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Judge Rules On The Intersection Of Corporate DPA Provisions And Individual Defendant Rights

Judicial Decision

This recent post summarized the decision by a judge to deny Roger Ng’s (a former Goldman Sachs executive) motion to dismiss including how the judge concluded that the FCPA’s internal controls provisions can be implicated even in transactions in which an issuer does not use its own assets to pay an alleged bribe.

In his motion to dismiss, Ng also pointed to certain aspects of the deferred prosecution agreement between the DOJ and Goldman (see here in for the prior post) as compromising his defense. However, in her decision, U.S. District Court Judge Margo Brodie (E.D.N.Y) also denied Ng’s motion on these grounds.

Given that the motion to dismiss stage is deferential to the prosecution, Judge Brodie’s decision on these issues was not a huge surprise.

Nevertheless, these aspects of Judge Brodie’s decision are worthy of exploring because various aspects of corporate DPAs (or NPAs) in the Foreign Corrupt Practices Act context are rarely litigated because: (1) the DOJ does not charge individuals in connection with approximately 75% of corporate actions; and (2) even in those instances in which the DOJ does charge an individual in connection with a corporate action, the individual frequently pleads guilty without mounting a defense.

Judge Brodie framed the first issue as follows (various internal citations omitted):

“Ng requests that the Court modify the Silence Provision [set forth below in more detail] “so that it specifically does not apply in the case against Ng,” because it “interfere[s] substantially with . . . witness’s ‘free and unhampered choice’ to testify” and violates Ng’s fundamental right to “establish a defense by presenting witnesses,” In support, Ng argues that (1) the Government’s threat to prosecute the Goldman Sachs Group for any statements made in contradiction of the DPA will prevent witnesses from coming forward with information that may be in Ng’s interest, and (2) Ng will be unable to “fully defend” against Count Two because he will need to call members of Goldman’s Firmwide Capital Committee, Business Integrity Group, and compliance department to testify about Goldman’s internal accounting controls. In response to the Government’s analysis under the witness-intimidation three-prong test in defense of these arguments, Ng asserts — without providing an alternate standard — that it is “remarkable” that the Government asks the Court to use the standard of criminal witness intimidation. Ng argues that even under that test, the DPA violates his constitutional rights because (1) the DPA will prevent Ng from calling certain Goldman-affiliated witnesses to defend against Count Two, (2) the Government acted in “bad faith” by shielding facts “with a [S]ilence [P]rovision that will prevent the truth from coming out at Ng’s criminal trial,” stating contradictory facts in the DPA, and refusing to provide “Ng with the exculpatory witnesses and materials that [the] Goldman [Sachs Group] provided to the Government as part of their DPA negotiations,” and (3) while cross-examination of Goldman’s witnesses will be able to “demonstrate how the [S]ilence [P]rovision has biased their testimony, this inquiry will be insufficient to establish the true nature of [the Goldman Sachs Group’s] internal controls” and “the jury will still not hear the underlying, exculpating truth.”

The Government argues that Ng has not met his burden to prove witness intimidation by “making a three-part showing of ‘materiality, bad faith, and lack of fundamental fairness.’” In support, the Government asserts that (1) Ng fails to show that material and exculpatory evidence from witnesses could not reasonably be obtained by other means as Ng already has access to the evidence he deems exculpatory, “the DPA binds [the] Goldman [Sachs Group] itself, and not any of its employees,” and Ng merely “speculates that certain witnesses might be disinclined to offer certain testimony,” (2) the Government did not act in bad faith as any concern can be “aired on cross-examination” and the DPA is “a standard agreement with a corporate entity,” and (3) Ng cannot demonstrate an absence of fundamental fairness that would prejudice him at trial as he can probe witnesses about their knowledge of the DPA and the Silence Provision.

