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Theranos Offers Defense Lessons For Multi-Agency Probes

Recent headlines about the discovery dispute in the criminal case against Elizabeth Holmes and Theranos Inc. are a reminder of strategic considerations for defense counsel when multiple agencies participated in the investigation of the defendant.

Two prominent decisions from 2012 seemed to serve as warning shots to federal prosecutors that when they cooperate with other agencies in a criminal investigation they must, generally, seek discoverable evidence from the other agencies.

During the prosecution of Rajat Gupta in 2012, U.S. District Judge Jed Rakoff wrote that federal prosecutors may choose to cooperate in an investigation with the U.S. Securities and Exchange Commission, but it makes "no sense at all" that prosecutors can then "disclaim such cooperation to avoid their respective discovery obligations."[1]

Later that year, the U.S. Court of Appeals for the Second Circuit in United States v. Mahaffy reversed a conviction based on the prosecutors' failure to turn over SEC deposition transcripts because "[t]he prosecutions were products of close collaboration between the United States Attorney's Office and the SEC."[2]

Despite the precedents in Gupta and Mahaffy, federal prosecutors today often narrowly define the "prosecution team" for purposes of discovery and decline to seek discoverable material at agencies with which they investigated the case. Indeed, just last year in the Holmes and Theranos case — recently rescheduled for trial in October — prosecutors sought to avoid producing documents from the U.S. Food and Drug Administration (which also investigated the case) by arguing that "the federal government is not a monolith" and "is comprised of numerous agencies and components, each of which has its own independent mission and a significant degree of autonomy over its records and resources."[3]

What should criminal defense lawyers do when federal prosecutors decline to produce evidence from other agencies after a joint or parallel investigation, setting up a potentially lengthy and expensive discovery fight? And what if the different agencies are not just components of the federal government, but agencies of a different country?

In this article, we suggest that defense counsel consider, early in the case, asking the court for exculpatory evidence orders that define the agencies from which prosecutors must provide discovery. Federal prosecutors inevitably know better than defense counsel who participated in the investigation. A clear exculpatory evidence order both identifies the investigating agencies and helps avoid a protracted discovery dispute.

 

Litigating Prosecutors' Discovery Obligations in Multi-Agency Cases: A Costly Distraction

Litigating federal prosecutors' duty to disclose other-agency documents can be a time-consuming and expensive process. Two legal standards have emerged in the United States for federal courts to assess whether prosecutors must disclose evidence from an agency that investigated a crime together with their office.[4]

Courts following the so-called prosecution team concept require that prosecutors seek exculpatory evidence from government actors — including federal, state and local law enforcement[5] — who actually participated in the prosecution and investigation of the defendant.[6]

Courts following the knowledge-and-access standard hold that prosecutors must seek evidence held by any government agency if the prosecutors have knowledge of, and access to, the information.[7]

Under this standard, the fact that another agency actually participated in the investigation and prosecution is sufficient but not necessary. If prosecutors know of, and have access to relevant evidence at another agency, they must review that evidence for discoverable information regardless of whether the other agency participated in the investigation.

A key factor in determining whether prosecutors have knowledge or access is the level of cooperation between the prosecutors and the other agency, i.e., whether there was a joint investigation or merely a parallel one.[8] Whether a joint investigation will be found turns on the degree of cooperation, especially whether the agencies engaged in joint fact-gathering such as "coordination in conducting witness interviews and otherwise investigating the facts of the case."[9]

Both legal standards contain enough wiggle room to set defense counsel up for a long and expensive fight. Prosecutors often take a narrow view of concepts such as "prosecution team," "joint investigation," and "knowledge and access." Defense counsel are often in the dark about which agencies participated in the investigation of the defendant[10] and therefore lack the means to test — or reliably credit — the assertions of their litigation opponent.

In the Theranos case, federal prosecutors argued they lacked access to documents from the FDA and the Centers for Medicare & Medicaid Services,[11] even though:

  • A special agent from FDA was on the prosecution team;
  • CMS used the prosecutors' litigation platform;
  • The FDA had granted numerous prosecutor requests for documents, including nonpublic documents and interview memos;
  • The prosecutors had issued a litigation hold to both agencies; and
  • The prosecutors had documents from both agencies on their exhibit list.[12]

Based on these factors the court ultimately found that the government had knowledge of, and access to, the documents at issue and granted the defense motion to compel. By that time, defense counsel had spent valuable resources litigating the issue without resolution for at least seven months.

 

Litigating Criminal Discovery Internationally: Even More Issues to Navigate

Disputes in this area are likely to be even more difficult and protracted when the other agency is not within the federal government, or even within the country, but rather a component of a foreign government.

Given foreign sovereignty concerns, courts typically require only that federal prosecutors request, as opposed to obtain, exculpatory information from a foreign sovereign, and only mandate such a request when federal prosecutors engaged in a joint — not parallel — investigation with the foreign agency.[13]

And defendants may have jurisdictional reasons for not wanting to deal directly with foreign governments investigating a crime, such as concerns over taking action that could be construed as acceding to jurisdiction or service.

