That's what the U.S. Court of Appeals for the Second Circuit just held today in U.S. v. Stein, in a case involving the prosecution of 13 former KPMG partners and employees. "We affirm the district court’s ruling that the government deprived Defendants-Appellees of their right to counsel under the Sixth Amendment by causing KPMG to place conditions on the advancement of legal fees to Defendants-Appellees, and to cap the fees and ultimately end them."
I'm not an expert on this particular area of the law, and the state action caselaw on which the court relied to get to this result is murky. But I tentatively think the court's decision is right. Constitutional rights generally (with some exceptions not applicable here) include the rights to pay for what it takes to exercise the right -- to pay for counsel, advertising space, private schooling, contraceptives, abortion, and the like. They likewise include the rights to pay for what it takes to exercise the right using money donated by friends, family, well-wishers, or others.
Thus, if the government pressures (using the threat of indictment and financial ruin) your customary benefactors to stop paying you the money you need to exercise your rights, precisely to affect your exercise of the right, that would itself presumptively violate the constitution. If the government is investigating (say) a pro-life public advocacy organization's funder for some crime, offers more lenient treatment if the funder cooperates, and tells the funder that one factor in deciding whether he's cooperating is whether he cuts off funding for the advocacy group, I think that would violate the Free Speech Clause. If the government is investigating a Planned Parenthood funder for some crime, offers more lenient treatment if the funder cooperates, and tells the funder that one factor in deciding whether he's cooperating is whether he cuts off funding that goes to paying for abortions for poor women, that would violate the Supreme-Court-recognized right to abortion. Likewise, if the government is investigating a company, offers more lenient treatment if the company cooperates, and tells the company that one factor in deciding whether it's cooperating is whether it cuts off funding for its employees' exercise of their right to hire counsel, that would violate the Sixth Amendment.
It's true that the company might well have been free to voluntarily cut off the payment for its employees' lawyers (apparently such payment was the norm at KPMG and similar companies, but probably wasn't part of any enforceable promise on KPMG's part). Likewise, the funders in the examples above might well have been free to voluntarily cut off funding for others' political advocacy, abortions, and the like. But when the government coercively pressures the funder, the government's actions may violate the funded party's constitutional rights even if purely voluntary actions on the funder's part would be entirely lawful.
In any case, that's my tentative thinking. Thanks to Paul Caron (TaxProf Blog) for the pointer.
a complicating point, clear in the KPMG decision, is that once an executive or partner is a subject of a DOJ investigation, relations between the company and the individual can become strained. The company decides to "clean house" or sue the employee for breach of contract. As a result, the company itself doesn't want to pay fees. After all, it certainly doesn't look good in front of shareholders. And so you see suits like this.
If there's no explicit agreement between the government and the company that the company's role in the matter won't be pursued legally, then pulling the legal rug out from under key employees involved in the matter is a tremendously bad idea. The company stands to lose a lot if these employees present evidence or testimony that the company as a whole was complicit... whether it's factual or not. That's a lot more dangerous to the company.
But if the company does secure such an agreement, without an implicit agreement to remove the funding for the individuals' legal counsel, then... what's its incentive to do so? I suppose if the company was being completely supine, it could do it of its own volition... except in cases where it was contractually or legally obligated to provide such funding, anyway.
The moral, of course, is that it's essential to exhaustively document any dealings you have with any law enforcement official. Video, audio recordings, total preservation of any written records, DNA sample of saliva from the half-eaten donut, everything.
The funding here relates to funding a criminal defense. In the context of an investigation that switches over to prosecution before indictment is filed, a prosecutor hamstringing the defense by cutting off attorney's fees is egregious precisely because he knows the Sixth Amendment will not attach until indictment is filed, which he controls. The deliberate act to operate in a constitutional black hole is offensive to fair play.
That seems quite different than discouraging abortion funders from funding abortions. There is no trial. There is no impending indictment. There is no constitutional right whose applicability is purely within the control of a prosecutor who seeks to send you to trial on unfair terms. There is no prosecutor. There is no prospect of a life in prison. It also has nothing to do with the Sixth Amendment.
