Court Warns Government Agencies Against Directing Internal Company Investigations

The U.S. District Court for the Southern District of New York recently criticized government agencies for outsourcing their investigation to the target company, Deutsche Bank, and its counsel, Paul Weiss, to such a degree that the court treated statements that an employee made to internal investigators as the product of government interrogation.  United States v. Connolly, No. 16 Cr. 0370 (CM), 2019 U.S. Dist. LEXIS 76233 (S.D.N.Y. May 2, 2019).   The investigation concerned potential manipulation of the London Inter-Bank Offered Rate and resulted in the conviction of a Deutsche Bank employee.  The employee challenged his conviction on the ground that his statements to internal investigators were obtained through government coercion because the internal investigators acted as de facto government agents.  Though the court ultimately denied the employee’s challenge, it forcefully reprimanded the Government for dominating Deutsche Bank’s investigation to such a degree that it was unfair to characterize that investigation as “internal.”

The court found that the Government controlled Deutsche Bank’s investigation through the following activities, among others:

  • Demanding that Deutsche Bank have its outside counsel, Paul Weiss, conduct a “voluntary” investigation;
  • Directing Paul Weiss to interview specific employees, whom Deutsche Bank required to cooperate at the risk of termination;
  • Having Paul Weiss continuously update the Government about its findings; and
  • Using the information obtained through Paul Weiss’s investigation, rather than its own investigation, to make charging decisions.

The Connolly decision is essentially a warning to the Government that if it directs a company’s investigators to interview an employee, and if that employee must participate to avoid losing his or her job, then a court may treat statements from that interview as obtained in violation of the employee’s right against self-incrimination.  Such treatment could potentially result in the loss of criminal convictions.  To reduce that risk going forward, the Government may take a less heavy-handed approach to its interactions with internal investigators for target companies.

Leave a Reply

Your email address will not be published. Required fields are marked *