The authors dealt with such a situation in their representation of Richard Usher, a British foreign exchange trader acquitted of an antitrust conspiracy to fix prices through participation in an online chatroom with counterparties at competing banks.

A full two years before trial we sought statements that the government's star witness — one of the members of the defendants' online chatroom who cooperated under an immunity deal — had made to foreign regulatory authorities.

The government declined to provide these statements, claiming it had only discussed timing and other procedural matters with the foreign agencies, and we moved to compel.[14]

Eventually — after months of litigating and waiting — we obtained the statements, some of which included useful information for our defense at trial. But, again, we spent valuable time and effort on this issue; indeed, some of the statements we did not obtain until the eve of trial, and not from the prosecutors but from the cooperator's counsel.

 

Effective Defense Tactics Include Informal Requests to the Other Agency, and Exculpatory Evidence Orders

The most effective strategy for avoiding a protracted discovery dispute in a multi-agency criminal investigation will vary by case. Defense counsel should attempt formal and informal requests to the prosecutors — and, if possible, to the other agencies at issue. If such efforts fall short, a motion to compel may be necessary.

In some instances, direct requests to the other agency may speed the resolution of a motion to compel. In a case one of the authors handled, the local SEC office started an investigation that the U.S. Department of Justice prosecutors asked to join.

The two offices conducted joint interviews, and the SEC subpoenaed documents that it made available to DOJ. The DOJ prosecutors copied about one-third of the documents to treat as evidence before the grand jury. The DOJ prosecutors at first sent a discovery letter that did not mention the uncopied remainder of materials at the SEC, and denied the investigation with the SEC had been joint.

We contacted the SEC directly, which candidly described the joint fact-gathering the two agencies had conducted. Based in large part on the SEC's disclosure and affidavits filed in court, the prosecutors eventually disclosed the uncopied SEC materials without any need for the court to decide a pending motion to compel.

Counsel should also determine whether the judge might be amenable to issuing a so-called exculpatory evidence order that spells out the agencies from which prosecutors must seek discoverable evidence under Rule 16 and Brady. U.S. District Judge Emmet Sullivan of the U.S. District Court for the District of Columbia has called on his "judicial colleagues on every trial court everywhere ... to consider entering an exculpatory evidence order at the outset of every criminal case."[15]

In some jurisdictions, such a case-specific exculpatory evidence order would act as a needed supplement to more general standing orders addressing the timing and disclosure of exculpatory evidence by federal prosecutors.

For instance, Local Rule 116.2 of the federal District of Massachusetts includes a rule addressing the timing and content of the government's disclosure of exculpatory evidence. The federal rule in Massachusetts, however, does not explicitly address the sources from which prosecutors must search for discoverable information. Other jurisdictions lack a standing order, making a case-specific order even more useful.

Early efforts to obtain an exculpatory evidence order defining the agencies from which prosecutors must seek exculpatory evidence may offer several advantages. An order from a judge may provide more comfort to defense counsel than deferring to adversarial prosecutors. Briefing such an order may also provide valuable "free discovery" to the defense about which agencies participated in the investigation of the defendant.

Most importantly, seeking an exculpatory evidence order early in the process may save defense counsel valuable time that counsel would otherwise spend litigating a discovery issue. Judges, who often dislike becoming embroiled in discovery issues between the parties, may appreciate an early effort to set the rules of the road for the prosecutors' disclosure of exculpatory evidence in the case.

At least one multi-agency criminal case provides an example. In United States v. Cerna, a gang-related Racketeer Influenced and Corrupt Organizations Act prosecution, prosecutors issued press releases before trial indicating they had worked with eight different federal, state, and local agencies on the investigation.

Five months after the indictment issued, prosecutors filed a notice of agency preemptively announcing they considered "only Immigration and Customs Enforcement and the Federal Bureau of Investigation to be [their] 'agents' for purposes of Brady v. Maryland, 373 U.S. 83 (1963))."[16] Defense counsel disagreed and moved to enforce Brady.[17]

The defense noted in particular that the government intended to use inculpatory evidence from these agencies while at the same time denying the agencies were subject to Brady.[18] The court agreed, at least in part, with the defense and ordered that certain additional agencies constituted the prosecutors' agents for purposes of Brady.[19] The order also provided a pretrial disclosure schedule for non-Jencks Brady material.[20]

The idea of seeking an exculpatory evidence order in cases where the other agency is a component of a foreign government appears to be somewhat novel; we are not aware of cases in which defense counsel have sought such orders.

Given the subjective joint investigation standard that courts apply to foreign-agency criminal discovery scenarios, though, such cases may be well suited to the issuance of exculpatory evidence orders. Whether an investigation with another agency was joint or merely parallel is, in many cases, in the eye of the beholder.

