the investigating attorney could result in criminal prosecution, the employee now has more reason to remain silent than to lie. If an employee chooses to remain silent, the investigating attorney can infer that the employee believes he or she has done something wrong, rather than having to come to this conclusion weeks or months later after following up on bad information.

Although there is not yet a plethora of prosecutions against employees under section 1519 for lying during an internal investigation prior to government involvement, employees should be made aware that their lies during an internal investigation could result in criminal penalties. This will allow employees to make informed decisions on what to disclose. Although this additional warning may cause employees to be less forthcoming during an interview with investigating counsel, it may also ensure that the information provided by employees to investigating counsel is truthful and accurate.

Keywords: litigation, commercial, business, Miranda rights, Upjohn warnings, attorney-client privilege

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