The Silence Provision of the DPA provides that: [The Goldman Sachs Group] expressly agrees that it shall not, through present or future attorneys, officers, directors, employees, agents or any other person authorized to speak for [the Goldman Sachs Group], make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by [the Goldman Sachs Group] set forth above or the facts described in the Statement of Facts. Any such contradictory statement shall, subject to cure rights of [the Goldman Sachs Group] described below, constitute a breach of this [DPA], and [the Goldman Sachs Group] thereafter shall be subject to prosecution as set forth in Paragraphs 17–20 of this [DPA]. The decision whether any public statement by any such person contradicting a fact contained in the Statement of Facts will be imputed to [the Goldman Sachs Group] for the purpose of determining whether it has breached this [DPA] shall be at the sole discretion of the Offices. If the Offices determine that a public statement by any such person contradicts in whole or in part a statement contained in the Statement of Facts, the [o]ffices shall so notify [the Goldman Sachs Group], and [the Goldman Sachs Group] may avoid a breach of this [DPA] by publicly repudiating such statement(s) within five business days after notification. [The Goldman Sachs Group] shall be permitted to raise defenses and to assert affirmative claims in other proceedings relating to the matters set forth in the Statement of Facts provided that such defenses and claims do not contradict, in whole or in part, a statement contained in the Statement of Facts. This Paragraph does not apply to any statement made by any present or former officer, director, employee, or agent of [the Goldman Sachs Group] in the course of any criminal, regulatory, or civil case initiated against such individual, unless such individual is speaking on behalf of [the Goldman Sachs Group].”

Judge Brodie concluded:

“Ng fails to satisfy the three prongs to prove witness intimidation. First, Ng fails to show that “he was deprived of material and exculpatory evidence that could not be reasonably obtained by other means,” as his asserted deprivations are entirely speculative — the trial is yet to occur and Ng has not shown that he attempted to seek witnesses who indicated their refusal to testify.  Contrary to Ng’s arguments that it is “possibl[e] the employee himself[] could be . . . charged with a crime by the Government,” the Silence Provision only binds the Goldman Sachs Group and does not control the behavior of individual employees.

Second, Ng fails to show “bad faith on the part of the [G]overnment,” and merely speculates that the DPA will encourage untruthful testimony at trial, which is insufficient. The Silence Provision contains standard language that is routinely included in DPAs with corporate entities and there is no evidence that the Government entered into the DPA with the Goldman Sachs Group for reasons other than “resolv[ing] [the Goldman Sachs Group’s] criminal exposure for its role in the criminal conduct detailed in the Indictment.

Third, Ng fails to show that “the absence of fundamental fairness infected the trial,” as a trial is yet to begin. Thus, Ng fails to satisfy the three prongs to prove witness intimidation.

Even if the Court reviewed Ng’s claims without the Williams test, he nevertheless fails to show that the Silence Provision is unconstitutional. Indeed, at least one court has upheld a similar DPA provision. See United States v. Stein, No. 05-CR-888, 2006 WL 1063295, at *2 (S.D.N.Y. Apr. 5, 2006). In Stein, the defendant asserted that the government’s DPA with a corporation “constitute[d] prosecutorial misconduct and deprive[d] [the defendant] of rights under the Fifth and Sixth Amendments” and alleged that the provisions of the DPA that prohibited the corporation’s affiliates from making statements contradictory to the statement of facts would “[force] [the corporation’s]-affiliated witnesses to sing out of the government’s hymn book, regardless of the facts and their personal beliefs.” In denying the defendant’s motion to dismiss, the court found that the government had a “legitimate interest” in making sure that the corporation did not gain the benefits of a deferred prosecution, while simultaneously being able to make statements that lessened its culpability; noted that there was “no basis to suppose that the DPA provisions . . . [would] be used to retaliate against [the corporation] should any of its employees cooperate with the defense in any appropriate way”; and classified any concern about a chilling effect on the corporation’s employees as “speculative.” The Court is guided by the analysis in Stein and for similar reasons, is unpersuaded by Ng’s contention that the DPA will cause witness intimidation.

Accordingly, the Court finds that the Silence Provision does not violate Ng’s constitutional rights and declines to modify [the relevant portion] of the DPA.”