The Second Circuit responds that the government conceded that "it is in the government’s interest that every defendant receive the best possible representation he or she can obtain," and that blocking the employees from receiving funds from the firm was therefore purposeless.
I don't know why the government lawyers made this concession. It makes their bargain with the firm irrational. What other purpose could they possibly have been pursuing?
The government can have a legitimate interest in preventing people from exercising their constitutional rights. The government has a legitimate interest in getting criminals to confess, even though they have a constitutional right not to. Similarly, it seems evident that the government has a legitimate interest in depriving suspected criminals of the funds they might otherwise use to mount a defense; and, there's dicta in <i>Caplin</i> legitimating such a government interest.
Interest, yes; legitimate interest, no: it's one thing to persuade people not to exercise a right, quite another to prevent them from it. The latter is a crime under 18 USC 242.
The government may have an interest, but do the citizenry?
Those are separate entities.
(1) And now that I read the opinion, they cite the case.
This issue, of course, is but one of the controversies surrounding the evoloution of the DOJ "Principles of Federal Prosecution of Business Organizations" over the years (e.g., the so-called Thompson Memo, McNulty Memo, etc.).
In fact, the exact issue was most recently addressed in yet another revision announced by DAG Mark Filip just yesterday. See Press Release here.
On the exact issue raised in this post, as stated in the press release, DOJ policy is now:
Of some interest, the Principles are finally going to be formally incorporated into the U.S. Attorney's Manual.
And here's the prepared text of the DAG's speech announcing the revision.
In fact, according to this logic, every time a criminal defendant pleads to a lesser charge, you could argue that the prosecution coerced him into waiving his right to trial by threatening to try him on all those other counts.
Most likely I'm missing some important distinction here but I can't put my finger on it . . .
As is pointed out above, those Corporations should be free to fire and cut off all funds to such employees (subject to their contractual rights), but prosecutors shouldn't be allowed put a gun to their head to require it.
While legal minds can differ about whether the Sixth Amendment really protects reimbursement of legal fees by one's employer, as a practical matter the issue raised in Stein is basically moot insofar as future Federal prosecutions are concerned. It's not gonna happen without solid evidence to believe that providing legal representation is in fact part of a scheme to obstruct justice (e.g., the old "nobody talks, everybody walks" scheme -- such as the Mob paying the hit man's legal fees to ensure he has counsel with an obvious conflict of interest who will prevent the individual from flipping and cooperating, even if that is in his best legal interest).
The decision is very well-argued, by the way. It's worth reading.
This doesn't seem to be true. A mob-hired law firm might be more qualified than what a defendant can hire on his own but will almost certainly work contrary to the defendant's best interests (e.g. getting him to plead when he should roll over).
A first year law student would be one of the last people familiar with how this works in practice. And considering the Thompson memo, that first year law student would be deeply, deeply misguided.
If some low level employee was accused of theft and the evidence seemed strong, he would be fired and would not be provided any legal or financial help.
Tatil: In the type of work they do, right at the edge of what is legal, criminal charges are an occupational hazard. It makes sense for a partnership to spread the risk as it spreads the profits of that risk.
cf
Those are not the same thing! A more qualified attorney that underhandedly represents your boss' interests is not really better than a less qualified attorney that actually has your best interests at heart.
Because it undercuts their case if the managers defend themselves by arguing that it was accepted company practice. They can't have that, so they need to make sure that their attorneys are directing the defense.
That said, they should bring the hammer down on KPMG now.
An attorney who does not represent his client's interests is not qualified. He is lacking the 'represents his client's interests' qualification.
With respect to the issue of employees' defense undercut the company, obviously that's a possibility and a risk. However, I think the idea that shared risks should go with shared profits is at least as much of a factor.
The firm may suffer in many ways if its employees have poor representation. One of the key purposes of the representation was to avoid indictments.
It is in everyone's best interest for the employees to turn state's.