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Harry Cassin
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Expand The Corporate Miranda Warning

On her way to be interviewed by her employer’s outside lawyers about alleged overseas corruption, Rose Carson, the government says, stopped by the ladies room and flushed some relevant documents down the toilet. Because of that, she’s charged with obstructing a federal investigation under 18 U.S.C.§ 1519, which carries up to 20 years in jail.

Did anyone warn her that concealing information from company lawyers conducting an internal FCPA investigation could be a federal crime?

We assume when her interview started — just after her alleged trip to the ladies room — Rose Carson was given a so-called corporate Miranda warning. It’s required by case law and Rule 1.13(a) of the ABA’s Model Rules of Professional Conduct — now adopted in most states. The rule says, “A lawyer retained by an organization represents the organization acting through its duly authorized constituents.”

The corporate Miranda warning usually covers three basic points, formulated along these lines:

1. Counsel represents the corporation and not the employee.
2. Communications between the employee and counsel will be privileged.
3. However, this privilege belongs to the corporation and the corporation alone can decide to exercise it or waive it.

But what about the role of company counsel as agents for the DOJ in an FCPA investigation? What about their status as unofficial deputy prosecutors, which makes concealing evidence from them a federal crime?

Rose Carson’s interview with the lawyers probably happened months before the government started its own investigation. Her employer, Control Components Inc., had self-disclosed the internal investigation just two days earlier. So the DOJ presumably hadn’t issued any subpoenas or called any witnesses to testify when she allegedly flushed the documents. Yet she was charged with the federal crime of obstruction.

We don’t know what sort of warning Rose Carson was given. But whatever it was, if she didn’t hear it until she sat down to talk with the company’s lawyers, it wasn’t enough because it came too late.

Instead, the moment a company launches an internal investigation, its key employees — whether they’re scheduled for an interview or not — should be warned about the “federal” consequences of destroying or hiding evidence.

With up to 20 years in jail at stake, that seems like a small thing to do for the people in the company.

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  1. The relevant federal obstruction of justice statute in this case (18 U.S.C. 1519) clearly applies to Carson's activity:

    "Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both."

    This statute was part of the Sarbanes-Oxley Act and is specifically meant not to include any technical requirement to tie the obstructive conduct to a pending or imminent proceeding or matter by intent or otherwise, and was meant to address the type of document shredding that occurred in the Arthur Anderson case. It doesn't seem particularly surprising that she would be prosecuted for this conduct under this provision, which has been in place for several years.

  2. There aren't many parallels between this case and Arthur Andersen, which involved a well-publicized and ongoing government investigation, subpoenas, and prior related prosecutions, none of which were present in this case at the time the alleged document destruction took place. We find it very surprising.

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