As to a second issue raised in Ng’s motion to dismiss, Judge Brodie framed the issue as follows (various internal citations omitted):

“Ng requests that the Court modify the Witness Provision “to require [the] Goldman [Sachs Group] to make its employees available as defense witnesses to the same degree it makes its employees . . . available to the Government” because “the Government controls which, if any, Goldman employees will be trial witnesses” and “many of the key trial witnesses are foreign nationals who live and work in Southeast Asia and are therefore beyond this Court’s subpoena power.” In support, Ng argues that (1) “[w]hile the Government has unfettered access to these foreign witnesses, Ng does not,” (2) “the Government will not only be able to choose which Goldman witnesses will testify at trial but also control what these witnesses will say at trial,” (3) Ng’s “counsel is not able to travel to Malaysia to interview potential witnesses because of the country’s [COVID]-19 restrictions,” and (4) Ng “does not have the might of a DPA behind him to require Goldman’s foreign witnesses to travel to the United States and testify in the Eastern District of New York in his defense” and that “[t]his reality has [c]onstitutional consequences.”

The Government contends that Ng’s request fails because he “has tools available to him to compel witnesses to provide trial testimony, whether located in the United States or abroad” and “[h]e does not argue that those tools are insufficient.”  The Government further asserts that Ng “does not explain or cite any authority supporting his position that the Constitution requires that he and the [G]overnment have equal investigative or trial-related means to obtain evidence” and that “to the extent that [Ng] appears to rest his claim on Williams and similar cases, his claim[] fails for substantially the same reasons” as the Silence Provision claim.”

Judge Brodie stated and ruled (various internal citations omitted).

“Rule 17 of the Federal Rules of Criminal Procedure governs the issuance of subpoenas and states that the subpoena of a witness in a foreign country is governed by the Walsh Act, 28 U.S.C. § 1783. Fed. R. Crim. P. 17(e)(2). The Walsh Act authorizes courts to issue a subpoena to “a national or resident of the United States who is in a foreign country.” However, the Walsh Act “does not authorize issuance of a subpoena” to a foreign national who resides abroad.  “[T]he Sixth Amendment can give the right to compulsory process only where it is within the power of the federal government to provide it.” “Otherwise, any defendant could forestall trial simply by specifying that a certain person living where he could not be forced to come to this country was required as a witness in his favor.”

In addition to Rule 17 subpoena process, Rule 15 of the Federal Rules of Criminal Procedure “permits a witness to be deposed under ‘exceptional circumstances’ in order ‘to preserve testimony for trial.’” “Rule [15] is generally used when a witness may not be available to testify at trial, not simply when it would be burdensome or inconvenient for the witness to appear.” A movant “must show that (1) the prospective witness is unavailable for trial, (2) the witness’ testimony is material, and (3) the testimony is necessary to prevent a failure of justice.” “Foreign witnesses who are not subject to the government’s subpoena power and, despite the moving party’s appropriate efforts, refuse to travel to this country to testify are routinely found unavailable.”

Under paragraph 5(c) of the DPA, the Goldman Sachs Group is obligated to: use its best efforts to make available for interviews or testimony, as requested by the [o]ffices, present or former officers, directors, employees, agents and consultants of [the Goldman Sachs Group]. This obligation includes, but is not limited to, sworn testimony before a federal grand jury, in federal trials or at any other proceeding, all meetings requested by the [o]ffices, and interviews with domestic or foreign law enforcement and regulatory authorities. (DPA ¶ 5(c).) The Witness Provision contains standard language that is routinely included in prosecution agreements. Plea agreements, cooperation agreements, non-prosecution agreements, and DPAs, which are integral to the justice system, often include clauses that require cooperation with government investigations. These agreements with private parties often provide the Government with easier access to obtaining evidence but do not preclude the defense from obtaining such evidence. Ng requests that the Court modify the Witness Provision — an agreement between the Government and the Goldman Sachs Group — “to require [the Goldman Sachs Group] to make its employees available as defense witnesses to the same degree it makes its employees . . . available to the Government,” but fails to cite any case in support of his position that the Court has the authority — outside of its subpoena powers — to direct a third party private entity to provide its employees to the defense, and the Court finds none.