Clear guidance from the court in such cases can assist the parties in focusing on the issues that matter in the months leading up to trial.

 

[1] United States v. Gupta , 848 F. Supp. 2d 491, 492 (S.D.N.Y. 2012) (ordering federal prosecutors to produce materials in the SEC's possession).
[2] United States v. Mahaffy , 693 F.3d 113 (2d Cir. 2012) (vacating convictions for Brady violation based on SEC deposition transcripts).
[3] United States' Opp'n to Defs.' Mot. to Compel, United States v. Holmes, No. 18-cr-00258 (N.D. Cal. June 12, 2019), ECF No. 79.
[4] The two standards apply to both the disclosure of relevant evidence pursuant to Federal Rule of Criminal Procedure 16(a)(1)(E) and the disclosure of material exculpatory evidence under Brady v. Maryland , 373 U.S. 83 (1963), and its progeny. Broadly speaking, Rule 16 provides a lower threshold for production (materiality only) but is limited to certain specified types of evidence; the due process rule of Brady and its progeny provides a higher threshold for production (material exculpatory evidence) but is not limited by type.
[5] See U.S. Dep't of Justice, Justice Manual §9-5.001, available at https://www.justice.gov/jm/jm-9-5000-issues-related-trials-and-other-court-proceedings.
[6] See, e.g., United States v. Meros , 866 F.2d 1304, 1309 (11th Cir. 1989) (quoting United States v. Antone , 603 F.2d 566, 569 (5th Cir. 1979)) (rejecting Brady claim regarding evidence in possession of federal prosecutors in two other jurisdictions, in part because two other jurisdictions were not part of the "prosecution team"); United States v. Morris , 80 F.3d 1151, 1169 (7th Cir. 1996) (rejecting Brady claim regarding evidence held by the SEC and other agencies because prosecutors were unaware of the information and those agencies were not on the "prosecution team").
[7] See, e.g., United States v. Santiago , 46 F.3d 885, 894 (9th Cir. 1995) (finding that federal prosecutors had knowledge of and access to Bureau of Prisons documents even though Bureau did not participate in the investigation of defendant); United States v. Bryan , 868 F.2d 1032, 1036 (9th Cir. 1989) (remanding for a determination of whether out-of-district documents seized pursuant to a nationwide investigation were documents the prosecutors had knowledge of and access to).
[8] See United States v. Upton , 856 F. Supp. 727, 749-50 (E.D.N.Y. 1994) (citing Bryan, 868 F.2d 1032 at 1036) ("The inquiry is not whether the United States Attorney's Office physically possesses the discovery material; the inquiry is the extent to which there was a 'joint investigation' with another agency.").
[9] United States v. Martoma , 990 F. Supp. 2d 458, 462 (S.D.N.Y. Jan. 5, 2014) (prosecutors not obliged to seek Brady materials from SEC, Commodity Futures Exchange Commission, or New York Department of Financial Services because prosecutors did not engage in joint fact-gathering with those agencies) ; see also Gupta, 848 F. Supp. 2d at 494.
[10] A criminal complaint or a press release may offer clues, but generally not the complete picture.
[11] See Joint Status Mem. at 1-2, Holmes, No. 18-cr-00258 (N.D. Cal. Oct. 13, 2019), ECF No. 170 (government arguing that "[t]he problem with Defendants' motion is that it seeks an order from the Court compelling the prosecution to produce the requested documents.").
[12] See Order Granting Mot. to Compel, Holmes, No. 18-cr-00258 (N.D. Cal. Nov. 5, 2019), ECF No. 174.
[13] See United States v. Connolly , No. 1:16-cr-00370 (CM), 2017 U.S. Dist. LEXIS 36759, at *23-24 (S.D.N.Y. March 2, 2017).
[14] See Letter from Defense Counsel to Hon. R. Berman, United States v. Usher et al., No. 17-cr-19 (S.D.N.Y. Nov. 16, 2017), ECF No. 61.
[15] Transcript of Record at 8, United States v. Stevens , No. 08-cr-231, 2009 WL 6525926 (D.D.C. Apr. 7, 2009). Judge Sullivan said this in the context of the overturning of the conviction of late Senator Ted Stevens, a case in which the government committed serious discovery violations unrelated to the multi-agency issue.
[16] Notice of Agency, United States v. Cerna et al., No. 3:08-cr-00730-WHA (N.D. Cal. Mar. 20, 2009), ECF No. 266.
[17] Motion to Enforce, Cerna, No. 3:08-cr-00730-WHA (N.D. Cal. May 12, 2009), ECF No. 315.
[18] See id.
[19] See Ruling on Defense Motions to Enforce Brady and Case Management Order Re Timetable for Brady Disclosures and Request for Comment, Cerna, No. 3:08-cr-00730-WHA (N.D. Cal. June 26, 2009), ECF No. 403.
[20] See id.

 

This article was published by Law360 last May 11, 2020.

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