On May 2, 2019, the United States District Court for the Southern District of New York issued an important decision delineating the boundaries between conducting a proper internal investigation and acting as an arm of the government.
For the government, the consequences of “outsourcing” an investigation to a company and its counsel could be exclusion of evidence collected as a result of that internal investigation, including statements made by a company employee in an interview, or even dismissal of an indictment.
In United States v. Connolly, Chief Judge Colleen McMahon held that the Department of Justice, Commodity Futures Trading Commission (“CFTC”), and other agencies had effectively outsourced their investigation of potential LIBOR manipulation at Deutsche Bank to the bank and its lawyers and that as a consequence the Fifth Amendment rights of the former Deutsche Bank trader who was on trial, Gavin Black, were likely compromised when he was compelled under threat of termination to submit to an interview by Deutsche Bank’s external counsel. The conviction was ultimately sustained, but only because the compelled statements were not used to obtain a conviction. The ruling has potentially broad implications for conducting internal investigations because of the significant obligations that attach to those deemed to be government agents, even beyond the important Fifth Amendment rights at issue in Connolly.
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