The Witness Provision does not prevent Ng from obtaining information via traditional means, including requesting a Rule 15 deposition or Rule 17 subpoena. Although Ng argues that “many of the key trial witnesses are foreign nationals who live and work in Southeast Asia and are therefore beyond this Court’s subpoena power,” Ng has not alleged that he sought their depositions pursuant to Rule 15. Indeed, courts routinely grant depositions pursuant to Rule 15 where a witness is a not a United States citizen and resides outside the country.

To the extent that the COVID-19 pandemic may limit Ng’s ability to confer with potential witnesses in-person, such circumstances are beyond the control of the Government and the Court and is not a violation of his constitutional rights. While the Court recognizes the impact of COVID-19 in restricting in-person contact and proceedings, Ng’s counsel can conduct informational interviews via telephone or video conferences which are generally sufficient, even if not perfect.

Thus, the Court’s inability to compel foreign nationals to testify at Ng’s trial is not a violation of his constitutional rights.

Accordingly, the Court finds that the Witness Provision does not violate Ng’s constitutional rights and declines to modify paragraph 5(c) of the DPA.”

In his motion to dismiss brief, Ng also suggested that the DOJ scripted co-defendant Tim Leissner’s guilty plea.

Judge Brodie framed the issues as follows (various internal citations omitted):

“Ng argues that due process entitles him to know whether the Government had “any involvement in or supervision of the statement that Leissner made to the Court” during his plea allocution, as “Leissner . . . can be cross-examined on these issues” and “[s]uch coordination would directly impact [his] credibility.” In support, Ng observes that “[a] close comparison of the [original] Indictment filed against [him on October 3, 2018,] with the plea colloquy that Leissner claimed he wrote himself [on August 28, 2018,] lays bare that numerous sections mirror each other — often word for word,” suggesting that Leissner may have “initially drafted a version of events in which Ng was less directly implicated”; that the Government may have “scripted either Leissner’s colloquy or his trial testimony”; or that the Government may have commented on Leissner’s proposed allocution, which may have led to “material changes in [the] allocution.” In addition, Leissner stated in his allocution that he “conspired with other employees and agents of Goldman Sachs very much in line [with the] culture of Goldman Sachs to conceal facts from certain compliance and legal employees of Goldman Sachs,” and the Indictment (and now Superseding Indictment) similarly states that “the business culture at [Goldman], particularly in Southeast Asia, was highly focused on consummating deals, at times prioritizing this goal ahead of the proper operation of its compliance functions,” suggesting that the Government “may have interacted with Leissner and subsequently changed its pleadings.” Therefore, Ng requests that the Court “order the Government to produce the items attached to [his] motion as Attachment A27 or to represent to the Court that no such material exists or was ever communicated in any form.”

The Government argues that Ng is seeking the production of impeachment material and witness statements to which he is not entitled months before trial. The Government maintains that it is aware of its disclosure obligations and “will produce to [Ng] prior to trial potential impeachment materials pursuant to Giglio and witness statements pursuant to Section 3500,” as well as “documents related to Leissner’s allocution to which [Ng] may be entitled . . . to the extent that they both exist and fall within either or both of these two categories.” In addition, the Government argues that Ng “cites nothing” suggesting that he is entitled to these materials at this time — only cases that “discuss the unremarkable proposition that allegations that a . . . witness was ‘coached’ are properly addressed through cross-examination” or cases with “instances where courts have evaluated, after trial, the impact of the government’s failure to produce certain material.”

Judge Brodie ruled:

“While Ng has the right to cross-examine Leissner on his allocution and testimony and to ask him whether the Government assisted him in crafting his allocution, there is no pretrial discovery right to these impeachment materials, particularly where the Government has represented that it is aware of its discovery obligations and will comply with them and Ng has not provided a reason for suspecting that the Government will not comply with its obligations.”

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