Federal Grand Jury Practice

This discussion provides illustrations of the stages involved in a federal grand jury investigation and shows counsel's role in helping the subpoena recipient understand the process and avoid missteps.

The United States Department of Justice, through its divisions and the U.S. Attorney's offices, may apply for authorization to present to a federal grand jury evidence it believes may relate to a violation of federal law. Once it possesses grand jury authorization, it typically will assign investigative tasks to agents of the FBI (or agents of a particular federal agency's Inspector General's office) and issue subpoenas for the production of documents and things to witnesses, subjects and targets that it believes could further its investigation. The assigned prosecutor has practically unbridled discretion to identify subpoena recipients, and there is no probable cause threshold that must be shown to a court for prosecutors to exercise this power. An attorney for the Division of the U.S. Department of Justice or the U.S. Attorney's office simply completes a form subpoena, signs it and directs the U.S. Marshall to serve it.

Once a person or a firm receives a federal grand jury subpoena for documents, alarms should go off that tell the recipient immediately to seek counsel. Bad - and often irreversible - things can happen if counsel is not engaged and the subpoena recipient mistakenly concludes that he or she can “straighten things out” with the government simply by explaining what happened and answering a few hours' worth of an agent's questions. Typically, when the “I'll-just-straighten-things-out” approach is taken, the risk of that person's or firm's prosecution increases dramatically. And often, the subpoena recipient will erroneously believe that the firm and its employees have done nothing wrong and, therefore, a simple explanation will resolve any “misunderstandings” the government may have about the firm's (or its employees') conduct.

While sometimes subpoena recipients are classified by the government as mere fact witnesses, most often the recipient is at least a “subject” and could be a “target” of the government's investigation. These words have specific definitions in the U.S. Attorney's Manual and must be well understood.

The subpoena recipient, through counsel, should immediately review the subpoena and attempt to make some determination regarding the focus and scope of the government's investigation. As quickly as possible, counsel should have a communication - preferably face to face - with the client in order to begin assessing and evaluating the relevant facts in order to make a preliminary risk determination regarding the activities that appear to be within the scope of the subpoena and to identify and the players that have been involved in that activity during that time period stated in the subpoena.

An important first step when counsel is contacted by a federal subpoena recipient is to determine the client's status - fact witness, subject or target - and attempting to educate the client regarding compliance with the subpoena, which includes immediately suspending the company's document destruction/retention policy and freezing in place all documents, especially electronic ones, that could be called for by the subpoena or, for that matter, that would be within the general scope of the investigation. Erring on the side of freezing more information rather than less is almost always the strategy demanded under the circumstances; dallying at this stage of the proceedings is foolish due to the possibility that the government and grand jury could view a company's inaction as evidence of obstructing a federal grand jury investigation if documents are destroyed as a result. It is important to note that even otherwise innocent subpoena recipients may be charged with obstruction.

Once counsel has a reasonable feel for what is believed to be the scope of the investigation and how the company fits into it, counsel should then surface by identifying itself to the attorney who has issued the subpoena and confirm that conversation in writing. Notification of counsel's representation of the company or subject or target employee will obviously provide the government with a contact to call if a question comes up. Just as important, counsel should try to reach an agreement with the government that agents will not make direct contact with the company's officers and employees, although some prosecutors will choose to play hard ball and refuse to provide such assurances. A considerable amount has been written about the issue of government agents directly contacting officers and employees after being notified that the company is represented by counsel, and the subject is far too complex to provide black and white examples of what is fair game and what is off limits to the government under these circumstances.

The company should be urged to arrange interviews of those employees who may be within the scope of the investigation. Company counsel can ensure the company is protected by making it clear to any employees and officers that the company's counsel represents the company and not the individual, that the interview is being conducted by company counsel for the company's benefit and that, as such, the interview has the benefit of the company's attorney-client privilege.

Decisions can be made following the employee interviews regarding whether suggestions should be made that the employee retain counsel and whether the company is willing to reimburse that attorney's reasonable attorney's fees. (company policy or bylaws may dictate whether the company is obliged to reimburse attorney's fees; it is important that counsel make that determination early on.)

