September 01, 2014

Navigating the Government’s Use of Parallel Proceedings

An examination of what the government can and can't do when simultaneously pursuing civil and criminal cases against the same defendant.

Patricia M. Sulzbach

When the government initiates “parallel proceedings,” both criminal and civil cases or investigations are in progress at the same time. The government does not have to disclose that a parallel proceeding is under way, and it can use enforcement mechanisms to its advantage across a wide array of cases. Recent developments demonstrate that government agencies will be using parallel proceedings more frequently and more aggressively, and companies facing a governmental investigation must be aware of the possibility of—and unique dangers associated with—parallel proceedings. Understanding these risks can better protect targets facing parallel proceedings and help reduce the dangers associated with these tricky situations.

The 2006 case of United States v. Stringer poignantly highlights the risks associated with parallel proceedings. See 408 F. Supp. 2d 1083 (D. Or. 2006).Stringer began when the Securities and Exchange Commission (SEC) started investigating FLIR Systems, Inc., a thermal imaging company. A short time later, the SEC met with prosecutors from the U.S. attorney’s office, who quickly initiated a parallel criminal investigation.

The U.S. attorney did not disclose its parallel criminal investigation for almost a year. Instead, it relied on the expanded scope of discovery in the SEC civil case to obtain statements and information from the defendants. But the U.S. attorney was actively involved behind the scenes. Prosecutors instructed SEC attorneys on how to establish a record sufficient to support a criminal false statements charge, and the SEC took its depositions in Oregon—despite it being an inconvenient location for the SEC—to provide a better venue to prosecute a false statements case. The SEC shared documents and information with the U.S. attorney, and an SEC attorney even directed a court reporter not to tell FLIR’s defense counsel that a criminal prosecutor was assigned to the case.

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