Of course the purpose of grand jury subpoenas is to obtain documents, and even though it is essential that counsel conduct a preliminary internal investigation to understand the apparent thrust of the government's investigation, the fact remains that all responsive documents must be identified, gathered, reviewed, appropriately marked, copied and or scanned and prepared for production to the government by the deadline specified in the subpoena.

Regarding the deadline, typically the government will provide a short period of time to respond, understanding that counsel will call for an extension of that deadline. Unless the circumstances are exigent - and in the investigation of business crimes that is usually not the case - the prosecutors are typically willing to grant reasonable extensions to respond to the subpoena, especially if the demands of the subpoena are quite broad. In this regard, it is advisable to attempt to negotiate extensions that will allow the production of documents on a rolling basis so that the government is at least satisfied that it is obtaining some information, and the subpoena recipient is similarly satisfied that it has a sufficient amount of time to do a proper and thorough job in responding to the subpoena.

Counsel must also be aware of the need to make some difficult determinations regarding privilege issues in deciding what should be withheld from production to the government. Some of these determinations are quite simple; for example, if the company's president has had a conversation with the company's counsel in order to obtain legal advice, the written memorialization of that conversation is privileged and may be withheld. However, there is one other privilege applicable to a subpoena issued to an individual that is often difficult to analyze and apply. It is known as the “act of production” privilege and it enables the producing party to claim a Fifth Amendment privilege against self incrimination. This privilege recognizes that, under certain circumstances, an individual's very act of producing the document could tend to incriminate that person. These are often difficult issues to analyze, but they are critical to assuring that an individual's Constitutional rights are preserved (a corporation has no Fifth Amendment privilege) and that the producing party complies fully with the government's document subpoena.

Once the grand jury has its documents, a second round of subpoenas is issued. These typically call for witnesses to appear before the grand jury to testify. The testimony is provided to the grand jury in secret - the witness's attorney may not accompany the witness inside the grand jury room - and aside from 16-23 grand jurors, only the prosecuting attorneys and a stenographer may be present.

If a witness believes that the answer to a question may tend to incriminate him, he may exercise his Fifth Amendment privilege and refuse to answer the question. However, the grand jury also has the ability to override the assertion of the privilege and compel witnesses to provide oral testimony in exchange for immunity from prosecution.

Counsel must be well acquainted with and equipped to advise clients regarding immunity and related procedures. In determining how to approach these matters, the government's perception of how the witness fits into its investigation - as a subject, target or fact witness - is important to confirm in advising the witness (counsel should be aware that the witness's status may change during the course of the government's investigation).
Another important consideration applying to corporate subpoena recipients is as follows: While a company may be subpoenaed to testify through a document custodial witness about its document retention procedures and compliance with the grand jury's document subpoena, it enjoys no privilege against self incrimination in providing that testimony nor is it entitled to a grant of immunity.

The grand jury proceedings can continue for an extended period of time. The statutory life of a grand jury is 18 months; however, upon motion of the government, the grand jury may be extended for good cause. In fact, it is not uncommon for grand jury investigations to last two to even four years, depending upon the complexity of the activities that are within the scope of the investigation.

Early in the investigation, it is advisable for counsel to go on record on behalf of the client seeking notice from the prosecutor in the event the government decides to consider recommending adverse action - an indictment - to the grand jury in order to offer to make a “pitch” to the prosecutor that such action is inappropriate. Prosecutors will typically comply with such a request and provide notice of adverse action; however, the degree of specificity of that notice will vary depending upon the prosecutor.

Once notification is provided, there can be several avenues to pursue in order to talk the prosecutor out of criminal prosecution. These vary according to the investigating body (U.S. Attorney, Antitrust Division, Tax Division or other Justice Department division) that come into play at the time the notification is provided. These procedures usually begin locally at the staff level and proceed through appeals up the chain to a final meeting with the assigned assistant attorney general. It is at this stage of the proceedings that difficult decisions must be made regarding how much information to reveal about a defense or other factor in order to argue that the government should not prosecute.